U.S. Debt

The long-term outlook for U.S. Debt is not favorable. The fiscal situation is terrible and Congress and the President lack the will to make the necessary budget cuts.

The terrible fiscal situation:

For the last 30 years, Social Security has been used to fund the government. Now Social Security and Medicare are already spending more than they're taking in. The government is at an impasse, with the Republicans refusing to allow this country to move forward, refusing to allow legislation on Budget cuts or a bipartisan budget panel. Fiscal balance looks impossible. Each year we are adding to the debt -- tax revenues are declining and funding programs are increasing. There is a limit to how long people will continue to buy US Debt.

Here are a few good articles on the problem:

http://finance.yahoo.com/news/US-debt-will-keep-growing-apf-219502322.html?x=0&sec=topStories&pos=5&asset=&ccode=

(Why US Debt will keep growing.)

http://www.financialpost.com/story.html?id=2538944

(El-Erian says that German debt is a much better buy, even as a safe haven.)

http://www.theglobeandmail.com/report-on-business/commentary/euro-zone-woes-foreshadow-threat-of-us-debt/article1460923/

(Quotes Roubini warning that focus will gradually shift from Greek and European Debt to US Debt, examines GS economist's analysis of primary debt, concludes that US Debt is unsustainable and that the US lacks the political will to tackle it.)

So the conclusion would be to buy leaps against U.S. Debt at all opportunities. What's interesting is that TLT failed to rise appreciably even when the stock market fell 10% recently. What would it take to get TLT to rise appreciably?

As far as currencies are concerned, the the Aussie, the Loonie, the Indian Rupee and the Chinese Yuan have better long-term fundamentals than the US dollar.