DHUnplugged #753: Big and Beautiful

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10d ago 1:01:02

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The dreaded downgrade.

Biden’s health in the spotlight.

The big and beautiful Tax bill making its way through the sausage factory

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Warm-Up
- The dreaded downgrade
- Biden's health in the spotlight
- Tax bill making its way through the sausage factory
- China continues to stimulate

Markets
- Yields - moving up after worrying signs for US debt levels
- Stocks posting big gains for May
- Bitcoin surges past $100k
- Our debt load is untenable - great chart to consider

The Big Beautiful Bill
- The bill eliminates taxes on tips and overtime.
- The bill achieves "no tax on social security" by increasing deductions for seniors on the program.
- The bill eliminates several green energy spending programs and ends the EV tax credit early.
- The bill makes auto loan interest tax deductible.
- The bill raises the debt ceiling by $4 trillion.
- The bill raises the State and Local Tax Deduction to $30,000 for people making $400K or less.
- The bill makes changes to the IRS free tax filing program, pending review by a task force.
- The bill includes tax on college endowments and private foundations.
- The bill includes reforms for how pharmacy benefit managers do business with the government.
- The bill creates a new savings account for children, and $1000 of funding will be provided.
- The bill raises the child tax credit to $2500 from $2000.

USD DEBT

Moody's
- U.S. Treasury yields spiked on Monday after Moody's downgraded the U.S.' credit rating, citing fiscal concerns.
- That brings it down one notch from Aaa — the highest score — to Aa1
- The first time since the initial rating back in 1919 that Moody's made a change
- Interesting timing - in the middle of a big spending package process -
--- maybe they are sending a message
-"This is a major symbolic move as Moody's were the last of the major rating agencies to have the US at the top rating," Deutsche Bank analysts said in a note.

Market reaction
- Futures fell in late trade after the close of the markets- when it was announced
- Bonds - long end moved.
--- 30 yr treasuries up over 5%
---- 30 yer mortgage rates over 7%
- Markets - yawned and turned on the open after a 1.5% love lower on the futures

Bessent reaction
-Treasury Secretary Scott Bessent said in an interview on NBC News' "Meet the Press" that Moody's Ratings were a "lagging indicator" after the group downgraded the U.S.' credit rating by a notch from the highest level.
-"I think that Moody's is a lagging indicator," Bessent said Sunday. "I think that's what everyone thinks of credit agencies."
- He asserted that the downgrade was related to the Biden administration's spending policies
- Is that right?

China - Stimulating
- China cut its key lending rates by 10 basis points on Tuesday, as Beijing ramps up efforts to boost its economy at a time when trade tensions threaten to derail growth.
- The People's Bank of China trimmed the 1-year loan prime rate to 3.0% from 3.1%, and the 5-year LPR to 3.5% from 3.6%.

US Steel still in play
- Nippon Steel plans to invest $14 billion in U.S. Steel's operations including up to $4 billion in a new steel mill if the Trump administration green lights its bid for the iconic U.S. company, according to a document and three people familiar with the matter.
- Under details of the plan included in the document, the company will plow $11 billion into U.S. Steel's infrastructure through 2028. That includes $1 billion in a green field site, which is expected to grow by $3 billion over the following years and has not been previously reported.
- There is a deadline of May 21st for a national security review - then Trump administration has 15 days to make a decision on the deal
- Odds of this happening?

Eat it!
- Walmart (and other retailers) have been discussing the potential need to increase pricing due to the tariffs
- Over the weekend, President Trump said that they should EAT IT
- It seems that the companies have made billions in profits over the years and should just absorb the increase (that was suppose to be paid by the other country - but who is counting anyway)
-"Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected," Trump said in a social media post.
- "Between Walmart and China they should, as is said, 'EAT THE TARIFFS,' and not charge valued customers ANYTHING."

Home Depot Earnings
- Missed on EPS, beat on Revenue
- Quick to say that they will not be increasing prices due to tariffs, but reaffirm guidance
- Wordplay here - they will surely increase prices, but will not pin it on the tariffs to stay in the good graces
--- How else are they going to commit to guidance for the year?

Buy Dental Stocks?
- Florida became the second state to ban fluoride in its water supply on Thursday, as use of the mineral used to strengthen teeth increasingly comes under attack from Republicans.
- Florida Governor Ron DeSantis signed the bill banning fluoride, saying at a signing event that "forcing it into the water supply is basically forced medication on people."
- RF Kennedy JR. and others opposed to the use of fluoride in water say it is associated with numerous health issues, including certain cancers and lower cognitive ability among children.

Shoes!
- Dick's Sporting Goods has agreed to buy smaller rival Foot Locker for $2.4 billion, the companies said on Thursday.
- Shares of Foot Locker surged 75% to $22.50 premarket after the announcement, while Dick's Sporting fell 9%.
- The sporting goods retailer has offered $24 per share of Foot Locker, representing an 86% premium to the stock's last close. Foot Locker has lost about 40% of its value so far this year.

Hmmmmmm
- U.S. energy officials are reassessing the risk posed by Chinese-made devices that play a critical role in renewable energy infrastructure after unexplained communication equipment was found inside some of them, two people familiar with the matter said.
- Power inverters, which are predominantly produced in China, are used throughout the world to connect solar panels and wind turbines to electricity grids. They are also found in batteries, heat pumps and electric vehicle chargers.
- Over the past nine months, undocumented communication devices, including cellular radios, have also been found in some batteries from multiple Chinese suppliers, one of them said.

THIN IS IN
- Samsung on Tuesday unveiled a thin version of its flagship smartphone in an unusually timed launch as it looks to maintain momentum in its mobile division against an uncertain consumer backdrop and U.S. tariff policy.
- The Samsung Galaxy S25 Edge is just 5.8 millimeters thin and weighs 163 grams, making it one of the thinnest smartphones on the market.
- Samsung said the device starts at $1,099 and goes on sale on May 30.

Coinbase - Joining the big league
- Coinbase is joining the S&P 500, replacing Discover Financial Services in the benchmark index, according to a release last week.
- Shares of the crypto exchange jumped 8% in extended trading.
- The change will take effect before trading on May 19.
- Discover is in the process of being acquired by Capital One Financial - completed 5/19

Quantum
- D-Wave Quantum (QBTS) on Tuesday said its most advanced quantum computer has reached "general availability" for customers such as governments and research institutions. D-Wave is the top performer among quantum computing stocks in 2025.
- Further, D-Wave said the Advantage2 quantum computer is available in more than 40 countries for applications such as artificial intelligence and materials science. On the stock market today, D-Wave stock gained more than 20% to 15.89 in early trading.
Also, D-Wave stock has advanced 56% in 2025 thus far

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