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The Debt Ceiling

The Debt Ceiling—why do we have it, why do we hit it, why do politicians fight about it, what happens if they don’t raise it?

Record your investing question at 310-734-8889.


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More Subscriber Questions About the Current Stock Market

NEIL from Central Illinois asks how much recovery we need to regain our 9Sig plan’s year-end 2021 balance. He wonders if a full recovery of the Nasdaq 100 to its long-term trajectory is a reasonable possibility.

NICK from Denver wants to know if it makes sense to move his Income Sig plan’s AGG balance into TQQQ at today’s depressed price. He’s also grateful for this plan that will enable him to retire early. Great!

DOUG from New Westminster, British Columbia is trying to decide between the money market and bond market for his uninvested money.

MICHELE from Cape Cod, Massachusetts has a brother who is worried that the dollar will crash on high federal debt and take down Wall Street and the US economy with it. Is this time different for this recurring macro concern?

KENT from Old Lyme, Connecticut reminds everybody that the key is controlling emotions and going with historical averages—hear, hear!

Sources Mentioned:

US Department of the Treasury. Fiscal Service, Federal Debt: Total Public Debt [GFDEBTN], retrieved from FRED, Federal Reserve Bank of St. Louis

The US Dollar as the World’s Dominant Reserve Currency, 15 Sep 2022, Congressional Research Service, PDF

China’s debt ratio hits record high at 3 times GDP, 7 Dec 2022, Nikkei Asia, article


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Subscriber Questions About the Current Stock Market

Harry from North Carolina read a report warning about the “go nowhere” market of the mid-1960s to the early 1980s, and wonders if today’s market resembles that one. If so, would bonds and CDs be better than stocks?

Mike from Slingerlands, New York notes that the “easy money” of the past 13 years is gone. Have we seen a past market like this one? If so, how would our plans have fared through that earlier one?

John from San Francisco wants to know if the disappearance of easy Fed policy changes our plans’ rules. How confident am I that the Signal strategies are still solid?


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Bear Market Coping Tactics

You might feel glum heading into this Christmas.

The Federal Reserve is still a hawk flock. The world is bad, about to get worse, no end in sight. The tone of last Sunday’s year in review persists. If it’s grinding your gears, this note’s for you.

I spoke with longtime subscriber and friend Chad Fischer last night, about the emotions of the market.

He explained that it’s been hard watching fear and greed fluctuate throughout the year, every Fed press conference disturbing the peace, followed by a glimmer of cooler inflation data, hope for a reprieve, then hopes dashed by the Fed’s PR department.

Some coping tactics can help. Here are some of my favorites:

Don’t give stocks too much of your attention.

Your stock-market money is not your entire financial picture. You probably own many assets that the Fed doesn’t touch directly, nor do market algos, volatility, none of it.

Your home, your car, your bank accounts, your credit cards, indeed most of what you call your life is unaffected by stock market movement. Keep an eye on that non-stock side of your ledger in this bear market.

You sustain it, now let it sustain you.

Buy low prices.

You might be surprised by the psychological benefit that even a small purchase of low prices bestows upon your ruminating brain.

I have monitored investors and their accounts over the years. One of my favorite discoveries is that little triumphs go a long way.

For example, an investor friend owned many thousands of shares of a fund that declined from $61 to $18. When it was $18, he bought 50 additional shares. They represented something like 2% of his position, but you know what he talked about when the fund recovered to $30, then $40, then $50, then $60? That buy, way back at $18.

“I jumped on this thing at the very bottom,” he crowed, and the sentiment powered him through bad times. Small though it was, that symbolic move helped him cope.

It’s for this reason that our leveraged plans include a buying throttle. In a long enough bear market, our quarterly purchases will become tiny, but they’ll happen. That mere happening of something good sustains our souls.

Even small purchases pack a powerful emotional punch.

Focus on share count, not balance.

Here’s a clever tactic passed along to me by other longtime subscribers, Preston and Cambry Dane.

One way they keep themselves greedy when others are fearful is by replacing financial targets with share count targets. “How fast can we get to 5,000 shares?” they wrote. “How about 10,000? Low prices bring new highs!”

That’s right. Lower prices should bring higher share counts.

If you own 9,000 shares of a fund, make it a goal to nab another 1,000 for an even 10,000. In this set-up, a lower price that enables you to attain the milestone number comes as a blessing, not a curse.

Seeing your share count mount, and letting your mind project the big impact it will have on your balance when the fund appreciates $1 per share, then $5, then $15, will provide ever-present hope. Such hope goes a long way, in the market and in life.

Draw on the wisdom of elders.

They’ve seen it all, and know that this too shall pass. Anybody who has been in the market for decades learns to live with it. Their techniques will help you.

Here’s something that helped me: I plotted major life events on an axis of emotional impact, then overlaid the plot on a price chart of the S&P 500. Watching this showed me that my high, happy life moments did not necessarily coincide with a strong stock market, nor did my difficult life moments necessarily coincide with a weak stock market. There wasn’t much correlation.

My dominant memories were about life, not stocks.

The market goes up and down, and along its generally rising line life happens. It’s life we remember—oh, and something or other went down in the stock market. Those stock moments blend together in an amalgamation of the basic factors again and again. Fed, interest rates, earnings, jobs! Fed, interest rates, earnings, jobs!

In the future, and probably not as far as you think, news from this month and last will have liquefied into the long-term amalgamation you won’t care much about.

Your balance will be where it’s at and you’ll be fine. In time, the stock market will not dominate your memories.

For more of this kind of wisdom from two friends who are veterans of the stock market, please see:

Roger on Avoiding the Biggest Risk

John Prather on Embracing Volatility

For a round-up of thoughts from experienced investors in The Kelly Letter community, please see:

Seasoned Investors on Managing Stress

Finally, here’s a 42-minute video of me answering subscriber questions back in March, when the bear market and invasion of Ukraine were becoming entrenched:

Stick With Our Plans In The Stock Market Crash


May this note boost your spirits and help you enjoy the countdown to Christmas.

We will spend better years together.

Yours very truly,

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Penalty Shoot-Outs Are a Terrible Way to Decide a Soccer Match. Here’s a Better Idea.

In the knockout stage of this year’s World Cup, four matches finished 90 minutes of regular time and 30 minutes of overtime in draws, and were then decided by penalty shoot-outs: Croatia vs Japan, Morocco vs Spain, Argentina vs Netherlands, and Brazil vs Croatia.

Penalty shoot-outs are a terrible way to decide a soccer match, for the following reasons:


  •  There is no penalty involved. Awarding a penalty shot to a player who was fouled while taking a shot on goal makes sense. He was denied that fair shot, so he gets a man-to-man, high-odds chance of scoring on the opposing team’s unprotected goalkeeper. When a game is tied, what is the penalty? There is none, so neither outfield players nor goalkeepers should be subjected to this high-stress arrangement that creates the false impression that the losing goalkeeper in the shoot-out lost the game for his team.


  • It’s a different game. Changing from the dynamics of soccer field play to a staged shoot-out is like determining the winner of a draw with, say, an arm-wrestling match between the goalkeepers, or a coin toss, or team captains facing off in rock, scissors, paper. It’s a different game, with different rules, and disconnected from field play.


  • It loses the team spirit of soccer. If the teams could not find a way to win in team play, why should their poor goalkeepers suffer the high stress ending of a penalty shoot-out? All eyes are on them, everything comes down to this one awful moment, and they shoulder a disproportionate burden if they lose. It’s grossly unfair.


  • It’s boring for fans. Shoot-outs are a drag. They’re staged, no defensive players can help the goalkeeper, and there’s no excitement in seeing the teams compete for dominance on the field. They create a feeling in the stands of, “Why did we just sit through two hours of running around only to see the match determined in a different game?”


I have a better way to break a tie at the end of regular time.

It penalizes nobody, sticks with the rules of field play, maintains the team spirit of the game, and ratchets up excitement for fans. Kelly Overtime would be a “golden goal” arrangement (sudden death in which first score wins) that works like this:


  • Pull the goalkeepers. For the first 10 minutes of overtime, both teams pull their goalkeepers. The outfield players keep going and it’s up to them to defend their goals.


  • Pull two outfielders. In the second 10 minutes of overtime, both teams pull any two outfielders. The teams are now down to only eight players on the field, and no goalkeepers.


  • Pull two more outfielders. In the third 10 minutes of overtime, both teams pull two more outfielders. The teams are now down to only six players on the field, and no goalkeepers.


This would put no undue pressure on individual players, still follow regulation soccer rules but with fewer players on the field, require even better teamwork due to the shrinking roster, and be the most exciting part of the game. It would be quite a change of pace for fans to actually hope for overtime, given its new level of drama.

While I doubt many 30-minute overtimes run per the above rules would fail to produce a winner, any that did could just keep going until a winner emerged. Possibly, a fourth 10-minute period could lose two more outfielders. My vote would be to just keep going with six-man teams for as long as it takes for somebody to score. Tennis goes for as long as it takes. Why couldn’t soccer?

Come on, FIFA. It’s time to get rid of the penalty shoot-out. Teams and fans deserve better.

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