Very few people are talking about it, but new data shows the interest on the Federal debt is about to soar past $1 trillion a year.

If nothing else, this will stop the Fed cold.

February 8, 2023

Dear Fellow Investor,

Jerome Powell and his minions have been all over the news lately.

Yesterday, Powell gave a speech in which he tried to pound home the Fed’s hawkish stance once again. Elsewhere, Minneapolis Fed President Neel Kashkari was predicting that the Fed Funds rate would rise to 5.4%.

And this morning, New York Fed president John Williams warned that “If financial conditions loosen too much, we would have to go higher on rates.”

They’re talking a good game, but the markets aren’t listening. Investors are parsing every speech and every pronouncement to find the one ray of potential dovishness…and then rushing to buy based on it.

We often see these post-Fed rallies reverse the next day, as more-sober investors, who weren’t willing to fight the fervor of the previous session, come in to sell. We’re seeing that to some extent today, as the major stock indices are lower after yesterday’s post-Powell rally.

The big factor that Powell has been keying on in his recent comments has been the ongoing “disinflation” evident across a number of sectors in the economy.

However, the big factor Powell has not yet mentioned is the one that I think will be perhaps most consequential in bringing the rate hikes to a halt.

Consider this relatively little-noticed data that just came out with the U.S. fourth-quarter GDP report:

The latest update on annualized federal interest expense on the federal debt was recently released from the BEA, and it soared to $853.29 billion a year.

That’s up from $736 billion in the third quarter…and this is before the Fed’s massive rate hikes so far are fully priced in.

We’ve been reporting on this dynamic for a few years, and the chickens are now coming home to roost.

In the weeks ahead, we’ll see this cost soar through the big number of $1 trillion in interest expense, each year, every year. That’s more money than is spent on defense or any entitlement program, and most of it going to hedge funds, rich investors and foreign investors, including China.

I think that number will represent a fiscal and political barrier for the Fed. Add in the potential for something breaking in the stock or bond markets, or emerging markets that tilt dominos in the U.S. financial system…as well as the upcoming recession…and it seems obvious that the Fed will at least pause its hikes this year.

This is why the markets, especially gold, have been rising since last November. They are looking ahead to the end of the Fed’s crusade, which is likely to come at some point over the next few months.

Looking at the big picture, we can expect that the pause or pivot will come under one of two possible scenarios:

1) The Fed will pause or pivot after having gotten inflation near its 2% goal, or…

2) The Fed will pause or pivot without having gotten inflation near its 2% target.

Either scenario will be bullish for gold, but the latter will be much more so, as it will prompt significant portfolio shifts out of stocks and bonds and into gold.

I think it’s much more likely that the Fed will be unable to get inflation near 2%, and thus I’m very positive on gold and the rest of the metals and mining complex for this year.

Looking short term, gold and silver are holding ground after last week’s big sell-off, and are up a bit today. Gold got extremely over-bought in the surge to the mid-$1,900s and the old trading adage that it takes gold a few tries to get through a “big number” proved true once again.

This doesn’t diminish my bullish outlook and, as I told you on Monday, I’m excited about a number of high-potential junior mining stocks that I feel are on the verge of big re-ratings.

You can get all the details on these explosive new recommendations in a special Gold Newsletter Alert I just sent to my subscribers. If you’re not already a subscriber, you can CLICK HERE to join now and get all the details.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference