Finally, Rates Are on the Rise

The 52-week bill is now yielding 3.13%, if I’m reading the table correctly.…

1 Like

International Man: In addition to stocks, it seems that almost every asset class is also crashing. What’s your take on the markets, and where do you think it’s headed?

Doug Casey: Let’s take them in order of size and importance. The biggest market is bonds. It’s especially dangerous because it’s the most overpriced. Bonds are a triple threat to your capital. First, because of the inflation risk, which is huge and growing. Second, is the interest rate risk; I expect rates to double, triple, or quadruple from here, going back to or above the levels of the early 80s. The third is the default risk, which applies to everything except US Government debt. AAA corporate debt hardly exists anymore.…

I like to read what Doug Casey says, because his insight are very often correct. But this time, I think he’s wrong about how high interest-rates will go. Already, the US has to borrow to service the interest on its debts. If rates go as high as they need to go to break the back of inflation, then the US really won’t be able to service its increasing, out-of-control debt.

The more likely scenario is that the Fed will reverse and resume QE by year’s end. The article making that case is behind a paywall. But the title --also from Zero Hedge-- says it all. Fed Rate-Hikes To End This Year, Followed By 3% Of Rate-Cuts & QE.

This is my take on what’s happening. Despite Biden’s gimmicks and pandering to try to prevent a GOP midterm sweep, it’s going to happen, which will ease the socio-political climate and craziness, but not the economic one, because the problems are structural, and they will take more time and discipline to fix than either party has. But the Fed’s reverting to QE will probably prevent the cleansing depression this country needs. Meanwhile, I’m building short-term Treasury ladders and trying to pick up shares of ETFs that pay monthly fat divs, like USOI, GLDI, SLVO.


1 Like