It has been a great run. For 15 years, the U.S. stock market has been the envy of the world. Led by the FANG stocks, global investors could not get enough of American stocks — until now.

 

By the end of 2024, global investors had committed more capital to America than ever before. At the same time, the dollar traded at a higher value than ever since the world abandoned fixed exchange rates 50 years ago.

 

While America's share of the global economy was 27 percent, its stock market represented 70 percent of the worldwide stock market. Since 1992, every year China has grown closer to the U.S. as the world's biggest economy. China's GDP has grown 6.5 times as fast as America's, but U.S. stock returns have been 3.5 times as high. China, which makes up 17 percent of the global Gross Domestic Product, has captured less than 3 percent of worldwide market investments.

 

This has not always been the case. At the beginning of the 20th century, for example, the U.S. accounted for less than 15 percent of global equity markets. Since then, we have improved with gains throughout the 1950s and 1960s. Japan at one point in 1989-1990, caught up with our gains but quickly reversed while we continued to gain. 

 

U.S. markets have outperformed all other markets in eight of the past 10 years. And the global market for private-sector investments, which includes equity and credit, is huge. Some companies estimate it is more than $100 trillion. 

 

In the first decade of this century, our ranking fell during the financial crisis but shot up as productivity growth boomed. Productivity is creating more output with the same amount of labor. Over the last five years, American economic output per hour worked rose almost 9 percent despite the COVID-19 setback.

 

The dominance of U.S. returns was also helped by a variety of other factors such as accelerating earnings by U.S. corporations improving profit margins, and cleaner balance sheets. In addition, U.S. firms have had greater success expanding overseas. Prior to 2010, 30 percent of U.S. corporate profits were generated overseas. That number has since expanded to 40 percent.

 

Another reason for U.S. outperformance is our ability to take risks. America has been a fertile ground for business formation and risk-taking is part and parcel of starting a new business. 

 

But regardless of how efficient Corporate America and the private sector overall are, it has had enormous support from the government. While America went on a debt spree, Europe, for example, practiced austerity. All that government spending boosted corporate profits considerably.

 

In 2025, however, the mood toward American dominance has soured. Just weeks ago, U.S. investors were hailing Donald Trump's second term as the beginning of America's golden age. His blend of tax cuts and tariffs would accelerate economic growth and boost American dominance once again. Next week, we will focus on the risks that could reverse our No. 1 position in capital markets.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

It is getting to be a regular occurrence. The U.S. Treasury runs out of money and warns Congress that they need more. Politicians on both sides strut and crow but delay until the 11th hour only to pass another "continuing resolution" for a few months. Will it ever end?

 

Exactly what is a continuing resolution (CR)? They are temporary spending bills that allow the federal government operations to continue when final appropriations have not been approved by Congress and the president. CRs are never-ending stories with a shelf-life of 2-3 months.

 

This time, the deadline is March 14. Has anything changed? Well, yes and no. The factions within the Republican party are still around, with scores of Republicans who routinely vote against funding the government. At the same time, the narrow GOP House majority of last year is narrower still. The Republicans versus Democrats score card is 218-214 (with the death of Texas Democrat Sylvester Turner on Tuesday) in this new Congress. That makes it probable that to pass another CR, Democrat votes will be needed.

 

In prior votes, Democrats have stepped up to the plate to support short-term bills but that was under a president of their own party. However, that was then. President Trump's program of slashing government workers, efficiency efforts by DOGE, the threatened upending of entire departments, and the administration's effort to control spending have the minority party in no mood to compromise.

 

The Democrats argue that Congress, not the president, holds the power of the purse. Unless there is explicit language in the bill that limits the involvement of the executive branch in spending decisions, many Democrats will not be a party to a compromise. Other Democrats insist that there also be included written constraints that would rein in Trump and Elon Musk's attempts to close or reduce the size of government agencies.

 

The opposition is also against several GOP add-ons to the bill including $32 billion in transfer authority for the Defense Department, a $20 billion cut to IRS enforcement, and an increase in funding ICE deportation operations. Of course, the Republicans are laughing at these Democrat demands and have no intention to compromise either.

 

Within the Republican Party, the Freedom Caucus voted last week to go along with the rest of the majority to pass a budget resolution to raise the debt ceiling by $4 trillion. The chairman of that group, Rep. Andy Harris, has already signaled that the group is on board to pass a continuing resolution as well. But there are at least two Republicans who say they are sick and tired of kicking the can down the road and want a full appropriations bill passed. 

 

Every president, including Donald Trump, would like to put an end to these constant bills that last for a month or three, but a full funding deal seems out of reach. The most that can be expected is maybe another short-term bill to keep the government running on autopilot until the end of the fiscal year. You can be sure that the administration will be doing its utmost to make sure every one of the party faithful votes yes on March 14th.

 

If a deal fails to be passed, Donald Trump has proven that shutdowns do not deter him.  It happened during his first administration when Congress failed to fund his proposed wall along the southern U.S. border. The partial government shutdown was the longest in U.S. history.

 

 This time around there would be some unintended benefits to a shutdown from the administration's point of view. For one, government spending would come to a standstill for the most part. That helps when your stated aim is to reduce government spending anyway. For another, thousands of government workers would be laid off, some of which could be permanent if the administration so desired.  That also coincides with their effort to reduce the size of government.

 

In any case, whatever happens will be dragged on until the last bit of free airtime is used up and every legislator has his or her comments duly recorded for posterity. Some things never change. In Congress, it appears as if it is business as usual when it comes to spending.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

They love their country. As such, it is no surprise that many veterans would want to continue to serve their nation after discharge. It is why so many vets apply to work for the federal government. That partnership seemed to work out for both parties—until recently.

 

For those of us who have served in the military, we have done so out of love for our country. When it called, we stepped up. In exchange, we learned a lot of good things in the armed services. For me the list is long. Leadership, teamwork, a strong work ethic, the ability to handle stressful situations, self-direction, and motivation come to mind. I am sure I have missed some.

 

These attributes make vets an incredible asset in the workplace; something long recognized by the government. Working for the government was a marriage made in heaven for many vets. Many veterans viewed working for the government as a way of extending that sense of purpose and belonging they found in the military. Not only could they continue serving their nation, but they could also help their peers outside of active duty. 

 

In addition, the federal government, recognizing their value, offers a "veterans' preference" which puts vets at the front of the line when choosing qualified candidates for employment. The Veterans' Preference Act was established in 1944. It entitled veterans who were disabled and/or served on active-duty preference for virtually all government jobs.

 

The trend was self-reinforcing. The more veterans that worked for the government, the more the atmosphere of camaraderie and understanding among co-workers deepened. Another attraction is the government's generous retirement benefits that allow a vet's years of military service to count toward their federal pension.

 

Given this background, it should be no surprise that veterans made up 28 percent of the federal workforce in 2024, compared to 5% in the private sector, according to the U.S. Office of Personal Management (OMB).  Of that number, more than 200,000 vets are disabled or have a serious health condition.

 

Unfortunately, the Department of Government Efficiency (DOGE) has failed to account for veterans in its campaign to reduce the federal government workforce. What is worse,  veterans are spread out throughout various government departments, which makes downsizing even more dicey for this group.

 

Military veterans have tended to affiliate with the Republican Party and its candidates historically. About six in ten registered voters (61 percent) who say they have served in the military or military reserves supported President Trump in the 2024 presidential election, according to the Pew Research Center. In the past, President Trump has favored veterans on various occasions including improving VA healthcare, education benefits, and reducing homelessness among vets, but not this time. 

 

Many Republican legislators, while publicly cheering the administration's push to cut federal government workers and services are privately attempting to backchannel the powers to be on behalf of veterans. They are not only concerned that the dismissal of military veterans will alienate their base but are also concerned that many federal services that veterans depend upon,  like the Veterans Administration, could be cut back as well. That is already starting to happen.

 

The federal government has dismissed 1,400 VA probationary employees this month although a few senators have succeeded in getting the Trump administration to reinstate some fired employees. 

 

The new Secretary of the Department of Veteran Affairs, Doug Collins, a career politician, who once served a brief stint as chaplain in the U.S. Air Force Reserve, crowed on the DOGE social media conduit, X,  that he has found $2 billion in savings thus far by axing outside contractors who do things like train and coach vets seeking jobs in the private sector. He promises even more cuts in the future. Collins also urged viewers not to let senators, congressmen, and the media scare us into stopping his downsizing efforts.

 

I come down on the opposite side of his argument. Finding and keeping a job is crucial to many veterans transitioning into civilian life. Reconnecting with society through jobs is particularly important during this period. As it is, veterans face higher unemployment rates and poverty levels than non-veterans, making employment even more vital for their economic well-being. Doubly so, for those who are handicapped. The VA is an important backstop in these efforts as well.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

At last count, the federal government owns 28 percent of the total land in the U.S., and under the surface of that real estate lies a wealth of oil, gas, and coal. Does selling off federal assets make sense in this era of downsizing government?

 

President Donald Trump plans to shrink the federal government through firing, hiring freezes, and layoffs. The only personnel spared are those in military enforcement, national security, and public safety. Everything else is fair game.

 

Earlier this month, regional managers at the General Services Administration (GSA) received memos from headquarters directing them to terminate the leases on approximately 7,500 federal offices across the nation. By doing so, the goal is to save upwards of $100 billion. This could be just the first step in a wider effort to raise additional capital through asset sales.

 

In the president's first term, Trump, the real estate mogul, once suggested that we sell off some of our U.S. assets and pay down part of the debt with the proceeds. He was specifically speaking about energy assets, but the U.S. also owns roads, railroads, infrastructure, levees, dams and hydroelectric facilities among other assets, such as the rights to mineral and energy leases from which the government receives royalties, rents, and bonus payments.

 

No one really knows how much these assets are worth but from time to time some organizations have taken a stab at valuation. In 2013, the Institute for Energy Research estimated the value of federal land and energy resources at around $200 trillion. That is a good round number that would more than solve our debt problem — if only it were true.

 

The problem is that the IER study used gross resource values. They assumed oil was worth $100 a barrel but ignored the cost of finding, extracting, and transporting oil to a refinery. If all those above costs were subtracted, the government's share came to about $9 a barrel. That is not counting the fact that 80 percent of the government's oil is in shale, which is the most expensive to extract.

 

Our coal resources are another good example. Federal coal reserves in the contiguous 48 states represent 1,300 years of American coal consumption. How much will companies be willing to pay for any part of that supply when the U.S. industry is moving away from coal as a source of energy?

 

In 2015, the Bureau of Economic Analysis estimated that the 464 million acres of land the government owned in the contiguous 48 states was worth an average of $4,100 per acre. That amounts to $1.8 trillion. The problem here is that about one-third of that acreage is national parks, wilderness areas, and wildlife refuges. Selling off those areas would be a political hot potato, even for Republicans. Millions of other acreages are either alpine or desert tundra.

 

Other uses like timberlands are not fetching anywhere close to the average acre price nor is agricultural land used for grazing cattle and other domestic livestock. The U.S. has 1.1 billion acres of prime private land but only uses 350 million acres to grow all the food we can eat, feed our livestock, export food, and grow corn for ethanol. 

 

The most likely use of some of the land could be for low-cost housing or second homes. That would be problematic since most of the government-owned land is in Alaska and in western states where demand for housing is far less than in other regions where the population is far greater. 

 

All in all, while an intriguing idea, selling off our energy and land assets would probably not make much of a dent in our $36.22 trillion debt. The few organizations that have estimates of asset sales over the last 5-10 years believe land and energy rights would fetch no more than $2 trillion to $4 trillion. Even if we double that total, selling these assets doesn't seem to be worth the effort involved when the real problem is overspending.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Scott Bessent, the nation's new Treasury secretary, is a product of the investment world. His private sector background brings to the government a different set of tools and ideas that may lessen the burden on the Federal Reserve Bank in its fight against inflation.

 

For decades, politicians of both parties with few exceptions have left it up to the Federal Reserve Bank to curb inflation while maintaining employment. It has been a tough job, especially when fiscal policy is working at cross purposes with their mandate. The fly in the ointment over the last several decades has been that while the central bank has been largely insulated from political pressures and has functioned independently, the Treasury is not. It answers to the president and through him his political party.

 

Fast forward to today. Most readers know that the government has a big spending problem. At the same time, over the last four years, we have witnessed a rebound in inflation that climbed to as high as 9 percent. Massive spending programs made inflation far worse.

 

The Fed's job was to reduce inflation, so it hiked interest rates while reducing the number of government bonds it purchased. It has been a long fight to quell inflation, and it is not over yet. It would have been easier if Congress and the president were willing to reduce fiscal spending. Nonetheless, the Fed had made enough progress despite the fiscal failure to cut spending, that in September of last year, the central bank was able to cut interest rates for the first time in four years. They reduced the Federal Funds short-term interest rate by 25 basis points.

 

The way it works is the central bank has the power to cut interest rates on securities on the short end of the yield curve like notes, bills, etc. but not on the long end where the yields on the 5-10-20-30-year bonds are determined by the market in general. Normally, when the Fed cuts rates on the short end, bonds of longer-dated maturities fall. This time around that was not the case.

 

The U.S. Ten-Year Treasury bond, and bonds of lengthier maturity, failed to follow short-term bills and bonds. In fact, although the Fed has cut interest rates several times since then, longer-dated securities have risen in price. Why?

 

Government spending remains out of control. The nation's deficit and debt are at record highs. If that situation continues, the bond market will continue to demand higher and higher interest payments to buy Treasury bonds. It appears the Fed can do no more in the face of the prolific spending by our elected officials.

 

Unlike other politicians, Bessent understands the problem. He said last week that "we are not focused on whether the Fed is going to cut." Instead, he wants the Trump administration to reduce the yield on benchmark Ten-Year U.S. Treasury bonds through fiscal actions.

 

He knows that the interest rates Americans pay on mortgages, credit cards, and other kinds of loans are based on the 10-year Treasury yield and not the Fed Funds rate.

 

Instead of leaving it up to the Fed, which is pushing on a string at this point, he wants to cut government spending that is a major source of inflation, debt, and the deficit. He also hopes to sustain economic growth at a 3 percent rate by cutting regulations and boosting energy production by 3 million barrels a day of oil equivalents. That would also raise tax revenues.

 

If he can accomplish that, then the bond market will take care of long-term rates all by themselves. If bondholders see that the deficit and government debt is coming down, then buying and holding long-dated Treasuries will be less risky. To me, it is the first practical plan I have heard to reduce the national debt which has become the nation's number one challenge on the economic front.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.