Financial Advisor Tim Hayes

The U.S. Is In a Precarious Situation

You would think that with the stock market at an all-time high and interest rates at exceptionally low levels, the United States must have its financial house in order. Nothing, however, could be further from the truth.
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The public debt and deficits, private debt, total debt, and the Federal Reserve’s balance sheet have never all been at or close to their all-time highs at the same time.

Exploding Public Debt and Deficits

When President Reagan took office, the federal public debt ratio to Gross Domestic Product (GDP) was around 31%. When he left office, it was about 50%.[i] Today, after the 2008 Great Recession and the COVID-19 pandemic, with total government debt around $27 trillion and a $21.5 trillion GDP, the deficit ratio stands at 129%. The previous high of 118% occurred at the end of the Second World War.[ii]

Today, the deficit hovers around 14% of the GDP. The only time it was higher was also at the end of WWII when it reached 27%. Amazingly, it took only four years 1948 until the U.S. government turned this deficit into a surplus.[iii]

Read More: 10 Years After the Financial Crisis, Does the U.S. Still Have a Debt Problem?

My Professional Designations

Financial advisors who hold the AIF® designation have:

  • Completed the AIF® Designation Training;
  • Passed the AIF® designation exam;
  • Met the designation’s prerequisites and qualification and conduct standards;
  • Accrued a minimum of six hours of continuing professional education, with at least four hours coming from fi360-produced sources;
  • Attested to a code of ethics.

Financial professionals who hold the CRPS® designation have:

  • Completed a course of study encompassing design, installation, maintenance and administration of retirement plans;
  • Passed an end-of-course examination that tests their ability to synthesize complex concepts and to apply theoretical principles to life situations;
  • Pledged adherence to the CRPS® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.

CRPS® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.

Financial Advisor who hold the AWMA® designation have:

  • Completed a course of study encompassing wealth strategies, equity-based compensation plans, tax-reduction alternatives, and asset-protection alternatives;
  • Passed an end-of-course examination that tests their ability to synthesize complex concepts and apply theoretical concepts to real-life situations;
  • Agreed to adhere to the AWMA® Standards of Professional Conduct, and are subject to a disciplinary process in that regard.

AWMA® designees renew their designation every two years by completing 16 hours of continuing education, reaffirming adherence to the Standards of Professional Conduct, and complying with self-disclosure requirements.

CFS designation is awarded upon passing an examination on mutual funds, ETFs, REIT's, closed-end funds, and similar investments.

Advanced studies on topics include:

  • Fund analysis and selection;
  • Asset Allocation;
  • Portfolio Construction
  • Sophisticated investment strategies for risk management, taxes, and estate planning.

 

 

San Diego, CA, November 13, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the only nationally recognized tax designation, CTS (Certified Tax Specialist). This graduate-level designation is conferred upon candidates who complete an 135+ hour educational program focusing on personal income taxes and methods to reduce tax liability. The combined top state and federal bracket can easily exceed 40%.

San Diego, CA, September 1, 2020 – The Institute of Business & Finance (IBF) recently awarded Tim Hayes with the estate planning designation, CES™ (Certified Estate and Trust Specialist™).

This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on trusts, wills, probate, retirement benefits, caring for children, and what should be done after the death of a loved one. Over $50 trillion is expected to pass from one generation to another during the next half-century.

The Accredited Portfolio Management AdvisorSM, or APMA® program, is a designation program for financial professionals. The program educates advisors on the finer points of portfolio creation, augmentation, and maintenance. Students will gain hands-on practice in analyzing investment policy statements, building portfolios, and making asset allocation decisions.

San Diego, CA, May 12, 2020 – The Institute of Business & Finance (IBF) recently awarded Timothy Hayes with the only nationally recognized annuity designation, CAS® (Certified Annuity Specialist®).

This graduate-level designation is conferred upon candidates who complete a 135+ hour educational program focusing on fixed-rate and variable annuities. Several trillion dollars are invested in annuities; it is estimated that at least one-third of all annuity contracts are not titled correctly.

Near-Record Private Debt

With a GDP of $21.5 trillion, private debt today—which includes mortgages, car loans, and business debts—is about $34 trillion, making the ratio of private debt to GDP 160%. Before the Great Depression, it was 140%, and right before the 2008 Great Recession, it got as high as 170%.[iv]

Gigantic Total Debt

In 1980, total debt—private, corporate, state, and federal—was 1.75 times the GDP. Today, it is around 3.8 times. Think of it this way: in 1980, we had $175,000 of debt for every $100,000 of GDP. Today $100,000 of GDP equates to $380,000 of debt.

In raw numbers, total debt in 2008 was $50 trillion. Today, twelve years later, it is at $80 trillion.[v]

An Enormous Federal Reserve Balance Sheet

The Federal Reserve’s balance sheet is currently $7.4 trillion, which equates to 35% of the GDP, eclipsing the previous high of 23% of the GDP during the Great Depression and 20% at the end of WWII.[vi]

And after ten years of quantitative easing, the Federal Reserve now owns 22% of outstanding Treasuries, 5% higher than the previous high of 17% in 1974.[vii]

The U.S. Is in a Precarious Financial Situation

Can We Grow Our Way Out?

With President Biden’s $1.9 trillion COVID-19 relief package and, my guess, another aimed at infrastructure, the administration hopes that similar to post-WWII, the economy can outgrow its current debt levels.

However, the level of private debt is more significant now. During the war, the government limited personal debt, requiring large down payments on installment loans and restricting terms to one year.[viii] Plus, the depression forced untold bankruptcies and the write-off of enormous personal and business debt.

So, after the war, consumer spending quickly made up for any reduction in government outlays. But unlike then, there is more competition for economic success because the rest of the world does not lie in ruin from the war.

Should You Make Any Changes to Your Financial Plans?

As bad as these debt levels are, they are not predictive. Keep your allocation between stocks and bonds that meet your goals and risk tolerance. Don’t chase rising stock prices. Resist the drumbeat of inflation predictions. Diversify some outside of the United States. Maybe lock in any variable rate loans. If possible, pay down some debt.

These are the opinions of Financial Advisor Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only, and should not be construed or acted upon as individualized investment advice. 

References

[i] Total Public Debt as Percent of Gross Domestic Product, Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/gfdegdq188S

[ii] Amadeo, Kimberly, “ US National Debt by Year Compared to GDP and Major Event,” the balance, February 5, 2021, https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287

[iii] Amadeo, Kimberly, “ US Budget Deficit by Year Compared to GDP Debt Increase, and Events,” the balance, October 8 2020, https://www.thebalance.com/us-deficit-by-year-3306306

[iv] Perkis, David F, “ Making Sense of Private Debt,” Economic Research Federal Reserve Bank of St. Louis, March 2020, https://research.stlouisfed.org/publications/page1-econ/2020/03/02/making-sense-of-private-debt

[v]All Sectors; Debt Securities and Loans; Liability,Level (TCMDO), Federal Reserve Bank of St. Louis, https://fred.stlouisfed.org/series/TCMDO

[vi] Christopher J. Waller, Lowell R. Ricketts, “ The Rise and (Eventual) Fall in the Fed’s Balance Sheet,” Federal Reserve Bank of St. Louis, January 1, 2014, https://www.stlouisfed.org/publications/regional-economist/january-2014/the-rise-and-eventual-fall-in-the-feds-balance-sheet

[vii] “Ibid”

[viii] Richardson, Gary, “Federal Reserve’s Role During WWII,” Federal Reserve History, https://www.federalreservehistory.org/essays/feds-role-during-wwii#:~:text=The%20Reserve%20Banks%20processed%20applications,postwar%20return%20to%20peacetime%20activities.

Securities Licenses

Passing the exam qualifies candidates as both securities agent and investment advisor representative.

Individuals who pass the Series 7 examination are eligible to trade all securities products: corporate securities, municipal fund securities, options, direct participation programs, investment company products, variable annuities contracts, etc.

The exam measures the degree to which each candidate possesses the knowledge needed to offer the products of investment and insurance companies, including the sales of mutual funds and variable annuities.

The exam qualifies candidates as securities agent within a state. Nearly all states require people to pass the Series 63 for state registration.

I am also licensed to offer life, health, accident, disability and long-term care insurance products, as well as fixed annuities.

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