What To Do When The Planets Diverge

Planets Jupiter and Saturn came into closer alignment than any time since 1226 this week.  Yet the planets in Washington did not align.  The federal government was unable to ‘Christmas tree’ its stimulus bill.

At the 11th hour, President Trump called bull pucky on the contents of Congresses hideous creation.  Too much pork.  Not enough relief.

Congress will return next week and attempt to salvage a deal.  Likewise, we’ll save fiscal stimulus and its consequential economic distortions for reckoning with another day.

It’s Christmas, after all.  We’d prefer to delve into the esoteric.  Thus, today, for fun and for free, we seek meaning through numerology and astrology.  Where to begin…

Not long ago, if you recall, a Dow Jones Industrial Average (DJIA) above 30,000 was impossible.  Nothing could touch it.  But here it is, in the flesh, a DJIA that’s a peppermint stick above this “sacred” number.

A DJIA above 30,000 is, indeed, quite impressive.  But equally impressive is a distinct, yet somehow related milestone that’s rapidly approaching.  The U.S. National Debt is over $27.5 trillion.  At the current spending rate, the national debt will surpass a round and rotund $30 trillion within nine months.

The reality, however, is that the national debt exceeded $30 trillion a long time ago.  In fact, it’s really 568 percent higher.  Remember, current unfunded liabilities, including Social Security and Medicare, now total over $156.2 trillion.

Added together, the national debt and current unfunded liabilities total $183.7 trillion.  Truly, this number is so large it’s near impossible to comprehend.  Thus, for simplicity and for the sake of numerological harmony, today’s ruminations are limited in breadth and scope to DJIA 30,000 and U.S. National Debt $30 trillion.

Arbitrary Data Points

Quite frankly, we don’t really know what the DJIA and the national debt have to do with each other.  We can’t quite put a finger on it.  But we have a hunch both milestones are in some way emblematic of a great transformation that has taken place.

Is DOW 30,000 and U.S. National Debt $30 trillion merely a coincidence?  Or is there a correlation?  And if there is a correlation, does it imply causation?

There are a variety of ways, no doubt, to explore these questions.  Here we opt for the path of least resistance.  Hence, what follows is not a detailed desktop evaluation of the numbers; but, rather, one very simply deduced conclusion based on inference, guess work, and conjecture.

To begin, we peer back to the past in search of arbitrary data points that look as if they’re interrelated.  For example, in the autumn of 1982 the DOW surpassed 1,000.  This wasn’t the first time this happened.  But 1982 is the last time the DOW rose above 1,000 without then dipping back below.  Similarly, 1982 is when the U.S. National Debt first topped the $1 trillion mark.

From $1 trillion to $30 trillion, the U.S. National Debt generally followed an exponential growth curve.  There was a slight pause in the late 1990s.  But otherwise it has progressively concaved upward approaching a parabolic trajectory; particularly since 2009.

The DOW’s march from 1,000 toward 30,000, on the other hand, has been less direct.  There have even been several brief, yet significant, selloffs along the way.  What to make of it?

A statistician may run the numbers for the DOW and the U.S. National Debt and conclude that there’s a weak correlation, and certainly no causation.  They may even graph a scatter plot to make their case.

A numerologist, however, may look at the divinely round numbers and infer something much different.  Maybe even that there’s a connection that can be projected into the future.  Who’s right?  Who’s wrong?

What To Do When The Planets Diverge

Along the road from DOW 1,000 to DOW 30,000 and from U.S. National Debt $1 trillion to U.S. National Debt $30 trillion one thing is quite clear.  There have been episodes of alignment and episodes of significant divergence.

For instance, in March of 2009 the DOW touched down at about 6,700 while the U.S. National Debt was over $10 trillion.  Perhaps we’re approaching another such divergence.

Namely, using a subjective combination of supposition, numerology, astrology, and crude statistics, it seems likely that we are entering a time where the U.S. National Debt continues its exponential trajectory while the DOW dives 15,000 points – or more – to below 15,000.

You can take this shrewd little nugget of insight for what it’s worth and set it aside for another day.  Remember, today’s Christmas.  Now’s the time for joy, good cheer, and merriment.  Not gloom, boom, and doom.

Thus, like the stock market over the last decade, now’s the time to seize the day and make something of it.  For the planets may not be so amicably aligned come this time next year.

So wreck the halls, if you’re so inclined.  Have another eggnog or peppermint bark.  Give the bell ringing Salvation Army lady a wink and a crisp Andrew Jackson or Benjamin Franklin…before the Fed outlaws cash.

Of course, whatever you do, always do it in a ‘safe and sane’ manner.  In short, sell the DOW – and sell bonds too.

On that cheery note, we’ll conclude our ruminations.

Merry Christmas!

MN Gordon
for Economic Prism

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