The DC Today - Wednesday, May 17, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 17 May 2023
⏱️ 9 minutes
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Summary
Today's Post - https://bahnsen.co/3OnePfQ
So markets rallied hard today as both sides in this Biden/McCarthy negotiation assured listeners that a default won’t happen. Here’s the lay of the land in the debt ceiling debate:
It is fair to say “deadlines” thrown out for various actors in this are more bark than bite – negotiating tactics and all that stuff.
No one can really say when they have to start prioritizing payments because they don’t know what exactly June 15 tax receipts will look like. There will be lots of “rounds” in this negotiating process The White House largely believes it is more to their political benefit to be seen as getting a deal done than to be seen as fighting with the Republicans Noise is not material to a portfolio. One need not know what happens between now and whatever the X date is to know that on the other side of the X date, it will be like this noise never happened. For us contrarians, it is worth noting that cash levels are now the highest they have been all year and bond allocations are the highest they have been since 2009. And the recent Bank of America survey had money managers the most pessimistic as they have been all year. Keep this up, and we may end up seeing a full-blown boost of economic expansion … =)
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. |
| 0:15.5 | Well, hello and welcome to the Wednesday edition of D.C. today. And I have just literally walked into my apartment here in New York City. |
| 0:24.4 | Been on a plane all day coming out from Southern California. |
| 0:27.6 | I fought the traffic from JFK in my car service through Queens over the Queensboro Bridge into Manhattan to run up and record this for you. |
| 0:39.3 | And I bring with me a rally day in markets. |
| 0:42.8 | Dow up 4008 points, both NASDAQ and S&P up about one and a quarter as well, |
| 0:50.1 | literally within a few basis points. |
| 0:52.2 | All three indexes up literally right around that 1.25% level on the day. |
| 1:00.0 | Basically, both Speaker McCarthy and President Biden saying we don't have a deal yet. |
| 1:04.5 | We're not done, but no, no, no, we're not going to default on the debt. |
| 1:08.3 | And the only thing I want to say is I think there's days the market's |
| 1:11.1 | going to drop for no reason around, oh my gosh, they don't have a deal. And I think there's days that the market's going to rally higher for no reason. Like, oh, yeah, good news. They promise they're not going to default. So let me just tell you something. They're not going to default of the debt. It's all been a big lie to begin with. But beyond that, I still think the glass is half-empty side of where we go between now |
| 1:33.6 | and the end of it, we'll have deals that fall apart before a deal that gets done. |
| 1:39.3 | That's just my experience with this and my read of what the politics are like. So the kind of major points I want |
| 1:46.4 | to offer on the debt ceiling thing and then I'll give a few other little tidbits and I'll let you go. |
| 1:52.7 | I don't know when they'll have to start prioritizing payments. But that is prioritizing payments |
| 2:00.8 | is different than the debt default. That's the big |
| 2:03.0 | point I've been making for months and months and months and months that a debt default is a technical |
| 2:07.5 | term, meaning the missed principal or interest payment on a treasury bond. It's not going to happen. |
| 2:12.8 | Priorizing payments, which they've had to do dozens of times in my lifetime, and it's ugly and it's |
| 2:20.8 | weird and it's political and it's not good, but it's not a death default. |
| 2:25.6 | I suspect that there will come a push up against that wall before they actually get there |
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