WHAT WE LEARNED ABOUT THE FUTURE OF THE BOND MARKET FROM OUR 'THESIS 2019: DE-DOLLARIZATION' PAPER

There is a shock soon coming to the unprepared! This chart best illustrates what it means to the equity and bond markets.

The 10Y UST is already signalling a reversal is in the cards.

INVESTMENT STRATEGY

A CEO on how the company went broke:

“Slow at first, then all of a sudden”

STAGE I – 2019-2020

The following “slow moving glaciers” will lead to Stage II

  • Trade Wars – Tariffs act as a US Consumption Tax,
  • Unfunded Liabilities come due,
  • Underfunded Pension come due,
  • Contingent Liabilities in the $210T Fiscal Gap triggered,
  • Falling Productivity reduces standards of living,
  • Employment Income growth fails to support middle class and bottom 40% lifestyles in a 70% consumption economy,
  • US faces its first Recession in over a decade with highly leveraged corporate debt levels.

STAGE II – 2020-2021

The following results of falling productivity because of ‘consumption’ versus investment of ‘savings’ will lead to Stage III

“A Steady Decline in Standards of Living”

  • Tax Revenues shrink,
  • Fiscal Expenses mount,
  • US dollar begins to weaken with advancing “De-Dollarization” & US Credit downgrade,
  • Price inflation becomes a concern,
  • Economic Stagnation can’t be fixed by Deficit stimulus,
  • A Sudden & unexpected surge in sovereign debt is experienced,

STAGE III – 2022-2024

The US experiences “Hyper-Inflation” and a Crack-up Boom as the currency loses its “Exorbitant Privilege”

  • US Dollar falls significantly as confidence is lost in the US economy & leadership,
  • Price Inflation Surges as goods become more expensive,
  • Yields rise rapidly,
  • Government funding expenses soar,

STAGE IV – 2025

  • US Dollar becomes part of a Global Reserve Currency “Basket”