When Ben Bernanke announced his plans in November 2008 to stave off what he feared could be a “depression” and not just a “recession,” long-time market watchers had never heard of “Quantitative Easing” (QE). The concept of “printing new money” and using those funds to “purchase bonds” to drive the cost of borrowing down was unprecedented. The QE strategy ran for 6 years (to October 2014) and resulted in $4 trillion of new assets on the Fed’s balance sheet. Janet Yellen’s plan from 9/20/17 began the unwinding of QE (and shrinking of the Fed’s balance sheet) by having bonds mature without reinvesting the principal into new bonds. “Quantitative Shrinking” has resulted in $266 billion of bonds roll off the Fed’s balance sheet as of last week. The challenge for the bond market is to replace the Fed’s “buying footprint” with another major bond purchaser. Without that new buyer, interest rates would likely rise (source: Federal Reserve).
The federal government completed fiscal year 2018 as of 9/30/18. The financial result: $3.3 trillion of tax revenue collected vs. $4.1 trillion of outlays. The nation’s budget deficit was $779 billion, our 17th consecutive year of spending outpacing revenue. The USA has run a budget deficit in 53 of the last 58 fiscal years, i.e., 1961-2018. The only surplus years were 1969, 1998, 1999, 2000 and 2001 (source: Treasury Department).
The impact of the “Tax Cuts and Jobs Act” legislation is already being felt by businesses. Corporate income taxes collected during fiscal year 2018 were $204.7 billion, down 31.1% from the previous fiscal year (2017) total of $297.0 billion. Corporate income taxes collected in fiscal year 2015 were $343.8 billion (source: Treasury Department).
Notable Numbers for the Week:
WHERE ARE THE WORKERS? - From the 2.1 million job openings in the United States reported in July 2009 while the country was mired in a recession, that number has jumped to record 7.136 million as of August 2018. The 5 million increase in job openings since mid-2009 is equivalent to 100,000 new available jobs in each of our 50 states (source: Department of Labor).
MORE EQUITY - The average loan-to-value ratio in the US housing market as of 6/30/08 was 55%. The average loan-to-value ratio in the US housing market as of 6/30/18 was 40% (source: Federal Reserve).
SPENDING - 62% of the $4.108 trillion of total outlays for the US government during the recently completed fiscal year 2018 was in just 4 categories – Social Security ($988 billion), National Defense ($665 billion), Medicare ($589 billion) and Net Interest Expense ($325 billion) (source: Treasury Department).
MOM AND DAD - The national median cost in 2017 for an assisted living facility (private 1-bedroom accommodation) was $3,750 per month or $45,000 per year (source: Genworth).
This message and any attachments contain information, which may be confidential and/or privileged, and is intended for use only by the addressee(s) named on this transmission. If you are not the intended recipient, or the employee or agent responsible for delivering the message to the intended recipient, you are notified that any review, copying, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please (i) notify the sender immediately by email or by telephone and (ii) destroy all copies of this message. If you do not wish to receive marketing e-mails from this sender, please reply to this email with the word REMOVE in the subject line. By industry regulation, we cannot accept time-sensitive information via e-mail. If you would like to execute a trade or if you have time sensitive information for me, please call my office. We cannot guarantee receipt of, nor the timing of placement, for investment orders received via e-mail.
If you do not want to receive further editions of this weekly newsletter, please contact Jayne Weddington at 614-431-4328 or e-mail us at firstname.lastname@example.org. You may also write us at 300 W. Wilson Bridge Rd., Suite 320, Worthington, OH 43085. Securities and Investment Advisory Services offered through FSC Securities Corp., a broker/dealer and registered investment advisor. Member FINRA/SIPC. Vorisek Financial Corporation is not affiliated with FSC Securities Corporation or registered as a broker dealer or investment advisor.