The Dividend Cafe Thursday - May 22, 2025
May 22, 2025
Dive into the latest market movements as major indices show positive trends and interest rates drop. There's a spotlight on a new tax bill, particularly the SALT deduction cap adjustments. Insights into treasury auctions reveal common misconceptions while exploring the US debt situation brings potential solutions to light. Plus, a look at the strong labor market with encouraging jobless claims. The host also pays tribute to fallen heroes ahead of Memorial Day, making for a reflective conclusion to the discussion.
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Treasury Auction Normalcy
- The U.S. Treasury 20-year auction appeared poor but was within normal variation.
- Interest rates remain historically average around 4.5%, not exceptionally high.
Debt Servicing Impact
- Current U.S. debt servicing cost is about 18% of tax revenue at 4.5% interest rate.
- Historically anything above 14% shifts government policy towards austerity.
Three-Pronged Debt Strategy
- Three ways to address U.S. debt: raise tax revenue, decrease spending, and grow the economy.
- Current legislation attempts to do all three simultaneously to progress economic health.