Trending Stocks, Investing Tips, and Market Insights on Stockchase

US Government Debt of $40T
Jackson Hole is this week. The market didn't like Warsh's laissez-faire approach to interest rates at the last FOMC meeting. Bonds have been selling off, but not just in the US. It's a story of total debt to growth that probably ends badly.

Larry brought along a chart that shows revenues/expenses of the government as a percentage of GDP. Post WW2, for many decades, revenues and expenses were pretty aligned. Overall debt to GDP came down after financing WW2. Then partisan politics started kicking in over in Washington, DC, with parties wanting to outdo each other. So deficits and debts got crazy.

Today, the amount of debt to GDP is 121%. Debt is $40T, on a $32T economy. Question is:  How do we finance all of this?

One of the mandates of the US government is to lower the cost of debt. As long yields got higher, Scott Bessent said a few weeks ago that they were going to buy back some of their long bonds, issue a few more treasury bills, and twist how they raise $$ for the government. There's a hope and expectation that stablecoins will be backed by US treasury bills.

His next chart shows the total cost of US treasury bills, bonds, and the current yield. Of all treasuries outstanding right now, current yield to maturity is 4.55%. The old ones are in the range of 3.6%. So new debt is coming in around 90 bps more than the debt that's maturing. That'll just put upward cost on the debt, and add hundreds of billions to the deficit.

Catastrophic in terms of what it means for future spending and budgets. It limits governments' ability to help when things get bad. Times have been good, and the government's still spending massively. We've been fiscally managed by the lot of them around the world -- Republicans, Democrats, Liberals, Conservatives. 

There's a universal hate on right now for long bonds. There's a trade here, but not for the faint of heart (as yields could keep rising). Speculators are bearish on long bonds. Hasn't been like this since the last time yields were over 5%. Price of these bonds is really low. You can use some options to protect yourself. On risk/reward, long treasuries are one of his favourite asset classes right now. See his YouTube channel.

Has long owned it. They have strong pricing power. It really benefited from the World Cup. Is up 30% this year. Pay a 2.3% dividend.

The preferreds of Microchip give you a little exposure to tech and still get income of 5.75%.

30% of the names in this are at 52-week highs, but is not an overbought sector.

Not worried about it. Apple does well when everybody worries about capital spending, then doesn't well when there are worries Apple is not spending on AI. Whatever's in vogue.

Messaging from Scott Bessent yesterday is that they're buying back money because the US economy has a major fiscal challenge. This tells us that we have some trouble ahead. You're probably misreading the tea leaves if you don't take some money out of your growth names and pivot to some defense.