저자: Beast Finance · 외국인
다듬은 글
Well, as I pointed out, bonds and interest rates move in long-term cycles along the cycle of inflation, which occasionally is called the long-term Kondratiev. And these are waves, upward waves and downward waves. And during the upward wave, interest rates go up. Such as we had between the end of the Second World War and 1981, we reached a peak in interest rates in '81.
And after '81 and in the monetary interventions by Paul Volcker inflation was abating and we had a period of disinflation, partly because of the opening of China, by the way. And this declining interest rate cycle was a secular decline in interest rates that lasted from 1981 to between May and August 2020.
And then interest rates bottomed out on the 10 years at 0.57% and since then, I agree with you, we are in an up cycle for interest rates. And the longer the American politicians don't care about the deficit, especially not Mr. Trump, that deficit will go up and the interest payments on the debt will go up and it will force more money printing.
Okay. And it will lead to more inflation and to higher interest rates. And the longer these politicians stay in power uh will get, say, 200% interest rates. So. In the meantime, we are in a cycle where in my view, the economy in the US is much weaker than uh the government publishes. And as you know, 70% of Americans, they live like paycheck to to paycheck.
Of course. And uh when uh when the cost of living will go up, their affordability, their their purchasing power will be killed. And I can see it nowadays, I think the economy is very weak. And in my view, I'm not saying because the cost of living would justify uh higher interest rates, but the economic reality would justify lower rates.
I And I believe that the bond market is going to be the least bad For now. On gold, I do not hold gold because I think that it will go up where anything. I hold gold because when I look around, I don't see any store of value. Mhm. do you think a store of value is government bonds? But it may be good to be short bonds, but it may be better to short Tesla or Nvidia.
Right. Right. I mean, these these two, Tesla and Nvidia, a year ago, were the most popular stocks among individuals in Wall Street service. And what have they done? Nothing. Right. Nothing. I hold gold as a store of value. And as a store of value, I would never sell it. Are we talking about the trade?
The I may buy gold in the morning and sell it in evening. I don't do that because I'm not interested. I have enough money to live a comfortable, say, normal life. Mhm. But I'm interested to hold gold as a store of value because I don't think that paper money are stores of values. When I look at the intellectual capacities of central bankers, I want to remind every investor.
The best investment in life is to work and to have discipline because most people are lack discipline. And I'm not a genius and I know many rich people. I mean, ultra-wealthy people. What sets them apart is that they have discipline and work ethics and curiosity that they keep on learning. They don't stop learning.
They keep on reading and studying. I studied at universities. I never went to university. I finished up with a PhD. But I knew nothing. But later on, during the course of my life, I started to work on Wall Street in 1970. I read a lot. And by giving a speeches and also writing the newsletter, it forced me to actually do things that I want to do the whole day.
I sometimes also tempted to drink the whole day, but I can't do it. So, I have to to do it now. It's uh close to 12:00 at night, so I can go out and play pool. I like to play snooker. The thing is, my view is starting the end of 2024. Actually, it began already in 2021 when the meme stocks peaked out and the crazy stuff peaked out because if you look at the market and you look at the new high list, the maximum number of stocks that reached 12-month highs was in 2021-2022.
Then 23, we went down. And then 24-25, we had a recovery. But I'm believer that we are in a major truck top for asset prices. And that liquidity will tighten because unlike other people who believe that the tightening only happens through central banks, I believe that when asset prices go down, the asset prices prices that go down tighten liquidity.
Of course. I mean, you get it does. You get the commercial property prices down in some cases in the US by 70%. I can tell you it tightened the liquidity of some property developers. And then you get the private credit contraction. And declining asset prices, it tightens the purses of individual investors.
And so forth and so on. And then the generation Z, the geniuses, huh? The generation Z, who were all in Bitcoins and cryptocurrencies, but they came in late. They are suffering now. I can see it with my own eyes because I go to bars where all these people converge. And they're no longer there. This is the issue that I'm deliberating the most with.
What is the impact of declining asset prices on the economy. Because when asset prices go up, it's logical someone has a house, it goes up by $100,000 in value, then he goes and borrows some additional money against it, and he uses that money to buy a Mercedes. Uh more so in the stock market, if someone makes a profit, he goes and spends it on some girlfriends or uh Epstein and company, what not, he understand.
So, but once the profits are gone, the economy will suffer very badly, in my opinion, much more than the economy on Wall Street say. And you will never find an economist on Wall Street that strongly criticize the money printing by the Federal Reserve. Because Wall Street lives from rising asset prices.
Economically, interest rates should be higher. In other words, say, in my view, given the underlying inflation rate, the interest rate on the 10-year should be around 6%, 7% on the 10-year note. But uh we have this environment also in Europe, where interest rates are very low relative to the cost of living increases.
But uh I think for some sectors of the economy, even the current interest rates, the 10-year at say about 4%, is relatively high for some sectors of the economy. And for ordinary people, you refer to the consumer credit. The the credit card debt. I mean, their interest rates are not always They're like 20%.
The point is I am [clears throat] thinking that everything will be bad, but some things will be less bad than others. So, I think that gold may go down, but I'm holding gold because I think it's better than to hold cash with banks and so forth. But, I also hold bonds, and I want to explain to you why I'm holding bonds.
First of all, if you look at portfolio allocation, the bond allocation at the present time by individuals is at an all-time low, essentially. Or close to an all-time low. They have much more in stocks. I believe that what Greenspan once said, that the US government will always pay the interest, is true.
The question is what is the value at which they paid the interest. I mean, how much How much is the purchasing power of money? But, the problem nowadays is that all currencies, all paper currencies, are bad because they're all manipulated by central bankers, and they hold together, and talk together, and act together to print money.
So, all currencies are eventually becoming worthless. But, the US dollar, at least, has relatively high interest rates compared to the others. I want to add something to your bond position. First of all, I am very interested in interest rates and in history and so forth. And, as you know, interest rates move in long-term cycles, and these cycles uh last 40 to 60 years or sometimes longer and sometimes shorter.
But basically, uh the last up cycle in interest rates began at the end of the Second World
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