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Turnaround Tuesday – More Stimulus Rumors as Powell Speaks

National debt would explode if Trump or Biden wins, but who cares?MORE FREE MONEY!

That's what this economy is based on and that's what the people expect.  The way we make money in America is by MAKING MONEY – literally printing it and giving it away like… money.  I was going to say like candy but you can't create candy out of thin air so, if you tried to give away $6Tn in a year, you would go bankrupt and create sugar and labor shortages and even Bazooka Joe would run out of ideas for clever cartoons on the wrapper.  But MONEY – that is created by simply flipping a switch at the Fed that adds another zero to the balance sheet.  

Since 2008, our National Debt has climbed from a shocking $8Tn to what is a now a "Who gives a f*ck anymore?" $27Tn and, whether now or next quarter, the market is execting AT LEAST $2Tn of additional stimulus and at least $2Tn of additional debt in 2021 (there's no way to stop Trump's fiscal-year budget now) so we'll be over $30Tn in debt by the end of Q1 – more than 150% of our GDP.  How long do you think this can go on?  

Don't Blame The Pandemic For The $277 Trillion Debt Pile | Seeking Alpha

$19Tn of additional debt in 12 years is $1.5Tn per year, close to 10% of our GDP is debt financing and our GDP was $15Tn in 2007 and let's even pretend it's $20Tn now, that's up 25% in 13 years so 0.5% annual growth which means our REAL, unstimuluted GDP is FALLING but, thanks to 10% annual stimulus – we're fine, right?

And we are fine, as long as we never, ever, ever have to pay that money back.  And we probably don't have to pay it back because it's not possible to pay it back so our lenders have to either accept this ongoing fantasy and keep lending us 10% of our GDP per year (30% this year) or put us in default, which would surely collapse the global economy.  So party on boys – they can't touch us!  

The markets are certainly celebrating this endless orgy of over-spending with the Futures more than reversing yesterday's little sell-off already.  3,640 was the previous top of the S&P channel and the S&P Futures are up 40 points this morning, blasting through that so, tempting though it may be, we can't short /ES until/unless it breaks back under that 3,640 line. 

The S&P 500 is 66.6% above the March lows and that may seem like a sign to short but, taking a look at our 5% Rule™ Chart, it's the 30% line at 3,705 is the next major resistance but the 27.5% line at 3,634 is lined up as the place to watch for the moment.  If we are on the way to 3,705 then 3,634 should not be much resistance but, if it is, then it's more likely we'll re-test the 25% line at 3,562 and that would be a very nice gain on /ES shorts from 3,640 – so there's the positive risk/reward ratio we like to look for.

Other than that, it's pretty much watch and wait into the holidays.  We'll see what Powell has to say as he testifies to Congress this morning but mostly he's been saying they need to spend MORE MONEY as $6Tn in one year doesn't seem to be enough to get us back on track.  Just gotta keep swinging and maybe one day we'll hit the ball?

See – everyone is doing it!


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  1. Phil….the US debt to GDP can go on for a while, no?

  2. No worries Phil and Pharm – As of January 20, 2021, the GOP will rediscover the evil in fiscal deficits. It's only allowed when you have Republican presidents. They will also fight tooth and nails against any attempt to increase taxes in top 1% (makers) but will propose cuts in subsidies to the bottom 20% (takers). See, easy to reduce deficits. And growth as well… 

  3. Good Morning.

  4. Phil/Market direction,

    What do you think the market direction would be in short term? I actually thought Potus will ask his insiders to tank the market after he lost to tell America how important he was to the economy..but nothing of that happened.. It seems one of those times where they flush out all the shorts slowly …slowly and then just pull the carpet out from below…


  5. Interesting:

    I am guessing lower now…

  6. Someone made calculations about the herd immunity:

  7. Good morning!

    Debt/Pharm – We've got nothing on Japan, getting close to 250% debt to GDP over there.  

    Post-Covid-19 exit strategies and economic challenges for emerging markets  | VOX, CEPR Policy Portal

    Good, wonky article with these charts.  

    Yes, StJ, they've done such a great job in the past.

    Still, if there are no consequences to huge deficits, why stop?  Send $1M stimulus checks to everyone.  That would only cost $300Tn but we'd all be Millionaires and the government would get back about $100Tn in various taxes so we'd be able to finance the debt for a decade or two – then it's someone else's problem.  I don't see the flaw in that logic at all….

    One Direction/Pat – Trump wants his "record" to stand if possible.  Greatest market gains, etc.  Just like his properties and casinos, he props things up with a good facade and walks away before the inevitable collapse and them blames the people he sold it to. 

    The reason we're at the 30% line on the Big Chart and 20% is usually where we re-draw it is because the reality of the value of these stocks is still a good 20% below where we are.  I don't care who manipulates what – we had spectacular gains in 2020 and I feel better about being mainly in cash for the moment until we see what shakes out.  I don't want to make any big bets – up or down.

    Good point on the repercussions, StJ. 

  8. Phil / protection,

    I have 20 '22 SDS $10 / $20 BCS @ $3.55 and 10 Jun '21 SQQQ $15 / $30 BCS @ $4.65. What would you suggest in terms of adjustments, if any, and their timing? I am thinking rolling long SQQQ to Jan '22 $10, selling Jan '22 $25 and leaving short $30 calls, but am concerned about the market overextension and possible pullback. On SDS was thinking lightening up on the short calls.

  9. KPTI….sell the Jan12.5C calls for 5.30 or better.  NOW!

  10. Pharm — sell the calls?  what made you decide on the 12.5 calls to play KPTI short?  as opposed to another strike?  Just curious.

  11. Jeff, we bought the calls a month or so ago.  Not selling short.  Here.

  12. Pharm  — aaaaahhh — that makes more sense.   I am breaking even with ARNA so far – bought the stock at 75 but sold $9.00 worth of calls that expired.


    Thanks for all your Pharma insight.

  13. First blood test to help diagnose Alzheimer’s goes on sale

  14. GOLD

    today someone sold 1000 Jan23 $20 puts for $3.20 

  15. Phil   

    What is your longer term suggestion for our investing in light of the huge amounts of deficits and debt? 

    Interest rates are low for now because of the FED, but for how long?

    For us older retirees trying to have dividends and preferred stock income, will these go lower as expectations lessen? 

    Your overall thoughts.  Thanks

  16. txchili – my opinion does not count, but interest rates will be low for decades to come.

  17. Thanks Pharm. I agree and am worried that over time dividends and other fixed rates decline as investors bid up prices of the underlying stocks etc. 

  18. Japan is our runway.  That's who to follow.  My concern is all the 'bitcoin' things around that will wipe out a generation when they go all in.

  19. GOLD/Stock – I think Biden will calm down gold prices and strengthen the Dollar but, long-term, this money-printing spree has to have consequences.  

    Long-term/Tx – That's the thing, how long can this BS, propped up economy be sustained.  You can keep a patient on life-support for decades is you have the equipment, staff and money and Biden put the right staff in Treasury and they make the money so this can go on for a long time.  But, if the GOP and our crazy ex-President start trying to bring down the system by questioning all this (the same stuff they've been doing), then we could have a major loss of confidence and that would be the beginning of the end.

    I think dividends will make a comeback as people will look for consistent ways to generate income but the trick is finding the right stock (T) that will make it through a very rough ride ahead.

    Decades/Pharm – That's what Greece said.  

    Greece Long Term Interest Rate

    Greece Finally does a deal but so what?

    A little selling at the close but a strong day.