Investment Opportunities

Stocks Are the Only Lifeline Left as Devastation Comes

We hope you’re taking advantage of this raging bull market.

You’re gonna need that money.

We’re on the record calling for Dow 100K. We say it’s inevitable within, at most, a decade.

The way things are going these days, it could come much sooner.

To the untrained – or not yet skeptical – it looks like good news. Soaring stocks bring more wealth.

But what if buying into a soaring stock market were the only way to survive?

Well… it is.
[mw-adbox]

The Devastation Awaits

Take the devastation in Illinois, for instance. Unless you live there, you may not have heard the news. But voters (rightfully) shot down an amendment to the state’s constitution that would have paved the path for a major tax increase.

Thanks to the COVID-19 crisis, Illinois is in a world of trouble. It’s broke and getting more broke.

For the taxpayer, it’s a perfect example of “shrinkflation.” Folks are paying more and more to their government and getting less and less.

In this case, Illinois’ governor begged for a tweak to the state’s constitution. He wanted to ditch the language that mandated a flat tax… and replace it with a boneheaded oxymoron – what he calls a “fair tax.”

He wants the rich to pay more… and not just on the money they make each year, but on the money they saved for retirement.

And what will the good-hearted governor do with that tax cash? He’ll use it to pad the funds of the state’s own retirement system.

In other words, the bureaucrats couldn’t run their own retirement scheme well enough… so they’ll take the money they need from the folks who could.

Math Hurts

Thanks to the COVID-19 mess, the numbers in Illinois are off the charts.

It has a $6 billion budget deficit this year. On top of that, some $8.1 billion of its bills remains unpaid. And, worst of all, its unfunded pension liability has soared to more than $135 billion.

In all, its pension debt is the equivalent of 25% of the state’s economy.

That’s bad. It’s the very definition of a government gone wild.

If Illinois were a person, no bank would lend to them. But as Illinois is a state with taxing authority, the money kept flowing as the numbers went higher and higher. Lenders convinced themselves that tax rates would simply rise to pay off the debt.

Now that may not be the case.

Junk

The state has already warned its citizens to start expecting less for their tax dollars.

Just as dire, credit agencies are now on the verge of moving the state’s rating to the dreaded (and embarrassing) “junk” status.

“Now, this is where it gets interesting, to see if the rating agencies actually have the chutzpah to pull the trigger on the first-ever U.S. state junk rating,” said Bloomberg’s Eric Kazatsky.

We don’t need chutzpah to see what’s happening.

It’s bad news.

The state’s borrowing costs will rise – costing many millions more each year just to pay the same bills.

Again… taxpayers will pay more and get less.

Safety nets will get lower and lower.

Adding to the pain, though, is that many big investors will be barred from buying the state’s junk bonds. Many pension funds, endowments and other institutional investors are only allowed to own investment-grade bonds. Illinois could soon be pushed out of the ranks.

Costs will rise, and borrowing will get harder.

It’s a sad state of affairs.

The people are getting punished for the deeds of others.

They’re paying more each year and getting less.

It’s a devastating trend.

But it’s not just in Illinois. It’s all across the country.

New Jersey is in trouble. Alaska is on the ropes. Pennsylvania has a lousy credit rating. And even Rhode Island is falling short.

In all, it would take at least half a trillion dollars of somebody else’s money just to balance the books these days. It’s a tough proposition, especially given the fact that COVID-19 has slashed revenues and ballooned expenses.

For now, most folks expect Uncle Sam to swoop in and plug the holes with free money. But he has already printed $3 trillion this year and is having money trouble of his own.

How much more can Washington print before its money falls in value… and trust?

Hmmmm… just ask the stock market.

It tends to rise when the value of money falls.

Dow 30K is just a blowout day away… Dow 100K won’t be far behind.

As the devastation of this fiscal mess unfolds, stocks are the only lifeline that’s left.

It goes against the gut. But the ticker tape doesn’t lie.

We’ve got plenty more to say about this crisis and how to survive it. Stay tuned for more details later this week. And tell us what you’re worried about at mailbag@manwardpress.com.


About

Andy Snyder is the founder of Manward Press, the nation’s premier source of unfiltered, unorthodox views on money and what it means for a free society. An American author, investor and serial entrepreneur, Andy cut his teeth at an esteemed financial firm with nearly $100 billion in assets under management. Andy and his ideas have been featured on Fox News, on countless radio stations, and in numerous print and online outlets. He’s been a keynote speaker and panelist at events all over the world, from four-star ballrooms to Senate hearing rooms. Today, Andy’s dissident thoughts on life, liberty and investing can be found in his popular daily newsletter, Manward Digest.

Articles by
Related Articles