Treasury yields crossed 5% and the financial media invented a new crisis. Called it a potential debt spiral. Used the phrase "fiscal apocalypse" with a straight face. Added "yet" at the end like that makes it journalism.
Retail traders saw the headlines and immediately googled what a Treasury yield is. Found out it's the government's cost to borrow money. Decided this was their moment to understand macroeconomics. Bought puts on TLT without knowing what duration risk means. Lost money in three days. Blamed Jerome Powell on Reddit.
The debt spiral theory goes like this: higher yields mean higher borrowing costs which mean more debt which mean even higher yields which mean we all die poor. Sounds terrifying. Also describes literally every moment since 1790 when Alexander Hamilton figured out the government could just keep borrowing forever and no one would stop him.
Five percent used to be considered normal. Grandparents made 5% on savings accounts and bought houses. Now we hit 5% on the 10-year and CNBC rolls out the apocalypse chyron. Markets didn't even blink. Moved sideways for two weeks. Retail traders kept refreshing their portfolios waiting for the collapse that would validate their puts.
The "yet" in the headline does heavy lifting. Implies the apocalypse is coming but absolves the writer of being wrong when it doesn't. Perfect hedge. Cowardly as hell but perfect.
Technical analysis says none of this matters. Yields go up. Yields go down. Chart looks the same either way. Trend is your friend until it isn't. Price action is price action. Everything else is noise designed to make you feel smart for losing money on macro bets you don't understand.
The fiscal apocalypse will arrive exactly when retail figures out that "yet" was doing all the work in that headline.
Photo by David Jones on Unsplash
Leave a Comment