Is the Bond Bubble Finally Unraveling?

While NoBull’s simple 1% Plan to fix America’s deteriorating financial condition will not cure our condition overnight, it could buy us some time by setting the U.S. dollar on a firmer foundation.  

The Fed has crushed its own bond portfolio by hiking interest rates. Maybe there will not be a run on the Fed, but perhaps we should be more concerned about a run on the US$.

Must read: China lectures about U.S. Hegemony & Its Perils. Maybe China would prefer if it had hegemony instead? Some classify this diatribe published in February 2023 as an informal declaration of war.

The frailty of the banking system has come front & center over the last couple of weeks as more secondary, unintended symptoms develop from the Fed’s race to raise interest rates.

Despite growing evidence of systematic bank risks associated with the Fed’s aggressive rate hikes over the last year, Powell hikes another 25 bps anyhow, citing labor pressure as the culprit. However, in the real world, labor conditions are already improving.

Total U.S. fixed income (FI) issuance declined -34% y/y to $8.8 trillion during 2022 as interest rates ramped up.

Banks have been parking excess deposits in various forms of government debt that are subject to interest rate risk & in some cases, risky crypto bets. This is causing systematic risk.

Consumers are combating the higher price of living & higher interest rates by driving less, buying store brands & taking on more debt.

Americans need to be reminded about our heritage as the single most productive nation as measured by GDP/person with a unique capability to bless the entire world if we can simply get back to business.

Since the 2008 Great Recession, 134 banks with assets of $1.25 Trillion have been closed by regulators. At the same time, the Fed’s ballooning balance sheet now amounts to nearly 50% of total domestic bank deposits.