The Weekly (5/12)
May 12, 2023
Debt ceiling chatter continues to echo louder as we approach the potential default date of June 1st. If unfamiliar, think of the debt ceiling as a self-imposed, and easily raised, federal credit card limit that (sort of) curbs government spending. Terms need to be decided on by Congress, and as we all know, they don’t move quickly.
Introduced during WWI in an effort to provide more accountability over government borrowing, the debt ceiling has evolved into a political tool for televised negotiations and brinkmanship. Throughout its history, the ceiling has been raised or suspended (ignored) over 100 times, often accompanied by deals made at the eleventh hour to avert a nasty economic situation.
The debt ceiling was initially set at $11.5 billion in 1917, which shakes out to roughly $250 billion after adjusting for inflation. To put that into perspective, the current U.S. debt limit is over $31 trillion, now surpassing our GDP of about $23 trillion.
A notable debt ceiling dilemma played out in 2013. It resulted in a 16-day government shutdown that was remembered by piles of trash in DC and the resurfacing of the “trillion dollar coin” idea.
Some claim that a nation with its own sovereign currency, like the U.S., can never run out of money and simply should get rid of the debt ceiling concept altogether. Why? Well, essentially, because the U.S. can technically always print more money. Of course, we’ve seen firsthand that pumping trillions into the economy can quickly lead to sticky inflation, and we shouldn’t take the responsibility of having the global reserve currency lightly. But, they might be right.
Just yesterday, Jamie Dimon exhorted politicians, "Please negotiate a deal” because "the closer you get to it, you will have panic." It’s clear that an extended default would critically impair the economy. Unemployment well into the double digits, surging interest rates, and ripple effects across global markets could be expected.
Do we have a variant perception of the likelihood of an extended default? Certainly not, and anyone who claims they do, we’d advise taking their opinion with a grain of salt. Having said that, history may not repeat itself, but it certainly rhymes. We expect there to be a resolution just when everyone is certain there won’t be one.
We’ll keep a close eye on the situation while working to control the controllables: investing in what we believe to be great companies, attempting to size our positions well, and holding on tight.
Have a great weekend.
– Your Titan Team
Cash Management
© Copyright 2024 Titan Global Capital Management USA LLC. All Rights Reserved.
Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept and agree to Titan’s Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are hypothetical in nature and may not reflect actual future performance. Account holdings and other information provided are for illustrative purposes only and are not to be considered investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.
Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit www.titan.com/legal for applicable terms and conditions and important disclosures.
Cryptocurrency advisory services are provided by Titan.
Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
Contact Titan at support@titan.com. 508 LaGuardia Place NY, NY 10012.