💰 Too Big To Feel

THE PULSEYou Were Right About One Thing 📊

🛒 Groceries. Last week I asked whether grocery prices have actually changed the way you shop, and you split almost down the middle.

Nearly half of you have made a real change: either switching stores, moving to store brands, or buying less beef and coffee. The rest simply "shop the same, grumble more."

💸 Free cash flow. Last month's Main Event was Google burning more cash than it brought in for the first time ever, so I asked whether Meta, Microsoft, or Amazon would follow. About 40% of you said all three would, and none of them did. Meta came closest yet still stayed positive.

The AI bills are real and enormous, but the biggest companies are still paying them out of pocket.

🏦 The Fed. I also asked what the Fed's next move would be, and 47% answered “🤷 no idea,” which turned out to be totally fair.

Core inflation has cooled to 2.5% since then, and the odds of a September hike have slipped from 51% to 34%. So anyone who felt certain was guessing too.

THE MAIN EVENTToo Big To Feel 🥱

On Tuesday, the national debt crossed $40 trillion for the first time.

It barely made the news. Most Americans have never looked at the national debt and never will.

One group seemed to notice, though: bond investors. This week, the 30-year Treasury yield touched 5.31%, its highest since June 2007.

A 30-year loan to the US government is a bet that you’ll be paid back in dollars that still buy something. As the debt grows, so do the odds that Washington either struggles to pay or lets inflation shrink the burden. Lenders price that risk by charging more.

That yield sets the cost of borrowing for everything long-dated, from mortgages to factory expansions. It is one of the few figures from Wall Street that can affect your monthly payments.

A Small Move, Off Schedule 🧰

On Wednesday, off the quarterly schedule it normally uses, Treasury said it would double the size of its bond buyback operations. The cap went from $2 billion to at least $4 billion per operation.

A buyback works like this:

1. Treasury repurchases old bonds it already owes.

2. It pays for them by issuing new ones.

3. The total debt does not change. What changes is when the debt comes due.

So what's the point?

Treasury retires the long bonds and replaces them with 3-month bills. That takes the longest, most expensive debt out of the market, and pushes long rates down.

It also saves money immediately. 3-month bills pay 3.87%. The 30-year pays 5.23%. Swapping $4 billion from one to the other trims the interest bill by roughly $54 million a year.

Two details worth knowing:

• It has not happened yet. It starts September 9 and expires November 4.

• It is tiny. $4 billion is 0.01% of the $32 trillion Treasury market.

Treasury Secretary Bessent said this: "Part of it is signaling here and to show that we believe that the yields don't reflect the underlying fundamentals." He also said the level of yields did not factor into the decision.

Color me skeptical on that last part. Cheaper borrowing is literally Treasury's mandate.

The market agreed.

The 30-year yield fell 0.09 percentage points on the announcement, when a change this small should have had almost no effect at all.

Clearly, investors were not reacting to the buying itself.

They were reacting to what it signaled: that Treasury will buy more if yields climb again. Bessent confirmed as much, adding that the $4 billion "could be more.”

Treasury Is Not The Fed 🖨️

Parts of the internet called this money printing. It is not.

When the Fed buys a bond, it creates the money on the spot. It credits the seller's account, and spendable dollars suddenly exist that did not a second earlier.

Treasury has no such button. Its money comes from three places:

• Taxes

• Selling new debt to investors

• A small tail of tariffs, fees, and asset sales

To buy a bond, Treasury first has to collect that dollar from a taxpayer or borrow it from an investor.

Bessent Versus Bessent 🪞

That being said, Bessent still attacked the previous Treasury Secretary for a version of this exact move back in 2024.

His argument was that funding the government with short-term debt artificially holds long rates down, flatters the economy at a convenient moment, and creates future risk.

He was right, and the risk is real.

Short-term debt is cheaper (usually), but it has to be replaced constantly. About 22% of publicly traded federal debt is short-term paper, so if yields keep climbing, the government is forced to refinance into higher rates.

In the first Trump term, the opposite approach got a serious look.

Treasury studied 50-year and 100-year bonds in 2017 and shelved them, reportedly for lack of demand. I have my doubts. The 30-year paid about 2.9% back then, which makes it an enormous missed opportunity to lock in cheap debt.

Regardless, those two ends of the spectrum highlight the real trade-off. Pay more now and lock in certainty, or pay less now and carry the risk.

Washington keeps picking cheaper, and yet the debt is still $40 trillion and climbing…

A Preview, Not A Panic 🔭

If you are planning on borrowing for something long-dated, like a mortgage, this could help put a ceiling on your costs.

If you buy long-term bonds for income, this cuts both ways, lifting the price of what you already own and shrinking what you earn on the next one.

The key point, in my view, is that Treasury has signaled a willingness to intervene when yields rise. That is a small piece of stimulus nobody had to vote for, arriving in a midterm year.

For now this is small. But as I mention every few months, the debt is not. As that sum grows, so does the pressure to do something about what it costs. Apparently, this is the kind of tool that gets reached for, even by its former critics.

MARKET MOODHard Assets Rally As Stocks Retreat 🥇

Winners

Moderna ($MRNA) - Market Cap: $53.2B (Week-to-Date: +110.5%)

Moderna spent years floundering as its Covid shot came to look like a one-hit wonder. One trial changed that. On Wednesday, its personalized cancer vaccine, paired with Merck's Keytruda, kept melanoma from coming back better than Keytruda alone across 1,137 patients. It is the first custom cancer vaccine ever to clear a late-stage trial, so the stock more than doubled.

Coinbase ($COIN) - Market Cap: $45.5B (Week-to-Date: +16.1%)

Coinbase makes money when crypto trades, and lately that means it trades on Washington's mood as much as bitcoin's. On Thursday, Senate leaders said the long-awaited crypto market-structure bill has a real shot, with a procedural vote set for September 15. It would end the SEC's decade of regulating the industry by lawsuit. Bitcoin rose 16% on the week, and so did Coinbase.

Newmont ($NEM) - Market Cap: $134.5B (Week-to-Date: +8.4%)

Gold rose 4% this week as the dollar slipped and long-term yields fell back. Newmont, the world's largest gold miner, spends about $1,600 getting an ounce out of the ground no matter what the metal sells for. At nearly $4,600 an ounce, the margin is close to $3,000 today, and it widens every time gold ticks up.

Losers

CrowdStrike ($CRWD) - Market Cap: $193.8B (Week-to-Date: -12.3%)

There is no good week to lose your chief technology officer. Six days before earnings is a particularly bad one. CrowdStrike's Elia Zaitsev is leaving after 13 years to start a venture fund investing in AI and cybersecurity startups. A stock up 62% this year, with no successor in place, has very little room for that kind of surprise.

Walmart ($WMT) - Market Cap: $826.4B (Week-to-Date: -9.9%)

Walmart's quarter was good. Walmart's read on the American shopper was not. Profit and sales both beat, but those are in the past. Investors were watching sales at stores open at least a year, which grew 2.6% against 3.7% expected. That is the slowest pace since 2020. When the country's biggest retailer sees shoppers slow down, it rarely stays their problem.

Meta ($META) - Market Cap: $1.39T (Week-to-Date: -7.5%)

Twenty-nine state attorneys general put Meta on trial Tuesday, arguing Instagram and Facebook were built to keep kids hooked. The states want $200 billion. Meta is in the middle of the most expensive spending spree in its history, and that bill would come from the same account. It lost a similar argument in New Mexico this month for nearly $1 billion, which is why the market flinched.

CHART OF THE WEEKYour Bank Is Keeping The Difference 🏦

The Treasury spent this week fighting to shave a few basis points (hundredths of a percent) off what it pays to borrow.

The FDIC puts the national average savings rate at 0.38%. My own Chase savings account pays a measly 0.02%. Yet plenty of online accounts pay 4.00% or better.

Here's what a decade does to $25,000 left alone:

• At 0.02%, ten years of interest pays you $50. You finish with $25,050.

• At 0.38%, the same decade pays $968. You finish with $25,968.

• At 4.00%, the same decade pays $12,271. You finish with $37,271.

That's $11,303 of free money for five minutes of form-filling. It's also the rare money decision with no tradeoff.

All three are insured to $250,000, all three let you pull the cash whenever you want, and all three are boring on purpose. The only thing that changes is whether your bank passes along what the Fed is paying or not.

If the Treasury thinks a few basis points are worth an unscheduled announcement, four percentage points are worth five minutes of your time.

Run your own numbers →

FAST FACTSOwed, Overdue, And Oversupplied 😬

💳 The Card Delinquency Spike Is Overstated: Late payments hit 12.8%, but the New York Fed says that's old charged-off debt, not new trouble. [Read]

⏳ Your SAVE Clock Is Ticking: Borrowers pushed off the dead SAVE plan have 90 days to pick a new one or get auto-enrolled at a higher payment. [Read]

🏠 Three Metros Now Have Too Many Lots: Austin, Atlanta and Denver tipped into "significantly oversupplied," which is where buyer leverage lives. [Read]

🆘 Record Numbers Are Raiding Their 401(k): 6% took a hardship withdrawal last year, the most ever, often to stop a foreclosure or eviction. [Read]

🧑‍🦳 Caregivers Retire Early And Broke: 34% have under $10,000 saved, and 56% retired sooner than planned. [Read]

💾 The Memory Shortage Is Getting Silly: The five biggest flash makers booked $68.87 billion last quarter, up 77% in three months. [Read]

🚜 An 82-Year-Old Turned Down $26 Million: A Kentucky grandmother and her daughter refused an AI developer's bid for their 200-year-old farm. [Read]

WORDS TO REMEMBERDeficits Are Just Delayed Taxes 🧠