Bond Market Jitters

Not just the U.S.

I don’t track financial stuff like I did years ago, but I still notice once things rise above a certain level. I saw the BNN Bloomberg “unfolding bond crisis” and figured this might be them playing to the ridiculous YouTube algo. A quick search showed this is a trend that’s been reported in many places the last few days, and I trust Tony at Market Update for keeping context.

The last section of this Market Update provides a broad view, albeit with a focus on the U.K. in this episode.

Tariffs:

This is just the beginning.

The container ships have stopped arriving here in Oakland.

The same is true for Long Beach.

They’re still trickling in to New Orleans and Savannah.

Even if we did away with this tariff foolishness tomorrow before lunch, we’ve got at least a solid quarter of pain ahead of us, and the back to school season is going to be problematic.

But we aren’t going to do away with tariffs, the thrashing around to break the global trade arrangements we’ve had the last four generations are going to continue.

Conclusion:

During the 2008 financial crisis there was serious concern about the condition of the monoline bond insurance providers. Have you ever caught a news report where the presenter talks about things “getting into the real economy”? Wall Street is basically an enormous casino that we tolerate because there are some bounds on it, but in 2008 there was a real chance that most of the “derivatives” would go to zero. The notional value of those instruments is multiples of global GDP, it’s all funny money, and that was the year that bank letters of credit briefly stopped working.

No letters of credit, no cargo, thems the rules.

I hope we’re not going back to the future that was 2008, but given that China has at least triple the overbuilt housing that we did … if one compartment springs a leak, it’ll get all of us.

We are approaching a time where low information voters are going to have their worldview adroitly smashed by objective reality.