“Into the Valley of Death Rode the…”

Posted October 17, 2013 by admin. tags:
We The People, the Constitution of the United States


Written by Nathan White, Chief Investment Officer of Paragon Wealth Management

We will have to see if the “Tea
Party” politicians will learn from their humiliating defeat on the budget
debacle and play smarter politics going forward.  I think they have
unfortunately hurt their cause and set it back.  Compromise is how things
get done in Washington and unless you control the commanding heights (i.e.
Presidency and both houses of Congress) you need to bide your time and play
better defense.  I think the Republican caucus needs a bit of Tennyson
recitation in the form the “The Charge of the Light Brigade” where he so
eloquently described the futility of a British Light Cavalry Brigade in 1854
charging a well-prepared Russian artillery battery with excellent fields of
fire resulting in high casualties and no gains.

The markets once again called
Congress’ bluff with not much of a sell-off and are now poised to go on to new
highs.  The scary part of this political game is that the politicians will
take this as a cue to keep their antics going and will eventually send us off
the cliff if they keep this game up.   I keep hoping these budget
escapades will finally cause some focus to be made to the long-term insolvency
problems the country faces but with each delay the problem only grows.  It’s
a classic case of avoiding pain and being unable to delay gratification.
We can spend more than we make right now because our creditors allow it and as
the world’s reserve currency we get a pass.  But this can and will change
at some point if we fail to act.

The U.S. government is
currently spending about $3.8 trillion per year while taking in about $3.15
trillion in taxes.  So we’re essentially spending 20% more than we
currently “make”.  At some point we will have to pay for all this extra
spending that keeps adding to the total Federal debt that is now 100% of
GDP.  The larger the debt grows the more it reduces future GDP growth and
the more work and taxes will be required of our children to pay for it.
Fixing the current deficit would require huge spending cuts or significant tax
hikes with of which would send the economy into recession.  Since no one
is willing to endure this “austerity” now we just keep piling on the debt and
hoping that GDP growth in the future will be large enough to cover the
gap.  Wishful thinking in deed especially considering that the future
spending required for the present level of entitlement spending is set to
explode with our changing demographics.  If we can’t change it now how
will we be able to do it in the future when it will be even more
entrenched?  The Federal Reserve is covering us for the moment with its
massive bond purchases but in the end their actions are just cosmetic and the
bill will have to be paid.

Strangely enough, if we just change the future trajectory
of entitlement spending we can give ourselves and our children the ability to
increase their standards of living rather than being weighed down by the burden
of debt and its debilitating societal ramifications.  After correcting the
long-term we would then be able to recognize the benefits of living within our
means and how that helps to increase economic growth in the long run.

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

End of the World?

Posted October 3, 2013 by admin. tags:Tags: , , , , , ,
Flying American Flag

It is no wonder that investors are concerned about the government shutdown.  Here is an excerpt from today’s press release from the U.S. Treasury Department.  Keep in mind the Treasury is supposed to report the facts and not play partisan political games.

In a Press Release posted on the U.S. Treasury website today they stated:

WASHINGTON – The U.S. Department of the Treasury released a report today on the potential macroeconomic effects of debt ceiling brinksmanship.  The report states that a default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, and U.S. interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse…..  This introduction was followed by two pages of extreme doom and gloom.

Really?  The word catastrophic was used twice in the press release.  “Could” was used repeatedly.  I have never seen anything this like this from the Treasury Office.  They usually deal
with facts and do not issue press releases based on what might happen if a worst case scenario unfolds.

The market was actually up the first day the shutdown went into effect.  Today, Day 3, it is surprising that the stock market did not drop harder with this type of hyperbole.

Economists are mixed on the outcome of the debt ceiling talks.  Because it is politics no one really knows how this will play out. We have watched our politicians play these games regularly over the last few years. Every time they create a lot of uncertainty and fear but in the end it all seems to work out. It reminds me of the story of “The Little Boy who Cried Wolf.”

In the real world, the markets have been doing well generally.  We are concerned that we have not seen a significant correction for some time. Also, we don’t like that investor sentiment is as positive as it is.  In a perfect world we would see a mild pull back followed by a rally into the end of the year. 

If we could see into the future that would be ideal.  In the mean time we will follow our models and systems and manage your portfolios accordingly.

Written by Dave Young, President and Founder of Paragon Wealth Management.

 

Disclaimer
Paragon Wealth Management is a provider of managed portfolios for individuals and institutions. Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy. All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. Past performance is not a guarantee of future results.

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