US Debt Bomb & Interest Rates | Brewing Auto Loan Problem for Consumers?
By Derek Moore
Show Summary:
Jay Pestrichelli, CEO of ZEGA Financial, joins Derek Moore again to discuss whether this current bear market is tracing the 2000/2001 bear market. Plus, they highlight how tight yield spreads are looking at what the 3-month treasury bill/ 2-year treasury note is yielding compared to high yield and investment grade bonds. Then Jay and Derek go through the looming US debt bomb in relation to where interest payments might go and whether there will be political pressure for the Fed to keep rates low. Finally, after going through the avocado vs bitcoin relationship, they give a few recommendations.
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Topics Include:
- The US Federal Debt is growing but what if rates stay higher and net interest owed goes up?
- What does the yield spread tell us about relationships of corporate bonds to treasuries?
- Is the current bear market tracking the 2000-2001 bear market?
- Does the price of Bitcoin and Avocados really track one another?
- Tom Lee points to breakouts in Nasdaq stocks
- Tom Lee Ex-FAANG forward PE ratios for the S&P 500 Index
- US Federal Debt held by the public
- Nominal GDP Growth vs US 10 Year Treasury Yield
- Looking at John Hussman regression chart on 10-year trailing growth vs nominal GDP
- US government spending next 10 years at WWII levels
- Current net interest payments by US government
- Average car price in the US hit new highs in 2022 while interest rates rising
- Negative equity on used cars getting rolled into new car loans
- Most home owners locked in really low interest rates
- Corporations interest costs as percent of cash flows low because they locked in low bond rates
- Comparing 3-Month Treasury Yields spread to high yield and investment grade bonds
- Car loans are getting too long considering cars are a depreciating asset
Mentioned in this Episode:
Underperformance of International stocks for a long time and valuations still too high?
No Volmageddon 2.0 | No Landing for the Economy?
2019 WSJ article on car owners rolling negative equity on long term car loans into their next car
Nominal (not inflation adjusted) US GDP
Federal government current expenditures net interest payments on debt
Jay Pestrichelli’s book Buy and Hedge
Derek’s new book on public speaking Effortless Public Speaking
Derek Moore’s book Broken Pie Chart