Are the travails of the bond market, like Macbeth expounds, a “tale told by an idiot, full of sound and fury, signifying nothing?” As we grapple with the whole edifice of fixed income, the existential crisis of Treasurys, the multitrillion-dollar market that the tale is based on, I have come to wonder what bonds really are signifying and whether they even matter to our portfolios. I know that’s a radical proposition, but hear me out. We need to steel ourselves to what may come from a failed set of debt ceiling talks between President Joe Biden and the part of the government that might only nominally be run by House Speaker Kevin McCarthy. The two are set to resume negotiations Monday, with a possible historic government default as early as 10 days away. Now, I am not a denialist, I know that a debt default — a failure to pay for the nation’s tab on spending that’s already happened — would ignite a cataclysm of unknown proportions. Again, we have 10 days before things could get out of hand. But I also know that, in the end, the Republic won’t fall apart, the center will hold, because we are a rich, albeit paralyzed country that has the money to pay the bills. The House of Morgan has been very busy of late, but the odds don’t favor our new banking colossus, JPMorgan, needing to loan the U.S. government money to pay Social Security bills. Nevertheless, I think it’s worth discussing that in an era where the mega-caps are known not only for their technical prowess but for their financial strength that the role of the bond market — so central to much of the transfer of capital from the government to the people — may not be as important to all equities, default or not, as so many believe. I know of the heretical way of which I speak. From the moment I got to Goldman Sachs in 1982 and didn’t start my pitch to buy the stock of Delta with my view of the bellwether bond — then the 30-year Treasury —and was castigated for it, I know the value of the…
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