Penner's Playbook – Financial Insights, Stock Market Analysis, and Investment Strategies for Building Wealth

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After a month-long hiatus, Penner’s Playbook is back! A colleague jokingly asked me last week, “Did Penner’s Playbook file for bankruptcy?” Well, no—just took a little break to refuel. You know how it goes—sometimes life gets busy, and in the past month, I managed to visit all four major time zones across the U.S., mixing work and pleasure.

Week one? I was in the Rocky Mountains with family, soaking in the outdoors, golfing, hiking, and of course, enjoying some cold ones with loved ones. Week two took me to California, where I found myself surprised by the cool weather in and around Santa Cruz—70 degrees in August? Not complaining one bit! It was nice seeing the ocean so close to the mountains, something you definitely don’t get in Kansas or Georgia! Week three? Wichita, Kansas, for a work conference. Although I didn’t spend much time with family, I was able to have a brief visit with my dad, which I don’t take for granted! Finally, week four brought me back to the East Coast, and just in time for the first week of my MBA program at the University of Georgia. Go Dawgs!

Needless to say, I’ve been on the go, but it’s good to be back, and I’ve got plenty of thoughts to share. After all, the news cycle hasn’t slowed down one bit! But today’s topic came to mind during my first day of class at UGA, specifically in a course titled “Economic Analysis for Business Leaders.” Sounds riveting, right? I know, a three-hour economics lecture doesn’t scream excitement, but stick with me—there’s more to it than meets the eye.

The professor started with a provocative question: “Would you rather live your life in a surplus or a deficit?” Naturally, nearly everyone in class, myself included, said surplus. But one brave soul raised his hand and said deficit. Shockingly, the professor agreed! For a second, I wondered if I should reconsider my MBA investment, but then he explained himself—and it was one of those “ah-ha” moments.

The Party’s Almost Over

The professor wasn’t actually suggesting deficits are good; he was pointing out the absurdity of how the U.S. government operates. He said, and I’m paraphrasing: “Wouldn’t you rather sit back, not work, buy cheap stuff produced by others, and just rack up debt with no immediate consequences?” That’s essentially what the U.S. has been doing—borrowing from abroad, importing goods for cheap, and kicking the can down the road. But here’s the catch: At some point, the lender is going to call in the debt.

Federal debt is now at a staggering $37.5 trillion, with $10 trillion due for refinancing in the coming year at around 4%. That adds up to a whopping $300 billion in new interest payments next year alone. On top of that, the Biden administration is proposing a $7.2 trillion budget, likely adding another $2 trillion to the deficit. Fast forward to 2025, and we could be staring down $40 trillion in debt, with $1.6 trillion in annual interest payments—that’s more than the entire federal budget in many areas.

For us, especially those of us in our 20s trying to build our careers and secure our financial future, this should be the major concern. Forget the daily stock market swings—this looming debt crisis is what should be keeping us all awake at night. The consequences won’t be felt by politicians or policymakers; it’s the next generation—our generation—that will bear the brunt of it.

Why Should We Care?

Think about it this way: If you or I managed our finances like the federal government does, we’d be broke, our credit would be ruined, and the bank would have shut us down years ago. But somehow, the U.S. keeps this debt-fueled party going. But how long can this last? What happens when foreign nations lose confidence in the U.S. dollar or decide they don’t want to keep lending us money?

At some point, the music will stop, and the fallout won’t just be in Washington—it’ll affect every one of us. From job losses to inflation to your retirement savings, the implications are massive.

Final Thoughts

As we edge closer to a $40 trillion national debt, the question isn’t if the U.S. will face the consequences, but when. And when it happens, the fallout will be felt by everyday Americans like you and me. This looming debt crisis should be the top issue in every election debate right now. But shockingly, you barely hear a word about it from any candidate. If we keep living on borrowed time, sooner or later, the bill will come due. And trust me, it’s not going to be pretty when it does. You may want to look at allocating a portion of your portfolio to geographically diversified investments and global companies.

Alright, I know this was a bit of a “Debbie Downer” article. I’m pretty bearish on the current state of U.S. debt, and it’s tough to ignore the looming storm clouds. But before you stock up on canned goods and bottled water, let’s take a step back. There are positives in our economy that I’ll cover in future posts. Despite the challenges, we’ve still got a lot going for us—like innovation and entrepreneurship. So, stay tuned and stay optimistic!

Yours in fiscal prudence,

Colten S. Penner