🚨 Secret Inflation Card…

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Hey there,

We’ve got a big issue in the US with government debt.

So much so that the debt-to-GDP ratio is at the highest it’s been since WWII (120%) and there’s no end in sight for this problem.

Now, we’re not here to solve that problem; that’s up to the politicians. But we are here to position ourselves to make money with what is likely to occur; after all, we are an investment firm.

Take a listen to what Paul Tudor Jones says is likely to occur:

Essentially, the government has no option but to inflate the problem (debt) away. This at least is the playbook that has been used in US history before and is currently being used in Japan.

As a side note, sure it is possible that you could grow the economy faster than the growth of the debt. In that case, yes you would correct the problem but this is a much harder approach.

If the government’s approach is to “inflate the debt away” we who borrow money (using long-term fixed rates) on multifamily would be bi-product benefactors. Our debt too gets inflated away and the product we provide, housing, isn’t something consumers can go without.

The challenge to this strategy may be getting debt:

A month ago the Fed cut interest rates by 50 basis points, yet today the 10-year treasury is higher than it was before the rate cut.

Normal conventional 30-year mortgage rates are higher than before the rate cut.

Why?

In part, the government’s ferocious appetite for debt is consuming a huge percentage of available debt therefore elevating prices. More telling though is that the market may be sensing higher inflation -supporting Paul Tudor Jones point above.

Remember the Fed only controls short-term interest rates not longer-term interest rates. So a 50 basis point rate cut does not have to translate into lower interest rates further out in the curve.

How this all plays out is TBD but this is a card in the playbook and could be why we’ve seen the opposite of what was expected with interest rates.

Let us know your thoughts.

Nate & Steven
Rust Belt Capital, LLC

www.rustbeltcapital.com

_Disclosure:
Rust Belt Capital, LLC is not a Registered Investment Advisor. Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Rust Belt Capital, LLC does not provide tax advice and does not represent in any manner that any outcomes described herein will result in any particular tax consequence. This is not an offer to buy or sell any security. Offers to sell, or solicitations of offers to buy, any security can only be made through official offering documents that contain important information about investment objectives, risks, fees, and expenses. Prospective investors should consult with a tax, investment, or legal adviser before making any investment decision. Distributions or profitable investments cannot and are not guaranteed. Not intended to be tax advice and should not be solely relied upon to make an investment decision.