More Geopolitical Risk Means Higher Yields Are Warranted
On Sunday Iranian proxies in Iraq launched rockets at the Kharab al-Jir base - a U.S. base in northeastern Syria. It is clear that Iran will keep poking and prodding in an effort to see how far it may push the Biden Administration. It is an intelligent strategy on Iran’s part as the feckless State Department has accomplished nothing in terms of de-risking the Middle East - a predictable outcome given that the U.S. lacks a mother mission insofar as its relationship with the Middle East is concerned (other than selling weapons to ensure that Lockheed, RTX, Northrop and the like get paid).
Why hold Treasury bonds given that the turmoil in the Middle East is unlikely to resolve itself under the Biden Administration? If I were to look 5, 7, 10 years out, the U.S. is only going to be in significantly greater debt, with less purchasing power and potentially greater geopolitical risk versus today. Why hold Treasury bonds when the 10-year Treasury only yields 4.6%? Wouldn’t physical commodities such as gold and silver carry substantially less risk than U.S. Treasuries over the long-term?
By the way, you won’t find news of the Kharab al-Jir base strike in the U.S. media. One must look outside the U.S. to find this piece of news - a fact that is becoming more common as of late.