Issue #13, Volume #1
And It Doesn’t Matter Who Wins the Race for the White House
| Editor’s note: We launched a major financial warning (Breaking Point) last weekend. Yes, this is an effort to encourage new folks to subscribe to The Big Secret on Wall Street. But even if you’re already a paid-up subscriber (or a Partner Pass member), you’ll get a lot out of our presentation. I hope you’ll watch it and reflect on what this means for your family and close friends. If you agree with our ideas, then please feel free to send the link to your friends and share it on your social media. We can’t stop America’s fiscal destruction, but we can at least make people aware of what’s happening and show them how to protect themselves. There’s plenty of solid free advice in the presentation. (Please note that we’ll be taking this off line at midnight Pacific Time tonight.) Editor’s note II: As I mentioned on Friday, my wife Shannon has launched a new 30-day health challenge at her business, Habitual Health. Shannon is a yoga instructor, a health coach, and a model. Health isn’t just her passion – it’s her job. Last month we led almost 100 subscribers through this 30-day fitness challenge. They learned how to meditate and how to do basic yoga movements to improve flexibility, endurance, and strength. I lost 15 pounds! And I felt better than I’ve felt in years. If you want to feel better, to think better, to sleep better… I urge you to take this 30-day challenge with us. It’s starting today! Please, don’t let better finance be the only thing we give you this year. Sign up right now and join our 30-day challenge. It doesn’t matter if you’ve never tried anything like this before. This is designed for beginners and I’ll be with you the whole way. |
Three Things You Need To Know Now:
1. The bond market isn’t happy. As we warned on Friday, interest rates on Treasury bonds are moving higher despite the Fed’s recent 50 basis point rate cut. The 10-year U.S. Treasury bond is the most important interest rate in the world. As bond prices continue to fall, the yields on U.S. Treasury bonds will go higher and higher. This morning, yields soared to over 4% on the U.S. 10-year bond.
Rising Treasury yields drive rates higher for mortgages and corporations, as the government’s soaring debt load “crowds out” private capital. We continue to expect rates to hit 5% before the end of this year, and higher next year. Nobody sees this coming. This could have a massive impact on the stock market, especially on high-flying tech stocks trading at huge valuations. And… here’s what’s even worse: normally when the Fed cuts rates, the 2-year yield falls. But not this time. Strangely, the 2-year yield has followed the 10-year yield higher, which means the banks are not going to see a big increase in their earnings as they normally would when the Fed cuts rates. (The spread between 2-year and 10-year Treasury rates is the effective spread that banks can earn on most of their overnight lending.) All of this suggests there’s real uncertainty in how the government will continue to finance its deficits.
2. This isn’t capitalism. Last week’s “blowout” jobs report was entirely driven by the biggest government hiring spree on record, outside of COVID-19. Whoever believes our economy is strong must think borrowing unsustainable amounts of money, printing money to pay for those loans, and then hiring people to do wasteful government jobs is the path to prosperity. It isn’t. We are on our way to a Soviet-like collapse in our economy as more and more of everything we do – including our jobs – is controlled by the government.
3. So much for real interest rates in Japan. The Bank of Japan’s campaign to restore free-market capitalism after its enormous real estate bubble hit a major speed bump. The Japanese central bank, which finally lifted interest rates out of negative territory in March, had begun a campaign to raise interest rates in July, increasing them by 25 basis points – the first real rate hike in 15 years. But that action saw traders around the world reverse their “yen carry trade” positions, resulting in stocks crashing, and the yen soaring. So, the Bank of Japan has “paused” the rate hikes for now. Isn’t it funny how there’s not a western democracy that can afford real interest rates?
And one more thing…
Over the past decade, the price of gold is up more than 100%. Since the Great Financial Crisis and our government’s decision to sacrifice the dollar to bail out the banks – and all of the bailouts that have followed – gold has gone from around $700 per ounce to $2,600 today. That’s a 270% increase. Sure, Bitcoin is up enormously more. So are certain stocks. But if you’re looking for the most reliable way to protect your wealth from the destruction of the dollar, you can’t beat gold. Priced in gold, the S&P 500 is actually down since the first of the big Wall Street bailouts, the September 1998 financial rescue of Long-Term Capital Management. At that time, the S&P 500 was worth 3.5 ounces of gold. Today, it’s worth only two ounces. Funny what happens when you destroy your economy by printing money. Didn’t work for the denarius coin in ancient Rome. Won’t work for us. (I’ll be writing a lot more about gold in the coming days… stay tuned.)
The Federal Government Is On The Brink
Back in 2010, I first began warning that our government was adopting policies – namely, printing money to buy back its own bonds – that would lead to both a financial and a social crisis. I warned that, throughout history, societies that debased their currency to protect the ruling class always experienced a shocking rise in violence, disorder, prostitution, gambling, and other forms of anomie.
We accurately predicted all the things that followed, and not just the financial problems of higher prices and the loss of Americans’ purchasing power. We specifically warned that America would lose its AAA rating. We predicted the rise of violent protests like Occupy Wall Street, the Freddie Gray riots in Baltimore, and Black Lives Matter riots that followed. We told millions of people that America’s government would become vastly more dictatorial and would soon control how you lived, worked, and traveled – which no one believed – until all of those things happened too, in the spring of 2020.
But what’s going to happen will be much, much worse.
According to The Wall Street Journal, former President Donald Trump’s economic plan (tariffs, military expansion, and tax cuts) will cost $7.5 trillion in additional deficits over only four years. The newspaper says that’s twice as much as Vice President Kamala Harris’ plan for our country. But… what no one has figured out yet these estimates are all based on increases to the rate of government deficit spending.
These numbers don’t mean that the national debt is going to grow from $35 trillion to $42 trillion under Trump. Or maybe to “only” $39 trillion under Harris.
What no one will say out loud is that these figures are in addition to the ongoing surge in mandated transfer payment spending. And those obligations mean the U.S. is already on track to rack up at least $22 trillion in new deficit spending over the next decade.
This combination of out-of-control, unfunded, and legally mandated spending (on Social Security, Medicare, etc.) along with the new spending programs proposed by both Trump and Harris mean that more than $30 trillion in new debt will be added over the next decade. That is more or less double the amount of debt we owe today. Measured against the size of our economy, our debt is going to soar past all previous records, including during the Civil War and World War II.
You’ve never seen an America like this, where the middle class is destroyed by inflation. Where Americans begin fighting over the federal spending – because without it, people will literally starve. Everyone believes that can’t happen in America.
To that I say… Really? We’ve already seen the government lie to us about a virus and lock us inside our homes for months, bankrupting our businesses. We’ve already seen our government promote utterly delusional concepts around race and gender, programs designed to alienate our children and destroy our cultural heritage. We’ve already seen our government lie about wars and waste trillions on foreign occupations that had no hope of a successful resolution (how many wars have we now lost in a row?). We’ve already seen our government print tens of trillions of dollars, destroying wages and savings while lying the entire time about the root cause of inflation. And we’re about to see an entire presidential election happen without either major party bothering to address the single most important issue at stake in our country: our government’s runaway spending and its growing control over every facet of our lives.
Back in 2011, I was vilified and even openly mocked by the mainstream media. Left-wing organizations like Media Matters threatened me with legal action. But everything we’ve warned about came to pass.
It is only a matter of time now until, one day, the U.S. Treasury market suddenly realizes that no amount of printing will stop the collapse: there will be “no bid” for our country’s bonds. And on that day, everything you think you knew about America will be completely gone.
If you’re not ready for that moment, you’ll be completely destroyed.
So, if you haven’t yet, please watch this interview that I did recently with legendary economist Peter St Onge. He’s one of the very few, credible economists (he works at the Heritage Foundation) who is willing to speak on the record about these very serious problems.
You can watch it here. (And again, we’re aiming to get more subscribers to The Big Secret… but even if you’re already a paid-up subscriber or a Partner Pass member, you’ll get a lot out of our presentation.)
Chart of the Day… Stocks Are More Expensive in the U.S.
Over the past decade plus, the U.S. stock market has dramatically outperformed the rest of the world. The S&P 500 is up 255% over the past 10 years… the rest of the world, meanwhile, is up around 68%. This chasm in performance has resulted in an increasing valuation discount – the S&P 500 trades at a price-to-earnings ratio of 21.5, compared to 13.8 for the rest of the world – that is now the biggest it’s been in more than two decades (and is more than twice the 20-year average). Mean reversion suggests that the rest of the world – from Asia to Europe to Latin America – should (at some point) start to outperform U.S. stocks. That’s not happening in 2024, though, with U.S. markets up 21%, and the rest of the world rising 13%.
Good investing,
Porter Stansberry
Stevenson, MD
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