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Economy is growing by 2.5% right now (faster than the end of the year) – my latest projections – no 1st quarter recession in the cards:

Bottom Line:  No burying of the lead – it’s all in the headline.  For the first time in months I’ve felt as though the economic information available is finally reliable enough to be able to deduct current and near term economic data (You may recall that I didn’t want to guess as to the outcome of the fiscal cliff outcome).  The news is certainly more positive.

With greater than 90% confidence I’m currently showing the US economy growing at 2.5% right now (with improvement over the first three weeks of 2013 – likely relief from the fiscal cliff resolution). 

The exact number I arrived at was 2.52% and the only variance that could sway the numbers is the actual percentage of the overall U.S. economy that consumer spending represents.  It’s typically close to 70% but we saw a wide range last year beyond typical norms.  So here are the bullets from my model:

  • Economic growth of 2.5%
  • Gaining strength led by housing / consumer spending
  • No recession risk for the 1st quarter
  • Negligible recession risk for the second quarter


Don’t let the drop in existing home sales fool you – it’s yet another indication of the housing recovery:

Bottom Line:  Yesterday we received a piece of data out of the housing market that if reported without interpretation would lead one to an incorrect conclusion. 

The headline:  Existing home sales drop 1% in December

The reality:  We didn’t have enough homes for sale to meet demand

So we did see a 1% decline in existing December homes sales nationally (though the local number was still up 1%) but the reason was a lack of existing homes available for sale.  Sounds kind of crazy doesn’t it?  After all of those years of excess inventory in housing.  It’s actually the case though. 

In December we had the smallest quantity of existing homes available for sale since 2000!  There are a couple of important takeaways:

  • The final cog of the housing puzzle – over supply has now been over come
  • It could be an excellent time to sell if you’re inclined because of short-term supply shortages in many areas (including our local market which is one of the top performing in the country right now)


Today’s question - How to reduce debt:

Bottom Line:  Today’s question comes from a gentleman who posed a series of very good questions.  They were:

In this vain my thoughts to you this morning are as follows:


Deficit Reduction Questions Accomplished Through Growth

·        What level of GDP growth would be required to reduce the national deficit by 25%? 50%? 75%?

·        How many consecutive years at this projected growth level would it take to reduce the deficit by these amounts?

·        When did the economy last register this level of growth?

·        How many consecutive years was the economy at this sustained growth period?


Deficit Reduction Questions Accomplished Through Taxes

·        What tax-rate would the top 1% have to pay to reduce the national deficit by 25%? 50%? 75%?

·        How many years would it take at this increased tax-rate to reduce the deficit by these amounts?

·        If there isn’t enough 1%’s in the country to reduce the deficit before the economy collapses then what percentage of the population will have to pay more in taxes to reduce the deficit by these percentages?

These are all valid questions.  The issue is so large though perhaps the most complete answer I can provide is this. 

We don’t have the 2012 tax receipt number yet clearly so let’s take 2011. 

In 2011 the total tax revenue to the Federal Government was $2.3 trillion.  The deficient was $1.1 trillion.  To put it another way.  There isn’t enough money earned by rick people to tax to fill the gap.  There isn’t a normal growth rate that would produce enough to bridge the gap (short term).  To fill the gap, to put it into perspective, every American would have to pay an additional 40% of their total income in taxes.  

To put it anther way…  It has to come through reductions in spending. We’re so out of whack we can’t grow or tax our way out of this anymore.


Politics is super social – just Tweet a politician:

Bottom Line:  Does it feel like you just can’t get away from politics?  There’s a good reason.  It’s everywhere.  Even if your friends or colleges aren’t talking about political issues – the politicians just might find you! 

All 100 US Senators are now active Twitter users and 90% of the 435 members of the US House are as well.  Now if they’d only be half as effective at their elected job as they are socializing…


Groupon enters gun control debate – halts sales of related companies:

Bottom Line:  And then this happened…  Groupon has decided to take a stance in the gun control debate.  It’s not with those who buy or sell related products.  Groupon has decided to suspend all deals and not to accept future deals with companies engaged in the sales of fire arms or ammunition. 

Based on what I’ve seen and heard recently I don’t think any sellers of these materials need Groupon or a half off promotion to sell their wares but just incase Groupon has spoken.  This comes with a certain amount of risk for a company which financially doesn’t appear to be in the position of picking and choosing which legitimate business should be able to do business with them.