Doug Hornig, senior prognosticator at The Casey Report, analyzes the alarming trend of U.S. federal debt and its future implications.

“I have always depended on the kindness of strangers,” said Blanche DuBois, in the final words of the play A Streetcar Named Desire. Well, don’t we all.

Many citizens probably still cling to the old saw that public debt doesn’t matter because “we owe it to ourselves.” Wrong. Debt always matters. And as for whom we owe it to, it is a lot of kind (or, at least, not yet unkind) strangers.

As recently as 1970, foreign holders of U.S. debt were essentially non-existent. But their slice of our obligation pie has steadily increased, especially over the past two decades, until now foreign governments and international investors hold about 35% of Treasuries, as the following chart reveals.

...

Baltimore — (TFN): Some good friends of mine recently took their TV out to their front yard, put two high-brass shells in their 12 gauge and pulled the trigger.  They rendered the hunk of glass and plastic useless. Called it Alaskan waste disposal.

After last night, I’m ready to get out the 00 buckshot, myself.

I’ve got my eye out for good intentions, gone bad after spending the last three editions of Notes discussing the idea of financial regulatory reform.

During 52-mile commute home yesterday, they were all over the place, anything from idiotic signs to a couple of state cops setting a trap and writing tickets for not moving to the left lane when passing a stopped emergency vehicle.

The gung-ho troopers had rush-hour traffic slowed for over a mile.

But my mind really started spinning when I passed an out-of-state big rig. I could not help but notice the federal and state ID

...

Chinatrust Financial Holding Company, the biggest credit card issuer of Taiwan , said on Tuesday that it will buy a 30% stake in American International Group Inc.'s (AIG) Taiwan life insurance unit, Nan Shan Life Insurance Company, for $660 million from Hong Kong-based China Strategic Holdings.  On Oct 12, 2009, AIG announced the sale of its 98% stake in Nan Shan to an investor group consisting of China Strategic and Hong Kong-based Primus Financial for about $2.15 billion. This amount was lower than Chinatrust’s bid but, Chinatrust lost its bid to buy the business. As a result, Chinatrust was considering legal action against AIG.  In exchange for the Nan Shan deal, China Strategic would take a 9.95% Chinatrust stake, worth about 20.8 billion New Taiwan dollars ($647 million). According to Chinatrust management, the transaction will combine Chinatrust’s distribution network and Nan Shan ’s customer base to ...

Braintech, Inc., a provider of software products that offer robust, scalable and transferable Vision Guided Robotic (VGR) solutions used for industrial and government and defense service applications, recently announced that the company’s wholly owned subsidiary, Braintech Government & Defense, Inc., received a subcontract from BAE Systems on a U.S. government and defense contract. Braintech is currently developing automated assembly solutions based on its industry-leading VGR technology in Phase II of the Automated Weapons Assembly project for the Office of Naval Research.

Adam Marsh, BAE Systems’ program manager, commented, “With its unique vision guidance software technology and dedicated technical team, Braintech is developing a critical system component that was key to proving to the customer that weapon assembly could be automated. Mr. Marsh concluded, “This will reduce the number of sailors required, reduce the risk of injuries and provide a reliable, repeatable process for the Navy. BAE Systems is very pleased

...

J Hancock Strategic Income A (JHFIX) seeks a high level of current income. The fund primarily invests in foreign debt securities of developed and emerging markets, U.S. government and agency securities and U.S. high yield bonds.

The fund may also invest in preferred stock and other types of debt securities. At the end of February 2009, its portfolio turnover was 52%.

Daniel S. Janis has been lead manager at the fund since October 1999. The fund has topped total returns of its benchmark index in the last 1-, 3- and 5-year periods.

J Hancock Bond A (JHNBX) was incepted in November 1973. The investment seeks to generate a high level of current income consistent with prudent investment risk.

The fund normally invests in diversified bonds that may include, but are not limited to, corporate bonds and debentures, as well as U.S. government and agency securities. It looks at bonds of all quality levels and

...

Recently, Human Genome Sciences Inc. (HGSI) announced that the U.S. Food and Drug Administration (FDA) delayed the approval of ABthrax (raxibacumab), the company’s candidate for anthrax treatment, asking for additional information pertaining to the drug.   The agency issued a complete response letter wherein it asked for additional information in response to the Biologics License Application (BLA) filed in May 2009. The company intends to provide the agency with the requested information shortly.   The agency’s decision comes weeks after an FDA advisory panel questioned the drug’s effectiveness when compared to existing anti-bacterial drugs since ABthrax was primarily tested in animals, not humans. Late last month, the panel of experts voted 17 to 6, with one abstention, that the company should submit more evidence on whether adding ABthrax to older drugs is beneficial for anthrax treatment. Consequently, the decision to delay approval does not surprise us.   As ...

The old normal allocation between the three most basic classes (Cash, Bonds and Stocks) is currently the new normal.

While the old normal return expectations for U.S. securities, and the allocation between U.S. securities and global securities (particularly emerging market securities) is not likely to be resemble the past; the old normal weighting between cash, bonds and stocks from whatever country is more likely to be used than not.

The last decade was abnormal in the preponderance of equity risk assumed in the aggregate across all households in the United States. The old normal is more balanced, which is something the typical investor advanced in age or wealth accumulation is seeking these days.

Based on Federal Reserve data from 1945, the average allocation between cash, bonds and stocks was approximately 10%, 40% and 50% respectively. The average over the past decade was about

...

Recently, William Demchak of the PNC Financial Services (PNC) was offered the position of the next CEO of the Bank of America (BAC). However, the offer was turned down by Demchak.   We suspect Demchak declined the offer as the pay package is likely to be among the least competitive in the industry, especially since the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average high-end salary by 50%. Moreover, the bank is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision.   The present CEO of the Bank of America, Mr. Ken Lewis, is set to leave the position, stepping down at the end of the year. It may be noted that he succumbed to the pressure to resign after his company’s Merrill Lynch acquisition.   Earlier this month, Robert Kelly of the ...

Citigroup Inc. (C) announced that it will sell stake in Bellsystem24 to U.S. private equity firm, Bain Capital Partners, in a deal that values the Japanese call center operator at $1.1 billion.   The company announced on Sunday that it will sell its 93.5% controlling stake in Bellsystem24 − which it held through its Citigroup Capital Partners Japan Ltd. − to Bain Capital Partners through a tender offer. The tender offer is expected to start on or before Nov 20 and be completed on Dec 30, 2009. Under the terms of the deal, Citi will receive 93.5 billion of yen ($1 billion) in cash.   Following the completion of the deal, Citi Holdings’ assets will be reduced by $1.2 billion. However, Citi’s net income and capital ratios will not be significantly impacted by this stake sale, the company said.   Citigroup, once the largest U.S. bank by assets, fell

...

Energy-focused engineering and construction company, McDermott International Inc. (MDR) reported better-than-expected third-quarter earnings, driven by robust performance from the Offshore Oil and Gas Construction segment. Earnings per share came in at 50 cents, 10 cents above the Zacks Consensus Estimate and 13 cents above the prior-year period. Revenues were up marginally (by 0.7%) to $1.7 billion.   Offshore Oil and Gas Construction   McDermott’s Offshore Oil and Gas Construction segment revenues were up 26% to a record $1 billion, as higher sales in the Middle East and Caspian regions more than offset reduced levels in other areas. Operating income for the quarter came in at $106.5 million (second highest quarterly income ever), compared to a loss of $19.7 million during the third quarter of 2008, reflecting strength in the Asia Pacific and Middle East regions. As of Sept 30, 2009, segment backlog was $3.9 billion, as against a backlog

...