Connect with us

Government

Zero-Coupon Bonds Will Soar When Rates Finally Fall

A few things are taking shape within the financial markets where investors should consider what lies ahead for bond yields and how to profit from the bond…

Published

on

A few things are taking shape within the financial markets where investors should consider what lies ahead for bond yields and how to profit from the bond market as opposed to the stock market. Let’s start with Fed Chair Jerome Powell noting in his post-Federal Open Market Committee (FOMC) presser that the Fed is seeing several inflation indicators moving in the right direction, which in my view, was the green light for stocks to advance.

The Fed’s stated target for inflation of 2% almost sounds like a pipe dream given the cost of housing and the strong labor market, but it sees the cost of interest on the $31+ trillion in U.S. federal debt as a looming judgment day for the dollar if it can’t rein in the cost to carry the debt load until Congress gets clarity on fiscal policy. This will only happen, again in my view, when fiscally minded Congressional leaders on both sides of the aisle agree that doing nothing will bankrupt the government and bring about a historical reset of biblical proportions.

It’s hockey stick charts like the one below that must keep the roughly 400 PhDs at the Federal Reserve up at night. I think Powell’s strident commitment to getting inflation back to 2% is rooted in a quote from Albert Einstein: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

If the Fed intends to deconstruct the embedded inflationary forces of the past 18 months, it will have to orchestrate the unemployment rate getting up to around 4.5%, which implies the loss of about 1.8 million jobs. This would indeed amplify the notion that the current pause in Fed monetary policy is temporary.

While I agree that inflation is moving in the right direction, the bump in retail sales and consumer confidence data sends a clear message, that despite $17+ trillion in household debt, the reactivation of student loan payments and credit card rates pushing above 20%, the cheapest average ticket price to see Taylor Swift is $969 in sold-out venues. The highest prices average $20,503, according to www.stubhub.com.

There seems to be a real disconnect in what the average U.S. consumer is facing in the next year. Case in point, Home Depot CEO Ted Decker stated in a recent CNBC interview that the #1 home retailer was expected to see sales decline by 2-5% compared to 2022 and earnings fall by 7-13%. Now, to rationalize this to some extent, Home Depot enjoyed an explosion of 47% sales growth and 60% earnings growth during the pandemic period. So, a pullback and shift in spending to experiential and services make sense, but not when it’s on borrowed money.

Former Home Depot CEO Bob Nardelli issued a grim warning over the United States’ “very complex” economy, cautioning consumers that middle market companies are under “tremendous pressure.” “I think we’re going to see a lot of bankruptcies. Like Bed, Bath and Beyond.” This is an insightful observation. While the market has rallied on the back of significant optimism surrounding all things AI, stocks of multiple specialty retailers have tanked from bearish forward guidance, running counter to market euphoria, according to www.foxbusiness.com.

I think the commentary from Costco and Home Depot about consumers shying away from big-ticket purchases is somewhat telling about what lies ahead. The chart below of the S&P Retail SPDR ETF (XRT) shows a big Covid-related spike in spending due to trillions in stimulus checks falling out of the sky, followed by what looks to be a now-hunkering down of sorts. It argues well that this summer’s expected spending travel spree will usher in a period of belt-tightening.

Of course, I could be dead wrong and consumer balance sheets will experience some sort of fiscal epiphany, from where I’m not sure, but I would venture to say that Bob Nardelli is probably on point and that recent stresses in regional banks, the Fed seeking to semi-break the economy to hammer inflation to 2% to salvage the national debt crisis bodes well for a deflationary cycle and lower interest rates going forward. The Fed failed to recognize inflation in all its fullness early on, and it is committed to getting it right or else it will imperil the ability of the country to make good on its debt obligations.

Ray Dalio, founder of Bridgewater Capital, the largest hedge fund in the world, stated on June 8 that the U.S. is facing a big-cycle debt crisis and that Treasuries are risky. It’s my view that Ray Dalio has an open line to Jay Powell and they are on the same sheet of music. Progressive spending habits are jeopardizing the future of the U.S., and unless both interest rates and government spending come way down, America will go the way of the Roman empire. It took a while, but it ultimately failed monetarily, culturally and morally. So many people seem jaded by high debt exposure, personally, in business and at the national level. There seems to be so little emphasis on the future.

https://fortune.com/2023/06/08/ray-dalio-bridgewater-associates-us-economy-debt-crisis-recession/

And now for the good news. Assuming common sense prevails at some point, and I think it will when people recognize the free stuff is no longer possible because the government is facing a head-on collision with reality, the Fed will orchestrate an economic slowdown that brings rates lower. In doing so, there is an investment proposition that is more than simply compelling.

About this time a year ago, the 30-year Treasury was yielding around 3.0%. Today, it yields 3.85%. The iShares 20+ Year Bond ETF (TLT) was trading around $118 then, and today, they trade at $102.60 as of last Friday. If the long bond gets back down to 3.00%, then shares of TLT should return 15% from current levels. That’s assuming the Fed gets its way with fighting inflation, and with the $31+ trillion debt elephant in the room, I think it will drill the economy to whatever level it takes to break inflation.

For those with an appetite for more risk, the PIMCO 25+ Year Zero Coupon U.S. Treasury ETF (ZROZ) was trading at $110 back in early June 2022, when long bond yields were at 3.0% and today trades at $91.25. A move back from 3.85% to 3.00% would theoretically return 21% in shares of ZROZ. Not bad, considering potentially high-performance alternatives to lofty year-to-date stock market returns.

If the Fed does, in fact, achieve its 2% target rate of inflation and long-term rates drop below 3%, then the returns on long-term zeros get into OMG territory, where 50% gains are a plausible scenario. At this juncture, this is a watchlist situation, but when, and if, the data fall into place, and it may be sooner than we all think, it will make compelling sense to lock and load up on zeros.

My view is the Fed has no choice but to drive rates lower to avert chaos at the governmental budgetary level. In doing so, there is some serious money to be made from a slowing economy, being in the right instrument.

P.S. Come join our Eagle colleagues on an incredible cruise! We set sail on Dec. 4 for 16 days, embarking on a memorable journey that combines fascinating history, vibrant culture and picturesque scenery. Enjoy seminars on the days we are cruising from one destination to another, as well as dinners with members of the Eagle team. Just some of the places we’ll visit are Mexico, Belize, Panama, Ecuador and more! Click here now for all the details.

P.P.S. Join me at FreedomFest, “the world’s largest gathering of free minds,” just a month away! I, along with my fellow Eagle Financial gurus, Mark Skousen, George Gilder and Jim Woods, will be speaking. The full agenda — speakers, panels, debates and breakout sessions — is now posted online. Go to www.freedomfest.com/agenda to check it out. You will be amazed! You can also click on the name of each presenter to see when and on what topic they will be speaking. Click here to find out more. When registering, use code EAGLE50 to receive a discount. I hope to see you at FreedomFest in “Music City,” Memphis, Tennessee, July 12-15.

The post Zero-Coupon Bonds Will Soar When Rates Finally Fall appeared first on Stock Investor.

Read More

Continue Reading

Government

Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…

Published

on

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

Read More

Continue Reading

Government

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The…

Published

on

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

Read More

Continue Reading

Government

Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…

Published

on

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.

(Shutterstock)

A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

Read More

Continue Reading

Trending