Financial markets are notoriously perplexing. If you’ve ever engaged in stock trading, you likely understand this sentiment. Anticipating market trends can be challenging enough, but pinpointing the exact moment of a shift is nearly impossible.
Reflecting on past trends and making predictions doesn’t necessarily yield accurate results. Charting price movements and drawing trend lines can only take you so far; eventually, these lines may be broken. What then?
The reality is simple: stocks rise and fall. Occasionally, they descend further before bouncing back up. What seems to be the perfect time to invest can turn out to be profoundly misguided, while moments of hesitation may reveal themselves as excellent opportunities.
Consider Southwest Airlines; it was the standout performer of last year’s S&P 500, achieving a remarkable return of 124.63 percent. Yet as of May 14 this year, it had declined by 0.47 percent.
It’s hard to assume that anyone managed to buy Southwest Airlines shares on January 1 and sell them on December 31, 2014, solely by intuitive judgment. Such a feat would require a combination of fortunate timing and fortunate guesswork.
Treasury Bubble Redux
However, the stock market isn’t the only financial arena that can bruise egos and humble the overconfident. Have you checked treasury yields lately? It’s quite alarming.
The 10-year Treasury note seems to be sinking rapidly. Yields, which inversely correlate with prices, have jumped to 2.28 percent from a mere 1.85 percent just a month ago. But that’s not the only concerning development…
Gold prices have surpassed the $1,200 per ounce mark, oil has risen to $60 a barrel, and copper now sits at $2.90 per pound—a staggering 11 percent increase over the last two months.
If we were still clear-headed, we might argue the markets are hinting at impending price inflation. However, after being misled by the treasury market repeatedly, we’ve resigned ourselves to a cautious outlook. “Fool us once, shame on you; fool us twice, and we’re amiss.”
We have been anticipating the collapse of the significant 30-year treasury bubble for over six years. Every uptick in yield sees us speculating that the moment has finally arrived.
Pinching the Losers in Congress
It’s not that we wish for a crash in the treasury market. Such an event would undoubtedly lead to widespread discontent. Yet, we are equally restless residing in a stagnant economic environment.
We believe that treasury yields must rise eventually. Why delay? Let’s confront the realities and clear the slate for robust, fundamental growth. We’ve grown weary of an economy sluggishly mired in mounting debt and suffocating entitlement programs.
Rising treasury yields will undoubtedly squeeze the ineffective legislators in Congress. This is a scenario we would welcome. There would be poetic justice in witnessing the public suddenly realize that the politicians’ lifelong promises of free handouts have all been empty rhetoric.
Congress deserves to face scrutiny, and higher interest rates could facilitate this reckoning. Increased borrowing costs for the federal government will mean that merely servicing existing debt will consume an ever-larger portion of the national budget.
It’s disheartening to think that taxpayers are funding a federal workforce to the tune of $400 million for no results. Worse still is the notion that taxpayers are essentially funding interest payments on borrowed money that was already allocated to a workforce that isn’t yielding tangible outcomes. It’s a bitter pill to swallow.
Sincerely,
MN Gordon
for Economic Prism
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