Government Debt -> Hard Assets

The New Safe Haven Bet

Life and financial advice from David Goggins as we move further into this highly inflationary decade. Source: Fuel the Mind

Long-term bonds are trading like shitcoins.

The TLT — an ETF that holds 20+ Year US Treasury Bonds — is down 16.67% year to date and 48% from its 2020 all-time high.

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There’s very little reason to buy anything other than very short-term US government debt that you can hold to maturity, because:

1. short-term US debt is currently paying higher yields than long-term debt and

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2. long-term debt has been trading in secondary markets at very volatile rates.

Holding long-term government debt has gone from an almost risk-free trade to quite a risky one, if you don’t plan to hold the bonds to maturity. Even then, you’re earning a yield in a currency that’s rapidly being debased.

Right now, long-term debt yields are rising faster than short-term yields, because investors are getting out of their long-term bond positions, creating an effect known as a “bear steepener”, which indicates that the odds of a recession/bear market are high.

Warren Pies of 3Fourteen Research says that there have been 12 episodes like this in the past 50 years, according to Reuters (check out the article via the “investors are…” linked text above).

What makes this particular episode particularly difficult to deal with is that the yield curve is inverted while this “bear steepener” is playing out.

Here’s a fun chart indicating what might happen next:

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Given that there’s no good reason to buy long-term bonds, I’m assuming the US Treasury will continue to buy them in efforts to try to disinvert the yield curve.

Your bank or financial advisor might continue to push you to buy them, too, most likely because there’s messaging coming from above (from bigger banks/the government) telling you to buy them.

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When countries go into inflationary/hyperinflationary periods, the powers that be do what they can to keep people holding cash and bonds, because when people do so, it helps reduce the rate of inflation, even though it financially hurts the people who hold them.

Whatever you hear from the government or your bank, keep in mind that holding long-term treasuries is dangerous for this reason:

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And this reason:

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I also don’t think it’s just gold into which investors will move their money. I think many commodities will do very well in the next 6 years or so, as we’re likely about to enter a very, very inflationary period in which scarce assets — commodities such gold, silver, oil, natural gas, uranium, etc. — will become very expensive in a world drowning in government debt and paper currencies.

In other words, we’re entering an era in which owning hard, scarce assets will likely be the best play out there.

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And what’s the hardest, scarcest asset the world has ever seen? (If you don’t know the answer to that one yet, I’ve failed as a writer.)

If you do know, feel free to leave a comment with the answer and your Lightning URL, and I’ll send the first 5 people who respond 100 fractions of that hard asset.

For now, though, let’s take a closer look at whether or not gold might be a buy at its current price.