Questions about the US debt ceiling, the inverted yield curve and SMEs

Finally Friday! Dan DeFrancesco checking in from an unknown location (probably with a drink in hand).

Friday Fun Fact: The blood of horseshoe crabs is blue, incredibly expensive, and a key tool for the medical community. Here’s why.

Today I’m going to dedicate the newsletter to our mailbag reader. No need to bother. You asked, and I answered.

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Mail time!

How would a default in payment affect the overall economy?

Was there ever a time in US history when the government defaulted on its debt? If no agreement can be reached on the debt ceiling solution, how will this affect the global economy?

How does the fall in the stock market thwart the debt ceiling crisis?

Ah, yes, the dreaded debt ceiling.

I would start by recommending that you check out my colleague Phil Rosen’s newsletter, 10 Things Before the Opening Bell. (As long as you don’t stop reading this one!)

But I don’t want to send you home empty-handed.

First of all, we’ve been down this road before… sort of. The US government has already defaulted on its debt. This happened in 1979 and was considered a “mini-fault”. But it was actually the result of technical glitches – always blaming the computers – rather than hitting the debt ceiling.

When it comes to impact, many people shared their thoughts, including JPMorgan strategists and billionaire Ray Dalio. But no matter what you think the US government should do, there’s really no way around a possible debt crisis, according to a veteran economic analyst.

And if that all seems too long to read, just watch this video on what happens if the United States defaults.

Learn more about why it’s impossible to trade on a US default.

Why JPMorgan thinks failure to reach a debt ceiling deal would lead to “sharp” moves in stocks.

Why do people invest in longer term bonds when the yield curve is inverted?

An inverted yield curve means that short-term bonds offer better yields than long-term bonds, which seems counterintuitive. Traditionally, inverted yield curves are considered an indicator of recession.

So why would anyone invest in what seems like a bad deal?

Well, there is reason to believe that an inverted yield curve is not a sign of an impending recession.

So if you think things won’t end badly and rates will go down, you might be willing to take the risk.

Click here to learn more about why experts question the reliability of the inverted yield curve as an economic predictor.

The recent surge in initial public offerings (IPOs) and special purpose acquisition companies (SPACs) has raised concerns of a possible bubble in the market. How should investors approach these offerings and what factors should they consider when assessing their investment potential?

Is “overload” the right term here? I guess any number of companies going public might seem like a lot amid the current drought, but it still seems like a small feat.

I hesitate to give specific financial advice, but I think you can see any company looking to enter the public market these days from two very different perspectives.

On the one hand, a company that goes public must now have supreme confidence in its business. IPOs are a nerve-wracking process at the best of times, let alone when the market seems to be on the brink.

The counter is that a company sees the IPO as a last ditch effort to raise cash and expand its runway before the wheels come completely off.

The trick is being able to distinguish between the two.

Click here to learn more about how the secondary market is booming as startup employees and early investors look to cash out amid an IPO drought.

Pricing strategy for small business?

Ok, now we’re really getting out of my wheelhouse.

I will say this. A VC I met a few weeks ago mentioned all the great opportunities they saw for fintechs helping SMBs. Whether you consider this a good or bad thing is a matter of personal preference, I guess.

Luckily for you, last year we actually identified 12 startups that cater specifically to SMBs. We also have a ton of pitch decks from startups that focus on this space.

So maybe start there?

Check out the 12 startups looking to serve small businesses.

Click here to discover the fintechs that present themselves to SMEs.

What percentage of US corporate profits come from their China-based subsidiaries?

Something tells me there is a political motivation behind this question…

I’m going to avoid that minefield and point you to a recent story we did about some big US companies making money from the Chinese consumer spending spree following the country’s lifting of its pandemic lockdowns .

These five big US companies are winning on China’s spending spree.

Have you thought about changing the name of the newsletter to: “How to whine, complain and be a victim in ANY situation, no matter who you are or what you do”?

It’s always nice to hear from a fan. To be honest, I’m not sure which one jumps off the page. But always open to suggestions.

Organized by Dan DeFrancesco in New York. Feedback or tips? Email, tweet @dandefrancesco, or connect on LinkedIn. Edited by Jeffrey Cane (tweet @jeffrey_cane) in New York and Nathan Rennolds (tweet @ncrennolds) in London.


Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
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