@lonecoiner
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Recent Notes
People (including me) seem to be struggling with asset prices in a structurally rising rate environment. Understandable since most of us weren’t alive or at least old enough to understand the last one as it was unfolding.
From April of 1971 to October of 1981, a 30 year mortgage went from 7.3% to 18.5%.
The median home price went from $25,000 to $69,200, roughly 3x. Gold went from $41/oz to $429/oz, roughly 10x. National debt went from $397B to $997B, roughly 2.5x.
Yeah, the price of gold had probably been suppressed for decades at that point, but I think the message is that bond holder’s faith in the government’s ability to pay back that debt on a real basis evaporated. That is almost the definition of a structural rising rate environment.
Obviously history is not repeating itself. In the 1970’s, debt to GDP was 30%. Today we are quickly approaching 130%. The difference in outcomes going forward could look different.
If national debt grows another 2.5x to 100T, the interest expense quickly consumes the entire national budget and entitlements get cut off at the knees on a nominal and real basis. With a rapidly aging voter base, this will never happen.
If the government expands deficit even further, say to 4x or 160T, to keep funding entitlements at a similar percentage of the overall budget, this will drag rates and inflation higher. Keep in mind that US M2 is roughly 23T today. If they pin the entire yield curve and print the money to buy their own debt (Japan’s strategy), M2 expands rapidly and inflation runs even hotter, a runaway train so to speak.
Yes, there are claims that GDP is going to take off and we are about to have the digital revolution. I think even if those claims are mostly true, they still pale in comparison to how much the debt is going to expand over the next decade.
I think the coming decade is a bowling ball smashing into the left bumper (rising rates) and the right bumper (expanding the money supply) harder and harder, with lots of volatility in all assets every time the ball changes direction.
Putting all your eggs in one basket probably isn’t wise. Most of my net worth will be in real estate, bitcoin, QQQ, and maybe a little gold. Anyone holding bonds or dollars, best of luck to you.
From April of 1971 to October of 1981, a 30 year mortgage went from 7.3% to 18.5%.
The median home price went from $25,000 to $69,200, roughly 3x. Gold went from $41/oz to $429/oz, roughly 10x. National debt went from $397B to $997B, roughly 2.5x.
Yeah, the price of gold had probably been suppressed for decades at that point, but I think the message is that bond holder’s faith in the government’s ability to pay back that debt on a real basis evaporated. That is almost the definition of a structural rising rate environment.
Obviously history is not repeating itself. In the 1970’s, debt to GDP was 30%. Today we are quickly approaching 130%. The difference in outcomes going forward could look different.
If national debt grows another 2.5x to 100T, the interest expense quickly consumes the entire national budget and entitlements get cut off at the knees on a nominal and real basis. With a rapidly aging voter base, this will never happen.
If the government expands deficit even further, say to 4x or 160T, to keep funding entitlements at a similar percentage of the overall budget, this will drag rates and inflation higher. Keep in mind that US M2 is roughly 23T today. If they pin the entire yield curve and print the money to buy their own debt (Japan’s strategy), M2 expands rapidly and inflation runs even hotter, a runaway train so to speak.
Yes, there are claims that GDP is going to take off and we are about to have the digital revolution. I think even if those claims are mostly true, they still pale in comparison to how much the debt is going to expand over the next decade.
I think the coming decade is a bowling ball smashing into the left bumper (rising rates) and the right bumper (expanding the money supply) harder and harder, with lots of volatility in all assets every time the ball changes direction.
Putting all your eggs in one basket probably isn’t wise. Most of my net worth will be in real estate, bitcoin, QQQ, and maybe a little gold. Anyone holding bonds or dollars, best of luck to you.
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Anyone check on Luke Gromen?
I knew everyone else was an NPC
Officially out of dry powder
Running out of dry powder here
Everybody has a plan to buy the dip until the dip kicks them in the nuts.
My fat limit orders about to fil 🥹
Just sayin
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Pretty bullish on entrepreneurship in the age of A.I. it makes starting a Buisness100x easier.
Started my own business this year. No lawyer, no CPA, no accountant, just me and some AI assistance. Couldn’t have imagined doing it just a couple years ago.
The age of employees seeing enormous amounts of meat on the bone and peeling off to compete with none of the overhead has begun.
The age of employees seeing enormous amounts of meat on the bone and peeling off to compete with none of the overhead has begun.
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Most of my predictions are dog shit, but this one might have been pretty solid 😎
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