Morning Reads


Todays Open Interest Change




The clock is ticking for a divided U.S. Congress to raise the federal government's debt ceiling, which currently stands at $31.4T, but risks running out of cash as soon as June 1. Razor-thin margins in Congress are complicating the matter, as only a handful of rejections could derail any deal, and concessions are a lot harder to come by, with extreme flanks enveloping both sides of the debt limit debate. While President Biden has invited House Speaker Kevin McCarthy to a meeting on Tuesday, things can quickly spiral in the danger zone, and is one of three make-or-break crises now impacting the U.S., according to SA contributor ING.

Quote: "It's simply unacceptable for Congress to threaten economic calamity for American households and the global financial system as the cost of raising the debt ceiling and getting agreement on budget priorities," Treasury Secretary Janet Yellen told ABC's This Week. "Even as we get very close to this date, if Congress doesn't act, we're likely to see financial market consequences. There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills."

As the U.S. gets closer to the brink of a default, talk has even circulated about possible emergency options that could be used to circumvent a disaster. Some ideas that have surfaced include invoking the 14th Amendment, as well as the trillion-dollar coin and issuing debt with coupons above current yields. While President Biden on Friday said he's "not gotten there yet" regarding using an option like the 14th Amendment, Janet Yellen was slightly more forthcoming about what would happen if an agreement failed to materialize on Capitol Hill.

Go deeper: "We should not get to the point that we would need to consider whether the President can go on issuing debt - this would be a constitutional crisis," she declared. "If they fail to do it, we will have an economic and financial catastrophe that will be of our own making, and there is no action that President Biden and the U.S. Treasury can take to prevent that catastrophe." When pressed to answer whether there is a "break glass" alternative, Yellen didn't appear to rule anything out, but said she didn't want to consider emergency procedures as there were "simply no good options." (180 comments)

Debt ceiling

Should the U.S. use an emergency procedure like invoking the 14th Amendment, the trillion-dollar coin, or issuing debt with coupons above current yields to avoid a catastrophic default?

· Yes (Desperate times call for desperate measures)
· No (It's a legislative mechanism to check spending)
· Not sure (Let's see how the negotiations play out)

Take the survey and see the results here

Woodstock for Capitalists

Thousands of Berkshire Hathaway (BRK.ABRK.B) shareholders and other investors flocked to Omaha, Nebraska, this weekend to hear Warren Buffett and Charlie Munger speak at an event known as the "Woodstock for Capitalists." The annual meeting came on the heels of an impressive set of earnings from the conglomerate, which owns and invests in a wide range of businesses from insurance to industrials. The discussion spanned a wide range of topics, including the economy, AI, Bitcoin, and CEO succession, while Buffett opened up about several stock positions, including his comment that Berkshire does not plan to acquire control of Occidental Petroleum (OXY). See other key takeaways from SA contributor Fishtown Capital. (52 comments)

Reparations plan

California's reparations task force, which first convened nearly two years ago, has given the final approval to a list of recommendations on how the state may compensate and apologize to Black residents for historical discrimination. "Reparations are not only morally justifiable, but they have the potential to address long-standing racial disparities and inequalities," Representative Barbara Lee (D-CA) declared. The proposals now go to state lawmakers to consider reparations legislation and a final sum, which some economists estimate could cost the state upwards of $800B, or almost 3x the state's annual budget. To be initially eligible, applicants must be a descendant of Black people who were in the country by the end of the 19th century, though there are not yet details on how the payments would be funded. Age, state residence, and other factors will also play a role in determining compensation. (29 comments)

The narrative

The market has priced in a much-anticipated pause in the Fed tightening cycle, which many hope will give the green light to equities, though some caution that cuts aren't really bullish for stocks based on historical patterns. Fed funds futures predict a 90% chance that the Fed keeps rates at 5% to 5.25% at the June meeting and more than a 70% chance that cuts begin in September. The discussion follows the strong April jobs report, which confirmed that the economy remains resilient, according to SA Investing Group Leader Dan Victor, while contributor Jeremy LaKosh cites signs of normalization but cautions that the constrained supply side of the labor market remains inflationary. With the non-farm payrolls report out of the way, investors are now paying close attention to CPI numbers due out Wednesday. (7 comments)

Today's Markets

In Asia, Japan -0.7%. Hong Kong +1.2%. China +1.8%. India +1.2%.
In Europe, at midday, London closed. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:30, Dow +0.2%. S&P +0.2%. Nasdaq flat. Crude +2.3% to $72.95. Gold +0.3% to $2031.70. Bitcoin -3.3% to $27,913.
Ten-year Treasury Yield +1 bps to 3.46%

Today's Economic Calendar

10:00 Wholesale Inventories (Preliminary)
12:30 PM Investor Movement Index

Companies reporting earnings today »

What else is happening...

Regional banks revived Friday after a brutal week. What's next?

Spending on weight loss drugs to rise exponentially through 2027.

Coke (KO) vs. Pepsi (PEP): Which is the better buy for dividends?

Travel & leisure hiring may stay hot despite recessionary risks.

Activist Nelson Peltz said to be targeting Estee Lauder (EL).

Was selling overdone? AI fears hit these stocks this earnings season.

Tucker Carlson said to be prepping for war against Fox News (FOX).

U.S. pipeline regulator aims to toughen rules for detecting methane leaks.

After impressive Q4, what's in store for Palantir's (PLTRearnings?

Generative AI is all the rage. Tim Cook is asking for caution.

Concerns raised over OTC use of Perrigo's (PRGObirth control pill.

The winners: Best investment idea for a potential recession competition.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

More Posts by UPB: View All | Private Twitter Feed: Access Now! (For Diamond Members)