Reader mailbag: From the impact of a US default to analyzing the IPO market, all your questions answered
Finally Friday! Dan DeFrancesco checking in from an undisclosed location (most likely with a drink in my hand).
Fun fact Friday: Horseshoe crabs' blood is blue, incredibly expensive, and a key tool for the medical community. Here's why.
Today, I'll be dedicating the newsletter to our reader mailbag. No need to fuss. You asked, and I answered.
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How would a debt default affect the overall economy?
Has there ever been 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 worldwide economy?
How does the drop in the stock market counter the debt-ceiling crisis?
Ah, yes, the dreaded debt ceiling.
I'd start by recommending 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, we've been down this road before... sort of. The US government has previously defaulted on its debt. It happened in 1979 and was considered a "mini-default." But it was actually the result of technical issues — always blame it on the computers — as opposed to us reaching the debt ceiling.
As far as the impact, plenty of people have shared their thoughts, including JPMorgan strategists and billionaire Ray Dalio. But no matter what you think the US government should do, there's no real way to trade around a possible debt crisis, according to one senior economic analyst.
And if all that seems like too much reading for you, just watch this video on what happens if the US defaults.
More on why it's impossible to trade on a US default.
Why JPMorgan thinks the failure to reach a deal on the debt ceiling would lead to "violent" moves in equities.
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 returns than long-term bonds, which seems counterintuitive. Traditionally, inverted yield curves are viewed as an indicator of a recession.
So, why would someone invest in what appears to be a bad deal?
Well, there is a case to be made for an inverted yield curve not being a sign of an impending recession.
So, if you're of the mindset that things aren't going to end badly and rates will come down, you might be willing to take the risk.
Click here for more on why experts are questioning the inverted yield curve's reliability as an economic predictor.
The recent surge in initial public offerings (IPOs) and special purpose acquisition companies (SPACs) has raised concerns about a potential bubble in the market. How should investors approach these offerings, and what factors should they consider when evaluating their investment potential?
Is "surge" the right term here? I suppose any number of companies going public might seem like a lot amid the current drought, but it still seems like slim pickings.
I hesitate to give specific financial advice, but I think you can view any company willing to enter the public market these days through two very different lenses.
On the one hand, a company going public now must 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 views going public as a last-ditch effort to raise cash and extend its runway before the wheels come off completely.
The trick is being able to distinguish between the two.
Click here to read more about how the secondaries market is booming as startup employees and early investors look to cash out amid an IPO drought.
Pricing strategy for small businesses?
Ok, now we're really getting outside of my wheelhouse.
I will say this. A VC I caught up with a few weeks ago mentioned all the exciting opportunities they saw for fintechs helping SMBs. Whether you view that as a good thing or a bad thing is a point of personal preference, I suppose.
Lucky for you, last year we actually identified 12 startups that cater specifically to SMBs. We've also got a ton of pitch decks from startups that focus on that space.
So maybe start there?
Check out the 12 startups looking to serve small businesses.
Click here to check out the fintechs pitching themselves to SMBs.
What percentage of US corporate profits are from their subsidiaries based in China?
Something tells me there is an underlying political motivation to this question...
I'm going to avoid that minefield and point you in the direction of a recent story we did on some major US companies minting money from Chinese consumers' spending spree in the wake of the country lifting its pandemic lockdowns.
These five major US companies are winning on China's spending spree.
Have you thought about changing the name of the newsletter to: "How to Whine, Complain & be a Victim in EVERY situation, no matter who you are or what you do"?
It's always great to hear from a fan. To be honest, I'm not sure that one jumps off the page. But always open to suggestions.
Curated by Dan DeFrancesco in New York. Feedback or tips? Email firstname.lastname@example.org, tweet @dandefrancesco, or connect on LinkedIn. Edited by Jeffrey Cane (tweet @jeffrey_cane) in New York and Nathan Rennolds (tweet @ncrennolds) in London.
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