Tag Archives: Crowding out

POCKETBOOK: Week ending March 17, 2018

  • IMG_1801
  • Ever hear of “crowding out”? Time to learn about it.

Trump’s tax cuts may have made million- and billionaires happy, even some workerbees may think it’s a terrific deal, but in reality the move will prove to be hugely costly to most Americans.

Why? Because somebody has to pay for those cuts.

A recent New York Times story reported that one of the results of the tax cuts is that in this fiscal year, the Treasury Department will likely  have to borrow $955 billion from investors. That’s a lot and big increase from last year.

If you’re a believer in debt, and think doing business as a big debtor is a great deal— as President Trump does, did, and has throughout this real estate business deals– a government that continues to accumulate debt isn’t an efficiently run government. Or, one anyone can or should be proud of. And is a vulnerable government.

Bottom line here is that as our debt grows so does our responsibility to pay it. Meaning, interest rates have to go up to cover those debt costs, and, it becomes more expensive for a company or an individual to borrow money translating to life costing more for everyone.

“Crowding out”, according to that same article is when “large-scale government borrowing sucks up the supply of available capital, driving up financing costs for just about everyone else.


  • Market Quick Glance

Once again the numbers tell their weekly story of what goes up can come down.

It was Nasdaq where the weekly numbers showed best as it moved upward while the three other indices fell.

Below are the weekly and 1-year index performance results for four major indices— including the dates each reached new highs—according to CNBC.com based on prices at the close of business on Friday, March 16, 2018.

DJIA 0.92% YTD down a hunk from the previous week’s 2.49%

  • 1 yr Rtn 19.16% down from the previous week’s 21.21%

Most recent DJIA all-time high was reached on January 26, 2018 of 26,616.71. The previous high was reached January 18, 2018 was 26,153.42.


-S&P 500 2.93% YTD down a hunk from last week’s 4.22%

  • 1 yr Rtn 15.56 % down from last week’s 17.83%

The S&P 500 reached its most recent all-time high on January 26, 2018 of 2,872.87. The previous high was reached on January 19, 2018 of 2810.33.


-NASDAQ 8.38% YTD up from last week’s 5.13%

  • 1yr Rtn 26.80% down from last week’s 28.99%

Nasdaq reached a brand new all-time high on March 13, 2018 of 7,637.27. The previous high was reached on March 9, 2018 of 7,560.81.


-Russell 2000 3.29% YTD down from last week’s 4.01%

  • 1yr Rtn 14.43% down from last week’s 16.98%


The Russell 2000 reached an all-time high on January 24, of 1,615.52. The previous high was reached on January 16, 2018 of 1,604.02.


-Mutual funds

At the close of business on Thursday, March 15, 2018 the average fund that falls under the broad U.S. Diversified Equity Funds heading had a year-to-date return of 2.70%. That’s up from the previous week’s average return of 0.57%.

Once again, Large-Cap Growth Funds lead this pack’s performance with an average year-to-date return of 8.19% —one week before that figure was 5.50%.

Behind it came Multi-Cap Growth Funds at 7.54% (the week before it was 4.49%). Then, a switch up from last week’s Mid-Cap Growth Funds, 6.18%, to Small-Cap Growth Funds at 6.38%.

Under the Sector Equity Funds heading Science & Technology Funds and Global Science/Technology Funds lead the way with average returns in each category of over 12%, year-to-date.

Visit www.allaboutfunds.com for more information about how various equity and fixed-income funds have rewarded investors over the short-and long-term, based upon Lipper data. Short-term meaning weekly and monthly performance returns; longer-term includes quarterly, year-to-date, 1-yr, 2-yr, 3-yr and 5-yr returns.

  • CDs are looking kinda sorta good

Over the past few weeks ads in my local paper have been advertising CD rates of 2% and higher. That’s enough of a jump from the 1.10% kinds of returns to make short-term fixed income investors take notice. Particularly when the stock market is in its ninth year of a bull market and volatility is enough to cause one’s blood pressure to rise during daily and weekly market sessions.

Before biting, however, make sure to read the small print. For example, a recent ad from FCB, Florida Community Bank, offered a 2.15% APY, good through March 30,2018. To take advantage of it you’ve got to have $10,000 in “new funds” and be willing to lock those 10 Gs for 19 months.

Another ad from First Republic Bank offered a 20-month CD at the rate of 2.00%APY for a “limited time” with a minimum investment of $10,000.

Seeing yields in the 2’s is nice. But if you’re someone who thinks about annual returns, as in 12-months, make sure to read the small print in these offerings because you’d be locking up your money for at least 19 months. That’s more than a year and a half and makes the reality of these advertised 2% returns a bit of a tease.

As always, investor beware, read the small print and realize that rates could be going up before you know it.