Foreign Central banks dump $100 billion in US treasuries. Will this guarantee Fed rate hikes in the immediate future?

Photo above – India is suddenly selling US Treasuries to buy needed gas and oil, apparently on the advice of Ganesha, the Hindu god of enterprise. Vishnu, the Hindu god of crisis, has not been heard from so far.

If you’re like me, US treasury bills are not the largest holding in your 401K. But somebody has to buy them, and places like India and Turkey are dumping treasuries as fast as possible. Apparently a bunch of nations are cheesed that the strait of Hormuz is now a free fire zone, and oil tankers are getting delayed or sunk. (see link below).

Japan, the UK, and China still hold the most US treasuries. But China has been a net-seller for years. Chairman XI hopes to replace the US dollar as the world’s reserve/trading currency. Either with their17 cent Yuan, or a new cryptocurrency to be named later. Foreign ownership of US Treasuries hit a decade record low this week. If the president truly wanted Fed Chairman Jerome Powell to reduce interest rates, his actions are having exactly the opposite effect. Mortgages and all sorts of bank loan rates will rise. New home construction will stall even further. It will be more expensive to buy or lease a car. If you have an adjustable-rate mortgage, your monthly payment will go up. If you’re a renter, your monthly payment might go up too. There's no good news here.

Someone will have to buy those unloved Treasuries. Not just the old ones our frenemies are selling but also the $2 trillion in new debt the US government will issue this year to cover our budget deficits.

US based banks will probably told to buy some of them. “For safety and stability”, even though Treasuries are now highly unstable compared to the past 20 years. Nervous investors are already pulling money out of the stock market. Some of that is going to treasuries, in addition to gold, crypto, and crude oil speculation. The higher that government interest rates go, the fewer big shot investors are in interested in holding “normal” stocks like McDonalds, IBM, and Disney. Even tech darlings like AAPL and MSFT are well down, year to date.

I don’t see an immediate solution to the interest rate and treasuries problems. Depending on whose definition you prefer, we are either headed to a stock market correction, a recession, or stagflation, with negative economic growth and a falling dollar.

I bought exactly ONE stock over the past month. SHIP – Sea Energy Marine Holdings. Its price is gyrating between $11 and $15 since I bought in. But it has a 5.7% dividend payout. Better than treasuries, in fact. This looks pretty attractive, unless one of their ships gets hit by a missile in the strait of Hormuz.

I’m just sayin’ . . .


(disclaimer – this writer is NOT recommending the purchase or sale of any stocks named in today’s column. My holdings are discussed only as a matter of ethical journalistic disclosure).


https://www.ft.com/content/1c4189e9-36af-4779-b862-d868cf2aff76?syn-25a6b1a6=1