Weekly Update from RLA Tax and Wealth Advisory

Inflation May Be Heating Up

         After writing last week that future inflation was assured due to government deficit spending, the inflation data releases last week confirms that this was the case during the month of July.

         Producer Price Inflation accelerated dramatically during the month of July, rising .9% month-over-month.  (Source:  https://www.zerohedge.com/economics/producer-prices-spike-most-3-years-july-services-costs-soar). This level of inflation month-over-month is simply huge and was far higher than the consensus estimate of .2%. 

         Airline passenger services increased 1% month-over-month, while portfolio management costs rose 5.8% month-over-month.

         As far as government deficit spending is concerned, it rose as the federal government spent more in July than in any other July ever. 

         The good news for July is that the government collected tax revenues of $338 billion in July, up $8 billion from July one year ago.  (Source:  https://mises.org/mises-wire/federal-debt-surges-july-trumps-spending-spree-continues)

         The problem is that during the month of July, the Washington politicians spent $629 billion.  That means Congress and Trump, or any politician that you want to blame, spent nearly $2 for every $1 in tax revenue collected!

         That’s simply crazy, and as I noted last week will fuel more inflation.

         I’d suggest you strongly consider arranging your portfolio accordingly.

Does This Mean That It Will Soon Be Impossible to Sell Enough US Government Debt to Finance the Deficit?

         Last week, the US Government sold $724 billion in US Treasuries (Source:  https://wolfstreet.com/2025/08/08/government-sold-724-billion-of-treasuries-this-week-debt-hits-37-0-trillion-getting-ready-for-the-feds-shift-to-t-bills/).

         That’s a huge number and far higher than the deficit of $291 billion noted above.  The balance of the debt sold by the Treasury was debt that needed to be refinanced.

         If you’ve been a longer-term reader of “Portfolio Watch”, you may remember me noting that 2025 would be a potentially interesting year due to the fact that the US Government would be required to refinance record levels of maturing debt.

         Turns out that it’s getting very interesting.

         Of the $724 billion in debt sold by the Treasury, $505 billion were treasury bills with maturities from 4 weeks to 52 weeks.  In other words, about 2/3rd’s of this debt will have to once again be refinanced within the year, ON TOP OF selling debt to fund deficit spending and refinancing debt that is maturing.

         Like a snowball rolling downhill that gets exponentially larger as it rolls, this debt snowball is doing exactly the same thing.

         Only $33.5 billion of debt sold was for thirty years, and just $56.3 billion was for ten years.

         As I noted last week, this is an unsustainable trajectory, and at some future point, perhaps soon, the Federal Reserve will be forced to become the buyer of last resort.  

         To put it simply and bluntly, when that happens, inflation accelerates even more than we saw in July.

Is Higher Education a Bad Investment for Many Students?

         The United States Department of Labor released data last week that revealed the average college graduate earns $69,000 per year, while the average graduate of a trade school will earn $80,000, likely with far less debt and possessing a marketable skill rather than a degree that might lead to nowhere.  (Source:  https://www.zerohedge.com/markets/how-get-out-your-parents-basement)

         Seems that traditional college may have let down many students.  Nathan Halberstadt of New Founding posted this chart the past week, illustrating the percentage of 30-year-olds who were both married and homeowners going back to 1950.

         Notice that in 1950, nearly 55% of 30-year-olds were married and owned a home, while now the number is closer to 10%.  In my view, there are two primary reasons for this.  One, the Federal Reserve's artificially low interest rate policy recently drove real estate prices higher, pushing many young, potential homebuyers out of the market.  However, that only explains the recent drop.  As you’ll note from the chart, the decline began in earnest when the US Dollar became a fiat currency in 1971, ushering in an era of US Dollar devaluation.

         Secondly, when student loans became available to just about everyone enrolled in college, regardless of the degree they were pursuing or ability to actually earn the degree, students began accumulating debt that now totals about $1.7 trillion.  Many of those borrowers now have too much debt to qualify for a home mortgage.

RLA Radio

         The RLA radio program this week features an interview that I conducted with Mr. Michael Pento, host of the popular “Mid-Week Reality Check” podcast.

         I chat with Mr. Pento about his current portfolio recommendations and his forecast for the economy. 

         The interview is posted and available now by clicking on the "Podcast" tab at the top of this page. If you haven’t yet accessed the additional resources on this site, we encourage you to do so.

Quote of the Week

“Growing old is no more than a bad habit which a busy man has no time to form.”

                                                      -Andre Maurois