Morning Reads


Open Interest Changes



The United States is ringing in the new year with a lot of red ink as the national debt surpassed $34T for the first time. The gloomy fiscal milestone, reported by the Treasury Department, comes as Congress braces for another fight over federal spending. Unless lawmakers can agree on another short-term continuing resolution to fund the government, or pass appropriations bills by Jan. 19 (and others by Feb. 2), the U.S. would face its first federal shutdown since 2019.

On the rise: Not only is the overall balance increasing, but the cost of servicing the national debt is rising at a rapid clip. "The interest paid on the federal debt so far this fiscal year is $900B, but this is soon going to reach $1T... and [it] is clear that the situation is unsustainable," SA analyst WWS Swiss Financial Consulting wrote in The Fed And The Debt. Higher deficits can also make inflation a bigger problem for the central bank, which uses monetary policy to keep prices stable but has little say over what happens on the fiscal side, where outsized spending has been the norm across both parties.

Credit rating agencies are also taking notice, with Moody's recently cutting its credit outlook on the U.S. to negative from stable, citing heavier downside risks to the country's fiscal strength. Fitch lowered America's credit rating following the debt ceiling drama last summer, while S&P was the first to downgrade U.S. government debt in 2011. Kicking the can further down the road also makes the issue harder to resolve and can result in drastic action instead of phasing things in like lower spending or higher taxes.

Tipping point? 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 despite doomsday warnings for several decades. However, extreme partisanship has left both parties pointing fingers, with the GOP citing 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 - and Democrats referencing the "trillions spent on Republican tax cuts skewed to the wealthy and big corporations." Hard compromises will have to be made over tax increases, while the parties must be willing to tinker with the government's biggest expenses, such as Medicare, Social Security and the military. (5 comments)

More disruption

Marking another blow to Operation Prosperity Guardian, shipping giant A.P. Moller-Maersk (OTCPK:AMKBY) has halted all transit through the Red Sea and the Suez Canal after a weekend attack on one of its ships. There have been 24 attacks against merchant shipping in the Southern Red Sea since Nov. 19, according to the U.S. Central Command. "If we don’t protect the Red Sea, it risks emboldening those looking to threaten elsewhere, including in the South China Sea and Crimea," warned U.K. Defense Secretary Grant Shapps. Popular shipping stocks ended in the green on Tuesday, the result of higher booking costs for some tankers amid lengthy diversions, including ZIM (ZIM) +13.4%, Maersk (OTCPK:AMKBY) +7.2%, Hapag-Lloyd (OTCPK:HPGLY) +5.2%. (20 comments)

Energy policy

Chevron (CVX) has warned that it will book $3.5B-$4B in charges for Q4 on some upstream assets, primarily in California, which recently sued Big Oil for allegedly lying about climate change. The company sees "lower anticipated future investment levels" stemming from the state's harsh regulatory environment, although it will still operate the impacted assets for many years. Chevron will also recognize a loss related to decommissioning obligations linked to assets it previously owned in the Gulf of Mexico, as their buyers are now bankrupt. California, which already has some of the toughest climate policies, is currently weighing capping refining profits and its lawsuit is seen as one of the most significant legal challenges facing the fossil fuel industry. (34 comments)

Build Your Dreams

The EV crown is changing hands as China's BYD (OTCPK:BYDDFsped past Tesla (TSLA) to become the world’s biggest electric car maker in the final quarter of 2023. BYD sold 525,409 battery electric vehicles in Q4 compared to Tesla's 484,507 units, driven by aggressive end-of-year discounting. However, Tesla still outpaced BYD on an annual basis, selling 1.8M electric cars while BYD sold 1.6M BEVs. Investing Group Leader Livy Investment Research noted that Tesla's market share in China is diminishing rapidly, as its vehicles struggle to keep up with local rivals' frequently-refreshed product line-ups. (16 comments)

Today's Markets

In Asia, Japan closed. Hong Kong -0.9%. China +0.2%. India -0.8%.
In Europe, at midday, London -0.8%. Paris -1.3%. Frankfurt -0.9%.
Futures at 7:00, Dow -0.3%. S&P -0.3%. Nasdaq -0.4%. Crude -0.2% to $70.25. Gold -0.8% to $2,057.20. Bitcoin -7.1% to $42,338.
Ten-year Treasury Yield +3 bps to 3.97%.

Today's Economic Calendar

Auto Sales
7:00 MBA Mortgage Applications
8:00 Richmond Federal Reserve Bank President Thomas Barkin Speech
10:00 ISM Manufacturing Index
10:00 Job Openings and Labor Turnover Survey
2:00 PM FOMC Minutes

Companies reporting earnings today »

What else is happening...

Japan earthquake: Plane catches fire after collision with relief aircraft.

Airbus in talks to buy Atos' (OTCPK:AEXAFcybersecurity unit.

This shipping giant lands on Wells Fargo's list of top tactical ideas.

Rivian Automotive (RIVN) drops after slight miss on Q4 deliveries.

Palantir (PLTR) will hold first 2024 board meeting in Israel.

Cruise line stocks begin 2024 by headlining slide in leisure sector.

Tencent, NetEase (NTES) gain after China removes gaming official.

Moderna (MRNA) upgraded at Oppenheimer on commercial prospects.

GoogleMeta's potential fines removed from Russian database.

J.M. Smucker (SJM) completes condiment sale to Treehouse Foods (THS).

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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