Dear Reader,
A lot is happening in the U.S. bond market unmasking weakness in the United States.
Our debt is starting to choke us and we are really starting to see the effects. So that’s what I want to talk about today.
But first, I’ll answer a question I’ve been asked probably 50 times in the last two weeks:
Which foreigners hold the most debt?
Here’s the list:
Japan owns one trillion eighty billion dollars’ worth.
China owns $761 billion.
The United Kingdom owns $740 billion.
Luxembourg, $410 billion. Belgium, $378 billion. Canada, $351 billion. Cayman Islands, $405 billion.
France, $335 billion. Ireland, $330 billion, Switzerland, $301 billion. Taiwan, $290 billion. Hong Kong, $256 billion.
These are the largest foreign owners of U.S. debt.
Now, remember, in the past few years under Biden, Janet Yellen began to issue short-term bonds, because nobody wanted to lend the government money for the long-term.
Certainly not at interest rates the long end of the curve was offering.
Nobody wanted to lend into massive fiscal deficits, massive budget deficits, massive borrowing every week.
Not foreigners and not Americans.
No one wanted to loan the United States money for 30 years, because they know whatever the U.S. pays them won’t account for the debasement of the currency.
Basically, it’s just not going to happen. You’ll lose dollars in a real sense.
In other words, the interest rate offered doesn’t reflect the actual inflation and currency debasement risk.
That’s why I’ve been telling folks to hold onto short-term treasuries - look for things that retire in a year or less.
We talked about “Liberation Day” and why Trump flip-flopped so badly from the April 2nd announcement of Liberation Day and then April 9th canceled Liberation Day.
It’s important to point out that in the week of April 11th yields on 10-year U.S. treasuries saw their biggest leap in a quarter century.
That is quite a statistic I hadn’t picked up on.
It was a sign many creditors were not only on a buyer strike, but dumping, selling our debt very quickly.
Remember, we have $37 trillion in debt, okay?
And because people don’t want our long-term bonds, Yellen was forced to sell short-term bonds.
But short-term bonds have to be rolled over every two or three years, depending on the length of the bond.
So every couple years we’re rolling over trillions in debt.
In 2025 we have $3 trillion in debt to roll over.
So not only are we going to issue new debt, but we have to roll over $3 trillion worth of short-term debt from the last year or two coming due.
We need a lot of help from a lot of countries to buy these bonds.
That’s why you can now see even Trump pulling back on his tariff plan.
You can see how our debt size is beginning to limit our freedom of action.
It’s beginning to constrain the United States’ ability to move and dictate policy.
Basically, our creditors are starting to be able to call the shots on the United States of America, which is a terrible position to be in.
Look, we’re all adults here.
We’ve lived long enough, thank God, to get into financial pinches - who hasn’t? Especially if you’ve owned a business.
But if you live long enough, at some point in your life you might come across a difficult time where you start doing the math and say, “my goodness, I’m in trouble financially.”
Some of you went through it during the real estate crash. Some of you went through it during the dot-com crash. Some went through it during Covid.
We all go through difficult times.
I know I went through a difficult time after my second business failed.
I remember sitting down and saying, “okay, I have to come up with a sheet where I list necessities on one side and luxuries on the other.”
Luxuries were anything but the bare basics - electricity, food, water, car, gas, mortgage.
I had to cut luxuries from my life. I had to get my own house back in fiscal order.
My suspicion is we’ll have to do the same as a nation.
We’re already starting to see that work its way through the market.
We’re seeing stock market volatility - the Dow being pummeled and trying to find a place between 38,000 and 40,000. Somewhere in that 2,000 point range.
I estimate that will not get resolved till we have more clarity on these tariffs.
What I have been doing is sending regular updates (at least weekly) to Takeover Targets members.
I list my watchlist of top 10 stocks to start buying through this crash. As well as my crash-buying rules.
If you’d like to follow along, I recommend starting with “Our #1 Takeover Target for April.”
"The Buck Stops Here"
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