The DC Today - Wednesday, August 2, 2023

The Dividend Cafe

The Dividend Cafe - The Bahnsen Group

Business, Estate Planning, Monetary Policy, Wealth Management, Investing, Macro Economics, Dividend Growth Investing, Retirement Planning

4.9 • 572 Ratings

🗓️ 2 August 2023

⏱️ 6 minutes

🔗️ Recording | iTunes | RSS

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Summary

Today's Post - https://bahnsen.co/3DGpZpC

Fitch (the least known of the three major credit rating agencies) downgraded the U.S. from AAA to AA+, citing growing fiscal deterioration and overall debt burden. Now, you might be thinking, “oh no this sounds really bad,” and certainly anyone who doesn’t think the debt burden in the U.S. is really bad has, shall we say, not let the medication wear off … But on the other hand, not referring to the debt itself – just referring to Fitch saying all this, you also might be thinking, “ummmm, did you guys just return to the office yesterday?” All headlines and Johnny-come-latelies aside, treasury yields laughed off this announcement today. We should note, S&P moved the rating to AA+ twelve years ago.

If one were looking to understand financial market responses to U.S. sovereign debt reality, they would be more focused on the ramifications for liquidity in the financial system (Fed actions with easing and tightening and levels of reserves in the banking system) than the ability to repay debt. The latter is simply not a concern. The former is a volatile, uncertain, and unstable tale that ebbs and flows and impacts all sorts of risk assets.

The ADP jobs number once again blew out, this time at 324k private sector jobs created in July (versus 190k expected). We shall see what BLS says on Friday.

More than 40% of companies in the Russell 2000 (small cap index) have NEGATIVE earnings. Small cap benefits from active management.

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
0:06.9	through Thursday to bring you up-to-date information and perspective on financial markets.
0:14.5	Well, hello and welcome to the Wednesday edition of DC Today. Just some quick comments for you today, not a lot of extensive commentary.
0:24.4	It was a weird day because the NASDAQ was down over 2%. It was its worst day to the downside since
0:32.9	February. The S&P was down 1.38%. The Dow was down 350 points, down 1%. And yet, the breadth of downside
0:43.7	wasn't that bad. Consumer staples were up. Healthcare was up. Utilities were dead flat. So you had
0:50.6	defensives all kind of up and yet, you know, a lot of downside on the risk assets.
0:55.8	Please don't believe the nonsense.
0:58.2	And I mean just comical nonsense that today's downside was related to this fitch downgrade of the U.S. credit rating.
1:07.7	The S&P downgraded the S&P's credit rating, excuse me, S&P downgraded the United States
1:15.8	credit rating from AAA to AA plus 12 years ago. And I think the S&P is up, you know, 400% in that time
1:25.5	period. Fitch did it yesterday.
1:28.7	Congrats to them.
1:30.6	We, at the time, S&P, did it.
1:32.4	I think we had 10 trillion of debt.
1:33.9	We now have 32 trillion of debt.
1:36.1	And they expressed worries about the excessive debt.
1:40.0	The market, the bond market, the global currency market. I mean, there isn't a person on
1:48.2	earth who didn't know the state of U.S. debt situation. It's something I talk about all the time
1:53.8	and my belief in the stagnatory realities that come about as a result of excessive indebtedness.
2:01.6	But as far as it's impairment to the U.S. ability to make a principal and interest payment on debt,
2:09.0	which are what credit rating agencies are supposed to be monitoring, it's preposterous.
	...

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