The “iron top” have been stabbed, what to do next?

After the Fed’s interest rate meeting on September 22, U.S. Treasury yields rose across the board.

The yields on one-year, two-year, three-year and five-year Treasuries rose the fastest, breaking through 4%, and the yields on seven-year Treasuries and 20-year Treasuries were also close to 4%, while the yield on ten-year Treasuries, the market benchmark, broke strongly through 3.5% and has now come to near 3.8%.

That’s pretty strong.

Come to think of it, just 3 months ago, I wrote a particularly confident article.

“Don’t wait, this is the iron top”.

In that article, I used the “debt sustainability rate” to determine that

The U.S. 10-year Treasury yield is unlikely to exceed 3.5%.

It seems that the reality of the financial markets is used to beat the face, not, the U.S. ten bond yield, not only crossed 3.5%, and came to 3.7% such a high, and I can be said to be “professional face”.

At that time, a guy asked me to put a message on his top, saying that he wanted to have a “small bet” with me.

Congratulations to this little brother, I admit that small gambling easy to lose, please contact the small assistant, the small assistant will transfer the 1000 Yuan I lost to you.

The gambling lost, of course, to reflect, I will lose why?

In fact, I still think that the “debt sustainable interest rate” estimation and thinking logic, there is not much problem, but I put some long-term things, to short-term.

For example, without considering basic food and drink, I have an annual income of 120,000 Yuan, and I have 1 million Yuan of debt interest to repay monthly, excluding the basic living expenses of 20,000 Yuan per year, I can accept an annual interest rate on debt of no more than 10%, otherwise I will immediately go bankrupt.

However, in practice, I am OK with occasional months or six months or a year when the interest rate on debt exceeds 10% or even 12%, as long as the lower interest rate on debt at other times can offset the impact of this short-term increase.

This is the first reason for the bias in my judgment.

The second reason is that I think “too close” for the U.S. government and the Federal Reserve.

How do you say this?

In the calculation of the “debt sustainability rate”, I used the average of the last three years of GDP growth because I “thoughtfully considered” that the U.S. economic growth would be more volatile. In fact, in 2020, U.S. GDP plummeted, and in 2021 and 2022, the U.S. federal government’s desperate printing and issuance of money led to a surge in nominal GDP growth, according to the latest data, the total U.S. GDP over the past four quarters, compared to a year ago, the increment is 2.3 trillion U.S. dollars (last year and the year before last were about 0.5 trillion U.S. dollars), using this standard, to measure U.S. federal government’s $31 trillion in debt today, the highest acceptable sustainable interest rate on debt this year is, in fact, 7.4%.

Contrasting to the previous example, although my income was only $80,000 last year, my income became $150,000 all of a sudden in the past two years because of inflation, and I can accept a much higher interest rate for repayment after taking out $20,000 for basic living expenses. Although, my recent high income is unlikely to last, this high interest rate is also unlikely to last, but as just said, I don’t mind exceeding a bit in the short term ah, as long as it can be lowered more in the future, this also will not affect my credit at the root.

Not considering the three-year average increment, but according to the algorithm that is always updated, in 2021 and 2020, the maximum sustainable debt rate that the United States can accept, in fact, only 1.7% only, and then as the U.S. economy falls into recession, the U.S. GDP increment is bound to decline significantly, the U.S. maximum sustainable debt rate will also be a significant decline.

For comparison, I still believe that the three-year average increment is more valuable and meaningful than the volatile one-year increment in terms of data validity when estimating the Fed’s interest rate ceiling.

As recently as mid-June 2022, when the U.S. 10-year Treasury yield approached 3.5%, the Fed’s otherwise ongoing tapering was halted, and not only halted, but even increased the size of its balance sheet, which forced me to suspect that the 3.5% 10-year Treasury yield was, in all likelihood, a psychological line for the Fed.

The result proved to be that the central mom’s mind you do not guess, guess to guess you cannot guess, and will lose money – this kind of small intelligence, in the future to try to avoid.

In addition, about the dollar-yen exchange rate I estimated 135 of the depreciation limit why will also be easily broken, in fact, also comes from my underestimation of the United States Treasury yields rise – because the dollar-yen exchange rate, to a large extent, is dependent on the difference between the United States and Japan’s short and medium-term Treasury yields, when the dollar 2-year Treasury bond Yield straight to 4.25%, while the Japanese short-term interest rates are still lying around 0, the yen is not devalued to a mess ……

Here is also a confession of fault.

I reflect on the three reasons, are clearly written, next it is time to talk about the business.

Since I think the “iron top” of Treasury yields have been broken, there is this extreme market situation, in fact, the other way around, there is an excellent investment opportunity brewing, almost impossible to lose money, especially for those who hold a lot of dollar cash in hand, such an opportunity, almost once in a decade.

Such an opportunity, however, coalesces my long history of thinking logically and observing the market, so for advice on this information, I am prepared to sell at a high price of

RMB 9,999

I will communicate with you individually and tell you why this investment opportunity is a once-in-a-decade opportunity and I will also give you a detailed analysis of why the investment opportunity is so counter-intuitive, but in fact there is basically no risk of losing money, and I will also tell you clearly the timing and logic of the investment’s realization.

To emphasize, this investment, which is almost certain for those holding large amounts of USD cash ($100,000+ or HKD equivalent), makes little sense for those holding RMB cash, so please do not get involved.

 

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