Let’s go around the world in the next 10 minutes. Not even the Concorde could do that, right? I had to check and the last Concorde planes in service were actually shut down in 2003 by Air France. That’s 22 years ago! Time flies fast too, I suppose.
There are monumental developments around the world to discuss and some significant developments here at home as well. Let’s skip on over to China first to check on the ongoing property crisis. We find that it’s now 4 years in a row that Chinese home prices have now declined1. The more recent number were -4.6% year over year last month for new home prices and existing home prices fell -6.8%. These are truly ugly numbers that surpass those of the 2008 Great Financial Crisis in the US. A situation like this undoubtedly affects tariff negotiations …
Let’s hop on over the East China Sea into Japan where we find their biggest issue flaring up again, the government bond crisis. Japan’s 30-Year Bond Yield is now up 100 points since April’s bottom2. Their government has gone into crisis mode to intervene in their markets in the recent past to buy up their own bonds to alleviate the issue, but that has collateral damage with their currency, the yen. Much like our own Federal Reserve, they are between the proverbial rock and a hard place. But Japan’s issues are much more advanced and of even greater imminent concern than our own and their fertility rate is much worse than ours. Again, chalk another advantage up for the US at the negotiating table.
It’s not all bad news (it never is thank goodness). When we shoot on over to India we see that their business growth is on fire in the services space as their Composite Purchasing Managers’ Index (PMI) rose sharply to 61.2 from 59.73. 50 is the dividing line between expansion and contraction so India is killing it right now. This will be a most interesting negotiation as India’s own tariffs are high and their future looks brighter than other places in the world.
Now let’s hop on a flight back home where we discover the death of the penny, which now apparently costs 4 cents to make and the US Treasury said that businesses will need to round up or down to the nearest 5 cents4. So let’s give thanks for the passing of the $X.99 price (though I’m sure we’ll find a lot of $x.95 now)! It is symbolic of inflation’s impact over time that our base unit is no longer consequential or efficient at measuring wealth.
But we’ve got bigger issues as the stock market’s prominence has been surpassed momentarily by ascending bond yields. That sounds OK on the surface until you realize that means bond prices are taking a big hit. This morning the 30-year bond, much like Japan’s issue, is heading towards its highest level since 20075. As of the writing of this piece, the 30-year bond yield has crested 5.1%. This bodes poorly for stocks, for realtors, for fixed-income investors and for the housing market. We’re already seeing April home sales dropping to the slowest pace for any April since 20096. The cause of this is likely the House tax bill advancing. While we’re very happy for the increased likelihood of our tax brackets not going back up to levels of 2018, among other goodies in the bill, we have to realize that without more spending cuts (beyond what DOGE has done) the US budget deficits in years to come are set to soar. This will cause the government to borrow even more dollars to pay for borrowing they’ve already done, all at increasingly higher interest rates, based on the trajectory of recent weeks.
Regardless, it’s ever important to remember our history here as we look to an uncertain future of AI exploding everywhere, declining developed-world populations and rising deficits. Since 1950, the S&P 500 is up 11.4% per year annualized7. That is despite an average intrayear drawdown of -13.7%. So what goes down temporarily, comes back up as we’ve witnessed yet again from the strong rally in the latter half of April and early May sending the S&P 500 back up positive for the year-to-date.
If you feel like most investors in that at times you missed a rally here or there, it’s time to remember the story of Laszlo Hanyecz, who in 2010 spent 10,000 bitcoin to buy 2 Papa John’s pizzas8. Those 10,000 bitcoins are now worth $1.1 billion, which is just under the market cap of the entire Papa John’s business ($1.3 billion). Today just happens to be the anniversary of the infamous double-pizza purchase. So Happy Bitcoin Pizza Day, everyone! (Don’t we all have that moment of the investment we regret we sold – or never bought – and we still kick ourselves about?)
If you are concerned about the tidings that the bond market seem to be giving us, please call us. Our Investment Committee has identified a fantastic bond replacement where you may earn a reasonable rate of return that is capped but has very little downside risk. And no, I’m not describing a fixed indexed annuity. Call us for details and take action before you see more downside on your so-called “safer side” of investments. We’ve got a lot to talk about it, and that’s a good thing too, because if you listen to us, we’ll change your financial world …
Sincerely,
The WTA Investment Committee
Sources:
1&2@KobeissiLetter
3https://economictimes.indiatimes.com/news/economy/indicators/booming-services-fire-up-india-business-growth-in-may-despite-rising-inflation-pmi-shows/articleshow/121330712.cms?from=mdr#google_vignette
4https://www.msn.com/en-us/money/markets/u-s-mint-produces-final-batch-of-pennies-as-treasury-ends-production/ar-AA1FgTty
5@SullyCNBC
6https://www.cnbc.com/2025/05/22/april-home-sales-real-estate.html
7@PeterMallouk
8@zerohedge
