Magnetic North Financial: Tale of two economies.

Happy Fall season.

I wanted to break down exactly what happened in October and provide a brief synopsis of the opportunities that still exist, including some growing concerns.

The United States Federal Government is the largest single entity spender on earth. No other entity comes close; second place is held by China's central government, at approximately $4 trillion per year.

In 2024, the Federal Government spent $7.6 trillion and took in $5.5 trillion in revenue, resulting in a $ 2.1 trillion deficit.

If you consider the last 40 days without government spending, you are looking at $633 billion every month missing from the economy, or $20 billion a day.

That's a lot of money.

Why does this matter to our progress?

A government shutdown affects tens of millions of Americans daily.

Take a look out your window in your neighborhood for a second. Suppose you look across your respective community and encounter people who make $30,000, $50,000, or $100,000 a year. You may think they are well off, but in actuality, very few can manage high inflation. Adding financial pressure by removing critical subsidies from an already fragile system will lead to very costly scenarios in the real economy. ACA Enrollment subsidies, Food Stamp subsidies, and other social programs do affect the real economy.

Another key component of any economy, whether it is growing, shrinking, or stable, is unemployment. If this rises to, say, 5.25 and higher, due to the 1 million federal employees who are now working for free or have been laid off, we are going to face a dire situation.

Low unemployment is the one factor that has prevented a truly severe market correction.

It has become increasingly clear that the shutdown effect is becoming more apparent in the data, and with every passing week. This needs to end now.

The positive news:

In my last letter, I made clear that artificial intelligence spending was creating an economy of its own, with tremendous long-term positive impacts across America. This theory and fundamental shift have remained unchanged.

The opportunities here around AI are real! Equipment, data centers, fiber optics, machinery, and energy are all essential components for growth and expansion.

However, for the rest of the economy, the federal government needs to establish a stable, straightforward presence, eliminate distractions, and avoid flip-flopping on policies and trade.

Maybe one day in the future we can end government shutdowns and debt ceiling standoffs with Warren Buffett's solution to Government fiscal mismanagement.

Warren Buffet:

" Anytime debt to GDP gets over 3% all congressional incumbents cannot seek re-election....."

Warren continued:

"You will be shocked at how quickly the two parties come together to negotiate."

chris

Christopher R Lakian

Owner, Portfolio Manager, AIF

Magnetic North Financial LLC

3003 Dunes West Blvd Suite 29

Mt Pleasant SC 29466

Main Number: 843-353-0313

Cell: 843-737-6060

Global Relay Secure Text: 843-428-7827

Website: www.MagneticNorthFinancial.com

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