Juggling Dynamite

Happy Canadian Thanksgiving to all.

Rising bond yields are actually a good thing, says money manager Danielle Park. They finally offer savers a meaningful return. They clear malinvestment. And will bring down the prices of financial assets and housing to much more affordable levels.

Yes, there will be pain as overinflated asset prices correct. But that largely impacts those with assets who have benefitted disproportionately from the low-interest rate era of central planner intervention. For a LOT of charts explaining her optimism, watch this video. Here is a direct video link.

As bond yields/interest rates rise, everything is ripe for repricing. The segment below examines different theories driving rising yields and why each signals elevated risk in financial markets.

What’s next for the Treasury market? Jeff Gundlach, “The Bond King” himself, points to oil and bond supply as two culprits behind the selloff. His bigger worry is the trajectory of U.S. debt, now north of $40 trillion, and the risk that policymakers get pushed into something drastic, even a Treasury restructuring. I’m not there yet. I lay the yield spike mostly at Kevin Warsh’s feet, since his approach has left the bond market thoroughly confused about where policy is headed. We also sparred over the shape of the next recession. I see a classic risk-off episode sending money straight back into bonds, just as we’ve seen time and again. Jeff suspects we’ve entered a new regime where the old relationships no longer hold. Then there’s the AI mania, where Jeff reads widening credit spreads as an early warning sign. Is a crisis around the corner?  Catch the replay for a wide-ranging conversation on the dollar, the Fed, gold and the full spectrum of fixed income. Here is a direct video link.

The segment below delves into the history of bonds and why and how they form the foundation of the global financial system. The discussion starts out a little slow, but the second half picks up.

The Financial Times journalist and author of ‘A Fabulous Debt’ explains how bonds accelerate economic growth but have also contributed to some of history’s most significant financial crises.

Today’s guest on The Long View is Robin Wigglesworth. Robin is the editor of the Financial Times finance blog, Alphaville. He’s also the author of Trillions, which is the definitive book on the past, present, and future of passive investing. Robin’s joining us today to discuss his latest book, A Fabulous Debt, which is a history of the bond market. The history of the bond market is marked by war, peace, market mania featuring a very colorful cast of characters, and so much more. Robin is such a brilliant writer that he really brings every aspect of a history to life. One of the highlights of the show was when he was talking about the huge amount of capital spending we’re seeing in artificial intelligence and how it parallels the railroad boom in the 19th century. He made the point that debt-fueled capital spending sprees tend to end quite badly, although the scale of capital investment in AI this time around is still quite a bit smaller. As Robin points out, history rarely repeats, but often rhymes, and we might be living through one of those rhyming moments today.  Here is a direct audio link.

When you look around the poker table and wonder who the sucker is, it’s you. This is not a financing event anymore. What’s really going on is people are unloading shares. They’re unloading shares on retail investors and on quick-flip institutions who were able to back in and out. So, you have to look at it accordingly and realize that this is really what they’re saying: this seems like a good time to get out, and I’m an insider, and I want out.

Ed Elson is joined by Paul Kedrosky to break down the biggest takeaways from Anthropic’s S-1. Then, Jay Ritter joins the show to discuss why Oura delayed its IPO and what the decision says about the broader IPO market. Finally, Ed shares his take on the news that Manchester City was found guilty of financial violations. Here is a direct video link.