The yield on the long bond and the 10-year Treasury surged today on deficit concerns.
Today’s Bond Market Action
- 10-Year: Up 11 basis points to 4.59 Percent
- 30-Year: Up 11 basis points to 5.08 percent
- 5-Year: Up 9 basis points to 4.16 percent
Technical Disaster
The lead chart is a technical disaster. Short-term resistance is only 10 basis points away at 5.18 percent.
Next resistance dates all the way back to 2007 with a peak at 5.44 percent.
Rate Cuts Priced Out
The bond markets has now priced out rate cuts for June and July.
A month ago, the odds of at lease on quarter-point rate cut for July were over 98 percent. Today, the odds are 28.8 percent.
What Happened?
The short answer is total fiscal irresponsibility by Congress and Trump, plus tariff madness by the President.
May 20: Trump’s “One Big Beautiful Bill” Would Increase the Deficit by $4.8 Trillion
Penn Wharton updated their budget analysis of the House bill as it now stands.
Penn Wharton: “We estimate will increase primary deficits by $5,804 billion ($5.8 trillion) over 10 years. These changes are partly offset by spending cuts of $1,604 billion, for a total conventional cost of $4,806 billion.”
Instead of simplifying the tax code, Trump sloshed around more favors trying to buy votes.
May 20: Trump Threatens to Oust Republicans Who Want to Cut SALT and Medicaid
Trump finally took a fiscal stand. It’s with Democrats.
May 21: How Much Will Trump’s “Golden Dome” Missile Defense Shield Cost?
Trump says $175 Billion. The CBO says $542 billion. Think much higher.
Golden Dome by Executive Order
There is no funding for the Golden Dome program. It cannot be done by executive order.
One thing we have learned over many decades is no government program ever costs as little as preliminary estimates.
Rumsfeld Flashback
In 2003 Secretary of Defense Donald Rumsfeld said the war in Iraq would cost 3.9 Billion. By 2014, the costs soared to $4-6 trillion.
The US did not withdraw its last troops from Afghanistan until August 30, 2021. And most Republicans wanted to stay.
Q&A on the Deficit
Q: Does the Penn Wharton $4.8 trillion deficit increase include anything for the Golden Dome?
A: No
So tack on another $1 trillion over the next 10 years if we start marching down this path.
Ultimately, expect to spend many trillions of dollars on this.
What’s the Tune?
The fundamentals and the technical charts are singing the same tune.
Q: What Tune Is That?
A: Stagflation accompanied by a weakening US dollar
Stagflation is not baked in the cake, but the fundamentals and technicals both point in that direction now.
A return to reciprocal tariffs with increased prices would exacerbate inflation and recession issues.
And my May 20 Hoot of the Day was Trump Threatens a Return to Reciprocal Tariffs
Would anyone be surprised if the next Fed move is a rate hike?
No one should be.
Addendum
30-Year Long Bond – Daily Chart
10-Year Treasury – Daily Chart
Your reporting and commentary have been absolutely superb. I’m a former Fed economist, policy director of a major DC trade association, and a near two-decade partner in a major hedge fund. On a global basis, we’ve moved far from the “savings glut” of the 2000s and early 2010s. World net savings peaked about 2018, triggering the corporate debt problem and the Fed’s September 2019 “not QE” response. We’re now deep in a “savings drought”. The supply curve of world investible savings may be firm but most likely is moving leftward. The demand curve, reflecting the rising borrowing demands of all the major economies, is moving rightward. Result: rising real rates worldwide.
Thanks!
There we go, rates NEED to drift higher. Thank you
Yeah, I’d LOVE to have some CDs where my money actually grows faster than inflation like they did in the early ’00s. These artificially low interest rates have been such a crapfest.
My long-time credit union (PremierOne in San Jose, CA) just cut the interest they pay on the “Regular Share Savings” account by 50%! They were paying 0.1% and are now paying 0.05%.[lol]
https://www.premieronecu.org/Rates.aspx#Share-Savings-Accounts
My credit union did the same. Result is that I keep very little money in my credit union. I can get 4% or more on short term cash elsewhere, e.g. Synchrony Bank high yield savings about 4%, schwab and merril money market account a little higher.
The cash in my Fidelity account gets 3.99% so I put a lot of it in a 4.35% one-month CD just a day or two ago.
Yes, agreed, I do the same.
CU’s used to be for the members. Now, they are just profit seekers like any commercial bank.
I understand there is little love for CRE holders but virtually every decent apartment building exists by virtue of low cost financing ( under 4 %). Is everyone ready for no new housing supply or significantly more expensive? This is the grist for social unrest.
Time for used car dealer lots to function as hotels.
The competition for money couldn’t come at a worse time for all of the nations that printed their way through covid. OOPS! That’s us.
It has been my experience that it is hard to save when you spend more than you make. That seems to work at all levels, from the poorest single-mom family to the Fed Government.
However, for people and corporations, living beyond means usually leads to bankruptcy.
Government sees it as the reason to spend even more.
The Ph.Ds. in economics are stupid. All monetary savings originate in the banks. DDs are just shifted into TDs. An increase in TDs adds nothing to GDP.
There are now too many leakages in the flow of savings.
Is this what happens after a prolonged period of negative real interest rates?
When the market drives yields higher, is that a message that interest rates should be higher? DUH!
Me thinks the Land of OZ is in trouble, and has been for a while.
Gazprom CEO Sounds Alarm on Looming Russian Energy Crisis
Gazprom Neft CEO Alexander Dyukov has confirmed what energy analysts have long suspected: Russia is running out of cheap oil.
The country is being forced to tap into so-called “hard-to-recover” reserves—deep, complex, and geologically intractable deposits that require expensive extraction methods, advanced technology, and massive government support. If oil prices remain at current levels, Moscow could lose half of its production by 2030.
These figures may sound sensational, but this is the new reality. The fields the Kremlin is now actively exploiting were discovered in the 1980s—and they are already 90–95% depleted. New reserves will never be as profitable, which could lead the Kremlin toward complete bankruptcy.
Source
The world is running out of affordable energy … this has a direct impact on inflation.
Perhaps if they use 80’s technology?
Otherwise – this is absolute nonsense. Oil is being found in many places all over the world and Russia has many untouched reservoirs just waiting to be exploited. Interestingly, Russia has no issue with global warming because it brings millions of acres of tillable land into production.
They are already at the top of the list of wheat exporters.
Who do you think replaced the U.S. wheat exports to china when trumps tariffs were imposed?
Why is the Ruble up 40% since January first?
he is UKI-404 uneducated moron who probably in poland , making 10$ per day posting sh
it====
AND GOOD info about ruble, 2year high,
breaking 80 per $ , and oil just 60$
i would imagine ruble /$ will be 50*60 it oil move closer to 80*100 $!
So the head of Gazprom is lying?
Or perhaps you just cannot handle the truth
Conventional oil production peaked nearly 20 years ago, we have been desperately cannibalizing nuclear war heads to fuel reactors, and shale oil production is now declining. Renewable energy is nothing more than a mirage of hopium.
The fourth horseman of the apocalypse is now mounted – natural gas production is contracting.
Natural Resources Market Commentary – Q3 2024
Goehring & Rozencwajg Natural Resource Investors
In the volatile world of U.S. natural gas, the past quarter unfolded with all the drama of a Shakespearean act. Prices began at a modest $2.60 per Mcf, buoyed by the quiet equilibrium of early spring. But by mid-June, the plot had transformed. An unseasonal heat wave gripping the central United States sent prices soaring to $3.15, a rally that spoke as much to the market’s sensitivity as it did to the hot weather. Yet, as quickly as the heat arrived, it receded. Milder temperatures reclaimed the stage and gas prices tumbled in response, bottoming at $1.90 by the end of August.
While market participants obsessed over weather patterns, few paused to consider the silent protagonist in this unfolding drama: inventories. The 2023–2024 winter, among the warmest on record, left a legacy of near-record storage levels. At the outset of the injection season, inventories stood at a staggering 700 Bcf—or 40%— above the ten-year average. Yet, tight fundamentals have nearly erased this surplus in a remarkable turn. Over the third quarter alone, inventories were drawn down by almost 400 Bcf. By quarter’s end, storage levels stood less than 5% above the norm, a quiet but profound shift that few have fully grasped.
This brings us to the present moment, where the market stands at a crossroads. If the coming winter delivers typical cold—after two years of unseasonable warmth—U.S. natural gas prices could well align with international benchmarks which currently hover near $14/MMBtu. The implications are vast, mainly as U.S. natural gas production, once seemingly boundless, now hints of rolling over.
Over the past fifteen months, growth in U.S. gas production has stalled. Indeed, in the past seven months, production has begun to contract. Since peaking in December 2023, U.S. dry gas supply has fallen by 3 Bcf per day—a 3% decline. Year-over-year data tells a similar story, with dry gas production now down by 1.2 Bcf per day, slightly more than 1%.
https://fasteddynz.substack.com/p/natural-gas-production-is-contracting
=Which could lead the Kremlin to complete bankruptcy.
Always amused by Ukraine(=404) trolls who don’t want to fight in trenches, so they post totally bogus, without any sense, posts about anything related to Russia, and of course, negative.
mo1ron here is the facts!
=1 it is not Gazprom,it is Gazprom-neft. (=oil)
=2 Russia not only has oil, but probably 500+ years of coal, and god knows how many hundred years of gas reserves!
=3 Russia is number #1 producer of nuclear energy/reactors!
Russia builds more reactors than rest of world combined !
just google when last time USA built single reactor..
=4 Russia only started exploiting oil in 70x. before that Russia already won WW2, space race, built ballistic program and built nuclear industry!
all nuclear sites in Ukraine-404 were built during USSR times.
Ukraine built jack after 1991,cause you are mor11ons.
===
and last one
=5 Russia is not banana republic like your smallest and most corrupt Ukraine economy .
Russia is 4th economy in world, energy sector is big in Russia, but significance is overblown, that is why 1000000+ sanctions of g7 could no do anything to Russia!
learn history and read books mor11on !
alx
=https://kyivinsider.com/gazprom-ceo-sounds-alarm-russian-energy-crisis/
ahahah!!! ahahhah!! ahahahha!!!!
source from country 404!
laugh my a11ss off
We are still paying for the Vietnam war even today through the devaluation of the dollar through inflation.
Bretton Woods was dissolved in 1971 when the dollar could no longer be convertible to Gold. Central banks and individuals were no longer satisfied on what their dollar could buy, because deficit spending to fund the Vietnam war was inching up prices through devaluation of the dollar.
People wanted their dollars to be turned into Gold, and Nixon had to say no because the Ponzi scheming could no longer be supported.
There were more dollars in circulation wanting to be redeemed for Gold than there was actual Gold in Fort Knox.
Once the dollar had no backing the dollar devaluation/inflation race was on. By 1980 the dollar was worth a fraction of what it was 10 years earlier. All this to pay for a useless war and useless suffering.
Because the dollar was no longer backed, this war induced currency policy change has us still paying for the Vietnam war through ever devaluation of the dollar through inflation.
I recall my grandfather talking about this and saying that Social Security would never be be around when he retired, that the debt was unsustainable when it was in th billions and the dollar would collapse in his lifetime. He showed me the pictures of Weimar and its wheelbarrow’s of cash.
He gave me $5.00 in 90% silver half dollars for a few birthdays and told me they would save my life someday. I still have them and his predictions did not come true for him. He retired comfortably on the water in Florida and truly lived the American Dream.
Now many years later the numbers are reaching similar levels to post WWII debt to GDP levels and we have radically different demographics.
Everywhere I go land is being developed for business and housing. The population has surged and inflation has changed the mathematics. Gold as noted above was worth $35.00 per ounce when the window was closed and now it is worth $3,300.00.
It works until it doesn’t.
Will my generation be the ones that take the hit and re-set?
Time is the arbiter…
10 year heading back to a 5 handle per Halloween ’23; this time it will take much more than a tawdry Bill Ackman stick save to stop the bleeding.
Higher lending rates rates to quell asset valuations leading to increased:
bankruptcies
defaults
repossession
foreclosures
Yard sale asset prices for the rich will be the result, as always.
I pray nobody on this board thinks the US can stand an 8% 10 year treasury yield.
That would cause civil unrest.
I lived through 15% treasury yields and the republic survived. Being old gives one perspective.
Would it?
The early 80’s were plagued with far higher rates and things were quiet. All that needs to happen is trumps insane tariffs need to go away and have him replaced with a statesman that can re-build our foreign relations and world trade.
As long as trump and his policies go away, our nation will survive and we can rebuild our previously booming economy. Higher but reasonable taxes will increase revenues and this can be worked through as the boomers have shorter life expectancies because of their consumptive life styles. Soon enough they will be out of the expensive medicare phase of life.
It ain’t over til the fat lady sings (grandpa always said).
Powell should immediately raise interest rates by at least 50 basis points.
trump has always been a big city Democrat. the fact that the morons in flyover country think he’s a conservative just makes it hysterical. he’s like nixon. a profligate spender who had a price control board. stagflation is here. got bell bottoms?
Yes, actually.
Flyover would have preferred Kaisich in 2016.
A good point, the Republicans are not fiscal conservatives. We need to go back to Ike to find that. Nixon had wage and price controls twice and instituted much of the big government we all hate.
Considering how far Left the rest of the Democratic Party moved it’s not surprising Trump is now on the Right.
Interest rate rise whenever Trump open his mouth.
LoL has nothing to do with Trump, nor Biden. 😃
Massive deficit spending, cuts to medicare and medicaid and tax cuts for Elon Musk. We’re heading towards our own French Revolution if things don’t change.
Illusion. So no. That’s fear.
One concern that I think may be under reported is all the increases he wants in defense and homeland security. These are incredible boondoogles that defy comprehension and are going make current fraud, waste and inefficiency look like child’s play. On defense most of this money for the Golden Dome will likely go to Musk as he is one of the few contractors who can do this work. A very nice payoff for helping Trump. And homeland security will hire contractors to maintain prisons likely in Louisiana – thank you Mike Johnson for all your work. Why arent we hiring people and putting in systems to make the system work better rather than building non-productive prisons.
The sky is falling! The sky is falling! Yawn. The 10-year is lower now than just a few months ago, like Jan-Feb 2025. Those who think the 10-year or 30-year are going to 7-8% are smoking crack. As much as Powell might dislike Trump, the Fed would step in with QE to temper rates long before that happens. If anything, today was a great buying opportunity for stubborn bears earning less-than-real-inflation on their cash or t-bills.
Thank you for going on record. Bookmarked and added to calendar, we’ll check back in on October.
Stubborn bears? Price earnings ratios are absurd and above 40x earnings. Optimism list its legs 3 years ago. Reality is about to unfold , debt needs to be paid off or find ways to make their payments, not just the interest. Real growth or die. The fire sale will begin soon. Many of the wealthy elites are counting on this. Those thinking nothing will change? The pot will continue to simmer for only a few more years. Maybe not years, perhaps months. Gdp ratio to debt is nearing 150% and will exceed fast, as soon as rates shift higher. Will we get to 10% not likely. 8.5% will be enough to topple the house of cards.
Not all PE ratios are high. There are always bargains to be found.
How about a stock with a PE of 7.4, dividend of 7%, no debt, and good growth ahead?
I own a lot of stocks like that. Not very many with high PEs.
Phillips and Mobil about 39 years ago.
Your high ‘bra
Modern Monetary Theory beginning to crumble before our very eyes.
Funny, the reality is setting in. Finally. Rates were NEVER meant to fall, again. Rather, expected to go up.
How did many believe rates would fall? Mish?
Rates NEED to go up, not down. Why? As saidbin this news letter, the reasons are finally simmering to the top. The reveal? Poor deficit spending, over the last 25 to 30 years. No one, thought this train wreck would come to a stop? Here it is. Not because of Trump, not because of Biden(though many Democrats cleared the coffers, store shelves, in time, just in time) in the next 12 to 18 months, we will see a slow increase in rates. Then suddenly move up quicker. Why? Liquidity remains absent. Not enough velocity. Not enough real growth. China. China is not immune to this train wreck, neither.
Cash aka t-bills is safe now, and likely until the fire sale is over. Warren Buffet and many others are positioned, well.
Are you?
Brace your self. Could be bumpy
Interesting developments in the bond market indeed…
The Japanese bond market is growing unstable and that famous carry trade is vulnerable to unwinding. It will take a few hedge funds down if it gets out of hand at a minimum.
Thinking a little further, one has to look at the assets that Japan has to stabilize its currency if it decides to defend it from collapse. The prime asset it has is $1.15 trillion U.S. dollars.
Interesting that Japan has been a buyer of U.S. debt and just when their bond market cracks the U.S. has a weak auction and rates turn up, nearly against resistance.
I’m not a genius, or a saint, but I can tell which way the wind blows.
.
Fiscal irresponsibility’s been happening for many decades. I’m not worried about it for a couple of reasons:
1. People have been expecting deficits to be our undoing for that entire time. I suspect we can keep this going for a few more decades.
2. Even if something does break as a result of our fiscal deficits, there is nothing I can do about it except continue to focus on building my personal wealth so that it does not impact me personally. In fact, I hope to take advantage of any opportunity it provides.
Of course, the deficit may grow substantially, if Trump’s tariff war leads to a recession later this year, as I expect. Trump seems willing to harm the US economy by applying tariffs on virtually all our trading partners, in order to claim victory whenever he agrees to some insignificant “deal” with another country. Winning to Trump means claiming meaningless victories, while harming US businesses and consumers. And his supporters cheer him on!
How do you “biuld personal wealth” priced ib US$ which are declining rapidly in value?
Say you made +8% gain on your assets, but the US$ has declined -10% (and the year is not over yet) = you lost more than you made?
The USA won’t default, but the Fed will print to infinity, and beyond, paying debts with Monopoly money.
Simple. You must earn far more than 10% per year.
10% buying the usual suspects? What about the over leveraged corporate bonds? No. This is a myth, that has no legs. Yhe tjmebis near. People will see the big lie. The magnificent seven are over priced. X40 price earnings is real, not 100+x earnings. Reality is near.
Good luck
Lol! You have no idea. Sounds like you are not a very good investor. Probably just a saver who is always too afraid to invest and jealous of everyone who invests successfully.
Correct, not a speculator. And play a much longer game. Stocks are priced high. Play the sto cKS for short term game. I get it. Though, counting on it? A different story. My only suggestion? Stocks could very well replicate what happened in 1930s. Why? How? Simple. Same reasons now as in 1930s. Unrealistic PE ratios. Good times lasted too long. Reality bites.
As for govt spending? This time around. The govt is in trouble, unike 90 years ago.Dave, jealous, not quite. Easy money needs to be reinvested, now. Thisbis the time. Question. Will you shift out of stocks and perhaps from a victory garden LoL 😆
I have been investing for over 40 years. Been through many severe downturns. They provide the best opportunities to grow wealth. Buy when there’s blood in the streets.
Yes. Many opportunities now and for the last 40 years. Agreed. Will this always prevail? Jeanine 35 years of being locked in a Japanese market and no choice to leave the Japanese market? I suspect your prosperity is limited to an American market? Question. DAVE? How do you think your portfolio would have done in 1929 to 1939? What would your average return be? (My answer would have been much the same as now, infest in commodities and total ownership of assets, not stocks) you?
Regarding 29-39 I can’t say. I wasn’t there. But i have done great during every big market correction in my lifetime: 1980, 1987, 2000, 2008, and 2020. And fortunately, I am now wealthy enough to withstand a depression like 29-39.
we haven’t seen any real troubles in usa in past 80 years. the 1930s. or look at russia in 90s. i was there investing. or argentina past 100 years. with trump and our over extended world wide empire of warmongering we could easily spiral into a an argentina style problem in near future. does not really matter if your a good or bad investor when hyper inflation or secession or worse happens in one’s country. i suspect you will be fine PapaDave. you are nimble and smart. but living in land where currency is hyper inflated away means it’s time for bullet proof autos and guards at your home. like russia in 90s.
Yes. I have been fortunate to live in the land of opportunity, and I have taken advantage of that opportunity to become wealthy enough to withstand a financial collapse. Though I don’t expect one.
I remember you correcting me a few years ago when I commented that downturns were a time when I most prevailed.
You were sure to remind me that growth years vastly outnumbered downturns, and that growth years were the best time to prevail.
I want to make it clear that I did not prevail as a result of carpet bagging like some aspire to, but because I found the need to be more creative during downturns and started new businesses that reflected changing circumstances.
Correct. Though you are twisting my words. Downturns are indeed occurrences to take advantage of, “because they are rare”. The vast majority of the time, markets are going up. It is important to take advantage of the long periods of time when markets are rising. You can’t be sitting in cash for years waiting for the next big correction; which was my point.
Plus, with the volatility in markets today, you can also take advantage of that volatility by day trading a portion of your portfolio.
The Fed likely will not NEED you print to infinity. 2026 will be the point where the gap to debt ratio, combined with higher interest rates will be enough to topple the house of cards, quickly.
If rates maintain flat? Deficit cuts ? The only chance of maintaining status quo.
War could also be the savior. 5% gdp growth with zero inflation is another possibility. The path is unknown. At least to us, common people. The elites, are betting on a fire sale. Likely thanks to 10+% interest rates and a stock market liquidation jot seen since 1930s
My thought as well.
Decades more of deficit spending? Very hopeful.
Perhaps, if and only if, we have real growth (a new war effort) creates growth above 5%, without inflation. Could happen! Though doubtful.
Without real growth, the train wreck is near. 18 months or less, near. GDP ratio to debt is in trouble. Nearing 200%.
Hang on everyone. The fire sale could begin, soon.
I have been listening to folks like you for 50 years. It took me a few years to realize that there will always be chicken littles like you running around.
The Chicken Littles were correct in 2001 and again in 2008.
Those were market corrections. Not depressions or “end of the world” scenarios. They provided opportunities for the nimble. And I profited from those opportunities.
nations and currency and bond being destroyed is not end of world, just world history. a great read is “this time it’s different”. the greatest catalog of past 800 years world wide of all sorts of financial busts.
2001 was partly a 9/11-reaction decline. 2008 was a bursting business cycle, and should have been far worse but for the Fed bailing out Wall Street and the wealthy. In doing so, they created the greatest wealth transfer in history.
50 years, that’s a long time of post Nixon economic Era thought. I am guessing you are not holding many commodities? Oil, gold, copper?
Best returns in the last 8 years 😃 potentially out performing your stock portfolio?
gold was best performer for 21st century so far. same with 20th and 19th……..
The starting year you choose makes a big difference.
I have been investing since 1980.
Since 1980, gold has returned 4.4% per year.
The S&P 500 has returned 11.7% per year.
when you analyze world wide investors for past centuries, and account for taxation(most gold investors pay zero in world), and account for wars, and stock market confiscations, and bond devaluations and real estate confiscation due to coups and wars……..gold has been the best every century. if we are just talking about one short lifetime like myself born in 1960 on 3rd base, like all amerikans born in mid 20th century, then you have a great point. of course. but bottom line, gold has always been the best. go into any vietnamese nail salon or shrimp boat owner and ask how they got started. most likely it was a hand full of gold coins they got here with as war refugees or veterans……..
There are times to be in gold. This is one of them.
i started investing at age 13. bally. when i read in WSJ they produced slot machines, i had dad invest for me.
Nice.
I was 12 when I bought my first shares in BHP. At the time, it was a small miner in Broken Hill, Australia.
What is the return for investing based on business cycles? I am not talking about a long-term- buy-and-hold approach, but strategically placing funds to safeguard wealth when needed in contractions, and growth when it happens..
You guess wrong. I follow trends, themes, and the big picture.I was heavily invested in tech till 2019. Got out as the pandemic began. Went big into oil stocks in 2020 (some US, but mostly Canadian). Made a killing on those; 20x on a few. Still hold some of them. Began switching to Natural Gas stocks around 9 months ago. Again, more Canadian than US as they are much better values. Have a smattering of mining stocks, including some gold. Of course, I still hold bits of tech, financials etc.
I keep a core position (50% to 75%) and day trade the remaining amount (25% to 50%). The higher the market goes, the more I reduce the core.
As usual Mish misses the Big Picture, Trump is helping savers by driving the rates higher, everyone was complaining about saver getting crushed the last 10 years, Now Trump is helping them with rising rates and people still complain.
Excellent!
Trump wants lower interest rates to reduce the deficit and boost the economy. But his policies are doing the opposite. Funny isn’t it?
What rates are you earning on your savings?
Trump has nothing to do with rising rates, except he has NOT reduced the deficit spending.
More of the same, is the problem. I believe this is what MISH is trying to explain?
Why are rates rising? According to Mish:
What Happened?
The short answer is total fiscal irresponsibility by Congress and Trump, plus tariff madness by the President.
But you can believe whatever you want.
Agreed. Except the tarr8ff part. The tarrifs are a distraction
Correct. But tariffs are just getting started. As they start to bite and reduce economic activity over the next year, probably causing a recession, they will help grow the deficit.
Dude, the value of t h e USD has declined almost 10% this year, are savers making more than 10%/year?
NO
Imagine that, savers have money to buy assets, when the fire sales began!
I’ve been happy with my savings put in gold over the past year and my Kookmin Bank Korean won time deposit since Trumpybear came into office.
What a bunch of delusional TDS
Realllllllly??!! Then why is he asking the Fed to CUT the rates, instead of asking them to RAISE the rates????
Because you don’t understand 5D chess that’s why!!!!! You see asking the Fed to lower rates means they will raise rates, its reverse psychotics! Trump is outsmarting them all!!!!! He is the greatest thing in the universe!
Signed
MAGA idiot.
So usual 4d chess that nobody understands but Trump.
Some of it has already backfired, but we should be just patient, right?
winning
I hope Rumsfeld is roasting on a spit for eternity.
Mortgage rates have been holding around the 7% mark since last October. Coupled with Trump spooking the economy and the weak job market, the areas where house prices were increasing (SoCal, Midwest, Northeast) are about to finally fall like the rest of the country.
Inventory is currently piling up in the the Midwest, which really had no significant in-migration (such as Tennessee for example) to justify the huge price increases in the last 3 years since interest rates spiked.
People are taking a step back and realizing that $600,000 homes at 7% interest don’t reflect the reality of what the actual economy is like and where it’s headed.
Florida will be ground zero for real estate bag holders.
I remember after the 2008 housing bust, house prices in the Ft. Myers area were the most affordable in the whole country. I know people who moved down there because it was so cheap. It’s mind boggling how expensive it is now, never mind the insurance costs.
Maybe? Though worth noting, a good chunk of people flicking to Florida. Have no mortgages, and in some cases, uninsured homes. Translates to what? In case of decline or hurricane, Florida is home, unlike other inflated areas of America. Ground zero for massive declines. Sure. For those who are buying homes in Florida as “investment”
Florida has the perfect storm of issues. Demographic decline, insurance, disasters (flooding, sink holes, hurricanes), and Ron Desantis. The state may be under water in 40 years financially and literally.
And don’t expect FEMA to dole out cash, it doesn’t exist any more.
FL turned really stupid past 20 years. used to be moderate. all the dumbest NYrs i know moved there. i love FL, but it’s screwed.
“The US did not withdraw its last troops from Afghanistan until August 30, 2021. And most Republicans wanted to stay.” BS, most wanted out. Only a handful wanted to stay. I used to like to come to this site for the fair unbiased opinions, but it’s becoming Michinformation too often these days.
As recently as 2021 something like 65% of Republicans said that it was a mistake to withdraw. https://www.pewresearch.org/short-reads/2021/08/31/majority-of-u-s-public-favors-afghanistan-troop-withdrawal-biden-criticized-for-his-handling-of-situation/
When you’re mistaken about everything, everything looks like misinformation!
Agreed.
Good baseline news here, from MISH. Though, many thoughts depicted here now appear to be mainstream trends and biases.
Bigger picture?
Rates needed to be at 10% or higher, long before Trump. MISH is finally getting to the meat of things. Rates need to go up. We should ALL be looking at WHY and approximately when?
This hopefully culture is beginning to get stale. 😃
see reply from Phil below and apologize for your TDS – then correct it.
There is a “sell America” sentiment across the globe. Started with Canada then China, then Greenland and Europe. Japan isn’t too happy either and has threatened to sell all their US bonds. Swiss bank considering negative interest rates (again). The funny thing is we don’t even know if the trade deals will make people happy or mad so there is still another shoe to drop.
I don’t know where this ends, in worst case a global depression and maybe war.
Until then it will be….
“Trump turtles all the way down and inflation all the way up!”
Got SPY PUTS?
Got exit strategy?
I was hoping for New Zealand after Jacinda killed them off.
why would i buy puts when i can write them? as for your unsubstantiated claim of a “sell america” sale going on … good, there’s some companies i’ve been wanting to buy for 5yrs that have been too overvalued. wouldn’t hate locking in 5.5 on a 10yr either.
What are you writing exactly?
as in strikes?
Trade deals, is part of the illusion, distraction. What is coming next has not a whole lot to do with trade and deals.
What should we be focused on?
Liquidity, GDP TO DEBT RATIOs, most stocks are over leveraged and funded by the Federal reserve, no new debt is being issued, car sales are weak. In short, the housebof cards (debt) is unsupported without the 4.3 trillion budget. Essentially, by 2026, we will see something we haven’t seen in a long time. Mortgage rates going to 10% maybe higher. Thoughvi suspect 8 or 9% will start the house of cards to fall. Enough to send stocks lower (aka liquidation) trade? Consumerism will come to an abrupt halt or 30 to 50% halt, not seen since the great depression nor since the WW2 or WW1 supply shortages.
Fire sales of most assets will begin. The stupid wealthy will be ready. Cashing their t bills….
Will you or I be ready?
The problem, paraphrasing Jack Ma, is that we spent $14 trillion over 30 years on wars that accomplished nothing. We should have spent that on infrastructure. Blaming Trump just shows your political proclivity and shortsightedness (a defining trait of Democrats).
BINGO!!!
Ironic considering all the recent wars were Republican fiascos. Blaming Democrats just shows your delusional worldview (a defining Republican trait.)
The Ukraine War is now a fully Democrat construct, even if it was surely planned by the uniparty types.
Somebody (you) skipped history class.
Somebody slept through the three Bush wars
Plenty of us remember the Republican disaster that was Iraq, and aren’t stupid enough to equate it to what’s happening in Ukraine.
Are you naive as to what happened between the Junior Bush and Trump 1 years? The dronings, “black site” detentions, and follies in Iraq 2 and elsewhere continued unabated and profligate spending persisted. Do you willingly overlook congressional votes by those on the ‘left’ that were in support of the undeclared wars, mass surveillance of the domestic population, and shameful spending?
One shouldn’t keep pretending that, at the federal level, those under the blue banner are significantly different from those under the red banner. As the past two administrations have clearly shown via executive order usage, both sides have blended to a “royal” purple.
Yes. The spending was lopsided for decades, the fraudsters taking their piece of the pie aince 2009, has been am equalization period. DEMOCRATS or Republicans, the people in the know are stock piling cash, getting ready for the soon to come fire sale.
This really is end-stage Reaganomics. But Democrats have been big admirers of Regan’s policies too. In fact, BJ Clinton made more of Reagan’s economic wet dreams come true than GHW Bush ever could.
This has been building for decades, so blaming Trump or Biden is not the point. The US has been living beyond its means, but at long as GDP grew faster, it was sustainable – but it isn’t now. The interest alone is a killer. As interest rates go up on the 10 – 30 year bonds, it will kill whatever is left of the housing market, and to a great extent the auto market. Then there is CRE (commercial real estate) that is also in trouble. The “housing buble” part 2 is upon us, and that “jingle mail” (people sending the keys back to the bank) will become a torrent. I just saw a 40 million dollar highrise in Denver sold for 3 million – ditto here in San Diego – most sales of office buildings have been at about 28 cents on the dollar – banks holding these loans are getting killed. No a pretty picture.
CRE is in bad shape, but with residential real estate we have countervailing forces. Yes, higher interest rates would normally suppress values. That hasn’t happened the last three years because supply was crimped by people staying in their 3% mortgages. Also, monetizing the debt will kick inflation into high gear and in the longer term, tangible assets like real estate are the only way to survive inflation – especially if it’s financed with fixed-rate debt.
“because supply was crimped by people staying in their 3% mortgages”…yes, but do you know/understand what’s been happening to RE professional’s incomes due to that stalemate? It’s really bad, bad enough to generate a wave of foreclosures on its own. Real estate transactions don’t just affect the realtors and mortgage folks, there’s a thousand other knock-on effects/jobs. We’d be knee-deep in a foreclosure wave (not crisis, yet) had Biden not been pre-bailing out everyone by making loan payments on our behalf for the defaulters. And while yes, eventually inflation will come and rescue each and every recent hard asset buyer in nominal terms, that is not a linear graph at all. Whatever “emergency inflation” is utilized to bailout the system, it will happen faster than wages will be able to keep up (ala Covid), and as a result of that sudden spike in the prices of the things people need, other things like nice shelter (which nobody “needs” ) and nice vehicles (which nobody “needs”) will take a massive hit for several years.
Congress and Trump will spend to buy votes assuming future politicians deal with the problems; the future is now. The fed has printed money and fixed interest rates way too low which has facilitated the profligate spending. There are no penalties in any federal reserve legislation for failure to meet their goals, stable prices i.e. no inflation and full employment, so they have no incentive to do anything they are bound to and serve their banker owners. Nixon removed all discipline from the economic system by removing the gold standard. He did it because the system was working via foreign central banks exchanging gold for dollars losing their value thus draining the US gold reserves. The executive branch has abused EO’s to the point I believe any EO that affects the citizens either directly or indirectly should be required consent of the senate. That might have stopped Nixon, and it would surely slow Trump’s pace of issuance.
All Nixon had to do in his first 100 days in 1969 was to end the Vietnam War and LBJ’s welfare state.
It’s just China getting rid of the dollar as tariff blowback.
Yes. Let’s all remember, any country running away from the US dollar is essentially at war with the USA. Any country who wants ti back their dollar with gold or commodity assets? Is at war with the USA.
China, is shifting. And is NOT going to be the villain, first.
Russia, shifted 10 plus years ago. Holding little to no US treasury bills. No surprise. Russia has also shifted to larger gold reserves. No surprise. Who has followed? China, brazil. The Bricks Nations. No surprise. Though, the tough Arab/Muslim nations who declared backing their dollars to gold? Have been eliminated or destroyed. Lybia, iraq, Syria, perhaps soon Iran? All their gold reserves….vanished.
Noted.
They must be thinking that the European or Japanese bond market will blow up first, allowing them to get away with this fiscal insanity for a little while longer.
What has been going on in the Japanese JGB market lately is actually quite scary.
Great point. Japan has been out of the mainstream media, despite its GDP to debt ratio exceeding 200%. Yet some how still functioning. How? Perhaps some cheating non the side? Maybe Japan maybe the first card to fall?
There will be domino effect.
Much much bigger than Lehman crisis ( Great recession )
“Trump finally took a fiscal stand. It’s with Democrats.”
You say that like you are surprised. Neither party has any interest in cutting spending. Look at the howling Musk generates with trivial cuts to the most egregious waste.
As the headline says;”“Investors Have Accepted The Fact That U.S. Debt Will Expand At An Absurd Pace Until There Is Hell To Pay”
Yes. Good point. The illusion, Trump was going to cut spending. Gone!
Do not forget this. Spending g is necessary. And yet, another credit card issued. When will the spending stop? As soon as 10% rates are reached. 2026? Wouldn’t that be a shocker for both parties?
Something like this happened 30 years ago IIRC. It got worse before it got better. Bond prices shot up to 7-8% before real attention was paid to the problem. Eventually a somewhat balanced budget was achieved. But the progress was wasted shortly thereafter.
30 years ago the Federal debt to GDP ratio was less than 50%. Today it’s over 100% and rising very fast. Big difference.
True, but, interest percent of GDP was about the same: https://fred.stlouisfed.org/series/FYOIGDA188S
Demography is much worse now, though.
The ratio is headed to 150 and higher by the Ned of 2026. The economy needs real growth to occur and no inflation. 5% or higher. Either war? Or some miraculous innovation needs to occur fast!
What innovations could that be? Has AI given all the stimulus boost it could give for now? I think it has.
AI would be the wish, that everyone wishes to come true! Reality, now leans towards tarrif war leading just to a kinetic one.
By now, the bond market is the last remaining line of defense before a fiscal crisis is needed to square the books. The point is that the US structural deficit (as opposed to the actual deficit) is by now so high that there is no plausible “consolidation package” that standard politics would be able to put together. Both political parties are responsible for this miserable situation, but it’s astounding that the Republicans of all people are bent on destroying the US’s fiscal credibility built up over 220 years.
Totally agree. This sucker’s going parabolic, and there’s no way to “inflate our way out of the debt”, since higher inflation will force interest rates that much higher. I guess we’ll have Trump’s “Golden Dome”, though.
Y = e to the x power, like forever. Now it’s approaching the but-end of the hockey stick curve.
The gdp to debt ratio is headed to 150 and higher by the Ned of 2026. The economy needs real growth to occur and no inflation. 5% or higher. Either war? Or some miraculous innovation needs to occur fast!
Miraculous innovation…Hmm. Well, Global telecommunication is already instant and inexpensive now. No personnel transporter machines on the horizon. EVs were a joke. AI is a fairly commoditized thing already. Robots seem cool, but are they going to be able to deliver any boom? I mean a boom that isn’t a job-killing type of boom, because how will that be net positive for GDP? I struggle to see which innovation puts the US in the happy place again. No more real estate bubble to blow either. Guess we need aliens to visit ASAP and nothing short of that.
Sex robots.
AI was the last promise, or wish. Unfortunately the tarriff war turning into a kinetic one, is most probable?
Long overdue. I have been amazed for a long time why it took so long. Message sent loud and clear to trump from financial markets regarding his ill-fated policies.
Really? Trump the fall guy? His policies are an illusion to the bigger problem here
Was there any doubt that they would do this under Trump’s watch? The voters need to learn the lesson from the deep state/uniparty…DON’T YOU GUYS EVER VOTE IN AN OUTSIDER EVER AGAIN.
Will they make an action movie in 2035 about this? 😆 likely 110 minsnor less? Movie name: We are all fools!