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Jim Rogers, the man who founded the Quantum Fund with George Soros back in 1973, has just openly stated that he has sold almost every marketable asset on the planet. He is 82 years old. He is sitting on a mountain of US dollars, and the reason he gives is so simple it's almost rude. This is the first story.
The second is from a macro analyst who argues that the Federal Reserve is not too tight at all, but rather too loose, and a correction of this will leave its mark. The third is the quarterly borrowing document that came out this week and was barely read by anyone, even though it quietly changes the way $739 billion is raised.
The fourth is about a foreign government that owns so much of the American debt that Washington is now devising ways to ensure that it can never sell it. And the final story—the one that connects the previous four—is a single number that, according to the analyst, he personally guarantees. Stay with me, because once you hear this, the first four stories will no longer seem like separate events.
But first, about the 82-year-old man who quietly sold the world. Rogers retired at the age of 37. At that time, his fund had returned more than 4,000%, while the broader U.S. market had barely managed 47% over the same period. So when he tells an interviewer that he has liquidated almost all of his stock holdings, this is not a man chasing headlines.
His wording was calm and indifferent. “I have essentially sold most of the countries in the world,” he said, “ and I have a huge amount of cash in U.S. dollars.” Not most of their positions. Most countries. He left only a few things. A few Chinese stocks, a few Uzbek stocks. Physical metal that he already has, and he is not buying it at current prices.
And his stated reason is almost boring, which is what makes it disturbing. Almost every stock market in the world was at or near an all-time high, and it expects further inflation, as the standard response of governments when something breaks is to print money. Then he added the part that most people missed.
The dollar position, he says, is a crowded bargain, not a conviction, but a crowd. A man who for 50 years was known for being ahead of the curve is now telling us that he is acting conventionally, and he doesn't sound thrilled about it . If this resonates with you, take 1 second to like and then subscribe, because the algorithm only shows it to more people when the first hour of viewers reacts.
And write in the comments which city you are watching this video from. I genuinely enjoy seeing how far this spreads. If you know at least one person who still reads the financial pages in paper form, send this to them. She'll want to know the rest, because the next three stories are harder than the first, and the last one is the reason I'm writing this down in the first place.
Darius Dale runs a research firm called 42 Macro. And this week he put forward a thesis that contradicts almost everything you hear on financial TV channels. The Fed, he argues, is not a deterrent. It is stimulating. The market's estimate of the neutral rate has risen by about 50-75 basis points in recent months, which is a polite way of saying that the ground has shifted while the central bank has stood still.
He estimates the effective federal funds rate at 3.63% against the lower bound of the down cycle of 3.9% and the final rate of 4.15% priced in 5 years ahead. Read this arithmetic slowly. According to his calculations, the central bank needs at least one increase, possibly two, just to reach the neutral level.
Not to increase the pressure. And to be ordinary. He believes it is better to act through the balance sheet rather than the discount rate, since interest rate-sensitive sectors of the economy are already contracting. Real investment in housing construction has fallen by about 5% year-on-year over the past 6 months.
The housing market has not waited for the announcements, and if the Fed tightens policy at its September and October meetings , Dale expects something like the summer of 1998, a correction he estimated at 19%. His words about the central bank were more direct than mine. “They don’t have to kill the business cycle,” he said, “but they probably should give it a few blows .” His own model deviated from the April positioning some time ago.
And this is where it gets interesting, because someone in Washington seems to have been reading those same charts. The quarterly refinancing announcement came the morning Dale was recording, and he said it simply stunned him. The federal government is projected to borrow $739 billion in the third quarter of this year.
Treasury bills account for 49 billion, plus another 45 billion for redemptions. In total, the share of easy short-term financing jumps from 20 percent to 61% in the third quarter and 58% of the total amount of 628 billion in the fourth. Translating from accounting language: The Ministry of Finance decided to borrow for the short term, rather than the long term , which takes pressure off the long-term bond market.
Dale interprets this as Treasury Secretary Scott Bessant supporting the markets so that the Fed chairman has room to tighten policy without risking a crash. The Minister of Finance, he said, is trying to support the game. If markets avoid the September and October slumps and continue to rise through the rest of the year, Dale says it will be because of this financial mix, not earnings, optimism, or anything else you hear about in commercial breaks.
Now hold that thought, because that same instinct— to keep the game going— is manifesting itself in a much stranger place. Japan is the largest foreign holder of America's national debt. This is not just a thesis for discussion. This is a structural problem. If Tokyo were forced to sell hundreds of billions of these assets, the yield on about $40 trillion of US debt would instantly go against Washington.
Taylor Kenny of ITM Trading dedicated an entire episode to this this week. According to her , Bessant pressured the Federal Reserve to open a mechanism that would allow Japan to place, rather than sell, $100 billion in Treasury bonds in exchange for dollars and then buy them back later. Pawnshop for sovereign debt.
It is exactly what it is, and no abbreviations will change the essence. Kenny was not impressed by the official version that this was not money printing under another name, and she called it a “ band-aid” that bought time without solving the underlying problem. “ This is bad for the United States,” she said, “because we need more buyers for our debt.
"As we issue more debt, we need more buyers, not fewer." Dale described the same situation from a different perspective, calling it a coordinated intervention that required the Fed to weaken the dollar in favor of a foreign government. Two very different analysts, same conclusion: no one wanted Japan close to the sell button.
Which brings me to the number I promised you. Dale listed profitability metrics that should be on the front pages of every newspaper, but they're nowhere to be found. 15- year high for 10- year British government bonds, approaching 20- year high for 10- year US Treasury bonds, 15- year high for 10- year Eurozone bond yields, 30-year high for 10-year Japanese government bonds.
All major sovereign borrowers are simultaneously paying more than at any time in the last generation. Then he pointed out the part that almost no one appreciates. The term premium, the additional remuneration that lenders demand for holding debt for a long time , is still about 100–110 basis points below the pre- financial crisis average.
Put it back where history says it belongs, and the fair value of the 10-year Treasury bond today is 5.7%. His forecast was without reservations. “You ’ll see 6% on 30- year Treasury bonds,” he said. "I guarantee you." And the budget won't be able to withstand it. Medicare, national defense, net interest, and Social Security now total $4.7 trillion, about 2/3 of federal spending of about $7.3 trillion, nearly 15% of the entire economy, growing at about 9% per year.
In the event of a recession, Dale expects the deficit to increase from about $1.8 trillion to between $ 3.6 and $4 trillion. This is the arithmetic that underlies all four stories. Rogers is selling, the Fed is hesitating, the Treasury is borrowing short-term , Washington is quietly building a way out for Tokyo that is not the case .
Thank you for watching to the end. This episode was harder than most. Subscribe if you want to see more, as I will be following the refinancing schedule until the September meeting and reporting on what is actually happening, not what was promised. Write in the comments which of these five stories impressed you the most and from which part of the world you are listening to us.
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