The DC Today - Monday, June 5, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 5 June 2023
⏱️ 14 minutes
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Summary
Today's Post - https://bahnsen.co/3qnOZyl
Ask David
“With regards to the debt ceiling compromise, you point out that it suspends the debt ceiling entirely through the end of 2024. What I do not exactly understand is if the spending growth has been capped, then why would an increase in the debt ceiling be needed at all? ~ Mark
The part you’re missing is revenue. We can reasonably know what expenses will be now, and they will be reasonably limited. So yes, that should take the need for much borrowing above a given ceiling off the table. But revenue is a big variable, and especially in a deeper recession, it can drop well below the expenditure line, enhancing the need for deficit borrowing.
The variability of revenue is massive. Think of a 1% drop in the total GDP of the economy. Then think of an average drop of revenue as a % of GDP of 2-4% per recession.
So $24 trillion GDP goes to $23.75 trillion, and then the tax receipts go from 19% of 24tn to 16% of 23.75tn – essentially, lost revenues of roughly $750 billion. That could add 50-75% to the deficit and would be funded with debt issuance.
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:15.1 | Hello and welcome to the special Monday edition of DC today. We are now, you know, getting deeper into June |
| 0:24.1 | and some fun things to talk about today. I love the written Monday DC today. I did cover |
| 0:31.5 | a lot of ground, but I'm going to try to go through as much of it as possible with you here on |
| 0:35.7 | the podcast and the video. I'm going to quickly get |
| 0:38.7 | out of the way today's market action so we can go to more fun things. The Dow ended up |
| 0:43.8 | pretty much closed near the bottom of the day down exactly 200 points, which is just 0.59%. |
| 0:51.0 | Futures were pointing positive last night and again this morning, but they then opened |
| 0:58.3 | kind of flat and we went down from there and then we just sort of bounced around all day |
| 1:02.2 | between down 100 and down 200. And that's on the Dow. In terms of the S&P, it closed down just 20 basis points, the NASDAQ down nine, so basically |
| 1:14.7 | kind of flat. So really nothing super severe to talk about any of the markets. I will say that |
| 1:23.1 | when the OPEC plus announcement came out yesterday, and I was kind of deep into the markets last night, the futures on oil were above $74, up about 4%. |
| 1:36.5 | You had a bit different of a risk on appetite Sunday evening than ended up being the case on Monday. |
| 1:45.7 | But things were just kind of muted all around today. |
| 1:48.3 | We'll talk about oil and so forth in a moment. |
| 1:51.8 | Within today's market, it was communication services up the most, but only at 58 basis |
| 1:58.0 | points. |
| 1:58.4 | It was industrials down the most, but only at 71 basis points down. |
| 2:03.0 | And so, you know, really kind of a little flattish and not a big deal in the markets. |
| 2:09.4 | And speaking of flattish, the 10-year bond yield closed at 369, which is where it closed on Friday as well. |
| 2:15.6 | So you had a totally flat day in the bond market by the end of the, |
| 2:19.9 | at the close. |
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