The major U.S. equity averages have reached correction territory today, which is defined as a 10% drop from their recent high. The Dow Jones Industrial Average, Standard & Poor’s 500 and the Nasdaq all hit their highs of 2011 high on April 29th. From their peak, the DJIA is down 11.1%, Nasdaq 11.0% and S&P 500 12.0%. It seems to me that one major aspect of these sour economic times is the crowding out of the private sector by
a burgeoning public sector. Politicians on both sides of the aisle continue to be more interested in getting re-elected, and growing the size of government, rather than reducing the size of government and getting out of the way so that the private sector can thrive. In the private sector, success is determined by profits, and therefore costs must be managed or the business is a failure. In the government sector, there is no comparable accountability. Success is determined by how much money the politicians bring back to their district, or the size of the budget of their department or agency. In other words, in government, the larger your costs, the larger your success! That which would destroy a business, huge costs, are temporarily rewarded in government. Until the government’s astronomical costs bring down the entire economy.
Here is an article that lays out the massive expansion of government at the expense of the private sector under George W Bush, and the party that used to be proponents of small government.
With the increase we’ve seen in the debt ceiling this week, here is what the amount of indebtedness that our government is committing the American people to looks like in pictures.
This article from the St Louis Federal Reserve talks about the horrific loss of jobs in the recession of 2007-2009. 89 million jobs lost and 82 million gained for a net loss of 7 million jobs. Notice that the areas of job openings are concentrated in government or government related sectors such as healthcare and education.
As an 82 year old man who lived through the Great Depression said to me today, we are not in a recession, we are in a Depression.
Solving the nation’s problems is beyond the scope of our business. Awareness of the ever-changing domestic and global economic environment is our business because our mission is to protect and grow our client’s portfolios regardless of the direction of the economy. We continue to have defensively positioned portfolios for our clients due to the hostile business conditions that exist in the US and much of the global economy.
We specialize in selecting the right investments, buying them at the right price and combining them in such a way as to be defensive against market shocks like today, and the past 10 days. We like to sleep well at night and so do our clients.