Bessent's Bull Bond Market vs. Xi's Neo-Soviet Horde
The market seems fairly transparent: Bessent does speak the truth about impending deflation through both AI and re-shoring, and he also speaks the truth about the "market" rushing its anticipation of the inflation becoming sticky and spiraling out of control.
Why, then, are rates high?
Well, firstly, rates are not that high.
10yr was 5.5% in May 2001
In April, 2001, the Chinese downed an American spy plane and arrested the crewmen.
China officially took hostages, and the market reacted in kind:
The crewmen remained Chinese hostages until July, 2001, but the interim saw hacking between China and the US and large arms sales announced to Taiwan, to spite the Chinese.
Everything is "worse", but 10yr yield is still lower, today
The yield, today, 9/3/2026, is under 4.8% - 70 bps lower than in 2001 - and that's with:
- Exploding deficits
- "Run it hot" Fed
- Catastrophic military spending
- Economic misery for everyone but the 0.5%
- TFR collapse
What's keeping treasuries from just BLOWING-OUT and at LEAST exceeding 2001 highs? Simple: deflation expectations from AI and reshoring.
Bessent Holding-Fast With AI Bid, But Xi Can Force an Error
The simple answer comes from war: an escalating war that brings China to her knees will likewise bring foreign American allies to their knees, too: China has an "internal market" for her debt, but America still depends on Japan, Gulf States, and various safe-havens for a Treasury bid.
If the neo-Soviet alliance (Russia-China & whoever else dragged-in) shakes-out the foreign bidders for US assets, then America has to monetize the debt before the AI and reshoring take-hold.
When Bessent chides the market, he chides those punishing the Yen, Korean stocks, and other assets that correlate to the ownership of US Treasuries: if these collapse before re-shoring and AI credibly anchor inflation expectations, then Xi demolishes the American economic and political system.
It's Not the End of the World, But It Will Get VERY Scary
The war comes and soon: $SPCX will make a "generational bottom" in the upcoming conflict, and Treasury yields explode higher and force Bessent to overtly monetize the entire Treasury market AND impose commodity rationing to control inflation expectations.
The upcoming war will see not just QE but AI-governed commodity rationing and distribution.
BUY BONDS WHEN MORE THAN 10,000 US DEAD IN THE WAR
Once the rationing is announced, and after US casualties exceed 10,000 dead, you will see a GENERATIONAL BUYING OPPORTUNITY FOR BONDS.
The skew and panic will provide outstanding returns: be in cash for this moment, and scoop them up.
What About "Long & Wrong" Trades?
Mid-stream natural gas assets, crypto(esp. $GRAM and $XMR), REIT's, natural resources, alcohol, et cetera all do well, in a war, but bonds will be what you want to buy - bonds and $SPCX, after the panic and wipe-out.