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When Will The U.S. Debt Become A Negative?

|Includes: AAPL, Cleveland-Cliffs, Inc. (CLF), NTR

Since October 2008, the U.S. government has been spending a lot of money, most of which it currently does not have. Simply put, to keep the economy going the government has borrowed from other nations and from the Federal Reserve Bank. The major foreign debt holders are China, Japan, and Brazil. The capital borrowed from the Federal Reserve Bank is simply printed. The national debt for the United States is now estimated to be over $12 trillion dollars. I repeat $12 trillion dollars!

What is the amount of interest that must be paid back on this borrowed money? What will happen if the 10 Year T-note yields go to 5.00 – 6.00 %? How can the U.S possibly service the interest on this debt? Forget about paying off the principle on this debt, that simply cannot happen in the next 50 years.

Spending by the past administration was completely out of control in the United States throughout 2001-2008. However, this current administration is not any different than the last one. The last time I checked a household could not spend their way into saving money. Countless stimulus and entitlement programs from the government continue to unfold on a daily basis. Therefore, the U.S. debt only seems to increase.

At this time the stock market loves what is going on. The market seems to float higher everyday, and every dip is a buying opportunity. Leading stocks such as Apple Inc (NASDAQ:AAPL), Cliffs Natural Resources Inc (NYSE:CLF), and Potash Corp (NYSE:POT) are certainly trading higher and signaling all is well, for now. However, at some point the party will end just as it did in 2007. When the party does end and the music stops, this time around has the potential to be worse than the last crisis.


Nicholas Santiago,
Chief Market Strategist