US EQUITY MARKET RALLY IS ON FRINGE OF COLLAPSING
We are pragmatic investors and deal in facts, not hype or inflated earnings estimates and rose colored glasses. We are also not doom and gloom prognosticators.
We look at the U.S. Economy from the bottom up, starting with sales tax revenues at the Municipal and State level, which demonstrate substantial deterioration for four (4) consecutive years on a weighted average basis.
Secondly, we look at the property tax revenues, which lag the real time sales taxes, due to differing property value assessment cycles in each Municipality across the U.S. From the 2007 property market high, we are now seeing the true effects of substantial real property value deterioration across the U.S., as almost all Municipalities have been forced to assign lower tax values to real estate.
Real estate prices continue to deteriorate, and show no signs of materially improving in the foreseeable future, with the national vacancy rate at 12% for single family homes and growing.
Thirdly, we look at State income taxes, excluding Texas and Florida, which do not have income taxes. State income tax revenues have declined for three (3) consecutive years as real unemployment rates are 15% nationally and growing due to State and Municipal layoffs.
Thus when we summarize the deteriorating sales tax revenues, property tax revenues and income tax revenues across the lower 48 U.S. States, we clearly see the reasons why they are in fiscal deficits and insolvency in many cases.
Bottom Line: We conclude despite the U.S. Federal Reserve and Treasury propping up Wall Street with zero (0%) effective interest rates, and funding excessive speculation and driving up the cost of commodities most importantly food staples, the U.S. Economy remains in a Recession as measured by the average citizen, States and Municipalities across the Nation.