07 Oct DOGECOIN AND THE TRILLION DOLLAR COIN
The vitriol surrounding the debt ceiling may soon become apocalyptic. Like most on Wall Street, I believe there will be an 11th hour resolution as been the case with the 22 other times. The ramifications of a default will be cataclysmic and to suggest otherwise is nothing other than complete naivety.
Speaking of utter foolishness, some are advocating a trillion-dollar coin. As everyone knows from their seventh-grade civics class, spending bills must start and end the House. If the Treasury can circumvent Congress, any time the Treasury needs money all it has to do is mint a coin. Talk about a massive currency debasement, a debasement or devaluation that would make all devaluations look like child play.
The US dollar—which is the world’s only reserve currency—would be crushed. Treasury yields would surge. Equities would crater.
I rank a trillion-dollar coin up there with Dogecoin, the mythical cyber currency hyped by Elon Musk. Oh wait a second, last quarter Dogecoin is/was 4% of Robinhood’s revenues. There is a quote from P.T. Barnum that is perhaps appropriate here.
Radically changing topics, the ADP Private Sector Employment Survey was stronger than expected, perhaps suggesting workers are returning to the work force following the expiry of enhanced unemployment benefits. Will this strength translate into tomorrow’s BLS Employment report?
Equities were volatile yesterday, trading considerably lower on inflation fears. A midafternoon headline stating a possible debt extension reversed declines to end moderately higher. Bloomberg reports it was the biggest reversal since June 2020. Is the grand finale of the “buy on dip” strategy, a strategy some pundits declared as dead before Wednesday’s opening?
What will happen today?
Last night the foreign markets were up. London was up 1.12%, Paris up 1.52% and Frankfurt up 1.28%. China was up 0.90%, Japan up 0.54% and Hang Seng up 3.07%.
The Dow should open nominally higher on progress on the debt ceiling talks and kick the proverbial can down the road into December and Russia’s offer to ease Europe’s energy crunch. The 10-year is off 1/32 to yield 1.53%.