The Good, the Bad and the Ugly Yields for TVC:US10Y by akikostas

I have this question… Why are high yields bad? What is bad?

We are in a period of big changes. There are lot’s of balances changing, one of them is money. We have just passed (?) the biggest monetary experiment ever ( QE ) and we are about to enter the successor to that experiment, digital money. Digital money conveniently came about just at the time when hyperinflation became an expected reality. If you talked about hyperinflation 4 years ago, you were crazy, now it is expected (and perhaps actually coming).

… Instinct tells us that the unknown is a threat, rather than an opportunity. Instinct slyly and covertly compels us away from change and progress. …

-Dr. Breen

In the center of the stages is the paradigm shift in yields. After decades of consistently lower yields, now we are expecting consistently higher ones. Many (including me) have prejudged themselves into believing that high yields are inherently bad.

I cannot conclude into what high yields are bad at. The title suggests that they have 3 faces, good bad and ugly. I can conclude that now, like always throughout history, we are rolling in a cycle.

Some things have changed in unpredictable ways. This unorthodox chart shows us that this year, we have lived through something unique. Perhaps this will be the way things move forward.

From the charts above I have tried hard to conclude into something. The only thing I have learned is the following:

Bonds are the new equities.

In QE world, lower yields made more money. How? Money printing and borrowing needs low yields for it to be popular. Immense liquidity bubbled everything and productivity skyrocketed. QE is the fuel of globalism. Equities paid out dividends, so higher equities led to even more money.

In QT world, higher yields make more money. How? Money burning and lending needs high yields for it to be profitable. Money makes more money, and every day it makes even more money. Commodity producers (GOLD*PPIACO as an example) and wealthy individuals/corporations/nations can enjoy this new era. QT is the fuel of war. Everything is precious and everyone fights for it.

In a globalized world, you could make money by being an intermediate entity. Now to make money you must actually own the resources and money. Rich get richer, and poor get poorer.

This is the purchasing power of the consumer dollar. Poor get poorer…

Poor get poorer when rich get richer.

These charts above are simple to understand and analyze. Down below I will add some of my favorite charts. These charts calculate the value of commodities compared to equities or money supply.

Commodity production bull-flags against equities.

Commodity production bull-flags against money supply itself.

The bull flag is against yields as well.

True Production Cost (PPIACO*yields) is bull-flagging (?)

PPIACO is used as a historical alternative to USOIL . For some reason, we cannot perform old historical calculations using oil .

They show that the commodities prove a big motive for everyone. Especially to those who seek war.

Would anyone in their clear mind expect WWIII to be talked about in the 2020s? With the knowledge we have collected throughout all these years, this would be out of the question! Yet, here we are, casually talking about it. Again, changes are happening but we are stuck in a cycle. All we can do about it is to understand where we are, and not constantly deceive ourselves and others into thinking otherwise. So there is a clear benefit into just realizing where we are, it is not financial profit, it is speaking truth.

Conclusion? This is a zero-sum game for consumers. Also, with bonds we are committing hubris. Bonds is a mechanism that helps money itself make more money.

Have you heard about the Ancient Greeks? They talked about the fact that when money makes money, it is Hubris (something like sin, only worse).

Equities gave more output than there was input, if someone includes long-term dividends. You working and making money is not Hubris (according to Ancient Greeks). Making a system which enables money to make money, then you commit Hubris. Consistently higher yields will help money make even more money.

Equities are facing Nemesis (compared to bonds). Bonds have just now committed Hubris. There may be many years until they face Nemesis as well.

Tread lightly, for this is hallowed ground.

-Father Grigori

PS. This movie “good bad ugly” was released in 1966, a period financially similar to the one we live now.