Losers' Games

Avoid the Big Loss and stay in the game. People who buy long-dated Treasury bonds, counting on the feds to repay in good time, in good faith, with good money, are likely to be victims.

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Monday, October 14^th, 2024 

Bill Bonner, writing today from Baltimore, Maryland 

Whatever happens in the next election, Americans owe a big debt of gratitude to Donald J. Trump. Politicians are almost always conniving, lying, dumbbells. Most hide it behind lofty claims and high-minded claptrap. They wear their pant suits like a coat of paint over rotten wood.  

But not Donald Trump. What you see is what you get. Every time he appears on stage he strips naked as a jaybird. Almost everything he says is honestly and clearly dody.  

The benefit to the public is immeasurable. Like a crash course on cynicalism, it shows people what politics is all about. No deep thinking. No serious plans or analysis. Empty promises, bluster and BS is all there is to it.  

“Drain the swamp,” said the Donald. It was the right slogan. But you needed a big dose of cynicalism to fully appreciate it. Because Mr. Trump had no intention of actually doing it... and no idea about how to do it anyway.  

The Washington Post: 

Eight years after Trump entered politics promising to reduce the influence of Washington lobbyists — to “drain the swamp,” as he put it — advocates for corporate interests, including companies based in China and other foreign countries denounced by Trump, now sit at virtually every level of his campaign. Lobbyists are represented among high-level staff, informal advisers and party faithful who planned the summer convention in Milwaukee, as people with access to Trump or insight into his at-times erratic decision-making turn that knowledge into moneymaking opportunities. 

Then, there was his landmark legislation — the tax cut. It will ‘pay for itself’ said its backers... GDP will go up and tax collections will rise. No such thing happened. Deficits rose. And in the four years following, US debt increased by $6.5 trillion. 

But there’s no reason to single out Donald J. Trump. Both candidates are charlatans; Trump just doesn’t attempt to hide it. And the phenomenon goes much deeper than the candidates themselves: politicians are public policy pushers. And public policies [almost] always produce results opposite to the promises made for them. 

Just look at the mess the feds have made of US finances.  

The Fed’s policy, since the 1990s, was to boost the economy, with ultra-low interest rates. But after the strongest ‘stimulus’ medicine ever administered, 2009-2021, the patient got sicker. Growth rates sank below those of the Great Depression, while debt rose by $1 trillion a year for the last 30 years... headed now to $2 trillion per year.  

But does the Fed learn from its mistakes? Nope. It is lowering its rates again. And as it feeds low-cost loans to its privileged member banks, the real economy gags on higher real interest rates. Lenders fear more inflation; they want higher interest rates to protect themselves.

Last month, the core rate of inflation rose. And the yield on both the 2-year Treasury note... and the 10-year bond (the most important brick in the whole financial wall)…rose above 4%. 

Our new creed, cynicalism, helps explain it. Politics and investing are both ‘losers’ games.’ You win by not losing... that is, by not being a victim. How do you do that? 

In politics, the way to avoid being victimized is to vote for politicians who will reduce the burden of public policies, not increase it. Alas, neither of the 2024 candidates is proposing to do that.  

And in investing, the most important thing is to avoid the Big Loss and stay in the game.  For example, people who buy long-dated Treasury bonds, counting on the feds to repay in good time, with good money, are likely to be victims.   

Don’t believe it?  Buy 30-year Treasuries.  Hold to maturity.  Let us know how it works out. 

Stay tuned. 

Regards, 

Bill Bonner