General Stock Ideas

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More from Rickards -


- Trump's tax cuts are unlikely to generate anywhere near the economic growth that Reagan's did. With Reagan's, the tax cuts arrived at the depths of a deep recession, and were therefore very effective in reviving the economy. Trump's cuts come after 9 years of expansion (albeit a weak expansion historically). So Rickards says these tax cuts won't generate very much economic growth, but will add directly to the budget deficits. Estimates are for $1.5 trillion in deficits resulting from Trump's tax cuts, and Rickards thinks the price tag could be closer to $2 trillion.


- What remained of the budgetary spending caps that went into place in 2013 (the 'Sequester') have now been completely removed. So Congress is back to huge increases in domestic and military spending. This will add $300-400 billion to the deficit in the immediate future.


- These additional deficits are on top of the already existing $400 bil annual deficits.


- Student loan time bomb - Rickards says this is potentially larger than the 2008 subprime mortgage problem that lead to the 2008 meltdown. The amount owed is larger - $1.5 trillion for student loans vrs 1.0 trillion for subprime mortgages of 2008. Also, at the worst part of the subprime crisis, default rates were 6-7%. The current student loan default rate is whopping 20%, which represents a loss to the government of $300 bil. Rickards says these student loans currently in default are near the stage where the US govt has to fork over the $300 bil to cover the losses.


So when you tally it up, you come to an additional $2.5 tril in deficits, above and beyond the 'baseline' $400 bil annual US budget deficits.

The rating agencies are now talking about a cut to the US credit rating. Previously (~2011) Fitch had cut the US' credit rating, but S+P and Moody's didn't. Now S+P is talking about it due to the Trump tax cut and deficit binge. Rickards believes that this was the actual trigger for the recent stock market correction.