Transcript:
Tom Vaughan:
Hello everybody, welcome to Monday. Unfortunately, the S&P 500 was down 1.3% today. And really, there’s lots of stories going on at any point in time, but to me the big story is I’ve been talking about is really the “debt ceiling”. If you look at everything else, like the situation that’s happening in China with this big property company. There’s some threat there, there’s some danger there, but defaulting on debt and not being able to pay Social Security checks and things like that, it just really overwhelms anything else that’s out there. And so this part has to be solved. It’s why we made some defensive moves last week. I’m glad we did. It looks pretty good at this point in time, but I really don’t like making those type of moves.
It’s very difficult to figure out when you should get out, and even more difficult to figure out when to get back in. But this is such a unique situation with this “debt ceiling” in our current political environment. That combination, just seems fairly obvious to me, that as we head from the 4th today, to the 18th when we’re supposed to be defaulting, that things could continue to move along without a real resolution. And of course, the market’s going to continue to look at that in a negative way.
Theoretically, we might have a chance to come in at some lower point and actually take advantage of this. So hopefully, that does work out. We’ll see how that works, too. But you know, what happened today, Biden spoke about the “debt ceiling.” And he talked about trying to get this thing passed through the Senate. They tried to pass it once: The Republicans didn’t vote for it. And he’s trying to put pressure on the Republicans; which is fine, from a political standpoint. Again, I don’t like to talk politics that much on the show, because I have clients across the entire spectrum. I don’t want to offend anybody, but this is where politics and the stock market have definitely crossed paths. And so but one of the things that concerns me is that I don’t hear a real plan that’s coming out.
We talked about the possibility of putting the “debt ceiling” increase into the reconciliation package. That seems too complicated. Schumer came out over the weekend said that’s not going to happen. They moved back the vote on the buy on the infrastructure program until the end of October, which is past the default date. Which means that if those two are going to stay connected together with the infrastructure reconciliation, then that’s not happening. We’ve got a couple of different articles talking about how maybe Congress could force the government to ignore it, or the Treasury and White House could just ignore the “debt ceiling”. Lots of articles saying that that’s not constitutional.
You got this wild scenario, where the Treasury could print a $1 trillion coin. Apparently, the Treasury has the authority to print these commemorative coins, a platinum coin, and they’ve been doing this for quite some time. But they left open in that authority with the value, and so the Treasury can decide the value on these coins. So theoretically, they could print a quarter-sized platinum coin, call it a “Trillion Dollar Coin”, and deposit it at the Federal Reserve and pay out bills off of that. So this is a theoretically legitimate concept that could bypass this “debt ceiling”. I don’t think that would be very well received, honestly. Especially by the stock market, which is my main concern, so we’ll see what’s happening. And that’s what I’m saying.
I would think that possibly they have some solutions. I still think changing the filibuster to allow, you know, a simple majority to raise the “debt ceiling” or eliminate it, is something they could do very quickly. But they probably will want to continue to ratchet that pressure onto the Republicans for as long as possible, before they did that if they’re going to do it. Now, they said they didn’t want to do it. But I don’t think the Democrats want to be holding the bag on this debt default, either.
So again, this is just a situation where if you play the politics out, on the 17th, we’ll probably come up with some solution. And by then the market might be down some and so it’s a good place to be, in a more conservative position, and then maybe we can kind of come in after they do resolve it and get back to get back to normal.
So anyway, very fascinating timeframe. Thank you for you know, bearing with all of this. Again, this is a chance to really understand what’s happening, and then maybe take some advantage of it also at some point in time, too. So anyway, that’s what’s going on right now. Very fascinating. Every day is another chapter in this story that we continue to go down, and I look forward to seeing what chapter is going to happen tomorrow. Thank you very much.