As I am writing this, bond yields are rising across the globe. This is important in many ways. This is a clear sign that the “markets” are waking up to the fact that there is no convenient answer to exponentially rising debts and that the most likely outcome is the central banks conjuring up cash to kick the can further down the road. Just today, the US (admitted) debts went over $40 TRILLION. Keep in mind the first TRILLION in debt took over 200 YEARS to accrue. This last trillion took 95 DAYS.

On Wednesday, the Fed announced it is increasing its purchases of longer-dated bonds. They are already buying $40 Billion per month they they admit to (likely FAR higher). Keep in mind that the Fed has no magic wand. The money has to be created, and bonds bought to affect the lower rates. This is tremendously inflationary. It appears we may be entering a new phase where the interventions may have to grow exponentially- just like the debts and interest payments.

What this means is that they will keep “printing” to at least slow down rising longer-term rates. This latest episode all started last week when Japan’s Yen was collapsing. To stem the tide the USA stepped in, sold Euros, and bought Yen. This was not a solution, but it was a way to keep the system solvent for a while longer.

It is not only the Yen collapsing but also rates rising in Japan. Their MASSIVE debts depend upon low rates and as rates rise- bond prices generally fall. Thirteen major life insurers in Japan have reported that unrealized losses in long term bonds are up 60% year on year and are 30.86 TRILLION Yen (or $194 Billion). These are the types of losses that led to three major banks collapsing in the USA when too many redemptions came in and those unrealized losses became realized and required a bailout.

It appears to me that many are getting the picture that those “promises to repay,” if kept, will be kept with currencies that have little resemblance to the perceived VALUE today. Therefore, they are demanding more interest. If it were not for the “printing” there is no way to tell just how high rates may have to go to find willing buyers.

Rising interest rates will impact those with the greatest liabilities the most. Another looming crisis regarding inflation that will impact EVERYONE is festering as we speak. Food inflation has been bad but is likely to get far worse- and soon. There are many reasons, but the most important ones are:

· Drought conditions across the USA and reduced yields as reported by Pro Farmer Crop Tour. Reduced yields are being caused by high fertilizer prices- leading to some farmers taking shortcuts, rising diesel costs and severe storms in the Midwest that are causing problems.

· Lack of supply of natural gas and diesel because of supply bottlenecks that imply future prices for inputs could be FAR higher than we are seeing today. This is not just a US problem, but it is global.

· Even before the events listed above there was a problem with beef prices and they could go parabolic if something does not change. Cows are expensive to raise, and their feed could become prohibitive.

Add to all of this the fact that everyday Americans are already falling further behind which is evidenced by increasing foreclosures, Student loan and credit card delinquencies, record auto repossessions and ballooning credit card debt as many are going deeper into debt to maintain a lifestyle that is getting increasingly more expensive to hang on to.

One key point that should give everyone the idea that you can’t trust the “narrative” that all is well should be that in July the USA LOST 23,000 jobs (likely WAY worse since multiple part-time jobs and gigs count as multiple jobs) the unemployment rate SUPPOSEDLY dipped to 4.1%. Really? This just exposes the absurdity of this reporting. Meanwhile, hiding in plain sight is the fact that the labor participation rate is at near all-time lows just above 61%. The only reason I mention this is to show that the job market is collapsing and if current trends do not change could get MUCH worse as people are increasingly having to spend more on necessities rather than luxuries which could lead to an even slower economy and layoffs.

Fifteen years ago, when it was obvious the “printing path” was being used I wrote that once you go down this road there is no way out. Stop the “printing” and expect an almost immediate collapse of asset values. Keep “printing” and the currency will be destroyed at some point. I believe we are near a situation where our dollar’s decline will become more pronounced, and the trajectory will get much worse.

Of course, a weakening dollar which is kryptonite for Main Street because of the implied higher prices this causes is manna from heaven for those propping up asset prices as a weakening dollar makes the cost of all things rise.

I have NEVER seen a better setup for holding HARD ASSETS which contain no “promises to repay” but allow us to hold ASSETS rather than someone else’s liability. The central banks are voting with their wallets and buying GOLD in record amounts. Silver appears grossly undervalued because of supply, demand, and outright manipulation. Oil, gas, food, water, all of the things left behind as “investors” have been enamored by AI and other nebulous things like crypto also appear to have a bright future if you own them.

Bitcoin is presented to the public in the form of a gold-looking coin. In reality, it is a mathematical equation and actually has no physical attributes. AI companies have great looking numbers. So did Enron just before we all found out about all of the off- balance sheet debts that collapsed the company. By the way, it came out this week that over $3 TRILLION in debt is off balance sheet in the AI space. In fact, the Wall Street Journal reported that $3 TRILLION is growing at $1.2 TRILLION per quarter.

This would be bad enough, but I also read an article that there is no chance that there will be enough electricity generated to have this all come to fruition. This is the biggest reason I believe that China will win the AI race. They do all of the production FAR cheaper and are in the midst of building 37 NEW NUCLEAR plants. Here- ZERO.

While I would like to say that things are GREAT, I have to be honest and call it like I see it. Hard times are coming. Having said that, those positioned correctly will fare far better than those who fail to prepare. Always keep in mind that after all of this plays out there will be a recovery. You need to …

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not prove to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be dependable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

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