An eminently stupid political fight is about to begin.
We all know how it’s going to end… it’s just a question of how much trouble it causes in the meantime.
President Joe Biden says he wants Republicans to commit to the “bedrock principle” that the United States should not default on its debt.
National Economic Council Director Brian Deese and Office of Management Budget Director Shalanda Young said a fight over the debt ceiling “is not a negotiation; it is an obligation of this country and its leaders to avoid economic chaos.”
Except of course it is a negotiation.
Obviously, neither side wants to see the country default, unless you really want to do a Bane-style burn it all down, “crash this plane with no survivors” approach.
And I imagine a few frustrated progressives in the Democrats want to force a vote on something like Medicare For All.
Yet both Speaker Kevin McCarthy and President Biden understand they may all catch the blame if the economy collapses following a default.
That doesn’t mean there won’t be a game of chicken.
The new GOP majority needs to show its voters that it is willing to fight – even if it is purely symbolic.
McCarthy can’t just do nothing. “I’m not interested in political games,” he said. “I’m coming to negotiate for the American people.”
I daresay he is interested in political games – on both sides, this whole thing is a political game.
The thing is, we all know how this ends.
The debt limit will be increased and we’ll continue to kick the debt can down the road, pretending it doesn’t matter. And it doesn’t matter… until one day it does. But politicians tend not to look beyond the next term.
Speaker McCarthy has already said there will be “no default.” He says he just wants a way to limit this “runaway spending.”
But that’s not likely either. No popular programs are going to be cut. The GOP doesn’t have the power even if it had a political death wish.
What’s likely to happen? A lot of sound and fury, signifying nothing.
There will be plenty of speeches by the GOP bragging about their fiscal conservatism and probably some speeches by the president about how the Republicans are bringing us to the brink of disaster.
In the end, there will probably be a symbolic cut here or there and everyone will go home.
Keep your eye on the ball. Don’t get distracted by the political battles.
I break down how to use some of the most well-known technical signals in my column today.
Trust the numbers, not politicians’ rhetoric
Keep Moving,
COACH’S CORNER
“Today we’ve got J Powell on the mic at 2:30 EST. No chart analysis today, just some words of wisdom. First, I would expect exceptionally low volume leading into the meeting. Keep this in mind if you’re trying to get your order filled, and watch out for wide bid-ask spreads on your options. Don’t chase price and end up overpaying.
During and after the meeting volatility will likely spike. You’ll see your P/L flashing wildly and the market may do some strange things. This is just noise. Keep your wits about you and hold fast to your plan. Exit if you get stopped out, but otherwise just ride out the storm. Follow your indicators and have confidence. Learning to stay calm is all part of the process.”
Cheers,
Chris Hood
WORD ON THE STREET
No Negotiations, Mickey D’s Impresses, XOM RECORD Profit
- Yes, They Are In Fact Lovin’ It – McDonald’s (MCD) beat expectations on both revenue and adjusted earnings per share. Sales were also brisker than expected. Despite the win, MCD was down more than 1.2% during the trading day.
-
I Assume Greta Thunberg Is Not Happy – So much for the bold new era of clean energy. Exxon Mobil Corp (XOM) posted its largest ever annual profit, an incredible $55.7 billion. Only Apple, Microsoft, and probably Alphabet (Google) can post similar returns. It’s an astonishing turnaround from 2020, when XOM posted its first loss in four decades.
-
Dark Brandon Rises – President Joe Biden has said he will not negotiate with House Republicans about spending cuts in exchange for increasing the debt limit. “Congress has always done it, and the president expects them to do their duty once again,” said White House Press Secretary Karine Jean-Pierre. “That is not negotiable.” While Speaker Kevin McCarthy says he wants to avoid a default, he insists that the country’s spending policies can’t continue indefinitely.
- AMD Beats Expectations But Warns Of Trouble – Chipmaker AMD slightly exceeded expectations on both earnings-per-share and revenue, as the stock gained both during the trading day and after-hours. However, the greatest challenges may lie ahead. AMD CEO Lisa Su says the PC market will decline this year, but though “the demand environment is mixed, we are confident in our ability to gain market share in 2023 and deliver long-term growth based on our differentiated product portfolio.”
HOT SPOTS: What’s Going on in Geopolitics
- Split On Fighters For Ukraine – President Joe Biden gave a very direct answer when asked if the United States will supply Ukraine with fighter jets – “no.” France and Poland are reportedly considering the request, though other European countries have ruled out additional weapons shipments. Meanwhile, Russia continues to claim that its slow motion offensive is gaining ground, with Vuhledar reportedly falling to Vladimir Putin’s forces. This has not yet been independently confirmed. The Russians continue to encircle the strategic city of Bakhmut to avoid the need for a direct assault.
-
USA Forms High Level Partnership With India – The United States and India have joined forces in an “initiative on critical and emerging technologies” (iCET). This includes joint production of defense equipment. It’s a major blow against Russia’s diplomatic efforts, especially Moscow’s attempt to win India over as a customer for military equipment and as a pillar of an anti-Western BRICS (Brazil, Russia, India, China, South Africa) coalition.
-
Bolsonaro In Exile – Former Brazilian president Jair Bolsonaro has filed for an extension on his visa so he can stay in the United States. He has plenty of reasons why – after his supporters stormed government buildings in protest of election results, the former president may face an investigation if he returns home. Most suspect he’s trying to distance himself from his more militant supporters and return when he can credibly lead the opposition to President Luiz Inacio Lula da Silva.
CUTTING EDGE: What‘s Happening In Tech
- SNAP Signals Doom For Online Advertising – This isn’t what tech companies wanted to hear. SNAP disappointed on earnings and the stock fell off a cliff in after-hours trading, losing close to 15%. The company also didn’t give a forecast for the rest of the year, a bad sign.
-
PayPal Slashing Staff – About 7% of PayPal’s employees, around 2,000 people, are about to lose their jobs in the latest round of tech sector layoffs. CEO Dan Schulman put the best face on it by saying the company “must continue to change as our world, our customers, and our competitive landscape evolve.” PYPL gained 2.3% during the trading day.
- CBD A “Dangerous” Drug… – At least in Hong Kong. While it was once spreading in restaurants and cafes throughout the island, the Chinese government has determined it is a dangerous drug. In fact, it’s been put into the same category as heroin. The industry, at least here, can essentially be said to have been shut down by decree.
FOR YOUR CONSIDERATION
“When your indicators fail (and they will), there’s only one thing to pay attention to…”
“Price action.”
It’s one thing to see the technical signals. It’s quite another to know what they really mean.
Price action is the missing ingredient that you may need to take your trading to the next level. How do you factor this continuously changing variable into your trading system?
Corey breaks it down.
Enjoying Dawn Report? Learn something, made some money?
SHARE YOUR STORY WITH US OR TELL US HOW TO SERVE YOU BETTER.
Let us know at info@rogueinvesting.com
