Treasury yields

“Can you say: Balanced budget?”

Newsletter /

Optimism is rising for two main reasons: The U.S. economy and markets are going to continue to improve because Trump’s pro-growth, America-First administrative agenda – which will include tax cuts, deregulation, decreased trade deficits, and, most importantly, reduced government spending – promises to be extremely effective. Investors know it. Confidence has skyrocketed on the part of corporate executives, small businesses, households, students, and… even farmers.

“Can you say: Balanced budget?” Read More »

“Grub first, then ethics.”

Newsletter /

The Democratic Party lost the election because of deteriorating economic conditions. The majority of voters are not better off than they were four years ago.
The electorate understood that policies implemented by the previous administration were slowing growth and inflating the economy. Voters knew their personal economic prospects were deteriorating and that increased indebtedness, aggressive government spending, and the money printed to pay for it were the cause of their livelihoods’ destruction. They also knew that another four years of the same policies would inevitably result in higher taxation.

“Grub first, then ethics.” Read More »

“In the annual public surveys about trust and reputation, journalists and the media have regularly fallen near the very bottom, often just above Congress.”

Newsletter /

The economy continues to expand and consistently exceed expectations across most data series. Yet confidence surveys continue to languish well below pre-pandemic levels; at the same time, investor bullishness has rarely been higher. This is unusual and should reconcile itself to some consistency. I would expect confidence to rise. Yet truthfully, it is fiscal dominance –¬ more so than monetary dominance ¬– that is the more significant issue. The debt ceiling is currently suspended. In January 2025, however, it will automatically come back into effect. This means that the U.S. Treasury will not be able to issue more debt until Congress raises or suspends the ceiling again. However, they still have spending obligations and are running structural deficits due to the policies Congress has implemented for decades. Thus, government spending could potentially be forced downward – depending on whether conservatives or liberals control Congress. If that happens, it would be a net positive for the economy.

“In the annual public surveys about trust and reputation, journalists and the media have regularly fallen near the very bottom, often just above Congress.” Read More »

Additional Fed stimulus will only unleash more insidious inflation, which most households and small businesses consider a crime.

Bulletin /

Unlimited public welfare spending will destroy the country if it is not stopped. The exorbitant – and impossible to repay – government debt purchased by the current administration with fiat money to fund it will ultimately crush all investments. This is why Gold (and increasingly, Silver) and crypto are in the midst of rampaging bull markets.

Additional Fed stimulus will only unleash more insidious inflation, which most households and small businesses consider a crime. Read More »

“The greatest threat facing humanity is a radical Islamist regime meeting up with nuclear weapons.”

Newsletter /

The S&P 500 traded to yet another all-time high last week: $5,878. The benchmark closed Friday at $5,865, up 0.9% on the week, while the Dow rose 1%, and the NASDAQ was up 0.8%. The U.S. equity market performance marked the 6th straight week of gains––the longest winning streak of the year.
This should surprise no one. This is an unsurpassed, debt-fueled, inflationary growth cycle.
Gold, too, is at another all-time high ($2,749.)
70% of S&P 500 companies reported earnings, and 75% beat expectations, which (truthfully) were marked down over the last month––so, essentially, coming in close to expectations (+6%).
Treasury yields continue to climb and have done so since Powell cut the Fed funds rate on September 18th. This confirms that the financial system, the economy, and markets do not require more stimulus at a time when debt and deficits, along with robust consumer spending and a growing labor force, are providing ample liquidity. 10y Treasuries were bought at 3.595% the day before (3.595%) and have risen to 4.217%. That’s a yield increase of +0.62%.

“The greatest threat facing humanity is a radical Islamist regime meeting up with nuclear weapons.” Read More »

“Bringing inflation down to the Fed’s 2% goal while maintaining a healthy labor market is the number…”

Newsletter /

The rising sentiment towards a Fed rate cut seems premature—even for September 18th. Financial conditions are easier than they have been in two years. The S&P 500 is still up by 14.5% for the year (just below the Nasdaq’s 2024 return of 15.6%), but it sure doesn’t feel like it, even though it remains well above average returns over the last 15 years.

“Bringing inflation down to the Fed’s 2% goal while maintaining a healthy labor market is the number…” Read More »

“The ancient art of deception is to present two lies and get the people arguing viciously about which is true.”

Newsletter /

When the Fed finally started raising interest rates in March 2022, Mr. Powell reminded investors that the Fed’s primary objectives were full employment and stable prices. The Fed is now as close as it has been to achieving those objectives since the pandemic.
A balanced and patient Fed has been a stabilizing force in a chaotic world. Global GDP is rising, and headline inflation pressures in most countries appear to be abating. Perhaps the Fed’s duel mandate is on the verge of being realized.
Mr. Powell’s Fed last hiked rates in July 2023, yet the economy appears to be slowing more quickly now than it has since the Fed paused. Indeed, reporting to Congress last week, Mr. Powell sounded even more dovish than he did at the G7 confab 10 days ago. He seems convinced the Fed is succeeding in reducing inflation and is on track to reach its target objective of 2%. Maybe he’s right.

“The ancient art of deception is to present two lies and get the people arguing viciously about which is true.” Read More »

“If the Lord Almighty came down and said, ‘Joe, get out of the race,’ I’d get out. But He’s not coming down.”

Newsletter /

Being an economic thinker rather than a political one, I will say that all these elections seem to have one thing in common—voters are rejecting the status quo of imposed statism. They are rejecting the policies of excessive indebtedness and deficit sending. Voters know first-hand that slow growth and higher prices are pushing them further and further behind in their quality of life. The famous “misery index” is rising everywhere from Beijing to Tehran, Moscow to Paris, Berlin to London, and Washington. Most major countries across the world are in danger of debt death spirals. Voters everywhere know government bureaucrats are asking them to sacrifice more than they can bear. They want change.

“If the Lord Almighty came down and said, ‘Joe, get out of the race,’ I’d get out. But He’s not coming down.” Read More »

“History’s cunning passages, contrived corridors & issues deceive us with whispering ambitions & guide us by vanities.”

Newsletter /

Perry Capital is positioned for slower growth and higher inflation into the Summer. The economy continues to be supported by above-trend consumer spending from asset owners and way-above-trend increases in government spending. The Fed, or the Treasury Department, does not need to stimulate the economy, but it may do so to bolster the present administration’s re-election.

“History’s cunning passages, contrived corridors & issues deceive us with whispering ambitions & guide us by vanities.” Read More »

“By all means, let’s be open-minded, but not so open-minded that our brains drop out.”

Newsletter /

The Fed Won’t Cut Rates This Year. Most economists think they should. (Of course, they do! Most of them work for the government or on Wall Street.) But let’s face it, as calculated by the government, inflation for the average household is up 25% since it started rising in 2021. However, for most households, it feels much higher. The point is that inflation is not going to go down. The Fed doesn’t even want it to! Core PCE is rising at 3.5%, and it’s expected to rise to 4% by the election. The Fed’s stated target is +2%; inflation would have to be negative for a prolonged period to bring any relief to the average household.

“By all means, let’s be open-minded, but not so open-minded that our brains drop out.” Read More »

“You don’t need a weatherman to know which way the wind blows.”

Newsletter /

I have said for almost a year that there will be no Fed cuts in 2024. I stand by that forecast for one simple reason: “Immaculate Disinflation” is over. The U.S. economy is inflating, and it has been for a year. The structural and systemic price increases are not only permanent but accelerating. The twin cancers of elevated and rising inflation have metastasized and imperiled the health of the U.S. economy.

“You don’t need a weatherman to know which way the wind blows.” Read More »

“I thought by now you’d realize, there ain’t no way to hide your lyin’ eyes.”

Newsletter /

Stagflation reigns. Slow growth (2.5%) with rising inflation (4%) — driven by the rising cost of labor (+5%) — is the very definition of a stagflating economy. This forecast remains the dominant theme for the economy, markets, and investors. Stagflation has been the Perry International Capital Partners (PICP) forecast for two years, and we continue to be more worried about rising inflation than we are about slower growth.

“I thought by now you’d realize, there ain’t no way to hide your lyin’ eyes.” Read More »

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance…”

Newsletter /

Key economic reports in the upcoming week are various and reasonably important, but Friday’s employment report is the only one that really matters. The Fed’s game plan was to raise interest rates enough to reduce the imbalance in the labor market. But the tightening is really quite marginal compared to the continued stimulus, and it is that stimulus that has been supportive of higher equity valuations and growth. I think the stock market sees this. What it fails to see — for now — is that the stimulus is supporting higher prices.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance…” Read More »

“There’s no money. There’s no money.  If we don’t make a fiscal adjustment, we’re headed for hyperinflation…”

Newsletter /

Markets need to figure out a normalized level of interest rates appropriate to this volatile new era of De-globalization, rising military engagement, heightened Geopolitical tensions, excessive indebtedness, and the irrational rise in deficit spending.

“There’s no money. There’s no money.  If we don’t make a fiscal adjustment, we’re headed for hyperinflation…” Read More »