“The national debt poses no financial burden whatsoever.”
- Stephanie Kelton
That’s right out of Stephanie’s headline for chapter 3 of The Deficit Myth. That’s what she thinks about whatever you think about “one way or another, we’re all on the hook” (for more and more national debt). She says that’s a “myth.”
Her emphatic statements don’t make me “feel” anything. From a risk management perspective, I generally downgrade words like “no” and “whatsoever.” There, of course, are always non-linear risks associated with political assumptions.
When it comes to Treasury Debt, the biggest risk is that mucho Americans own it. You know… those TLT positions we’ve had in our 401ks, ROTH IRAs, etc. for the last 2 years? As most of you know, in the last month I’ve sold all of mine.
Back to the Global Macro Grind…
Myth: there’s no interest rate risk to being long duration right now… because the Fed is buying bonds
Reality: “no” is a silly word to use when risk managing anything and rates rise with an economy in #Quad2
No, that’s not happening in your accounts this morning. But Gold and Silver losing another -1% and -2% of their prior value is. Despite the US 10yr Yield falling (-2bps to 0.85%) alongside US Equity Futures, isn’t that interesting…
TRADE: From an immediate-term @Hedgeye TRADE perspective, the reason why Gold and Silver are down… and our new short position in Gold Miners (GDX) is working is because the US Dollar is up (off our #oversold signal) this morning.
TREND: From an intermediate-term @Hedgeye TREND perspective, the reason why GLD, GDX, and SLV have been breaking bad is that they’re starting to price in a trending rise in Real Interest Rates.
Yep, that @Hedgeye TREND thing is what happens when, economically, markets start to pull forward expectations of #Quad2. As a reminder, #Quad2 is when:
A) Real GDP Growth is #accelerating and
B) Inflation is #accelerating at the same time
No, that “inflation” won’t be on what government people like Kelton use as their “there is no inflation” policy crutch. It’s in obvious cost of living items like Commodities, Food, and Housing inflation first. It’s not, yet, in “Services Inflation.”
As most of you know, we’ve been Long Commodities, as an Asset Class, since June of 2020.
Yes, there is TAAS instead of TINA. There are alternatives to stocks. But, as the US economy enters #Quad2, is there an alternative to being long LTUSTB (Long-term US Treasury Bonds)?
Oh yes. And, yes, whoever still owns the national debt is going to have a problem in their portfolio.
In addition to our Long Commodities, China, Emerging Markets, FX & Global Equity Asset Allocations, Darius Dale, Dr. Drake and I will outline your Fixed Income options on our Mid-Quarter Macro Themes call LIVE @HedgeyeTV tomorrow at 11AM.
It’s been a long time (over 2 years) since we told you to buy the living daylights out of US Treasury Debt, Utilities, Housing, Gold, etc. We’re not “making a call” for the sake of making one here…
Nope, we’re simply executing on our data & signal driven Full Investing Cycle #process.
Immediate-term @Hedgeye Risk Range with TREND signal in brackets:
UST 10yr Yield 0.79-0.99% (neutral)
SPX 3 (bullish)
RUT 1 (bullish)
NASDAQ 11,508-12,022 (bullish)
Energy (XLE) 31.98-38.13 (bullish)
Gold Miners (GDX) 34.15-38.48 (bearish)
Shanghai Comp 3 (bullish)
Nikkei 241 (bullish)
DAX 126 (bearish)
VIX 21.68-27.97 (bearish)
USD 92.15-93.18 (bearish)
EUR/USD 1.175-1.189 (bullish)
Oil (WTI) 37.99-43.47 (bullish)
Nat Gas 2.60-3.13 (bullish)
Gold 1 (bearish)
Copper 3.11-3.24 (bullish)
Best of luck out there today,
KM
Keith R. McCullough
Chief Executive Officer
