May 21, 2016: First, Do No Harm

This week, Hillary announced that she was going to put First Laddie Bill in charge of the economy if she wins. She stated (as reported by ABC), “My husband, who I’m going to put in charge of revitalizing the economy, ’cause you know he knows how to do it,” Clinton told the crowd…

This got me to thinking about more than the odd grammar of that sentence. People give Bill Clinton the credit for the growth in the 1990’s, but does he really deserve it? The short answer is “no”. It was simply a decade when we took on debt and spent savings, drawing demand from the past and the future to the present, ultimately weakening the economy in the long run. To be fair, this wasn’t his fault, it was driven by cheap money from the Fed, not the President, but it wasn’t some economic miracle either. Today, we still have the cheap money, but not the debt capacity we had then, making even the illusion of prosperity today even more difficult, and the future more fraught. We discussed the likely lack of growth in the economy going forward, regardless of whom is elected this fall. We also spent a little time looking at the market and commenting on the implications of the fact that stocks continue to be unable to breakout to the upside. Finally, we talked about the possible implications of the release of the Fed minutes on Wednesday.

Check the show out here: 

Given this week’s topic we are going to be doing a special class, “Successfully Investing In A Falling Market”. If you would like free tickets to the class, call 84-48-Income (844.846.2663) and tell them that you read about it on the Next Week In Stocks website. I hope to see you there!

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  1. Ron Swalboski says:

    Ken, you made a reference to what is going on in Saudi Arabia but did not have time to get to it. Would you briefly let us know what you wanted to tell us? Thanks

    • Ron:

      It is a longer topic I will try to do in a few weeks. The key is that our standard of living is very tied to the world still using dollars for much of its commerce. If that “forced” demand for dollars were eliminated, the value of the dollar would fall significantly. We don’t really have any way of earning anywhere nearly enough foreign exchange without it. Over the last few years more non-dollar commerce has been taking place, but as long as Saudi Arabia requires dollars for oil, the world will still need to hold dollars. Right now SA is going through a number of changes and it appears that our relationship is strained at this time (our dealings with Iran and the legislation allowing us to potentially seek damages from important members of the Saudi royal family over 9/11) won’t improve things (not that they shouldn’t be done, but there will be consequences and it is not clear that there is more upside than downside to the Iran deal). There is also a general threat to the House of Saud from Iran and its proxies. It is unlikely the House will fall, but if it did, it could be catastrophic for our economy.

  2. Ron Swalboski says:

    Thanks Ken. Few people understand the importance of SA requiring $ to pay for oil. I really enjoy your programs.

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