Bonds To Keep Weakening Until Stocks Tank | Bill Fleckenstein

**Bill Fleckenstein** (0:00)
My motto for 2025 is, Bonds tank until stocks do. That's my shorthand expression. Now, I don't mean tank. Let's say bonds leak till stocks tank. How's that?

**Adam Taggart** (0:20)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest has long warned that the bond market will one day take the printing press away from the Federal Reserve. Well, the Fed has now cut its policy rate by 100 basis points since September, but the yield on the 10-year US Treasury note is now 100 basis points higher since then. This has flummoxed many investors and mortgage holders, yet it begs the question, is this the start of a bond market revolt against the Fed? To find out, we're fortunate to welcome back to the program analyst Bill Fleckenstein of Fleckenstein Capital. Bill, thanks so much for joining us today.

**Bill Fleckenstein** (1:00)
Well, thanks for having me back, Adam.

**Adam Taggart** (1:02)
All right, Bill, happy new year. It's going to be an interesting year. We'd love to get your thoughts in general about what you think is likely to unfold over the new year here. But to kick things off, let me just start this with a question I like to ask you at the beginning of these interviews.
What's your current assessment of the global economy and financial markets?

**Bill Fleckenstein** (1:22)
Well, I think that the global economy is going to stay the way it's been, which is not all that great, although not terrible.
The size of the fiscal deficit that we have, the budget deficit we have here is huge, and that has helped our economy. It's created these, what I like to think of as kind of stagflationary conditions where we've got a high rate of inflation relative to the underlying real rate. And of course, we have all the price increases we've absorbed up to this point. And meanwhile, there's no real powerful driver of growth. And in the rest of the world, there's nothing really to get excited about. Maybe China's policies are going to work if that's what they want. And who knows exactly what their agenda is and whether they can accomplish it. But, I mean, Europe continues to be the way it is, which is limping along for quite some time now. Of course, it appears that perhaps they're going to have some political turmoil there. But I don't think there's anything to get excited about on the economic front. I think that the prospect of pro-capitalist free-market types of policies that Trump wants to pursue and we'll talk about has gotten people's expectations up and have gotten them excited. But I think delivering on them, which we don't know exactly what they are yet, is going to be a bigger problem maybe than some people think.
I'd like to be wrong because I'd like the best things that can happen to the country happened but if you look at the construction of the budget or with the big spending buckets, without a willingness to tackle social programs, and if you look at what can be addressed, I would think that if Musk and the Doge team, VVAC, could come up with 500 or 600 billion dollars in cuts, that would be heroic. It would be a big deal, but it wouldn't really move the needle in terms of the problem of a trillion and a half dollar budget deficit and the overall size of the debt and the compounding that is occurring thanks to the interest on the debt. I think, unfortunately, we're probably... If they had come up with Doge in 2016, maybe we would be in an entirely different place right now. But the extra, pick a number, what is it, $10 trillion or so that we've gotten added to the debt in the last eight or nine years or so, I think we're kind of past the point of no return, or sorry, no way to get past it without some real pain. Now, maybe I'll be wrong about that, but that's the way it looks to me.

**Adam Taggart** (4:58)
Okay, I want to dig into that with you in some depth here. I've had this discussion with many people recently on this program, Bill, and was going to ask this question, but you've now already answered it, which is has the enthusiasm for the new administration's economic policies maybe outstripped those policies' ability to deliver the benefits on the timeline that folks are currently hoping for. It seems like you're thinking, there's probably going to be some disappointment in there.

**Bill Fleckenstein** (5:32)
I think so. Now, there may be more excitement before there's disappointment though. It's hard to say, right? Thinking about how great it's all going to be is a lot easier to do than actually creating the policies, and getting your people appointed, if they can even get them appointed, and people act like the Trump slash Republicans, although I don't really consider Republicans and Trump to be all on the same side. They don't really have much control of Congress because there are so many people in the Republican Party that will vote against things that Trump wants, even his appointments, right? I mean, let's see Lindsey Graham out championing against Robert Kennedy. Now, how can you be against Robert Kennedy, given what we've seen that has gone on in the healthcare system and all that? I mean, but some of these politicians are so worthless. Anyway, on both sides of the aisle, I see nothing but complications and roadblocks. Now, I'd like to be surprised about that, but by definition, I'm surprised it's something that I can't see right now.