Vorisek Financial Weekly Update for January 10, 2018

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Good morning!

What does the $24 trillion S&P 500 do for an encore after setting 62 all-time closing highs in 2017 and gaining +21.8% (total return) for the year?  How about 4 more record closes during last week’s short trading week and tacking on another +2.6% gain for the first week of 2018.  For the 46% of Americans that do not have any money invested in the stock market in the form of individual equities, mutual funds or retirement accounts, this nearly 9-year old bull market has been an enormous party that they have sadly been watching from the outside.  Those folks must determine which of the following will be more painful for them going forward: jumping into an aging bull market when it is possibly in its final stages, or continuing to sit on the sidelines and perhaps watch this bull market go on for years to come (source: Gallup).         

Saudi Arabia, the largest oil producer in the world, will not be content with a $60 a barrel oil price, a threshold surpassed in late December 2017 for the first time in 2 ½ years.  Even though their break-even price is less than $10 a barrel (the per barrel price required to profitably pump oil), the oil price that Saudi Arabia needs to cover its national government spending is more than $80 a barrel (source: Bloomberg).     

Fiscal year 2017, i.e., the 12 months ending 9/30/17, generated $3.315 trillion of tax receipts and $3.981 trillion of outlays, a net $666 billion deficit.  A decade earlier in January 2007, the Congressional Budget Office released a long-range forecast for fiscal year 2017 that predicted a $249 billion surplus, i.e., the number crunchers at the CBO missed the mark by $915 billion (source: CBO).  

Notable Numbers for the Week:

1.     SO WRONG - In January 2007, the CBO forecasted that our nation’s “debt held by the public” would fall from $4.843 trillion as of 9/30/06 to $4.274 trillion as of 9/30/17.  Instead, our “debt held by the public” has risen to $14.673 trillion, more than $10 trillion greater than the CBO estimate (source: CBO).  

2.     GOING AWAY - In July 2017, Dr. James Canton, CEO of the Institute of Global Futures in San Francisco, predicted the following 6 things will no longer exist within a decade: keys, parking meters, cash, brick-and-mortar banks, TVs, and telephones (source: NBC News MACH).

3.     OIL - With oil at $44 a barrel on 9/05/16, RBC’s Helima Croft predicted the price of oil will rise to $60 in 2017.  Oil closed at $60.12 a barrel on 12/29/17, its high for the year (source: CNBC).  

4.     DIDN’T HAPPEN - Savita Subramanian, head of US equity strategy at Bank of America-Merrill Lynch, predicted on 10/09/16 that the US will “hit a recession sometime in the 2nd half of 2017” (source: CNBC).   

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