Roundtable This Week: Expect Stocks to Get Crowded Out 📹

[] [View in browser]( [View in browser]( [] MAY 24 2023 Roundtable This Week: Expect Stocks to Get Crowded Out📹 [] [] DON YOCHAM No Rally from the Inevitable Debt Ceiling Rise The government isn’t especially price sensitive when it comes to borrowing money. Low interest rates. High interest rates. It doesn’t really matter. They borrow until the market says they can’t. And “the market saying no” has never happened to the U.S. government. At least not yet… At any point in time, there’s only so much capital to invest in stocks, bonds, equipment, land, or buildings, or spend on groceries, clothes… whatever. And when Uncle Sam barges in selling bonds, they soak up as much money as they need. Economists call this phenomenon “crowding out.” Those government bonds attract money looking to earn interest. So there’s less money to fund other projects. All else equal, this raises interest rates, deterring businesses and households from borrowing money to spend and invest. Hence, government borrowing “crowds out” private sector spending and investment. That’s the theory. But once the debt ceiling gets lifted, you’ll be able to watch the mechanics of this dynamic play out in real time. When Congress inevitably raises the debt ceiling, the treasury will immediately issue debt to raise roughly a trillion dollars or so in cash (Jeffry had some precise numbers in today’s “[Roundtable](. That debt – likely treasury bills at first – sucks cash out of the system. Short-term rates rise from the issuance of those bills, giving depositors even more incentive to pull cash out of banks and put it into money market funds. Money market funds buy the treasury bills to invest the new cash that just came from the banks. A lot of other investors now see money market funds paying over 5% interest as a viable place to invest money given all the uncertainty. That means less money going into stocks. Or, more likely, flowing out. To this, keep in mind that bank deposits leverage the amount of cash available in the system. That’s because every dollar of deposits gets turned into $10 worth of loans used to buy stuff and invest. Money market funds don’t multiply money like banks. A $1 in a money market fund is $1 in total money supply. Thus, $1 leaving a bank means $10 leaves the system. It, quite literally, evaporates like it never existed. And that means less money for stocks too. So, when the debt ceiling gets lifted – or suspended altogether – and the news network shout… [] Don’t expect stocks to rally. Regardless of technicals or fundamentals, the simple mechanics of money means stocks will get crowded out in the short term and the S&P will decline. Personally, I think we’ll easily test 4,000 on the S&P but I wouldn’t be surprised to see it trade a couple hundred points lower. Garrett and I talked about this issue on “Roundtable” earlier today. We covered how it could play out and Garrett had some important advice on what to do once the selloff hits extreme levels (and how to know what “extreme” looks like). “Roundtable” goes live, every Wednesday, at 11am ET right [here](. So mark your calendars. And to catch our discussion of how to approach higher rates to come, click the image below. [] Take What the Markets Give You. [] [] JEFFRY TURNMIRE’S CHART OF THE WEEK An Eye on Activision Activision Blizzard, Inc. ([ATVI]( is a buyout target for MSFT. But recent regulatory hurdles has put some doubt in the deal. In this week’s chart, I’ve outlined the gap lower in ATVI with the big orange box. [] This move has pushed ATVI to retest my Roadmap Line. If we can get a daily close above the high from Apr 26 (indicated by the red arrow), then we could see ATVI rally back up to the point from which it dropped around $86. [] A move above 87 would indicate we could even see $90 on ATVI. But wait for the close above the Apr 26 high though, because this pattern is void if the price makes a lower low. If you want more of these setups sent right to your inbox every single week check out my [Market Roadmap](. Jeffry [] [] [] MAY 24 2023 Roundtable This Week: Expect Stocks to Get Crowded Out📹 [] [] DON YOCHAM No Rally from the Inevitable Debt Ceiling Rise The government isn’t especially price sensitive when it comes to borrowing money. Low interest rates. High interest rates. It doesn’t really matter. They borrow until the market says they can’t. And “the market saying no” has never happened to the U.S. government. At least not yet… At any point in time, there’s only so much capital to invest in stocks, bonds, equipment, land, or buildings, or spend on groceries, clothes… whatever. And when Uncle Sam barges in selling bonds, they soak up as much money as they need. Economists call this phenomenon “crowding out.” Those government bonds attract money looking to earn interest. So there’s less money to fund other projects. All else equal, this raises interest rates, deterring businesses and households from borrowing money to spend and invest. Hence, government borrowing “crowds out” private sector spending and investment. That’s the theory. But once the debt ceiling gets lifted, you’ll be able to watch the mechanics of this dynamic play out in real time. When Congress inevitably raises the debt ceiling, the treasury will immediately issue debt to raise roughly a trillion dollars or so in cash (Jeffry had some precise numbers in today’s “[Roundtable](. That debt – likely treasury bills at first – sucks cash out of the system. Short-term rates rise from the issuance of those bills, giving depositors even more incentive to pull cash out of banks and put it into money market funds. Money market funds buy the treasury bills to invest the new cash that just came from the banks. A lot of other investors now see money market funds paying over 5% interest as a viable place to invest money given all the uncertainty. That means less money going into stocks. Or, more likely, flowing out. To this, keep in mind that bank deposits leverage the amount of cash available in the system. That’s because every dollar of deposits gets turned into $10 worth of loans used to buy stuff and invest. Money market funds don’t multiply money like banks. A $1 in a money market fund is $1 in total money supply. Thus, $1 leaving a bank means $10 leaves the system. It, quite literally, evaporates like it never existed. And that means less money for stocks too. So, when the debt ceiling gets lifted – or suspended altogether – and the news network shout… [] Don’t expect stocks to rally. Regardless of technicals or fundamentals, the simple mechanics of money means stocks will get crowded out in the short term and the S&P will decline. Personally, I think we’ll easily test 4,000 on the S&P but I wouldn’t be surprised to see it trade a couple hundred points lower. Garrett and I talked about this issue on “Roundtable” earlier today. We covered how it could play out and Garrett had some important advice on what to do once the selloff hits extreme levels (and how to know what “extreme” looks like). “Roundtable” goes live, every Wednesday, at 11am ET right [here](. So mark your calendars. And to catch our discussion of how to approach higher rates to come, click the image below. [] Take What the Markets Give You. [] [] JEFFRY TURNMIRE’S CHART OF THE WEEK An Eye on Activision Activision Blizzard, Inc. ([ATVI]( is a buyout target for MSFT. But recent regulatory hurdles has put some doubt in the deal. In this week’s chart, I’ve outlined the gap lower in ATVI with the big orange box. [] This move has pushed ATVI to retest my Roadmap Line. If we can get a daily close above the high from Apr 26 (indicated by the red arrow), then we could see ATVI rally back up to the point from which it dropped around $86. [] A move above 87 would indicate we could even see $90 on ATVI. But wait for the close above the Apr 26 high though, because this pattern is void if the price makes a lower low. If you want more of these setups sent right to your inbox every single week check out my [Market Roadmap](. Jeffry [] [] [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 495 Town Plaza | Ponte Vedra | FL | 32081 [Prosperity Pub]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 495 Town Plaza | Ponte Vedra | FL | 32081 [Prosperity Pub](