Thursday, August 20th, 2026
Bill Bonner, from Poitou, France
Today, like a hick at a county fair, we wander through BubbleLand. Our mouth open, we gawk and wonder. We’ve been hunting deer on the ‘back 40’ for years, we ought to be able to hit a few targets and win a stuffed teddy bear, no? Is the ‘Naked Lady’ really a lady? Would a sane person ride on the ‘Death Swirl?’
With so many bright lights and carnival barkers, it’s hard to stay focused on what really matters.
The war with Iran? AI? Trump’s health issues? Midterm elections? Rising interest rates?
We don’t know which of these will bring down the tent. But one of them probably will. Yesterday, in the early morning, interest rates looked like the frontrunners. MarketWatch:
The U.S. Treasury on Wednesday will be asking investors to hand over another $16 billion for 20 years to help finance the nearly $1.8 trillion U.S. budget deficit so far this year.
The answer from investors probably will be “fine, but you need to pay us close to a 5.28% yield” — the going rate for existing 20-year Treasury debt on Tuesday, and the most it’s cost Washington to borrow this way since the 20-year tenor was auctioned six years ago. With long-term Treasury yields hovering at multi-decade highs, traders have begun asking the uncomfortable question: How much will the U.S. need to pay to convince the world to keep lending it money?
And here’s Barron’s:
30-year yield rises to highest level since 2007 as oil and Treasury supply bite bonds
The Wall Street Journal is on the case too:
Bonds are getting hammered, and Wall Street says the rout won’t end anytime soon
Really? But the bond rout ended before we finished our breakfast. CNBC:
Treasury yields pulled back on Wednesday from multi-year highs seen earlier this week, with the long end of the curve dropping sharply after the Treasury Department announced an upscaled buyback operation of U.S. long-term debt.
The Treasury Department said it will double the size of its government debt repurchases, lending support to longer-dated bonds.
“Repurchase?”
With what money?
The word hides its true meaning. In effect, the feds are going to ‘print’ money in order to buy their own debt, lowering yields...and further inflating the economy. Gold knew what it meant immediately. At 8 am yesterday, it was selling for $4,416 an ounce. An hour later, the fellow with 10 ounces of gold was $1,000 richer.
And by the end of the day, the dots had come together in a preview of America’s financial future. Reuters:
‘US debt crosses $40 trillion threshold after doubling under Trump and Biden’
The feds can’t stop spending. And they can’t afford to let interest rates rise. Look for more intervention...more debt, and a dollar that shrinks like cotton candy.
Under our financial Big Top, there are two things of most immediate concern. First is the amount of debt hanging over us. Second is the interest rate we have to pay on it. As the two of them rise, so do the odds of major blow-up. The feds can delay it by ‘repurchasing’ their own debt...but they just make it worse, later.
But let’s continue our stroll through BubbleLand and keep our eyes open.
Here’s some ‘good news.’ Charlie Bilello:
S&P 500 Q2 earnings are now on pace to rise 50% YoY, the highest growth rate since Q2 2021. And the 29% upside surprise in Q2 earnings versus expectations at the start of earnings season is officially the biggest upside surprise on record.
Don’t get too excited. These are not real ‘earnings.’ They are bubble earnings. They come from investments the ‘hyperscalers’ have made in other AI companies. And they’re expected to keep coming. Earnings for next year are estimated at twice the ‘normal’ 15% rate. So far this year the S&P 500 has risen 15% — again, twice the normal level. But so many companies have spent so much money on AI that the ‘Death Swirl’ threatens to topple over.
The top ten companies in the S&P are all dependent on the AI bubble. Sandisk, Dell, Seagate and Micron all have gone up more than 200% this year. And overall, stocks are so expensive that the naïve, long term-oriented investor, depending on dividends, would wait a hundred years to break even. This is not a boom based on actual revenues...but on the hope of more capital gains.
Any Wall Street hustler worth his suspenders knows what to do next. That is the thinking behind what might be another Peak Bubble signal that appeared last week. The Street:
Anthropic’s $2 trillion IPO dream rests on staggering revenue bet
Anthropic now prepares the biggest IPO in history. When investors are eager for ‘pie in the sky’...give it to them a la mode.
Regards,
Bill Bonner
FedGov financing its debt with more debt; you have to laugh. Take two black pills and call me in the morning.
Bill, would be interesting to run a survey giving subscribers a choice of events that will pop the bubble so we can ascertain the uncommon wisdom of the group. You listed most of the events in today’s post.