Thanksgiving with the Dogs, and the National Debt

As unbelievable as it seems to me, Thanksgiving is a little more than a week away. Even though I don’t enjoy the holiday preparation shuffle, especially the effect it has on traffic, I honestly enjoy the lead up to the shared family time as it draws near. I’m excited about the future get-togethers, where we leave most of the world and its problems outside, and selfishly indulge in a time and space created for only our closest family and friends. Those scenes in my mind, either remembered celebrations or imaginings of those to come, are blurry and colorful. The conversations, songs and music, food and favorite drinks mill about in my head without any actual specificity, and I feel that is a testament to their value. The holidays allow us to create surreal sanctuaries in contrast to the chaos of everyday life.

Now I don’t know if it was always so, but I feel having election day this close to Thanksgiving is a disservice to us all. I’ve seen many articles advising people on how not to ruin Thanksgiving dinner because of differing political views, or people calling dinner off altogether. Maybe we should urge our elected officials to change the election calendar to save future holidays. My family is usually well behaved, but I am going to warn them all, if during our meal the conversation starts to turn political, I will take my plate outside with the dogs to eat in peace.

Even though three out of the past four weeks showed declines for the Dow Jones and S&P 500 indexes, the election week’s increase was large enough to counteract those negative weeks. So far, the month of November is showing positive returns of about 4.0% for the Dow Jones, and 3.0% for the S&P 500. It has, however, felt very choppy. There has been a lot of volatility in specific industries. Semiconductor, health care, and energy companies have seen dramatic shifts. Some of those swings are due to third quarter earnings results, however most of the volatility is due to the media stories involving “what could happen” during the second Trump presidency.

I am glad the election campaign advertisements are over, but I don’t see what the media has to gain by trying to scare the public with worst-case, hyperbolic scenarios resulting from unknown future policies. No one should want our country to fail, and this “reporting” won’t lead to Americans being better prepared for some supposed Chinese trade war apocalypse or bankrupt society. Hopefully, with a little help from the holiday season, this discourse will run its course and start to decline.

However, I do want to talk about a worry many of us have for the future of our country, and that is the national debt. It seems to keep growing and growing, as does the ongoing cost to support it. Just like each of us, the government must pay interest on its borrowings. One of the fears used by investment product salespeople involves an idea that our country will borrow too much, leading to either devastating harm to the economy, or something like a lack of faith by global investors of our issued debt (other countries and their economies).

Our country absolutely has a spending problem that we should all urge our politicians to address, but we are still a very long way away from a bankrupt country shunned by global investors. Joachim Klement, a strategist at Panmure Liberum whose writing I enjoy and have referenced before, recently published “US debt is risky: A rant about evidence-based investing.” The article identifies how much the cost of our debt has increased from all of our recent borrowing. The real yields of U.S. treasuries have increased 0.53% during the $5.43 trillion increase in our deficit. In other words, people and countries that invest in America (lend us money), are only charging an additional 0.5% based on our continuing to increase, large debt load. Mr. Klement calls that “… the bargain of the century.” No other country on the planet comes close to that level of credit worthiness.

The future will always be scary, but the idea that we here in America bear some kind of extraordinary risk that is singular to America is simply false. Even though the environment is worrisome, and this may create ripples throughout the investment marketplace, our economy is still strong, and corporations are growing.

Enjoy Thanksgiving with your friends and family. Check the politics at the front door. Be thankful for each other.

Justin Anderson