Good morning investors; I just wanted to thank you for reading this publication, and if you haven’t already, make sure to join 834 other readers to stay up to date on everything in the financial markets.

Today You’ll Learn:

• The US Treasury puts the Risk in ‘Risk-Free’

• Ledger done f***ed up

• The next banks to fall from commercial real estate

• & Much More!

⌛️ The US Puts The Risk In ‘Risk-Free’

June 1st is almost here, and there are two reasons that I’m not excited about it

• It means I’m getting one year older 🙃

• The US Treasury could run out of money

Best birthday present I could have ever asked for… 🫠

Let’s get back to business and talk about the real problem here. That would be the fears and concerns surrounding the US running out of money.

There are 2 main focuses that we need to address!

1/ The US Is Managing Finances Like A Shopaholic At The ‘Mall of America.’

The government’s got bills like the rest of us, and June is looking very interesting for their checkbook.

June 1st → $75 Billion in payments for (Healthcare, retirement, & veterans)

June 2nd → $22 Billion in payments

The $97 Billion in payments would eat up more than half of the Treasury’s remaining resources.

If the Treasury can get past May and early June, then it should be suitable for a few more weeks until the end of June, when they would have to shell out another ~$100 Billion in payments.

2/ The Damage Is Done With The Debt-Ceiling

While there is this looming fear that the US Government could default on its debts by not raising the debt ceiling, many investors think it’s not very likely for them not to come to some deal.

Even if lawmakers come to an agreement and evade a debt default, that doesn’t mean the economy won’t suffer any consequences.

Here’s a very simple breakdown of what’s happening at the Treasury and why it could affect the economy in a bad way: 

Imagine there's a person called Treasury who has some money to pay for the things they need. But they're running out of money and need to get more.

So, they have to sell special papers called Treasury bills to get that money. They need a lot of money, maybe more than a trillion dollars, and they have to sell these bills quickly. But when they sell so many bills, it can make it harder for banks to have enough money, and it can make borrowing money more expensive.

This can make things difficult for the economy of the United States, which is already not doing so well.

I know this is all a little confusing, but unfortunately, that’s just how finance was designed to be… CONFUSING!

To make a long story short, once the debt ceiling gets resolved, the US treasury will need a lot of money to pay its bills. This will result in a liquidity drain from the banks, making it harder on the banks in the short term.

That pain gets felt by businesses and large investors, which results in them selling off risky assets. This means we could see a sizeable drop in the markets leading into Q3.

To add salt to the wound, many traders believe that the FED will stop cutting rates by the end of the year.

This is highly unlikely because it would most likely undo everything the FED has done over the last year and would send inflation back to all-time highs.

We don’t want another 1980s situation 😳

🫣 Ledger Done F***ed Up

If you’ve spent any amount of time in the crypto world, you’ve probably heard these two phrases before:

1/ Not Your Keys, Not Your Crypto

2/ Put your crypto into cold storage

If so, you’ve also heard of the company ‘Ledger.’ They’re basically the largest and most well know cold storage wallets out there… well, they were.

Here’s a quick recap of how cold storage works:

Crypto is digital (duh), which means it needs to be held on the interweb.

That’s dangerous because hackers can get your crypto, and then you’ll never see it again.

The solution: is to put your crypto into Cold Storage, which means that you’re taking it offline and onto a USB drive. The ONLY way to access that crypto now is to have the 12-24 seed phrase (Password).

The Issue: If you lose your seed phrase… you just lost your crypto as well… forever

It’s a hard-knock life for crypto bros 🥺 

But Ledger has decided to do what no cold storage wallet has ever done… become a hot wallet.

They recently introduced an ‘opt-in’ service where your seed phrase can be sent to 3 different third-party services if you ever lose your password.

This sounds like a helpful tool, but it is a massive security risk.

Why?

When someone else has your seed phrase, your crypto can be hacked or stolen. You're better off just keeping it on a centralized exchange because there’s not much of a difference anymore.

Enough of bashing on Ledger; here are some of my favorite responses to the situation on Twitter.

🏢 Commercial Real Estate Suffering

Commercial real estate prices fell in the first quarter for the first time in over a decade.

The less than 1% price decline mainly came from multifamily residences and office buildings. 

Look, I know what you’re thinking, okay:

Here’s why that number is concerning:

• It’s the first drop in over a decade

• Banks accounted for more than 60% of the $3.6 trillion in commercial real estate loans

• Post-Pandemic more people are WFH, so there’s less of a need for office buildings

• Banks have already been struggling for the last several months

Combine all that together, and the rest of 2023 could look very interesting

📊 Indicators of the Day

1/ Initial Claims

An initial claim is a claim filed by an unemployed individual after a separation from an employer.

This is a leading indicator for unemployment rates; the moment this starts trending up, that’s when you could see a recession coming soon.

2/ Total Business Inventories

Total business inventories refer to the total USD value of goods and materials that all US companies hold in stock in anticipation of future sales.

The velocity of change to the downside has been a trusted indicator of a recession. Recently this chart has been falling off a cliff!

📺 What To Watch Out For

1/ World’s Largest BTC Convention Only Has Half Its Attendance From Last Year. Last year there were ~35,000 people at the Bitcoin convention; this year, only half showed up. Could be because of the crypto winter!

2/ Disney Scraps Billion Dollar Plan: Disney was planning to make another campus in Florida, but the ongoing feud with Governor DeSantis is making it difficult for the company.

3/ Tether LOVES Its Bitcoin: Tether said they will start to allocate 15% of their profits towards buying BTC. This is on top of the minimum in reserves that is required to keep its 1 to 1 peg with the USD.

🐦 Twitter Takeaways

BTC Is Bad!

The Debt Ceiling

🤔 Did You Know

Credit card balances increased over 17% YoY, the biggest spike since the 2001 recession.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.