Morning Reads

Morning Reads

Todays Open Interest Change



America's national debt has topped $33T for the first time, according to the latest figures from the Treasury Department. The record amount of red ink and gloomy fiscal milestone come as Congress braces for another fight over federal spending. Unless lawmakers can agree to pass a dozen appropriations bills by Sept. 30, or ink a short-term continuing resolution to fund the government, the U.S. would face its first federal shutdown since 2019.

Quote: "President [Biden] has proposed a series of measures that would reduce our deficits over time while investing in the economy, and this is something we need to do going forward," Treasury Secretary Janet Yellen declared. "The statistic or metric that I look at most often to judge our fiscal course is net interest as a share of GDP. Even with the rise we have seen in interest rates that remains at a very reasonable level."

"Net interest as a share of GDP" refers to net payments the federal government makes on its debt in relation to U.S. gross domestic product. Those interest payments totaled 1.86% of GDP in 2022, which falls in line with the historical average since 1960 of just under 2%, but other factors are causing more alarm. The national deficit for the first 11 months of the latest fiscal year was $1.5T, marking a 61% increase from the same period a year ago, while total public household debt hit a record $17T in Q2, with the U.S. debt-to-GDP ratio reaching 120%. "The U.S. debt situation is out of control, with no responsible body of people in the government willing to address it," SA analyst John Mason writes in The Fiscal Mess Of U.S. Debt.

What to watch: There's no magic number or level for when a government's debt begins to hurt its economy, and the U.S. has easily handled a much heavier debt load than was once thought possible - even using those conditions to remain competitive on the international stage. However, a spike in interest rates over the past year and a half has made the cost of servicing the national debt way more expensive, posing significant risks to the fiscal and economic outlook. Extreme partisanship has also left both parties pointing fingers and kicking the can further down the road. The GOP has cited bloated federal spending programs that passed during the Biden administration - like the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act - while Democrats have referenced the "trillions spent on Republican tax cuts skewed to the wealthy and big corporations."

No peak yet

Top oil executives are voicing support for the global transition to cleaner energy, but said that crude will continue to play a major role for decades to come, in remarks at the World Petroleum Congress in Calgary. Exxon (XOM) CEO Darren Woods and Saudi Aramco (ARMCO) boss Amin Nasser both pushed back against the recent prediction from the head of the International Energy Agency that the era of fossil fuels is ending and demand will peak by 2030, outlining the transition to cleaner energy to fight climate change will require continuing investment in conventional oil and gas. "No matter where demand gets to, if we don't maintain some level of investment in the (oil and gas) industry, you end up running short of supply, which leads to higher prices," said Wood - in a view echoed by Nasser. (37 comments)

At the high end

Grocery delivery firm Instacart (CART) has priced its initial public offering at $30 per share, at the top of a previously stated range, giving it a valuation of $10B. Instacart - also known as Maplebear - had boosted its IPO price range to $28-$30 a share to raise as much as $660M, following renewed optimism thanks to Arm's (ARM) impressive market debut. Instacart, led by former Meta (META) executive Fidji Simo, will issue 22M shares in total, with the stock expected to start trading today on the Nasdaq. While SA analyst IPO Kitchen said the increased pricing range suggests high retail demand, they're not too confident that Instacart can grow its top line fast enough to justify its premium valuation. (18 comments)

Not messing around

United Auto Workers are planning additional strikes against the Detroit Three if "serious progress" is not made in contract negotiations by noon on Friday, the union's president Shawn Fain warned, adding, "We're not messing around." The new deadline would mark a week since the union announced targeted strikes in factories run by General Motors (GM), Ford (F) and Stellantis (STLA). While a team from the White House is expected to arrive in Detroit this week, Fain downplayed its role in brokering a deal. Separately, Canada's Unifor extended negotiations with Ford for a 24-hour period to avoid a strike after the contract between the company and the union expired at midnight. (14 comments)

Today's Markets

In Asia, Japan -0.8%. Hong Kong +0.3%. China flat. India closed.
In Europe, at midday, London +0.1%. Paris +0.3%. Frankfurt -0.1%.
Futures at 7:00, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +0.9% to $91.38. Gold +0.2% to $1,957.60. Bitcoin -0.3% to $27,129.
Ten-year Treasury Yield +2 bps to 4.32%.

Today's Economic Calendar

FOMC meeting begins
8:30 Housing Starts and Permits
1:00 PM Results of $13B, 20-Year Bond Auction

Companies reporting earnings today »

What else is happening...

WSB survey results: Fed may not be done with its hiking cycle.

Pfizer sees 24% of eligible Americans getting COVID boosters.

Hedge fund bets on U.S. Treasury futures could spark turmoil.

EV maker NIO (NIO) plans $1B convertible senior note offering.

Gap (GPS) leads drop in mall stocks as retail worries grow.

Credit card delinquencies, net charge-offs trend higher in August.

Amazon mulls new subscription programs in grocery, healthcare.

Lyft (LYFT) to pay $10M to settle Carl Icahn-related investigation.

Tilray (TLRY) slides after new short call from Kerrisdale Capital.

Coke (KO) could be Burger King's (QSR) India beverage partner.

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.

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