Trust Bonds… At Your Own Peril

Trust Bonds… At Your Own Peril—because ‘risk-free’ is really just Wall Street’s favourite fairy tale… with a side of risk-y.

The Week That It Was…

Japan may have been honouring its elders with “Respect for the Aged Day,” but markets were far too busy worrying about the health of consumers in China and the US—and whether central bankers at the Fed, the BOE and Bank of Japan were feeling spry enough to shuffle rates around. As for earnings, only nine S&P 500 companies reported, with FedEx carrying the whole show—because who didn’t want to know if people were still shipping stuff while the world panicked?

China’s economy just hit the snooze button for the second month in a row, and this time it’s not a seasonal cold — it’s structural. Investment has collapsed like a bad soufflé, housing is still in the doghouse, and government spending has lost its magic wand. Consumption is wobbling too, despite subsidies and a stock rally doing their best cheerleader impressions. With weak growth but soaring equities, policymakers are stuck wondering whether to hit the stimulus button now or later. Industrial output and retail sales are both slowing, making the whole picture look like a slow-motion replay of a downturn.

The BOJ, ever the master of slow-motion drama, voted 7-2 to keep rates stuck at 0.5%, but for the first time since Ueda took office, two dissenters dared to break ranks and call for a hike — suggesting Japan may eventually flirt with the idea of normal interest rates (no rush, maybe by the next century).

In true BOJ style, they spiced things up by unveiling a “bold” plan to sell off their ¥75 trillion ($508 billion) ETF hoard — at a pace so slow it would take more than 100 years to complete. Yes, the BOJ has essentially promised to be in the market longer than most of us will be alive. Governor Ueda reassured everyone that, while none of us will be around in 2125, the BOJ will nobly keep selling — very, very carefully — to avoid upsetting Japan’s “slightly overheated” stock market, which is up 26% this fiscal year. In other words, normalization is coming… at a pace only a bonsai tree could respect.

The Bank of England held the dullest meeting of the week, announcing it will kindly slow its bond dumping to £70B a year (down from £100B) so as not to completely wreck the gilt market — how thoughtful. It will also spare the long end a bit, selling fewer 20+ year gilts while splitting the rest across short and medium maturities. This comes after gilt volatility pushed long-term borrowing costs to 30-year highs and scared off pension funds. Markets responded with a steeper yield curve, apparently disappointed the BOE didn’t go full babysitter and stop selling long-dated gilts entirely.

Donald Copperfield, the failed-realtor-turned-politician with six bankruptcies to his company names, now wants companies to ditch quarterly reports for semi-annual ones—because apparently, less transparency means better management. He claims it’ll “save money” and let managers “focus on running their companies,” which sounds suspiciously like “hide bad news longer.” Jamie Dimon and Warren Buffett once agreed, arguing that quarterly guidance fuels short-term thinking—convenient, since Buffett’s strategy is literally “buy and hold forever.” But in today’s stagflation, this push feels less about strategy and more about damage control. When the bosses stop talking every three months, it’s rarely because they’re brimming with good news.

Cutting transparency might save a few bucks in compliance costs, but it risks spooking investors and injecting more volatility into already jittery markets. A Columbia Law study on Tel-Aviv’s 2017 switch to semi-annual reporting found stocks of firms that dropped quarterly updates fell 2%, while those that stayed quarterly rose 2.5%—proof that investors value clarity over penny-pinching. The real issue isn’t saving audit fees; it’s confidence. Less frequent reporting signals weaker earnings ahead, triggers portfolio reshuffling, and makes money managers more risk averse. And if there’s one thing markets hate more than bad news, it’s uncertainty.

https://clsbluesky.law.columbia.edu/2024/07/18/how-shifting-to-semi-annual-financial-reporting-affects-market-dynamics-and-governance/

August retail sales got a nice “back-to-school” caffeine shot, as shoppers clicked their way to bargains instead of swallowing tariff price hikes. Headline ‘nominal’ sales popped 0.6%, and the core group clocked in at a strong 0.7%. Online shopping was the star student, jumping 2%, while furniture and personal care flunked the test. Even bars and restaurants saw a 0.7% boost — probably thanks to well-heeled stock market winners toasting their summer gains.

Adjusted for the “CP-Lie,” retail sales rose a meagre 0.3% — still stuck at March 2025 levels and well below the April 2022 peak. Historically, real retail spending peaks alongside the S&P 500-to-oil ratio, which will inevitably fall below its 7-year moving average sooner or later — a classic recession red flag. Markets, of course, are busy whistling past the graveyard.

US Retail Sales Adjusted to inflation (i.e. CPI) (blue line); S&P 500 to WTI ratio (green line); 84-months Moving Average of the S&P 500 to WTI ratio (red line).

As expected, and fully priced in, the Fed finally broke its nine-month pause, trimming rates from 4.50% to 4.25% — the second-longest wait since the 1970s. But unlike the gloomy 2001–2002 backdrop, markets are upbeat, consumers are still spending, and inflation hasn’t exactly left the party. The lone dissenter, Stephen Miran, kicked off his tenure by calling for a bigger 50 bps cut — talk about an entrance. In its SEP, the Fed now projects inflation will only get back to 2% by 2028 — seven straight years of overshooting, which would be hilarious if it weren’t monetary policy. GDP forecasts were upgraded through 2027, unemployment looks a bit better in 2026–2027, and PCE/Core PCE got a small 2026 bump — just enough to keep markets guessing.

The 2025 dot plot got a full makeover, with one Fed member mashing the “Cut!” button five times — likely Stephen Miran, Donald Copperfield’s freshly minted monetary magician, making savers’ money vanish and debtors’ burdens magically lighter (including a certain ex–real estate mogul–turned-politician). Out of 19 Fed members, 7 see no more cuts this year, 9 want two, 2 want one, 6 want none (yes, somehow that math checks out), and one lone hawk is still dreaming of a hike. The Fed funds forecast for 2025 was shaved from 3.9% to 3.6% — basically just one more cut after the two previously expected this year.

As Wall Street snuggles up with bedtime stories of Powell the Benevolent, traders are busy fantasizing about more rate cuts under the Christmas tree — plus two more as a New Year’s bonus, with an “81% probability” stamped on the gift tag. The catch? The magic wand’s out of batteries and shaving a few bps off the short end won’t keep the U.S. economy from faceplanting straight into an inflationary mess.

Anyone checking out the four pillars of the Permanent Portfolio since the start of the Jubilee Year would’ve seen quite the spectacle: gold is strutting around like a rockstar, beating the S&P 500 nearly 4-to-1 and leaving Treasuries eating dust—more than 7-to-1! Sure, some will politely point out that, if you ignore the “CP-Lie,” Treasuries have still eked out a nearly 5% gain this year… but compared to gold’s victory lap, that’s like bragging about coming in third at a two-horse race.

Nominal (not ‘CP-Lie’ adjusted) performance of $100 invested in physical gold (blue line); S&P 500 index (red line); Bloomberg US Treasury Index (green line); Bloomberg US Treasury Bill: 1-3 Months Index (purple line) since 31/12/2024.

The recent rebound in the US Treasury index feels like a classic case of Wall Street Pavlov: bankers and talking heads still salivating at the idea that Treasuries are “risk-free,” blissfully ignoring the chaos brewing in the world. Another likely spark? Leveraged bond positions hit an all-time low since 2016, meaning the shorts were primed for a squeeze. So, as the herd rushes in, long-dated Treasury yields could drop (prices rise) … until reality bites and investors finally realize that in a stagflation, Treasuries are about as helpful for preserving wealth as an umbrella in a hurricane.

Bloomberg US Treasury Index (blue line); Combined leveraged bond CFTC position (red line) since 31/12/2016.

Anyone who’s actually studied the business cycle knows the drill: after the inflationary boom party—currently raging in the US and soon-to-be “un-developed” Europe—the hangover is looming (i.e. inflationary bust). Enter what history may remember as the ‘Trump Stagflation.’

For those who trust market signals over government propaganda, the stagflation trigger is clear: oil needs to be a lot higher. Yet the YOLO crowd keeps acting like cheap oil is a birthright. Newsflash: oil prices respond to supply shocks, not only demand tantrums. With wars simmering in the Middle East and Eastern Europe, and the self-proclaimed “Peace Maker in Chief” in the Oval Office stirring tensions around Russian supply, it’s not if oil will spike—it’s when.

Everyone knows the Ukraine war is just a proxy fight — globalist West vs. mercantilist BRICS. Yet Washington’s self-proclaimed “Peace Maker in Chief” can’t resist meddling in a European mess cooked up to distract voters from a looming sovereign debt implosion. Instead of honoring Minsk and avoiding global chaos, Europe and the US are busy poking China and Russia, guaranteeing a permanently hostile world. If Russia actually lost, you’d get hardliners in power — and maybe WWIII. But sure, let’s pretend we’re saving democracy. Why not just hand the Regime In Change Diva ‘Victoria Nu-land the nuclear codes and get it over with?

https://www.nbcnews.com/video/audio-of-leaked-nuland-conversation-162208835907

For anyone still swooning to the siren song of the bond mermaids, it’s time for a reality check: higher oil prices have a nasty habit of translating into higher yields—not the lower yields (or higher bond prices) that the dreamers are hoping for. It’s like thinking a chocolate fountain in your office will somehow make your waistline disappear—nice fantasy, terrible math. Every time oil spikes, the bond market remembers it’s not a fairy tale; rising energy costs fuel inflation, which in turn scares investors into demanding higher yields. So while the Wall Street mermaids are singing sweet lullabies about “risk-free” Treasuries, the real world is over there waving a caution sign: in a stagflation fueled by pricey oil, bonds are not your cozy safety blanket—they’re more like a soggy umbrella in a hurricane.

US 10-Year Yield (blue line); WTI Price (red line).

As oil prices climb and chaos inevitably follows, those investors once again enchanted by the Wall Street mermaids crooning that bonds are the “risk-free” asset should take a deep breath. More chaos doesn’t whisper sweet nothings—it screams higher, not lower, Treasury yields. In plain English: when turmoil rises, bond prices fall, especially if that turmoil involves the ever-popular sport of weaponizing USD assets. So while the mermaids sing of safe havens, reality is out there giving bonds a not-so-gentle push off the cliff. It’s the financial version of thinking you can safely surf a tsunami because someone promised it’s just a “big wave day.”

US Chaos Index (blue line); US 10-Year Yield (red line).

While the YOLO crowd hangs on to the fairy tales peddled by CNBC and its army of financial “influencers,” reality has a different plan. As the world stumbles from an inflationary boom into the looming inflationary bust—speeding up with every new domestic or international chaos headline—gold quietly flexes its muscles. Since the start of the decade, it has consistently outperformed bonds, proving once again that while the media may hype risk-free fantasies, the shiny stuff doesn’t need a hype machine to hold its ground. It’s the classic case of the tortoise versus the hare, except the hare is leveraged, distracted, and scrolling Twitter.

US Chaos Index (blue line); Relative Performance of Gold to US Treasury Index in USD (red line).

From the same angle, anyone who’s actually paid attention knows gold is the war-and-chaos asset. So it should come as no shock that when chaos ramps up, gold—the ultimate antifragile, non-confiscatable rebel—doesn’t just beat Treasuries, it waltzes past equities like they’re standing still. Savvy investors recognize that gold outperforming the S&P 500 isn’t just luck—it’s monetary illusion, a historical canary signaling that an equity bear market may be looming, or at the very least, that equity returns are about to take a serious nap, even in USD terms.

US Chaos Index (blue line); Relative Performance of S&P 500 to Gold in USD (axis inverted; red line).

The inevitable World War III is poised to shift the economic and financial center of gravity eastward, with China—and most likely Hong Kong—emerging as the new hub of global capitalism. This would mark the eclipse of the globalist Keynesian agenda and the rise of a multipolar world driven by mercantilist ambitions.

In the meantime, as the global economy is heading into an inevitable inflationary bust, the path to real prosperity remains paved with tangible assets, not fragile IOUs not genius digital tokens, Physical gold and silver—free from counterparties, free from surveillance—stand as the ultimate antifragile shields. Beyond precious metals, broader commodities guard against a fracturing global supply chain.

Cash must be wielded with precision: favor short-dated USD investment-grade bonds and T-bills to maintain income and swift agility.

In equities, hunt for lean, low-debt, high-cash-flow champions—businesses ready to thrive amid reshoring, trade wars, and surging defense budgets. Because the real enemy isn’t next door; it’s the warmongers pulling the strings.

The Goldilocks era is dead. The age of Gold In Lots—is the new survival playbook.

Herbert Hoover nailed it: “We have gold because we cannot trust governments.” Translation: if you like your wealth safe, don’t hand it over to politicians or central bankers with a flair for creative “solutions.” Gold doesn’t need press releases, promises, or fiscal spin—it just sits there, quietly mocking every government that thinks paper money is a substitute for real security.

What’s On The Agenda Next Week?

The grand finale of Q3 in this so-called Jubilee Year is shaping up to be a real nail-biter — if your idea of excitement is watching Flash US PMI data shuffle in, the Core PCE hit snooze yet again, and Michigan consumers tell us (again) how grumpy or giddy they feel about inflation. As for earnings, just six S&P 500 companies are reporting — and let’s be honest, Costco is the only one you’ll pretend to care about while secretly just checking if the free sample trays are still full.

KEY TAKEWAYS.

By now, investors should know that trusting bonds is basically a hobby for financial masochists — here are the key takeaways:

• In China, the numbers say “slowdown,” the markets say “party,” and Beijing is trying to decide whether to be the DJ or the bouncer to ‘Make China Great Again’ sooner or later.

• BOJ promises to “normalize” by selling its ETF mountain over the next century — because nothing says urgency like a 100-year exit plan.

• BOE slows its gilt fire sale to avoid breaking the market—just enough to look cautious, not generous.

• When CEOs start begging to cut quarterly reports, it’s not efficiency they’re after—it’s extra time to hide the bad news before investors panic.

• August retail sales got a sugar rush from back-to-school shopping but adjusted for inflation they’re flatlining — a classic recession red flag that markets are happily ignoring.

• The Fed finally broke its nine-month pause with a 25-bps cut, promised more for 2025, and projected inflation won’t hit 2% until 2028 — proving that monetary policy is now equal parts stimulus plan and stand-up comedy routine.

• Since the Jubilee Year began, gold has been the rockstar of the Permanent Portfolio, crushing the S&P 500 and Treasuries while everyone else awkwardly claps for third place.

• The Treasury rebound is classic Wall Street Pavlov: everyone rushes in thinking “risk-free,” until stagflation reminds them Treasuries are about as useful as an umbrella in a hurricane.

• After the inflationary boom, the world is barrelling toward Trump Stagflation, and with supply shocks looming, cheap oil isn’t a birthright—it’s a ticking time bomb.

• For anyone still swooning over “risk-free” Treasuries, rising oil means higher yields—proof that bonds are soggier umbrella than safety blanket in a stagflation storm.

• As oil spikes and chaos rises, bonds will tumble while gold quietly outperforms, proving that “risk-free” is just Wall Street’s fairy tale.

• As the US economy shifts into an inflationary bust, investors will once again need to focus on the Return OF Capital rather than the Return ON Capital, as stagflation spreads.

• Physical gold and silver remain THE ONLY reliable hedges against reckless and untrustworthy governments and bankers.

• Gold and silver are eternal hedge against "collective stupidity" and government hegemony, both of which are abundant worldwide.

• With continued decline in trust in public institutions, particularly in the Western world, investors are expected to move even more into assets with no counterparty risk which are non-confiscable, like physical Gold and Silver.

• Long dated US Treasuries and Bonds are an ‘un-investable return-less' asset class which have also lost their rationale for being part of a diversified portfolio.

• Unequivocally, the risky part of the portfolio has moved to fixed income and therefore rather than chasing long-dated government bonds, fixed income investors should focus on USD investment-grade US corporate bonds with a duration not longer than 12 months to manage their cash.

• In this context, investors should also be prepared for much higher volatility as well as dull inflation-adjusted returns in the foreseeable future.

HOW TO TRADE IT?

U.S. equity markets continued their relentless march higher last week, with the S&P 500 blasting through the 6,600 mark and notching three fresh all-time highs in just five trading days. The Magnificent 7 and the Nasdaq 100 once again outperformed the broader market, leaving all major U.S. indices firmly in bullish daily and weekly reversals. Yet beneath the euphoria, cracks are starting to appear: Europe’s sovereign debt crisis is shifting from a distant “if” to an imminent “when,” and that clock is ticking louder by the day. Technical indicators are flashing caution, with stochastics now deeply overbought and on the verge of turning bearish — a setup that historically signals a pause or correction is near.

If volatility spikes, first lines of defense are clustered near key Fibonacci retracement levels — 44,026 for the Dow, 6,226 for the S&P 500, and 22,663 for the Nasdaq 100. A deeper selloff could see markets retest the 61.8% retracement (42,609 for the Dow, 5,960 for the S&P 500, and 21,493 for the Nasdaq 100), which would likely present the last tactical buying window of 2025.

Since the “tariff tantrum” of April, all major U.S. indices have been carving out higher lows, suggesting the structural bottom may already be behind us. That said, the coming weeks could test investor discipline as sovereign debt fears, rate-cut expectations, and rising volatility battle for control of market sentiment. For patient, long-term investors, the message remains the same: ignore the noise, use volatility as an opportunity, and don’t get whipsawed by FOMO-driven exuberance or end-of-the-world doom narratives.

As of September 19^th , 2025, the US remains in an inflationary boom, but with the S&P 500 to Gold ratio now below its year below its 7-year moving average for 8 months, an inflationary bust will materialize much sooner than Wall Street pundits and their parrots are eager to tell their clients. In this context, investors should stay calm, disciplined, and use market data tools to anticipate changes in the business cycle, rather than fall into the forward confusion and illusion spread by Wall Street.

Anyone who’s actually studied past government and empire collapses knows that the fairy tale of “infinite debt growth” was written by politicians who wouldn’t know a spending limit if it hit them with a budget report. It’s the same kind of linear nonsense as the climate zealots shrieking that one degree hotter this year means we’re all toast in 100 years — relax, we won’t last that long anyway. The real trigger for a sovereign debt crisis isn’t the absolute level of debt, but the moment nobody shows up to buy the next round of IOUs to fund ever-bloated deficits. For now, the U.S. is still the “cleanest shirt in the dirty laundry basket,” as Europe stumbles around plotting its next geopolitical stunt and the UK and France quietly whisper about IMF bailouts. Translation: U.S. long yields will rise, but not nearly as much as Europe, the UK, or even Japan. Because if endless debt sales were still a thing, none of this would matter — and you’d miss the global wildcards that always sneak in from outside.

Spread between US 10-Year Yield and Japan 10-Year Yield (blue line); France 10-Year Yield (red line); UK 10-Year Yield (green line).

Anyone who’s actually cracked a business cycle textbook knows something the YOLO crowd hasn’t: when the US stumbles from the current inflationary boom into what history may one day christen The Trump Stagflation, higher bond yields won’t just rattle the markets—they’ll shove the Nasdaq out of the limo and hand the keys to the Dow. Yes, those same Dow stocks Wall Street still loves to mock will quietly strut past, proving that sometimes the tortoise really does beat the overhyped hare… especially when the hare is busy scrolling TikTok.

US 10-Year Yield (blue line); Relative Performance of the Dow Jones to the Nasdaq 100 (red line) & Correlation.

In the same vein, investors should remember that when the US 10-year yield is climbing, energy producers—think oil & gas—tend to crush energy-hungry sectors like tech. The wise will use every dip to load up on producers and sell consumers into strength, getting their portfolios ready for the coming Trump Stagflation and the inevitable march higher in long-dated Treasury yields. After all, in stagflation, it’s better to own the gas pump than the server farm.

US 10-Year Yield (blue line); Relative Performance of the S&P 500 Energy Sector to the S&P 500 IT Sector (red line) & Correlation.

With the S&P 500-to-gold ratio stuck below its 7-year average for months, the clock is ticking: today’s inflationary boom could flip to a bust within 3–6 months, ushering in full-blown Trump Stagflation.

Translation: people will pay more for less, Wall Street will still be peddling its “Forward Confusion” fairy tale, and anyone hiding in long-dated bonds will get toasted.

The playbook? Load up on low-leverage, cash-generating names—energy over tech—keep cash nimble in short-term corporates, and hold 25%+ in gold, silver, and hard stuff to stay antifragile.

As Ron Paul quipped, “Because gold is honest money it is disliked by dishonest men.” No surprise there—gold can’t be printed, bailed out, or spun at a press conference, which makes it kryptonite for the debt-crowd. Its mere existence exposes the paper-money game, quietly reminding everyone that politicians’ promises aren’t worth the paper they’re printed on.

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