His punchline was that 5 percent on the long bond is still an early inning. The 40 year bull market in bonds died in 2020, he said. We are only six years into a secular bear that could run 20, with rates rising faster than they once fell.
The difference from the last time yields looked like this is about 40 trillion dollars of debt, a short average maturity, and a Treasury that has to refinance the same pile at higher coupons.
August CPI did not give the Fed an off ramp. Prices rose 0.4 percent on the month and 3.4 percent year over year. Core came in at 0.3 percent, hotter than the 0.2 percent the Street wanted. PPI jumped to 5.4 percent year over year. Oil sat back over 100. Consumer sentiment dropped from 51.7 to 47.8 while year ahead inflation expectations rose from 4 percent to 4.6 percent.Schiff’s Fox line from earlier in the cycle is the one he wants replayed. “I went on Fox News and I said the truth. Prices are still going up. The rate of increases is going to accelerate. He said I was a jerk. I didn’t know what I was talking about. I was 100 percent right.”
A hike, in his telling, is theater. “Now is the moment of truth. A quarter point rate hike just so the Fed can show that it’s willing to do it, this is symbolic. It’s not going to accomplish anything.” Warsh has talked hawkish long enough that skipping the move would torch what is left of the brand. Hiking 25 basis points while CPI and PPI are heating faster than policy rates still eases in real terms.Treasury already tripled buybacks toward 6 billion and yields rose anyway. Schiff read that as a flare telling the market Washington is worried, not as a bid that can pin the curve.
Gold closed near 4338 and silver near 64.36, both softer on the week. Schiff called the dip a gift, because a bond bear is bullish for metal even when the daily print looks ugly. Bitcoin sat just above 77000, and he walked a head and shoulders pattern he said projects into a fantasy low. Stocks finished the week about 1 percent lower.That is the order he has been selling for months. Bonds break first. Loans reprice for households and the Treasury. Equities follow.
Ounces are what you own while the government tries to pretend a symbolic hike is tightness.
Food prices “rapidly going down” while the CPI says otherwise. Record employment next to a record low participation rate. The big beautiful bill as an inflation bill, not a supply side miracle.
He marked 25 years since 9/11 with a line that will travel farther than the rate call. “The greatest terrorist threat to America doesn’t come from terrorists abroad, but from our own government. It’s Washington, DC.”
Americans, he said, are less free because of the laws passed after the attack, not because of the attack itself.
SilverTrade can keep the market half. Yields at a 19 year high are not a ceiling if inflation is reaccelerating and the borrower of last resort is already the biggest debtor in history. “We’re headed in the wrong direction. We’re not going down. We’re going up.”If Schiff is right, every mortgage, every car note, and every Treasury rollover gets more expensive from here, and the metal that sold off on hike headlines is the asset that benefits when 5 percent stops looking like the top.
