The Debt Limit
It’s simple: Congress has passed a budget.
It doesn’t have enough money to pay for everything in its budget.
It needs to borrow.
There’s a catch-22 — unique to the U.S. Congress/Treasury.
There is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury,
Hence, to fund what Congress has authorized to spend, The Treasury must raise the debt ceiling.
Congress must pass a law to raise that debt ceiling — which it’s done many, many times before.
Without that law, the U.S. Treasury will run out of money and default on its obligations .
If the U.S. were a building owner who can’t pay their mortgage to their bank, they would lose the building.
The U.S. Treasury doesn’t have a building to lose. It can simply not pay me the interest and principal on all those delicious treasury bills I own. It also can not pay salaries for all the military.
The United States has never defaulted on its obligations. Hence the scope of the negative repercussions related to a default are unknown but would likely have catastrophic repercussions in the United States and in markets across the globe.
That last paragraph is from Google. I asked Google “Has the U.S. ever defaulted on its debt?”
The Republicans in Congress have agreed to bump the debt ceiling if the Democrats will reduce spending in the budget.
The Democrats won’t because Congress has authorized spending the money.
There are many ways of dealing with this. The Supreme Court could even kill the debt limit altogether. Which is what it should do.
AI’s first “victim”
Chegg is an American education technology company that provides homework help, digital and physical textbook rentals, textbooks, online tutoring, and other student services. Wikipedia
This is what happened to its stock today. Not good:
Here is what caused this fall. Yesterday, Chegg’s CEO Dan Rosensweig reported:
Thank you, Tracey and welcome everyone to our 2023 Q1 earnings call. Chegg had a solid quarter, ending Q1 above our guidance on total revenue and adjusted EBITDA. As we shared with you during our last call, we believe that generative AI and large language models are going to affect society and business, both positively and negatively, at a faster pace than people are used to. Education is already being impacted and, over time, we believe that this will advantage Chegg.
In the first part of the year, we saw no noticeable impact from ChatGPT on our new account growth and we were meeting expectations on new sign-ups. However, since March we saw a significant spike in student interest in ChatGPT. We now believe it’s having an impact on our new customer growth rate.
Fortunately, we continue to see very strong retention rates, suggesting that those students who already understand the value of Chegg continue to choose us and retain us at high rates. We are also expecting a positive recovery in enrollment trends, which historically would be good news for Chegg. Because it’s too early to tell how this will play out, we believe that it’s prudent to be more cautious with our forward outlook. Therefore, we intend to provide only the next quarter’s guidance at this time and Andy will walk you through those details shortly.
We can all see that AI technology is evolving at a very rapid pace, and at Chegg we are embracing it aggressively and immediately. Throughout my career, I have witnessed the most significant technology platform shifts – from the creation of the internet to the explosion of mobile, and the movement of software to the cloud – and we believe that AI is the next big shift. Several months ago, I met with Sam Altman to discuss the future of AI and education and coming out of those discussions, we quickly reoriented our company to focus and prioritize on the utilization and incorporation of AI into Chegg services.
The first big step is the introduction of CheggMate, which we recently announced in cooperation with OpenAI. CheggMate will harness the power of ChatGPT, paired with our proprietary data and subject matter experts, to make learning more personalized, adaptive, accurate, fast, and effective – all in an easy to use and conversational manner.
This won’t be easy.
AI’s major beneficiary this year
And my biggest holding.
By common stockmarket metrics (like P/E ratio) Nvidia is far too expensive. But it’s going up. And I’m holding on.
Favorite innovation
Favorite tennis player
Her name is Iga Swiatek. She’s Polish. And she’s playing in the Madrid Open, now showing on the Tennis Channel.
Treasuries are holding up
The three month treasury is now paying a magnificent 5.13%.
The Fed will probably raise rates by 25 basis points tomorrow (Wednesday, May 3).
If you missed yesterday’s blog:
Please read the Wired article:
Click here.
Favorite gas pump
See you tomorrow. — Harry Newton
