The Morning Call---The great American debt bomb

The Morning Call

 

5/19/23

 

The Market

         

    Technical

 

            Thursday in the charts.

            https://www.zerohedge.com/markets/tech-turbocharged-hawkish-fedspeak-batters-bonds-bullion-banks

 

Note: the S&P (4198) appears likely to soon (like maybe today) test the 4200 Fibonacci 23.6% retracement level which has acted as resistance since last August.  A confirmed break above that level would be a good sign of further momentum to the upside. 4325 (the upper boundary of its short term trading range) would be the next target.

                                                                                           

Melt up momentum.

https://www.zerohedge.com/the-market-ear/melt-momentum

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                           

                            April existing home sales were down 3.4% versus forecasts of -1.0%.

                            https://www.advisorperspectives.com/dshort/updates/2023/05/18/existing-home-sales-fall-again-in-april

 

The April leading economic indicators were off 0.6%, in line; but indicate a mild recession by mid-2023 is probable.

                            https://www.advisorperspectives.com/dshort/updates/2023/05/18/cb-leading-economic-index-forecasts-mild-recession-by-mid-2023

                                                        

                        International

 

                          April Japanese CPI was up 0.6% versus consensus of +0.1%.

 

                          April German PPI was up 0.3% versus expectations of down 0.5%.

 

                          May UK consumer confidence came in at -27, in line.

 

                        Other

 

              More on the informational uselessness of the consumer confidence survey.

              https://politicalcalculations.blogspot.com/2023/05/less-than-useful-data-consumer.html#.ZGZlOnbMKUk

 

The Fed

 

  The Fed’s dilemma.

  https://thehill.com/opinion/finance/4005495-will-the-fed-keep-interest-rates-higher-for-longer/?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=258859922&_hsenc=p2ANqtz-81NlSFpOthfzvBEAJTGifiKkb6qEdUklrm3ZbOCCu4MeYQPIL8ssuQlMACpF9KZMp2mvUXGdckvC76f75RrvR-PQcJDQ&utm_content=258859922&utm_source=hs_email

 

Fiscal Policy

 

  Bribing the public with its own money.

  https://issuesinsights.com/2023/05/15/the-great-debt-ceiling-deceit/

 

As you know, I have long harped on the irresponsible fiscal management by our ruling class.  I have opined that running deficits (which need financing) usurps capital from the private markets which are much more efficient and provide a higher return.  That narrative found support in the Rinehart/Rogoff study that documents a slowdown in secular economic growth in those countries whose debt to GDP exceeds 90%.  In short, the larger the government debt, the less efficient the economy, so the less tax (at any given rate) is collected which forces the government to run even bigger deficits, etc., etc., etc. 

 

              Defusing the debt bomb.

              https://www.realclearmarkets.com/articles/2023/05/18/defusing_the_great_american_debt_bomb_900181.html

 

  Debt to GDP; it’s growing.

  https://econbrowser.com/archives/2023/05/federal-debt-to-gdp-when-did-it-jump

        

         Recession

 

           Recession calls keep getting pushed back.

           https://www.bloomberg.com/news/articles/2023-05-17/changing-recession-predictions-give-soft-landing-advocates-hope?sref=loFkkPMQ

 

Credit card usage is spiking according to latest Household Pulse Survey.

https://www.zerohedge.com/markets/battered-inflation-90-million-americans-struggle-paying-bills-credit-card-usage-spikes

 

                    Commercial real estate prices slide for the first time since 2011.

           https://www.zerohedge.com/markets/us-cre-prices-slide-first-time-2011-more-downside-coming

 

 

         The Debt Ceiling

 

  So, we get a debt deal; hardly anyone is talking about the $1 trillion aftershock.

  https://www.bloomberg.com/news/articles/2023-05-18/a-1-trillion-t-bill-deluge-is-painful-risk-of-a-debt-limit-deal?srnd=premium&sref=loFkkPMQ

 

         The Banking System

 

  Here is another possible solution to prevent unnecessary risk taking by bank    managers.

  https://www.ft.com/content/e303e43e-272c-4138-9f6e-4e0981269c44

 

    News on Stocks in Our Portfolios

 

Altria (NYSE:MO) declares $0.94/share quarterly dividend, in line with previous.

Cisco (NASDAQ:CSCO) declares $0.39/share quarterly dividend, in line with previous.

Home Depot (NYSE:HD) declares $2.09/share quarterly dividend, in line with previous.

What I am reading today

 

            Quote of the day.

            https://cafehayek.com/2023/05/quotation-of-the-day-4268.html

 

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.