The debt ceiling debate in Washington has been widely discussed but so far, few investors are truly worried.
Most believe that when the deadline arrives, Congress and the White House will reach an agreement—even if it’s to kick the can down the road. As of now, Treasury Sec. Janet Yellen has set the deadline as June 1. There are still a few weeks left, and if history is any indication, no resolution is likely to be reached until the eleventh hour.
So far, institutional investors have not entirely balked at buying new issue U.S. Treasury bills. During the May 11 Treasury auction, four-week T-bills drew an annualized bond yield of 5.723 percent, a high but not exorbitant interest rate for bonds expiring on June 13. The eight-week T-bills were sold with an annualized yield of 4.793 percent by contrast.
Usually, longer duration paper will have higher yield. But this recent disconnect, where the four-week bills cost more than the either-week bills, reflects some concern that the June 13 T-bills won’t be paid on time while the July 11 paper will. This assumes a new debt deal will be in place by July. But even recognizing that, the 5.723 percent yield is no indication that any catastrophic debt default event is expected to pass.
What should investors do if there is indeed a debt default, or if the debt ceiling fight gets ugly and no deal is in sight?
Enter gold. Gold has approached its record high in recent weeks without much fanfare. That’s an impressive feat given that gold pays no yield and bond yields remain very high. The Gold spot price has climbed around 10 percent year to date through May 12.
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There have been a few causes for gold’s recent rise. Global central banks bought 228 metric tons of gold during the first quarter of 2023, according to the World Gold Council. That’s after they collectively added 1,136 metric tons in 2022, a record year. Part of this demand has been driven by certain countries moving away from the U.S. dollar for global trade and potentially establishing a new common settlement currency.
Gold had a previous extraordinary run during the 1970s. President Richard Nixon ended the Bretton Woods system where the dollar converted into gold (at $35 per ounce) in 1971. Gold then eclipsed $850 by January 1980—a 33 fold increase. Gold served as an effective inflation hedge during a period of high inflation during the 1970s, when inflation averaged nearly 7 percent during the decade and culminated at 14 percent by 1980.
Silver, which typically outperforms gold in a bull market, increased by 7 percent to $25.01 year-to-date to May 12. Silver grew from $3 an ounce in the early 2000s and exploded to almost $50 in 2011. At around $25 per ounce today, it remains to be seen how silver will track gold and inflation going forward.
What else is in play?
Currently, the Swiss franc has proven itself to be the strongest currency and an FX haven in a volatile year for global foreign exchange market. During the last twelve months, the CHF gained more than 11 percent against the USD, while notching a four-decade high against its traditional currency haven competitor, the Japanese yen, by early May.
Global currency traders have been betting that the Bank of Japan will keep its ultra-loose monetary policy, which will keep the yen weak against a basket of global currencies. The Swiss National Bank, in the meantime, began hiking rates last year.
But is there value in holding Treasury bills or bonds?
Many investors say yes, despite the risk that America may not pay its bills on time.
Former PIMCO chief investment officer Bill Gross recently advised clients to take advantage of the one percent of extra annual yield on the shorter term T-bills despite default risk. The assumption is that a deal will definitely be reached even if the U.S. government can’t pay its obligations for a short period of time.
Article cross-posted from our premium news partners at The Epoch Times. Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
