The Time to Buy

The Fed is trying to encourage more leverage and more debt. Mr. Market is balking, worried either about a reversal of Fed policy, or more inflation, or a selloff in equities, or all of the above.

Bill Bonner, writing today from Baltimore, Maryland

Survive to fight another day.

–Tom Dyson

What’s an investor’s biggest ally? Time.

What’s his biggest enemy? The Big Loss.

Where’s the risk of the Big Loss greatest today? Bloomberg:

Neuberger Berman warned against buying US Treasury bonds on dips, saying the recent selloff could be the beginning of a “surprisingly sustained” move higher in yields [lower prices].

The risk of the Federal Reserve pausing its interest rate reductions, heightened volatility and resilient US growth as well as sticky inflation could push yields on five-year Treasury notes up to about 4.50% over the next three months, said Ashok Bhatia, the firm’s co-chief investment officer for fixed income. They’re yielding about 4.13% now.

“Fixed-income investors ought to brace for more downside volatility,” said Bhatia.

The yield on a 30-year T-bond has already moved up to 4.5% (meaning… the price of the bond has gone down). This is big news. The Fed’s interest rate cut was supposed to be the beginning of more cuts and lower yields.

It tells us that things are moving along more or less as expected (by us) and the Fed can’t control them. The Fed is trying to encourage more leverage… and more debt. Mr. Market is balking… worried either about a reversal of Fed policy… or more inflation… or a selloff in equities… or all of the above.

Whatever else can be said about it, it doesn’t look like we’re turning Japanese… at least not right away. More likely, we face higher interest rates and a big loss in stocks and bonds.

A little perspective…

Over a lifetime, Time and the Big Loss tilt to one direction… and then the other. When you are young, you have plenty of time… and little to lose. As you get older, time runs short… and the danger of the Big Loss grows larger.

Here at BPR, most of our subscribers are over 50. For them, as for us, avoiding the Big Loss is a major concern. Time can take care of itself.

Charlie Bilello spells out how time works for a saver:

What would $5k invested each year grow to by the age of 65 (assuming 8% annual return)? Beginning at…

Age 25: $1.30 million

Age 30: $862k

Age 35: $566k

Age 40: $366k

Age 45: $229k

Age 50: $136k

Bilello hammers away:

To achieve the biggest gains, extend your time horizon whenever possible. Median growth of $100k invested in the S&P 500 over…

1 Month: $101k

1 Year: $113k

3 Years: $138k

5 Years: $173k

10 Years: $270k

20 Years: $820k

30 Years: $2.27 million

But it only works if you don’t get wiped out somewhere along the way. Then, you’d have to start all over again. And after age 50… the runway gets short.

Charlie goes on to show how the taxman can help. The difference between saving in a taxable account and saving in a Roth IRA can be substantial. Over 40 years, at $7,000 per year, it can add about $730,000 to your account.

As cynicalists, we are skeptical of any performance claim. Skepticism, too, increases with age. Remember Bernie Madoff, who promised a safe and sure 11% per year? Remember the dot.coms that were going ‘to the moon’ in 1999? If you didn’t believe it, you just ‘didn’t get it.’

And there is still the biggest claim of all — that the insiders, who know their stocks better than you, will sell them to you so you can make the profits. You’ll make money, even while you sleep.

**Source: Charlie Bilello, Creative Planning**

Most stocks never pay off for investors. Very, very few pay off in a big way. Why should they? How many companies are lasting successes? How many pay consistent, substantial dividends? There were hundreds of auto companies in the early 20th century. By mid-century, there were only the Big Three left.

And of thousands of cryptocurrencies launched in the early 21st century, how many are still relevant? Today, most of the market cap is crowded into the ten top coins.

You never know what will happen. But the time to buy is when the sellers are discouraged by years of losses, not when they expect further gains.

Today, stocks are expensive. They’re trading at 25 times S&P 500 earnings — about 50% above the historical mean. And high yield credit spreads haven’t been so low since 2007, indicating a fearlessness among investors that is almost always followed by under-performance in both stock and bond markets for years ahead.

Wall Street’s claims that you always make money in the stock market is an exaggeration. You make money sometimes, not all the time. Is one of those losing periods coming up soon?

We don’t know, but if you’re over 50, it’s too great a risk to ignore.

Regards,

Bill Bonner

The Fed is trying to encourage more leverage and more debt. Mr. Market is balking, worried either about a reversal of Fed policy, or more inflation, or a selloff in equities, or all of the above.

Bill Bonner, writing today from Baltimore, Maryland

Survive to fight another day.

–Tom Dyson

What’s an investor’s biggest ally? Time.

What’s his biggest enemy? The Big Loss.

Where’s the risk of the Big Loss greatest today? Bloomberg:

Neuberger Berman warned against buying US Treasury bonds on dips, saying the recent selloff could be the beginning of a “surprisingly sustained” move higher in yields [lower prices].

The risk of the Federal Reserve pausing its interest rate reductions, heightened volatility and resilient US growth as well as sticky inflation could push yields on five-year Treasury notes up to about 4.50% over the next three months, said Ashok Bhatia, the firm’s co-chief investment officer for fixed income. They’re yielding about 4.13% now.

“Fixed-income investors ought to brace for more downside volatility,” said Bhatia.

Whatever else can be said about it, it doesn’t look like we’re turning Japanese… at least not right away. More likely, we face higher interest rates and a big loss in stocks and bonds.

A little perspective…

Here at BPR, most of our subscribers are over 50. For them, as for us, avoiding the Big Loss is a major concern. Time can take care of itself.

Charlie Bilello spells out how time works for a saver:

What would $5k invested each year grow to by the age of 65 (assuming 8% annual return)? Beginning at…

Age 25: $1.30 million

Age 30: $862k

Age 35: $566k

Age 40: $366k

Age 45: $229k

Age 50: $136k

Bilello hammers away:

To achieve the biggest gains, extend your time horizon whenever possible. Median growth of $100k invested in the S&P 500 over…

1 Month: $101k

1 Year: $113k

3 Years: $138k

5 Years: $173k

10 Years: $270k

20 Years: $820k

30 Years: $2.27 million

But it only works if you don’t get wiped out somewhere along the way. Then, you’d have to start all over again. And after age 50… the runway gets short.

And there is still the biggest claim of all — that the insiders, who know their stocks better than you, will sell them to you so you can make the profits. You’ll make money, even while you sleep.

And of thousands of cryptocurrencies launched in the early 21st century, how many are still relevant? Today, most of the market cap is crowded into the ten top coins.

You never know what will happen. But the time to buy is when the sellers are discouraged by years of losses, not when they expect further gains.

Wall Street’s claims that you always make money in the stock market is an exaggeration. You make money sometimes, not all the time. Is one of those losing periods coming up soon?

We don’t know, but if you’re over 50, it’s too great a risk to ignore.

Regards,

Bill Bonner

America has consistently reinvented itself in times of crisis. The founders survived monarchy. Lincoln survived disunion. We’ve survived bank panics, oil shocks, stagflation, and disco. We’ll survive deplatforming, too.

The Second American Revolution won’t be fought with muskets or manifestos. It won’t be fought with petty violence and street demonstrations. It will be written into code. And available to those who wish to take advantage of it.

Russell Kirk called the first American Revolution “a revolution not made, but prevented.” The second will be the same. We’re not tearing down the house — we’re going to rewire it in code.

The result may not be utopia. But it will be freedom you can bank on.

Treasury Secretary Scott Bessent has called stablecoins, including USDC, “a pillar of dollar strength,” estimating a $2 trillion market within five years. U.S. Treasuries back every coin.

Bessent’s formula even suggests that a broader, more efficient market for US dollars will help retain its best use case as the reserve currency of global finance… and, perhaps, help the current administration address the nation’s $37 trillion mountain of debt.

In trying to cancel a man, the establishment accidentally reinforced the dollar, and may add decades to its life as a useful currency.

As we approach the 250th anniversary of the United States, it’s worth recalling that our first Revolution wasn’t waged to destroy an order — it was fought to preserve one.

Political philosopher Russell Kirk called it “a revolution not made but prevented.” The colonists sought not chaos but continuity — the defense of their “chartered rights as Englishmen,” not the birth of an entirely new world. Kirk wrote:

“The American Revolution was a preventive movement, intended to preserve an old constitutional structure. The French Revolution meant the destruction of the fabric of society.”

The difference, Kirk argued, was moral. The American Revolution was rooted in ordered liberty; the French in ideological frenzy. The first produced a Constitution; the second, a guillotine.

Two and a half centuries later, the argument continues — only now, the battlefield is financial. Who controls access to money? Who defines legitimacy? Can a citizen’s ability to transact depend on their politics?

Trump and Powell are no buddies. They’ve been fighting over rate cuts all year—Trump demanding more, Powell holding back. Even after cutting twice, Trump called him “grossly incompetent” and said he’d “love to fire” him. The tension has been building for months.

And Trump now seems ready to install someone who shares his appetite for lower rates and easier money.

Trump has been dropping hints for weeks—saying on November 18, “I think I already know my choice,” and then doubling down last Sunday aboard Air Force One with, “I know who I am going to pick… we’ll be announcing it.”

He was referring to one Kevin Hassett, who—according to a recent Bloomberg report—has emerged as the overwhelming favorite to become the next Fed chair.