👨💼🇺🇸 U.S. Government nearing the Debt Ceiling (again)
Happy Sunday :)
In case you missed it on YouTube, I shared everything in my investment portfolio this past Wednesday. The video is here if you want to check it out!
I did get some comments about how risky my portfolio is, as I have a large concentration of Apple stock, and held losing names all the way down. I totally acknowledge that in the video. If you do watch it, understand it is for entertainment, and that I often take bigger risks in my portfolio than I may suggest for others. And I think that’s a challenging part of creating videos: people have a perception of you and if you aren’t aligned with that perception - judgmental comments come out.
Everyone has a different risk tolerance and goal with investing. What’s right for you, may not be right for your friend, or family member. What is more important is that we continue investing a portion of our income over time.
In other personal news, I’m taking a meditation course starting on the 17th, excited to see what it’s all about. The type of meditation I’m learning is called “Vedic” or “Transcendental” meditation - it’s supposed to be for more logical/analytical types. Will report back on how it goes.
Have a great Sunday and enjoy today’s Primer.
— Humphrey
Market Report
The overall consumer price index fell 0.1% from the prior month, with cheaper energy costs fueling the first decline in 2 1/2 years. Excluding food and energy, core CPI rose 0.3% last month and was up 5.7% from a year earlier, the slowest pace since December 2021.
Shelter costs — the most significant services component and make up about a third of the overall CPI index — increased 0.8% last month, an acceleration from November. Because of the way this category is calculated, there’s a delay between real-time measures — which currently show rents are beginning to decline. Thus, it’s possible that inflation is actually lower than what CPI is saying.
Big Bank Earnings
While banks earned strong income from soaring credit card fees, the lack of IPOs, M&A, and bond offerings reduced banking revenues… In addition, recession fears led to banks bracing for the worst. JP Morgan doubled its loss reserves, which estimates the amount the bank would have to pay out on future insurance claims on its underwritten policies. This was the largest reserve build since Q2 2020.
It wasn’t just JPM. The Big 4 banks (JPM, Wells Fargo, Citi, BofA) saw their total loss reserves increase to $6.2 trillion, the largest reserve build since 2013 (excluding the Covid quarter). Whether or not you think a recession is coming, the banks certainly are preparing for one.
U.S. to Hit Debt Limit Thursday
Treasury Secretary Janet Yellen notified Congress that the U.S. will reach its statutory debt limit next Thursday, and asked House Speaker Kevin McCarthy to either suspend or increase the debt limit. “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen warned.
The statutory debt limit often referred to as the debt ceiling, is the limit set by Congress to the amount of debt that the U.S. government can take on. It also includes interest payments on existing debt. Once the government reaches the statutory debt limit, it cannot take on new obligations.
Forecast Ahead
Corporate Earnings (Throughout Week)
Tuesday, January 17th - Morgan Stanley (MS), Goldman Sachs (GS), Citizens Financial Group (CFG), United Airlines (UAL), Interactive Brokers Group (IBKR), Signature Bank (SBNY)
Wednesday, January 18th - Charles Schwab (SCHW), Prologis (PLD), PNC Financial Services (PNC), Kinder Morgan (KMI), Discover Financial Services (DFS), J.B. Hunt Transport Services (JBHT)
Thursday, January 19th - Procter & Gamble (PG), Netflix (NFLX), Truist Financial Corp. (TFC), Fifth Third Bancorp (FITB), SVB Financial Group (SIVB), American Airlines (AAL)
Friday, January 20th - State Street Corp. (STT), Ally Financial (ALLY)
What We Read Last Week
Inside Goldman Sachs' layoffs: 'Every 10 minutes, I just kept hearing that someone was being let go' (Business Insider)
Microsoft + OpenAI: Inside Tech’s Hottest Romance (The Information)
Minibubbles in US Banking Are Popping With Costs in the Billions (Bloomberg)
Silicon Valley Can’t Quit Its Pizza Robot Obsession (Bloomberg)
Chips Are the New Oil and America Is Spending Billions to Safeguard Its Supply (WSJ)