Capitol Farce
The Primary Trend is not determined by what people want or what they expect. Instead, they get what they deserve, shaped by patterns of history rather than the conscious efforts of those who live it.
Thursday, May 22nd, 2025
Bill Bonner, from the ranch at Gualfin
‘Don’t f*** around with Medicaid...’
--Donald Trump to House Republicans
We remind readers that we do not take sides...nor do we imagine that we know the future. Our goal is merely to try to understand the Primary Trend and thus avoid the Big Loss.
Being on the right side of the Primary Trend is the real key to increasing long-term wealth.
So far this century, investors beat the stock market (the Dow) three to one, just by being in the best, safest asset class — gold. Can that go for another 25 years? We don’t know...that’s why we’re paying attention to the farce now playing out on Capitol Hill.
We also remind ourselves that the Primary Trend is not determined by what people want...or what they expect. Instead, they get what they deserve... shaped by patterns of history rather than the conscious efforts of those who live in it.
In the news yesterday... Barrons:
The bond market’s May meltdown has taken a turn for the worse.
Long U.S. bonds sold off Wednesday, pushing their yields through their 5% ceiling…. Bond yields and prices move inversely. The rise in yields was exacerbated by a disappointing 20-year U.S. Treasury auction.
That 5% level has been the general cap on the 30-year for about two decades, and the security hasn’t closed above it since October 2023. The 10-year Treasury’s yield, at 4.539% on Wednesday, has moved past its own psychological threshold of 4.5%.
Why are bonds selling off? Congressman Thomas Massie told us yesterday. Bond buyers have eyes and ears. They see Congress recklessly passing another big spending/big debt budget...and they “realize we aren’t fiscally responsible.”
Bloomberg:
Congress Pulls Tax Cut All-Nighter With SALT Fight Unresolved
Once the House passes the bill, the Senate could take weeks — if not months — to revise and approve the legislation.
The Republican budget proposal...already more than 1,000 pages of exceptions, qualifications, ifs and maybes... is getting more complicated all the time.
We can simplify. The idea is to pass a ‘big, beautiful bill’ that changes everything... but nothing. Some spending will be cut. Some will increase. Some people will get a juicy plum (keep reading)...others will get lumps of coal. The ‘all nighters’ determine which group has the stamina, insomnia, or lobbyists to get what it is after.
Here’s another headline from yesterday. USA Today:
Senate unanimously approves bill to create tax deduction for cash
The deduction would only apply to cash tips and could be claimed by people who earn up to $160,000, which would rise along with inflation.
Wow. Not a single member of the Senate thinks that tips should be treated like any other form of income. Not a one of them, apparently, is worried about raising deficits by reducing taxes.
This is a sign of a country that is not ready for a major change in direction...one that is not desperate for reform.
And how about this? Donald Trump went over to Capitol Hill. His mission: to make sure Republicans didn’t actually try to cut spending. In addition to telling them not to ‘f*** with Medicaid,’ he told them that he didn’t want ‘anything meaningful’ cut, but was instead focused on ‘waste, fraud and abuse.’
This is what you’d expect...from a leader who is not interested in real disruption. No need to make sacrifices. No need to change course. No need to cut ‘anything meaningful’. Things are basically OK; just trim out the ‘waste, fraud and abuse.’
Are we already headed to a $60 trillion national debt...with interest payments that will take up half of all tax receipts? What’s the big worry? We’ll cut taxes on tips...and make the deficits even larger.
Have Medicare rolls doubled...to 80 million people (Trump himself added 10 million of them during his first term) since Obama expanded the program? Do they not cost $11,600 per person? And couldn’t $4 trillion be saved by turning back the eligibility standards to the pre-Obama era?
Couldn’t America really be made Great Again if some fundamental changes were made?
Nah, never mind...don’t f*** with it.
Regards,
Bill Bonner
Research Note, by Dan Denning
Don’t look now, but 30-year US bond yields are back over 5%. There’s nothing magical about this level. But in the past five years, it’s seemed to be a ‘pain point’ for holders of 10-year US Treasury bonds (where the yield is around 4.6% at the moment).
Who will fund the US government’s massive perpetual deficits, and how much will it cost?
Bond market investors were not enthusiastic yesterday at an auction for $16 billion worth of 20-year notes. The average yield on bonds sold was 5.04%. Higher bond yields mean lower bond prices. Will they also mean lower stock prices? More on this tomorrow in my research note to paid subscribers.
Ben Franklin could have roused a drunk on the sidewalk of Philadelphia, dunked him in the watering trough, and asked of him, "What do you think of our new Country?", and the drunk could have stammered, "It will fail.", and the man, with a 50-50 chance of being right, would be hailed today as a prophet. As a sophomore in high school (1967-68), I took a required class "Ancient History", which turned out to be a study of failed human enterprises, ending with the fall of the Roman Empire. The message was not lost on me: the USA will fail as well at some point. What neither I nor any of my cohorts expected was that it would be doing so in my lifetime. Guess what? Best always. PM
Perception is an amazing thing. I too have been reading Bill for years. I've never thought him bias. He criticizes one and all relentlessly. Rightly so in my opinion. They are all from the same ilk, after all. Two sides of the same coin kind of thing.