Ten Year Treasuries hit 4.8% for the first time since 2007.
The Wall Street Journal
Interest rates bottomed in March 2020. They have soared since. Thirty-year mortgages are now at 7.5%. The Fed accommodated too low rates for far too long. While the media claims mortgage rates are high, the truth is that they have finally returned to normal. High rates were last seen at the 1981 top when people were borrowing at 14%.
The three-month treasury bill just hit a new high of 5.34%. Here is the real problem. Federal expenditures exceed revenue by $1.4 trillion. This is a 170% increase from a year earlier. Total admitted Federal debt is now $32 trillion. For perspective consider it is a mere 35 million miles to Mars. Observation, Congress is spending in numbers usually reserved for astronomers. All that debt has to be re-financed. Increasing rates will take a higher percentage of the budget. And understand the $32 trillion figure does not include entitlements like social security.
Households are not prepared either. Total credit card debt is about one trillion. That debt decreased to under $700M during the pandemic but since then households burned through saved cash and are back to borrowing. They are doing so at very high rates of 20%. A recession looks likely in 2024.
Our last few columns warned that the stock market rebound ended July 27. The larger move down was underway. That is now clear as August thru September wiped out all the gains of January through July. The rebound took stocks to 35,500 plus a bit. Today it is trading around 33,250 a loss of 2,250 points.
But perhaps we are at a short-term extreme. A check of what are now termed the Magnificent Seven reveals some support. Those are the seven tech stocks including AAPL, NFLX, GOOGL and others.
The best of the indexes is the NASD 100 which is showing strength. It bounced from the September low of 14,400 to 14,900 Friday.
Transports have had a nice bounce as well, and that index is a good barometer for the overall market. Bear markets feature vigorous counter-trend rallies. That may be what is about to happen next.
Our prediction for oil was on the mark. It leaped from $70 to $90, and briefly poked higher. Today it is $82.78. Proxy stock Apache APA has fallen from $48 to $47 since the July 27 high. This weakness suggests a coming world-wide slowdown.
The best strategy is to pay off all short term debt, it will only get more expensive. The best investment is the three-month Treasury bill. Uncertainty abounds, stay safe.
