Here’s the news of the week – and how we see it here at McAlvany Wealth Management:

1. As we repeatedly point out, things are not always as they seem.  Durable goods orders were up, and up big for the month of April – 2.9% to be exact.  As we all know, that’s yet another sign of recovery – except that when you subtract from transports the civilian aircraft component (the Boeing 787 Dream liner), which added 228%, you were actually negative 1%.

2. National Debt tipped the scales at 13 trillion.  Isn’t that a lucky number?  As debt levels accelerate at a 15% annual rate, we have catastrophically engaged the power of compound interest.  If you earn interest at 15% you double your money in about 5 years.  If you are adding new debt at that rate, you are in trouble. This week, Bond Guru Bill Gross suggested, “The burden of debt can take decades to accumulate, but only a few short months to change course into crisis.”  Bottom line: real and reasonable concern is growing amongst the bond crowd that the game is in the final inning.  A huge quantity of the debts that have been issued, both corporate and governmental, will simply go unpaid.  Linguistic check: Restructuring (extending the terms, adjusting the balances etc.) is the new default.

Next week, a look at earnings, municipal mayhem, and currencies that are not so pretty right now – (it won’t be a dollar rant).

Staying the course…

Have a great Memorial Day weekend!

David Burgess
VP Investment Management

David McAlvany
President and CEO