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Profentia: February 20th, 2015

Today’s data: All eyes on Brussels as the negotiations plod along.

Amateurs, maybe very dedicated/loyal/patriotic one and all, but the Greek populace has voted into power a whole bunch of inexperience, naïve and not yet capable political leaders. Debt, please pardon my use of this word, debt is a b*tch. The Great Depression taught that lesson to a whole generation of people who were kids at the time (I was raised by that generation and I had it imprinted on me so deeply it has never been lost). The Greek’s are today suffering through all of this as a direct consequence of having elected profoundly dishonest politicians for decades and over all that time the politicians in office took on debt with zero intent to re-pay it one day. Well, now the world is leaving them no choice; the sins of the father are clearly coming to visit the next generation. The debt did not go on to create an income stream to meet the obliged payments to the debt holders.

The Big Picture: The too much debt is a global issue, it is a problem everywhere.

Once again today I read multiple articles, one in particular about our slumping domestic productivity, that once again wondered why ‘things’ aren’t what we expect/want/need them to be. Take a look at the path of productivity as one of a hundred that could be used as an example and overlay that with a chart of the growth of debt in the US. Everywhere, in the US and Japan and China and certainly Greece debt has grown but the capital has been used foolishly rather than prudently; it has been used to pay the bills rather than investing it into something that generates income sufficient to manage the debt until it is retired. Have you noticed this week the squawking about the insane level that student debt has reached to become the largest form of debt other than mortgages? The US has a whole generation that has unintentionally almost guaranteed itself that its standard of living will be far lower than that of their parents and grandparents. Debt is a b*tch and this debt can’t be walked away from like most every other form of it. This all comes at a huge cost to us in the form of lower GDP, lower wages, lower productivity, lower investment and lost global competitiveness. The solution will crescendo here eventually just as it is now in Greece, probably the next big to do in this story will be Japan, but that is a ways out yet. China too, don’t think for a second that they have been any smarter than anyone else and that they have avoided this trap — they have not.

Investment Portfolio: UST supply (new issues being sold) coming next week.

Time for our monthly 2/5/7 cycle once again and that will be a welcome influence over the markets. It is pretty close to impossible for us to know how the Greek drama final act will play. If we did know, we would have a pretty good idea of how much demand to expect from buyers in the international community. My hunch is that even if it is resolved we will see lots of buyers seeking something far more attractive than the -0.74% of the five-year German Bund or the -0.522% of the Swiss five year issue. There will be a healthy dose of economic data next week also, so we look forward to an active and generally very positive week for bonds.

Weekly Market Data

  • Friday
  • Thursday
  • Wednesday
  • Tuesday
  • Friday

Current Market Levels from Bloomberg daily

  • Monday: 2/16
    No data
  • Tuesday: 2/17
    No data
  • Wednesday: 2/18
    Jan. Housing Starts expected at 1.070mm >>1.065mm
    Jan. Building Permits expected at 1.069mm >>1.053mm
    Jan. PPI expected at -0.4% >>-0.8%
    Jan. Cap U expected at 79.9% >>79.4%
  • Thursday: 2/19
    Weekly claims expected at 288k >>283k
  • Friday: 2/20
    No data

Data is taken from sources considered to be accurate, most often that of an agent of the US Government; no guarantee of accuracy is suggested.

Past performance is not a guarantee or a reliable indicator of possible future results. Investing in the bond markets is subject to certain risks including credit (worthiness of the issuer), market (interest rate changes), inflation uncertainties over time and the possibility that investments may be worth more or less than the purchase cost when they are redeemed. U.S. Treasury Bills, Notes and Bonds are backed by the full faith and credit of the Government, certain U.S Agencies are also backed in a similar manner and certain other Agency Issuers are backed solely by the Issuing Agency itself. Portfolios that invest in those securities are not guaranteed and they will fluctuate in value with time. High-yield low rated securities involve greater risks than higher-rated securities and portfolios that invest in lower-rated issues will incur more risks than portfolios of higher-rated only securities.

This article contains the current opinions of the author, but not necessarily that of Alfstad Capital, LLC, and a branch office of Commonwealth Financial Network. The opinions of the author are subject to change without notice. This article is distributed for informational purposes only. Here-in contained forecasts, opinions and estimates are based upon proprietary research or from publicly published sources and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.

Information contained here-in has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form or referred to in any other publication without written express permission of Alfstad Capital, LLC and Commonwealth Financial Network.

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