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Estimated read time: 2 minutes and 20 seconds
In this week’s newsletter:
Market recap
Skills & data used this week
Top holdings: what I am buying & selling
Market Recap
YTD returns:
S&P 500: +%
Nasdaq: +%
Russell 2000: +%
US Dollar ($UUP): +%
Gold ($GLD): +%
A quiet week in data, so let’s talk about money (or lack thereof).
Uhm…..?
The debt ceiling is established by legislation and serves as a mechanism to control and monitor the level of government debt. When the debt approaches the established limit, the Treasury Department has to take certain measures to avoid breaching the ceiling and defaulting on its obligations.
These measures are often referred to as "extraordinary measures" and involve adjustments to government spending and borrowing practices to create additional headroom under the debt ceiling…also known as “kicking the can own the road”.
A U.S. default on its debt obligations would have severe repercussions for the economy due to the following reasons:
Loss of Investor Confidence: Defaulting on its debt would damage the United States' reputation as a reliable borrower. This could lead to a significant increase in borrowing costs for the government, as investors would demand higher interest rates to compensate for the increased risk.
Higher Borrowing Costs: It would become more expensive for the government to finance its operations, resulting in higher interest payments and a larger portion of the budget being allocated to servicing the debt. This would reduce the funds available for other important government programs, such as infrastructure investments, education, and healthcare.
Negative Impact on Economic Growth: Business and consumer confidence would decline, leading to reduced investment, consumption, and overall economic activity. The resulting economic contraction could lead to job losses, lower wages, and a decline in living standards for individuals and families.
To put this situation into a picture, see below…
If you’ve been paying attention, this is not the first time I’ve shared M2 Money Supply YoY change. But knowing a little more about US defaults, doesn’t this chart start to make more sense?
The US is draining money.
So what does this mean for the markets? Judging by YTD returns, the economy is shrugging off the possibility of a default.
But as history has proven, risk happens slowly and then all at once
But hey, glad to see that Americans are on board with our #1 asset allocation! There’s a reason Gold is considered a ‘safe haven’ investment….
In The Account | my top holdings
GOLD - $GLD
Keep. Buying. The. Damn. Dips.
You can get this sucker up to 12% of your portfolio (beta-adjusted asset allocating)
BONDS
$IIGD
UTILITIES, HEALTH CARE, LOW BETA
$XLU, $PINK, $SPLV
Buy.
On The Radar | positions I want to build / sizing up
NONE
Off The Grid | removed positions / short selling opportunities
INDUSTRIALS - $XLI
HIGH BETA - $SPHB
RETAIL - $XRT
ENERGY - $XOP
TECH - $XLK, $QQQ, $GOOGL, $TSLA, $NFLX
CRYPTO - $BITO, $MSTR
HIGH YIELD - $HYG
FINANCIALS - $XLF
Retail and Energy got smoked this week, just sayin.
Until next week....
-BW
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.