Contrary to popular belief – foreigners are not buying the bulk of United States federal government debt

The United States government is likely to run a record fiscal deficit this year due to lower tax receipts. And given deficits since 2001, Federal debt is soaring (chart below). In the immediate aftermath of the last recession, the Federal Reserve was a major buyer of U.S. Treasury bonds.

US total federal debt until July 2018
Source: U.S. Department of the Treasury – Fiscal Service

Since 2014 though, the Fed isn’t really a buyer of Treasury bonds. The question is who is buying federal government debt?

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The youth economic dividend – does it really exist for the current day world?

We recently posted about population percentage for each country by age. The data was for 2016 from the World Bank and is the latest set of available data. We also wrote about the business of aging – how changing demographics are shaping the economic future in more ways than one. Here we explore if the youth economic dividend that many economists point to exists in the current world order.

Here is a map of population percentage for age below 15:

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Home and Rental Vacancy Rate for each state of the United States

The home vacancy rate is the proportion of the homeowner inventory that is vacant for sale.

The rental vacancy rate is the proportion of the rental inventory that is vacant for rent.

Here are the home and rental vacancy rates for each state of the United States (Data Source: U.S. Bureau of the Census),

US Home Vacancy Rate 2017 Map
Data Source: U.S. Bureau of the Census
US Rental Vacancy Rate 2017 Map
Data Source: U.S. Bureau of the Census

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The business of aging – how changing demographics are shaping the economic future in more ways than one

We recently posted about population percentage for each country by age. The data was for 2016 from the World Bank and is the latest set of available data. Here is a map of population percentage for age 65 and above:

And here is a map of interest rates for each country as of June 8, 2018:

See some correlation – direct or inverse?

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Here’s how the unemployment rate has changed for every state in the United States over the past decade

Some states in the United States have done exceptionally well over the past decade creating massive number of new jobs and reporting record low unemployment. There are reports of major labour shortages in at least some states currently.

Here are maps of the unemployment rate in each state in May 2008 and May 2018,

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Do economic fundamentals matter anymore?

This is a consolidated and slightly edited version of the series on economic fundamentals we ran last month.

Do economic fundamentals matter today? We look at the strange market conditions today. We are living in truly interesting times …

Stock Market Valuations

Equities globally have never been more valuable with market capitalization hitting $90 trillion.

Amazon trades at what a Price to Earnings ratio of some 200. Apple is worth some $900 billion. Even Tesla which makes no profit and is unlikely to make any profit any time soon is worth some $55 billion, more than Ford or General Motors.

Netflix is valued at $159 billion (13.6 times revenues of $11.7 billion) with 110 million paid (and 117 million total) subscribers. Netflix trades at a price to earnings ratio of 220. The company expects free cash flow of -$3 to -$4 billion in 2018 (yes, that is negative cash flow). Yet Netflix’s market cap is now greater than Disney’s and Comcast’s.

Don’t mention fundamentals …

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Something strange is happening in the global economy right now

Everyone seems to be focussing on the equity markets recently, but equity markets haven’t really moved much over the past one month. Over the past month, major equity markets have lost between 1.5% to 4%.

The real action is in bonds and commodities. And trade seems to be flourishing too.

10-year government bond yields of major economies are lower by 5% to 40% (in relative terms not absolute terms) in just the past month. 10-year German bonds are down 12 bps over the past month. That wouldn’t sound much but they are down 28% from 42 bps to 30 bps. U.K. yields are down 8%, U.S. yields down 5%, Japanese yields down 40%. Even Greek yields are down 20% over just the past month. Does the market anticipate a pause in interest rate rises? It would appear so.

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