Mike Tyson became champ at the tender age of 20. He was far and away the most intimidating fighter I’ve ever seen. But…he’s 58. I sleep wrong and I’m jacked for a day and he’s got 10 years on me.
I made some money off teammates this week after taking this poll on ESPN. I thought the outcome was almost a given and was stunned to see how many people expected a Tyson KO (my selection highlighted in blue). This felt like an arbitrage opportunity.
So I posted an open invite to the team slack for anyone that wanted Tyson and got some takers. Worst case, it was an emotional hedge. I wanted Tyson to KO this bonehead, I just didn’t think it would happen.
But I knew something they didn’t know. I was trading on inside information. No, not that the match was rigged. I had just had an interaction with our youngest last week that convinced me Paul would win. For context, our son turned 17 on Saturday.
An intense ping pong match devolved into a wrestling match. We take ping pong very seriously and some might accuse me of talking sh*t, escalating tensions. He has zero wrestling experience, while Royce Gracie himself had taught us jiu-jitsu in Ranger Batt. I probably have 40lbs and 6 inches on him. Also, I am 31 years older…the exact age difference between Mike Tyson and Jake Paul.
I didn’t lose but…it was way closer than I ever would have guessed. I was totally caught off guard, both by his strength and my lack thereof. I was winded and it had only lasted a minute or two. Let’s just say I wasn’t exactly bummed when The Real Boss™ told us to knock it off.
The all-time record for the men’s mile in the age bracket 55-59 is 4:36. Drop that into the all-time best high school times and it would be just 11th best…for girls.
Tyson didn’t lose because it was rigged, he lost because he’s old. Jake Paul is good enough to handle over the hill boxers. He won’t fight top tier boxers in their primes because they will destroy him. That’s not a knock, either. He clearly takes training seriously, but if he wasn’t an influencer he’d be boxing in church basements on Saturday afternoons and then bouncing at the Rathskeller later that night, not fighting pros.
Now he’s megarich influencer beating up on the greatest champs of all time when they are desperate for cash and attention.
The lesson, as always, is getting old sucks. And so does social media.
Given Netflix buffering issues and my penchant for coming full circle, maybe they’re just old?
Nope. Netflix is the same age as our youngest – 17 years old. I guess they still have 3 years before they are expected to be the world champs.
Oh, and Jake Paul now has more wins in AT&T Stadium this year than the Cowboys do...
Last Week This Morning
- 10T: 4.44%
- 2T: 4.31%
- SOFR: 4.58%
- Term SOFR: 4.61%
- CPI – as expected by all measures
- PPI Inflation Data – as expected
- Fed Chair Powell speech: “The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully”
- Retail Sales m/m: 0.4% v 0.3% expected
- The Vikings Bynum INT celebration last week is the GOAT
Rates
Markets are more optimistic than a Cowboys fan in August. I get it. Tax cuts. Less regulation. All reasons for optimism. But will the euphoria meet reality?
A 5% T10 can’t be dismissed, but it’s important to remember everything is relative. For example, global yields. From a credit perspective, Germany and Australia are generally considered the primary alternatives. Unfortunately, Australia’s sovereign bond market is about as deep as Jerry Jones’ GM knowledge.
You’re scared of US fiscal health. Cool, pick one to invest in instead.
Germany 2.35%
Australia 4.45%
Japan 1.05%
UK 4.47%
Canada 3.28%
France 3.08%
Spain 3.05%
China 2.06%
Italy 3.55%
Greece 3.18%
Not a single developed nation has higher yields than the US. Shouldn’t that help keep a lid on US rates?
OK, how about equities. Less regulation and lower taxes - stonks to the moon!
Sure, but aren’t they starting from all-time highs? Warren Buffet is selling and is max long cash…good luck.
But deficits!
Finally, a very solid point. Thankfully, we have precedence when markets get nervous about US fiscal health. What happened when the US lost its AAA rating in 2011?
The T10 surged from 2.5% to 4%. This is what all the deficit hawks are so concerned about. A similar move today puts the T10 at 7.0%. Gulp.
Oh wait, that’s not 8/5/11. Shoot, let me try again – this time with the correct date.
That announcement came at 8:15pm on a Friday night while I was glued to the TV because I like to party. I sent out a special newsletter blast saying I had no idea what to expect, but that I figured a 25-50bps spike in Treasury yields felt like a reasonable knee jerk reaction. JPM called for a 60bps spike the next day.
At first, T10 yields jumped 15bps. And then crashed. A few days later, here’s what I wrote about the drop in yields.
“Our fiscal mess is more likely to wreak havoc in ten years than today, and if you’re trying to figure out where it is safe to keep your money right now, 2021 can be dealt with at a later time (kicking the can down the road anyone?). We are the world’s mattress and if we are in trouble, how much worse is everyone else?”
But our debt problem! This is unsustainable! We have a crisis on our hands! “Look at this graph JP!”
Just like Brittany, whoops I did it again. I cut that graph off in 2020, right before we dropped another $10T on top of it. Did the T10 run up to 7%?
Also, if you only look at debt in absolute figures, we can’t have a rational discussion because it tells me you don’t believe in math. Everything is relative - we need to look at debt to GDP. Here is a current debt to GDP graph.
The red line is 100%. We’re at 120% of debt to GDP – not good. But we crossed that threshold in 2015 and rates didn’t spike. Inflation didn’t take off. The world didn’t end.
Japan crossed 100% debt to GDP in 2000. They currently sit > 200%. Did their rates spike? No, it was gigantic news when their interest rates finally turned positive last year. Their 10yr is 1.05% currently. Go put your money in their government bonds instead of ours.
Like all things, moderation is key. I do believe we are on the wrong side of a healthy debt to GDP ratio, I just don’t believe it’s going to push the T10 to 7%. These issues have a lot of very unhealthy impacts, but higher rates aren’t the primary one. A persistent drag on growth feels like a much bigger issue.
From the Bloomberg rates team, “Over very long periods, the 10 year Treasury yield can be modeled with nominal GDP and the policy rate with high accuracy, with supply being exogenous” (emphasis mine).
“As debt grows, however, supply could become a factor driving yields higher for any given economic and monetary policy scenario. The result could be shallower Treasury rallies and more pronounced selloffs as the debt stock rises.”
In other words, fears over supply and animal spirits can drive yields to 5% in the near term. But in the long run, the US government isn’t a typical borrower. Period. Stop trying to treat it like it is.
Expectations for Fed monetary policy is a much bigger driver of the T10. You tell me what the Fed is going to do, I can probably predict the T10.
Next week, I will attempt to tackle where Fed Funds is headed. From that, we can derive the implied T10.
The Week Ahead
Quiet week ahead but there will be a few Fed speeches.
I can’t believe I’m saying this, but I feel bad for the Fed. They are constantly accused of being behind the curve, yet when they finally try to move preemptively, they get accused of stoking the fire. Like the Cowboys in January, they can’t win.
Hopefully Jay$ isn’t blinded by the animal spirits like CeeDee was by the sunlight at Jerry World.
“JP, the Eagles beat the Cowboys last weekend. Heck, you even beat the Commanders since then. Isn’t this Cowboys hatred a little stale?”
You must be new here.
