After kicking the new year off with gusto, global investment markets took a tamer approach to February, perhaps to honour the day of St. Valentine. Hence the first one-sixth of the year has delivered mixed results. No one can say 59 short days are a prelude of things to come. Nor will I make any such magical prognostications. Instead, as is the usual case, I’ll submit a glimpse into what had my brain cells firing over the month, as I traversed the investment landscape for you over the past few weeks.
On and off on my mind for many years has been the growing public debt issue faced by many countries, mostly in the “West”. Plenty of financial crises of decades past were spurred by debt problems so the matter isn’t one to let lapse today. Two relatively fresh examples include the 1998 Long-Term Capital Management Crisis and then the 2007-2009 Great Financial Recession. In the first crisis, banks bailed out a hedge fund levered to its eyeballs in debt. In the second fiasco, the governments bailed out the crumbling banks. Now, some are left to wonder, who will bail out the governments when that chicken comes home to roost? We’ve had the ‘Tic’, followed by the ‘Tac’. Will the trifecta be completed with ‘Toe’?
Some may scoff, wondering the point of being unsettled by such a thought. But consider, even in these two identified examples, how much worse were the economic and financial shockwaves in the second one over the first one? And let’s not kid ourselves. The ramifications of the first crises were anything but minimal.
This is not at all suggesting financial Armageddon is upon us and that drastic measures must be taken. Such thinking in the past decimated overall wealth decimated of those sitting in cash, waiting for “the end” to come. But, as with most investment matters, the public debt issue is one that could have investment implications in the future. One need not look further than shudders felt during Greek and subsequent “PIGS” debt crises nearly a decade ago. (1.)
The US Debt Clock website (2.) has a handy running debt tally for many countries. Here are some approximate high (and low) lights to take note of at time of publication:
Country | National Debt | National GDP | Public Debt/GDP |
Canada | $2.27 Trillion | $1.77 Trillion | 128.11% |
USA | $31.60 Trillion | $26.26 Trillion | 94.69% |
Japan | $13.30 Trillion | $4.47 Trillion | 297.29% |
Greece | $522.88 Billion | $231.10 Billion | 226.26% |
Korea | $1.05 Trillion | $1.84 Trillion | 57.11% |
Nigeria | $218.00 Billion | $535.01 Billion | 40.75% |
Switzerland | $400.94 Billion | $839.31 Billion | 47.77% |
Saudi Arabia | $357.58 Billion | $1.05 Trillion | 34.04% |
Recall that GDP represents the country’s measurement of productivity, like your income as a productive member of society. Any debt/GDP ratio over 100%, infers that country owes more than their production covers. The inverse is true too. Countries with higher GDP than debt see a ratio below 100%. It may be surprising to see which countries are struggling and which are well-positioned to capitalize on the future.
Ensuring your investment portfolio survives and thrives the market uncertainty and clamor to come will require unconventional wisdom and approach not found in playbooks used by most frontline financial advisors. If you recognize the value of thinking differently, please contact us to arrange an initial discussion about how we are better arrayed to grow and preserve your money into the future.
All My Best,
Adrian Harasymiw Investment Advisor Pinnacle Sovereign Investments of ACPI
P.S. To review the February market numbers or download a PDF copy of this commentary, head over to the Monthly Market Pulse page on our website.
(1.) Before anyone gets offended, that is not my acronym but stands for Portugal, Italy, Greece, Spain; it's easily found via internet search
(2.) US Debt Clock