On the morning of Monday April 5, I presented a 15-minute slide deck to Zacks Ultimate members as part of our monthly 1-hour Strategy Session (ZUSS, for short).
My topic of analysis was one I had selected two weeks prior. Here was the email description I submitted on March 24…
America’s National Debt: Are we headed for a government-led financial crisis?
Dave Borun and Kevin Cook will attempt to tackle the biggest elephant in the room. Deficit spending saved the economy from recession and stocks from a crash, and the debt doesn’t seem to matter much now at these low rates. But we just crossed $28 trillion and the interest expense alone right now is in the hundreds of billions.
With the $1.9 trillion American Rescue Plan Act and a potential $3 trillion infrastructure bill, a decade of multi-trillion dollar deficits appears ahead. The CBO is projecting a nearly 60% increase in the national debt — to $44+ trillion — over just the next 6 years. Disaster appears to be looming as the interest rates we have to pay on US Treasuries rise.
But one of our strategists says the “debt clock disaster” folks are wrong. Tune in to find out where Kevin and Dave each stand on this historic showdown.
(end of blurb promoting our ZUSS “Agree to Disagree” segment)
Dave Borun graciously took the “deficits and debt matter” side of the discussion, which allowed me to take the out-of-consensus view that they don’t matter now and
won’t matter in 2050
— and the US economy will be able to tackle them quite sufficiently over the coming decades before/if/when the debt doubles GDP.
Quite coincidentally, John Oliver also chose the national doo-doo for his Sunday evening show on HBO, “Last Week Tonight.” I know that neither Dave nor I saw the show as we recorded our segments on Monday morning.
And I, for one, am quite grateful since I would not have been able to proceed with my presentation with quite the same conviction, since Oliver and I share some of the same conclusions about Congressional virtue-signaling on the debt —
while they persist in packing “pork” into every spending bill for their special interests.
How Does the Debt Hurt Future Generations?
We also happen to share a much bigger conclusion.
While you may not agree with Oliver’s politics, I hope you listen to either one, or both, of us about our final answer on this question: “Are we really harming our grandkids with the escalating national debt?”
With amazing synchronicity, coincidence, or whatever you want to call it, we both ended our videos with a major hammer down on that moral question.
Also of note, John does a superior job at crushing the “debt-disaster” hypocrites in the meat of his monologue, while I focus on the real answers to why inflation and interest rates are so subdued —
it’s Exponential Technology Innovation (ETI) stupid!
Technology innovation has been the primary driver of economic growth and transformation throughout history, while war and politics have their minor roles. And in the last few centuries, that innovation has become
exponential
as technologies converge and multiply each other’s impact and development.
And best of all, in John Oliver’s show that I just watched Wednesday morning for the first time, he hands me a fresh kill in the form of an IMF economist saying “we don’t really know why interest rates and inflation are so low.”
I skewer that bird right up the business end of a turkey spit.
US Debt Hawks Meet a Bigger Bird of Prey: ETI
In the video that accompanies this article, I give a longer version of that ZUSS presentation in hopes that I can deliver a compelling case to all parties… to at least get them to think about alternatives to “debt is the problem.”
In essence, I argue that “growth is the solution” and explain why technology innovation has ignited unbelievable economic productivity — and wealth creation — while annihilating inflation.
This is not a new idea for me. I wrote one of my most important economic and investment thought pieces in December of 2017 where I called what was happening
The Technology Super Cycle
. I wanted to get at the root of how multiple innovation trends were “breeding and superseding” all economic cycles and government/central bank intervention, or lack thereof.
At the time, I recommended four stocks to represent my “tech innovation” theme across two sectors:
NVIDIA
NVDA
and Lam Research for hardware/software;
Align Technology
ALGN
and
CRISPR Therapeutics
CRSP
for biotech/medtech leverage.
It wasn’t until two years later that I learned of Cathie Wood at ARK Invest building a revolutionary investment philosophy and actively-managed “thematic” ETF company around such ideas. She calls her primary theme and driver of growth and wealth creation “disruptive innovation.”
As further delicious coincidence would have it, on Monday evening — after I filmed my “The National Debt Rocks!” segment for the ZUSS — I saw Elon Musk begin a conversation with her on Twitter.
Full details on that important dialogue are in the video, where I also explain what I mean by Exponential Wealth Creation (EWC) and ETI (Exponential Technology Innovation) “ruling the roost” of the economy with much bigger leverage than anything to do with Congress or its compromised budget procedures.
My most powerful message to anyone pretending they can predict how and when a national debt matters comes in the form of this question: “Did you or your economic advisors truly predict the powerful rise of Apple, Amazon,
Tesla
TSLA
, or
Square
SQ
?”
The Technology Super Cycle is Real
I leave you with the summary introduction to my groundbreaking research report from 2017,
The Technology Super Cycle
, where I dig like Columbo to solve two mysteries…
Missing Link #1: Hidden Productivity
Missing Link #2: Extinct Inflation
Vital Fact: Innovation is driving earnings growth in unseen productivity and efficiency that keeps inflation low and investment high.
Just how how fast is technology innovation changing our world, and the global economy, and what are the impacts for investors?
Both as citizens and investors we benefit from high tech: smartphones, apps, the cloud and HPC (high performance computing), semiconductor efficiency and software automation, biotechnology and even advanced energy tech like fracking.
But we haven’t really seen this powerful growth show up in the GDP of our 2% economy for the past 8 years or so.
It’s almost as if you could believe the pessimists who say that technology innovation is somehow hurting economic productivity by burdening us with systems that are complex to learn, susceptible to failure, and vulnerable to hacking. Or maybe they think that productivity only causes jobs to go overseas and profits and wages to go down.
But in mid-November I offered a better answer to Zacks Ultimate members in our monthly ZU Strategy Session. In the “Agree to Disagree” segment, I challenged our Director of Research to a debate about whether “This Time Is Different” with respect to growth and equity valuations.
My thesis: Technology was actually accelerating growth but we didn’t see it in government data because productivity was also accelerating in ways uncaptured (or unpublicized) by the Bureau of Labor Statistics, thus changing both the numerator and the denominator of several derivative measurements.
(end of executive summary from my 2017 Tech Super Cycle report)
Be sure to catch the video attached to this article so you can see all my slides on the
debt debacle debate!
Talk soon!
Cooker
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader and Healthcare Innovators Portfolios.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
Today, Download Marijuana Moneymakers FREE >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report