Financial markets right now are no place for amateurs or the faint of heart. They’re probably as dangerous as they’ve ever been. From Bill Bonner at bonnerprivateresearch.com:
We’re in Maximum Safety Mode: Here’s why…
(Source: Getty Images)
Bill Bonner, reckoning today from Dublin, Ireland…
The US Empire can withstand moron presidents, a jackass Congress, and dumbbell Fed chiefs…
…but can it survive 5% interest rates?
We’re in Maximum Safety Mode. Here’s why.
By our reckoning, the big sea change came in the summer of 2020. That is when the Primary Trend in the credit market – that is, the most primary of all trends in the financial world – changed direction.
After a 40-year spell of rising bond prices (along with falling yields), the yield on the US 10-year bond finally hit bottom in July, 2020. Since then, bond yields are up…bond prices are down. In fact, it is the worst sell-off in the bond market ever seen. And it’s the strongest upswing in yields ever recorded.
Risky Business
The US 2-year note, for example, is the benchmark for short-term finance. On the last day of July, 2020, the yield was only 0.11% – barely one tenth of one percent. Today, it is over 5% – or 45 times higher.
When you can get 5% on two-year loans, it puts other investments in a new light. Adjusted for inflation, stocks are down 20% to 30% over the last two years. Why buy them? Who wants to risk another 25% loss? A five percent gain, guaranteed, takes the wind out of their sails…and sucks the credit out of their balance sheets.
