BERLIN – Berlin is not a particularly attractive city – at least, not from our hotel room near the famous avenue, Unter den Linden. The buildings are all monumental, graceless, and blockish.

For years, the city has attracted young people from all over. It has some of the cheapest apartments in Europe and a lively, bohemian art scene.

It also has a generous social welfare system that makes it easy to live here with relatively little money.

Maybe that’s why there are so many immigrants… Driving downtown, it looked like nearly half the people we saw on the streets were from east of Byzantium. Dark hair, dark skin, scarves covering their hair – these were not the blonds we think of from the old documentaries on the Hitler Youth!

But the world has changed a lot since jack-booted troops marched through the Brandenburg Gate. And as much as we moan about Fed policy and the Washington circus… at least today, the mass killings and World Wars of the 20th century are no more. What killing that does take place is on a fairly small scale and in fairly remote places.

Things go in cycles. Booms are followed by busts… periods of peace are followed by violence… and every day of life brings us closer to the end of it, with all the world aging and drooping unto death.

National Scandal

There, we got that out of the way…

Now, we can turn our attention to the great show taking place right before our eyes – the markets, politics, extraordinary popular delusions, and the madness of crowds.

Last week, we were enjoying the spectacle from the cordillera of the Andes.

Argentina is a great country… always full of surprises, twists, turns, claptrap, and razzle-dazzle.

“We go broke about once every 10 years,” explained a lawyer friend. “The politicians do just what you expect in a sh*thole country. They borrow too much. They spend too much. They steal too much. And then, they go broke.”

The last 12 years – since we’ve been going there – has been a field day for corruption in Argentina.

Cristina Kirchner, the previous president, employed a driver to deliver envelopes of money to cronies, functionaries, and politicians. Alas, the driver kept a notebook of the transactions, which fell into the hands of prosecutors and led to a national scandal.

Billions of dollars were stolen – in bribes, padded contracts, and crooked deals of many different sorts. Much of it is now in foreign banks, from where the authorities will have a hard time getting it back.

“Nothing’s really new in that story,” reports our Argentine friend. “Except for the notebook, of course. You don’t usually have a record of who was paid off, with how much, and when.

“But more importantly, the government put up trade and capital controls; it spent too much money trying to keep voters in line. And, of course, it didn’t have the money, so it borrowed heavily from foreigners, in dollars.

“That’s what always seems to cause the crisis. We can’t print dollars. We can only print pesos. So when the crisis comes, the peso goes down and the dollar goes up… and everybody gets squeezed.

“But I guess the good thing is that we can’t really borrow too much… because lenders know we’ll default. We’re protected by our bad reputation.

“So Argentine families don’t have much debt. We don’t have houses being repossessed because people pay for them with cash. And people with money try to keep their savings in dollars.”

Right now, the dollar is king in Argentina. The peso has lost two-thirds of its value in the last 12 months. Eventually, prices will rise to keep up.

But that takes time. And in the meantime, the peso trades at nearly 40 to the dollar. You can buy a steak dinner with a bottle of wine for $15. A taxi ride to the airport is just $5. And “local” houses – but not the prestige properties, which are typically priced in dollars – are available for the equivalent of $50,000 or less.

“What is interesting to me is that now, I see the U.S. doing the same things. You know, tariffs, overspending, too much debt… even the kind of mob politics that the Peronists have done here for decades.

“I don’t know, but my guess is that what goes around, comes around… The U.S. is subject to the same economic laws as everyone else. And I guess it will have its reckoning someday.”

Can’t Print Time

Here at the Diary, that is our guess, too. Nature does not suffer fools gladly. She punishes them, though not necessarily on a regular schedule. And not necessarily as they anticipate.

People don’t get what they want in life… or what they expect; they get what they deserve. But like an old mill, nature grinds away – exceedingly fine and exceedingly relentless.

Over the last 30 years in the U.S., debt has increased three times faster than GDP. The debt is in dollars. And the U.S. can still print dollars to pay it back.

But we can’t print time. And debt, ultimately, must be paid in time, not just in money. And as interest rates go up, bonds fall… and more time is claimed. From Bloomberg:

“Bond investors have rarely seen losses like this over the past 40+ years,” Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, wrote in a blog post. “Any further moves higher in rates could lead to the worst year since 1976 in terms of overall bond returns.”

At today’s average wage, a man who owes $100 has already “spent” four hours of his future. If he owes $1,000… he has spent an entire workweek.

Today, the average working person has about $500,000 in debt with his name on it (including his share of government debt, but not including the government’s unfunded promises).

It will take him 500 workweeks – or 10 years of full-time employment (not including taxes) – to pay it off (assuming he devotes 100% of his earnings to it).

That is already a huge burden to put onto the future. Eventually, the future will shrug it off.

More to come.




A Note From Dan Denning: Greetings from Steamboat Springs, Colorado. It snowed on the way over through the Poudre Canyon.


I’m in the midst of my latest “Bolthole Tour,” traveling the American heartland in search of overlooked, undervalued towns. In the next few days, I’ll be traveling through Meridian, Idaho and Walla Walla, Washington. If you’re a reader who lives in or near these towns, feel free to reach out. I’d be happy to sit down and hear your insights on the area. Write to me by clicking right here.


By Joe Withrow, Head of Research, Bonner & Partners

The 30-year fixed mortgage rate just hit its highest level in eight years…

That’s the story of today’s chart, which tracks the 30-year fixed mortgage rate from the start of 2010 through today.


As you can see, this month, the 30-year fixed mortgage rate shot up – from 3.4% in July 2016 – and hit 5% for the first time since 2010.

Yet, even with the recent spike, the 30-year fixed mortgage rate is still well below the long-term average of 6.2%.

But as Bill has shown, interest rates move in long “primary trends” for decades at a time. After falling for nearly 40 years and bottoming in 2016, interest rates now appear to be trending up.

If the long-cycle trend continues, we will see higher interest rates for years – possibly decades – to come. And if that happens, today’s 5% fixed-rate mortgage will seem like a great deal in retrospect.

– Joe Withrow


The Endangered Fiscal Hawk
Budget hawks once roamed free in Washington, D.C. With their calls for fiscal responsibility and balanced budgets, they were a permanent fixture in the chambers of Congress. But today, with deficits expected to hit $1 trillion annually, the fiscal hawks have all but vanished.

Pot Has Never Been More Popular
Legal cannabis goes on sale in Canada in a matter of days. Here in the U.S., new data shows that six in 10 Americans think the Canadians might be onto something…

How Trump Takes on Big Tech
Recently, President Trump accused Silicon Valley giant Google of “rigging” search results to stifle conservative-leaning viewpoints. Google denies the claim. But now, Big Tech is squarely in the crosshairs of the Trump administration. Here’s how the showdown might shake out…


In the mailbag, more talk of trade

You’ve got to love the determination of the Chinese to rule the world! They are sneakier than the NSA, planting tiny chips in the supercomputing motherboards going into many of the Fortune 500 and government computers, allowing them to pirate and monitor whoever owns them. Meanwhile, all the owners are publicly denying there’s a problem, but racing to replace the boards or find the chips.

In the ’80s, some of my customers were hell-bent on building plants in China. I cautioned, “Every bit of proprietary technology you take there will be stolen or duplicated.” They thought I was crazy, until competing products made down the road from their plants using their technology started showing up and cutting into their sales. Oil well (as they say in Texas).

– Steve B.

No trade deals are best; let everyone do what they want. That is, of course, BS, for lack of a better word. Tell the guy who lost his job: “Look at the bright side. Imports are cheaper.” “Well, what a relief, if I could afford them.” Please, stay on the plane of reality in your commentary, Bill.

Also, explain why U.S.-made cars should be more expensive as a result of the United States-Mexico-Canada Agreement (USMCA), which requires 40% of workers making $16 or more per hour, when United Automobile Workers (UAW) wages are way higher than that.

– Erich K.

Meanwhile, Bill’s new ranch project gets readers talking…

I am an Argentine reader. I enjoy your notes very much, both the serious, political ones and the travel insights into the places you visit.

– Ana C.

Best to avoid feeding cattle corn if you can find enough grass. Corn ruins the essential fatty acid balance in the feed and in the cows.

– Ed

Geez, Bill. Regarding the ranch, with all the problems you’ve had, why do you continue to operate it? It seems to me you went below the standard 25% trailing stop on this one a while back. Does Elizabeth put you up to it?

– Joe R.

I so enjoy your updates on your farm’s comings and goings. What a beautiful ranch you have, drought and all. I can only imagine how wonderful it would be to take that two-day cattle drive across the mountain, albeit tough. Regarding the drought, it isn’t too bad, considering many farmers in Australia have not seen rain for almost two years and have NO water. The springwater over the mountain, with crops growing… You have much to be thankful for.

– Lynette K.

Why alfalfa alone? Complementary planting of an appropriate grass would be beneficial for both. And alfalfa is actually “heavy” for ruminants, especially out of the ground. Sorry, this is my area of expertise – about 45 years of experience, and I’m only 50.

I would suggest synthetic tanks to hold, or go primitive with geopolymer, papercrete, etc. and use soaker hoses feeding from portable intakes along the waterway. Set them, move in 24 to 48 hours, and work in rotation as far as the ground will allow. When the first soak is drying up, reset and start over. Intelligent irrigation can use half the resources and increase returns exponentially. And smart doesn’t have to be the latest in ag-engineering. (But that’s a great option; self-propelled ag pivots are a wonder to behold.)

– Will R.

Bill’s Response:

Dear Sir,

Where do I find out more? Our approach is very primitive.


Next week, Bill will be presenting at a two-day investment conference in Bermuda. But you don’t have to hop on a plane to hear our editor speak. See how you can watch a livestream of Bill, as well as your favorite Bonner & Partners editors, right here.