Treasury Revenue Soars Again, but Deficit Grows by Another $347 Billion

Kirk's 6/12/24 Deficit Spending Update: For FY 2024 to date, total taxes and other revenues collected YTD are up 9.8% year-over-year.  The "good news" is SPENDING grew at "only" 8.0%!  This means the deficit is growing a "slower rate." 

The problem is during periods of economic growth like we've had for several years, we should be paying down debt by keeping spending below revenue, but we're doing the opposite.

After rising 10.3% in April 2024 vs April 2023, US Treasury revenue grew another 9.8% in May 2024 compared with May 2023.  The trouble is spending grew at 8.0% and remains well above revenue.  

Summary

Stated as a household budget by dividing by 40,000,000:

Inflation is a lazy government's way to raise taxes by pushing us into higher tax brackets while the spenders use borrowed money to buy vote for reelection without regard for what is good for the country.  Understanding this data is KEY but few take the time to bother.

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DATA FROM: https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0524.pdf

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May CPI at 3.3% Is Still Above Fed's 2.0% Target

 Despite President Biden's "Inflation Reduction Act of 2022" (estimated to contain $500B in new spending and tax credits) and the Federal Reserve keeping its Fed Funds Interest Rate at a 20-year high, inflation at 3.3% is 1.3% or 65% above the desired or "target rate" of 2.0%.

CPI-U: This morning the US Bureau of Labor Statistics announced, "The Consumer Price Index for All Urban Consumers (CPI-U) was flat in May on a seasonally adjusted basis, after rising 0.4 percent in April". and "Over the last 12 months, the all-items index increased 3.3 percent before seasonal adjustment."

Core CPI-U: "The index for all items less food and energy rose 0.2 percent in May, after rising 0.3 percent the preceding month" and "The all items less food and energy index rose 3.4 percent over the last 12 months."

Chart: CPI vs Fed Funds Rate vs Expected 10-Yr Inflation from 2004

Chart: CPI vs Fed Funds Rate vs Expected 10-Yr Inflation from 2020

Table: Raw Inflation Data from November 2023:

Kirk Lindstrom's Investment Letter: To see what stocks and ETFs are in my "Explore Portfolio" and get a full list of on my price targets to both take profits or buy more:

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In-N-Out Burger Prices

Today the Channel 2 Fox News in SF/Oakland CA showed the prices for In-N-Out Burger after California raised the minimum wage to $20 per hour for workers at fast food restaurants.

Here are the prices for a:

• Double-Double $6.05
• Cheeseburger $4.25
• Hamburger $3.75
• French Fries $2.40

Next, they showed the prices for an "In-N-Out Double Double Meal" by city which includes a soda.

• San Francisco: $13.60
• Alameda: $11.96
• San Jose: $11.81
• Pittsburg: $11.42

Healthy (ahem) hint: Skip the soda and drink a free water to keep your price under $10.

Discuss the prices on my FB Investing for the Long-Term Group. 

McDonald's Prices according to CNBC

Kirk's Investor Sentiment & Other Charts

Market Sentiment Update 

Investors Intelligence Bulls / (Bulls+Bears) & S&P 500 Weekly  -  5/23/24

AAII Survey: Bulls minus Bears vs. Log DJIA - 1988 to Today

US Stock Markets (Log Scale) vs. Fed Funds Rate 

10-Yr & 30-Yr T-Bond Rates vs S&P 500

CPC Put Call Ratio 

Fear and Greed Index @ 59

From https://www.cnn.com/markets/fear-and-greed

NAAIM EXPOSURE INDEX = 89.25: 

• The NAAIM Exposure Index represents the average exposure to US Equity markets reported by our members.
• https://naaim.org/programs/naaim-exposure-index/

2CS-p = 90.3 VERY high:  

Invented by Tom Drake, the 2CS-p is the "5 day moving average of the product of the vix and p/c ratio."   The scale runs from 0 to 100% with 0% max bullishness and 100% max bearish reading for us contrarians.

For more on investor sentiment and what it means to me, read my newsletter where 

• Page 6 is dedicated to a monthly update on sentiment.
• Page 12 summarizes sentiment and how it relates to five other "Market Factors" I follow.

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Kirk Lindstrom's Investment Letter: To see what stocks and ETFs are in my "Explore Portfolio" and get a full list of on my price targets to both take profits or buy more

Excerpt from my May 2024 Newsletter:

This is not an “exact science” so “all or nothing” market timing is foolish.

Market Timing Disclaimer: No sentiment indicator, or any indicator for that matter, is 100% reliable. I look at sentiment as head winds and tail winds. When sentiment is terrible, then it acts like a tail wind for your returns where you could see further declines, but long term, it is best to be buying when most others are selling. Likewise, if we see sentiment get too bullish, then I would consider lowering my portfolio asset allocation. It seldom pays to be buying stocks when EVERYONE is talking about stocks and how much money they are making at cocktail parties.

In addition, I am not market timing but for a small portion of my Explore Portfolio. I use market-timing indicators to tell me it is a good time to buy so I can add to positions when the market is down and thus help me overcome my fear to rebalance back to my target asset allocation. Likewise, when the market-timing indicators are saying to sell, they usually come when the markets are high where I want to be taking profits. The market timing indicators at market highs help me get over my greed and take profits.

April CPI Still Hot at 3.4% vs Fed's 2.0% Target

Despite President Biden's "Inflation Reduction Act of 2022" (estimated to contain $500B in new spending and tax credits) and the Federal Reserve keeping its Fed Funds Interest Rate at a 20-year high, inflation at 3.4% is 1.4% or 70% above the desired or "target rate" of 2.0%.

CPI-U: This morning the US Bureau of Labor Statistics announced, "The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis, after rising 0.4 percent in March". and "Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment."

Core CPI-U: "The index for all items less food and energy rose 0.3 percent in April, after rising 0.4 percent in each of the 3 preceding months." and "The all items less food and energy index rose 3.6 percent over the last 12 months."

Chart: CPI vs Fed Funds Rate vs Expected 10-Yr Inflation from 2004

Chart: CPI vs Fed Funds Rate vs Expected 10-Yr Inflation from 2020

Table: Raw Inflation Data from October 2023

Chart: Fed Funds Interest Rate vs S&P 500 - 1993 through today

Chart: Fed Funds Interest Rate vs S&P 500 - 2019 through today

Tariffs and Inflation:  Perhaps I should have included President Trump's tariffs as a contributor to inflation stubbornly remaining above the desired 2.0% target.

If so, then President Biden's new tariffs will make inflation worse.

Yesterday President Biden announced new tariffs on goods manufactured in China. 

WASHINGTON, May 14 (Reuters) - President Joe Biden is hiking tariffs on $18 billion in Chinese goods including electric vehicles, batteries, semiconductors, steel, aluminum, critical minerals, solar cells, ship-to-shore cranes, and medical products, while retaining Trump-era tariffs on over $300 billion in goods. 

The United States Trade Representative's Office told Reuters it anticipates the effective date will be in approximately 90 days.

Spending $500B to "reduce inflation" and then implementing new tariffs then listening to others debate the merits...

Kirk Lindstrom's Investment Letter: To see what stocks and ETFs are in my "Explore Portfolio" and get a full list of on my price targets to both take profits or buy more:

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Discuss this article at my Investing for the Long Term Facebook group.