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This episode of Prof G Markets examines the recent turmoil in the bond market as U.S. Treasury yields hit multi-decade highs, alongside ongoing conflicts in the Middle East and their impact on global energy prices. Legendary investor Howard Marks joins the show to discuss why the Treasury's recent bond buybacks are a cosmetic fix for structural economic problems, pointing to stubborn inflation, large fiscal deficits, and heavy capital demand from artificial intelligence. Later, Daniel Bayer breaks down the geopolitical and economic fallout of the conflict with Iran, rising oil prices, and the challenges facing international grain exports. The episode also touches on the delayed IPO of SB Energy and what it reveals about investor skepticism toward speculative valuations.
The episode opens with host introductions and a series of sponsor advertisements.
Ed Elson reviews the previous day's market movements, noting declines in indices and rising Treasury yields.
The hosts discuss the sharp rise in 10‑year, 30‑year, and 5‑year Treasury yields and the Treasury's buyback attempts.
Howard Marks outlines why yields are rising, citing inflation, risk perception, and capital demand.
Marks discusses the growing U.S. deficit, its historical context, and how it fuels investor concern.
Marks predicts that yields will likely stay high and examines implications for equity investors and dollar assets.
Ed questions Treasury Secretary Scott Besson's claim that yields don't reflect fundamentals, prompting Marks to defend market signals.
Bond Yields Hit Multi-Year Highsdata
The 10-year Treasury yield surged above 5.1% to a 19-year high, while the 30-year yield reached levels not seen since 2004 despite recent government buyback efforts.
Three Reasons Why Yields Riseinsight
The guest explains that yields increase due to inflation protection demands, perceived riskiness of repayment, and intense competition for capital across the economy.
The Golden Credit Card Analogyinsight
The guest compares the U.S. national debt and persistent deficits to a brother-in-law who continuously outspends his salary using a credit card.
Historical Context of Interest Ratesinsight
The guest argues that the era of near-zero Fed funds rates from 2009 to 2021 was an aberration, making today's interest rates relatively normal by historical standards.
Things Happen Faster Than Expectedinsight
The guest highlights the investment market maxim that systemic problems take longer to unfold than expected, but then materialize much faster than anticipated.
Human Psychology and the Debt Limitinsight
The guest notes that people ignored the national debt for years until it crossed $40 trillion, illustrating how psychological round numbers trigger sudden concern.
Energy Price Rebound Realitiesinsight
The guest expert explains that even with a fully reopened Strait of Hormuz, increased insurance and transport costs will keep energy prices elevated.
SB Energy Valuation Skepticismdata
The host exposes that SB Energy delayed its $50 billion IPO because it operates zero data centers and has a revenue backlog mostly sitting decades away.
“The 10 year is back at its highest levels in years.”
“The 30 year, close to 5.4% highest levels in decades.”
“The great problem in the investing and financial world, and I'm going to get a little wonky for a minute here, and I hope that's okay.”
“Interest rates probably will not be going down, much if at all in the coming year or two, let's say.”
Ed Elson is joined by Howard Marks to break down what’s happening with the bond market and how investors should act accordingly. Then, Daniel Baer joins to discuss the biggest takeaways from the UN General Assembly so far and where the relationship between the U. S. and Iran stands. Finally, Ed gives his take on an AI data center provider delaying its IPO. Howard Marks is the co-founder and co-chairman of Oaktree Capital Management. Daniel Baer is the former U. S. Ambassador to the Organization for Security and Cooperation in Europe and the Interim President of the Carnegie Endowment for International Peace. Subscribe to the Prof G Markets Youtube Channel Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices
5,419 words · 12 speakers
Speaker names marked are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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