When reduced to its simplest form, the U.S. banking industry’s business model can be described as funding long-term loans with short-term liabilities. Banks take in money as deposits from individuals, held mostly in the form of checking and saving accounts. Even though theoretically that money could all exit the bank at the end of each day, the bank confidently lends the money out as longer-term loans to individuals and businesses. Banks are paying almost nothing for those deposits today, allowing them to keep nearly all of what they are charging on the loans, but the profits derived from loans may be impacted due to COVID-19. (source: BTN Research).
The outstanding debt of our nation’s government has grown from $22.6 trillion on 9/24/19 to $26.8 trillion on 9/24/20, an increase of $4.2 trillion in the last 12 months. That means over the last year, the USA’s national debt has increased by $11.4 billion per day, $475 million per hour, $7.9 million per minute, or a dire $132,000 per second. In just the 30 seconds it took you to read this paragraph, our national debt has increased by $4 million (source: Treasury Department).
In an AII Investor Sentiment Survey conducted last week, 46% of investors surveyed are bearish on the expected performance of U.S. stocks over the next six months. That number is up from the historical long-term bearish average of 31% (source: American Association of Individual Investors).
Notable Numbers for the Week:
- BANKS – 21 banks have failed in the last five years (through 9/25/20), requiring a financial bailout from the Federal Deposit Insurance Corporation, about four failures per year. 127 banks had failed YTD through this point in calendar year 2010, i.e., YTD through 9/25/10, about three failures per week (source: FDIC).
- LOTS OF PEOPLE – 22% of Americans (74 million people) are on Medicaid, the nation’s health care program for low-income Americans that is jointly funded by the federal government and all 50 states (source: Medicaid).
- BUILDING EVERYWHERE – New residential construction in the United States totaled 139,100 housing units in July 2020, its highest monthly total since September 2006. The total includes 93,100 single family homes, 700 apartment buildings with 2-4 units and 45,300 apartment buildings with 5 or more units (source: Census Bureau).
- VOTING – The 2020 elections in the U.S. take place 36 days from today. On 11/03/20, Americans will vote for a president, all 435 members of the House and 33 members (out of 100) of the Senate (source: Congress).
Mark R. Reimet, CFP®
CERTIFIED FINANCIAL PLANNER™