Taking a Nail Gun to the Bond Market

It's raining nails in Texas... Meeting up with 'Dr. No'... Exquisite timing... Blame Ed Nixon... Druck on the Treasury market... Corporatism run amok... Banging on the bulkhead at 37,000 feet...

It sounded like someone was firing shotgun shells into the ceiling...

But it was just a brigade of workers armed with nail guns, putting a new roof on the Rosenberg, Texas Motel 6.

When I checked in at 5:30 p.m., the clerk asked me if I'd like an upstairs or downstairs room. I said I didn't want to hear a lot of noise coming through the ceiling. So the clerk promised to give me an upstairs "quiet" room.

I should have known what I was in for when I walked past a dozen workers climbing up and down ladders on the way to my room. Still, I heard nothing for about an hour. I figured they'd called it a day.

I figured wrong.

Soon, they were firing nail guns above my "quiet" motel room as I tried to work, sending me jumping from my chair. It was like the wrath of God raining down on the roof above me. And the work continued until around 9 p.m.

It was as if I had told the clerk I was wearing a new suit, and he had responded by dumping a can of paint on it. I got the exact opposite of what I asked for and expected.

I had reserved two nights, but I left the next morning knowing I'd never return. As I passed the front desk, I mused that the clerk would probably wind up in politics. Promising something and delivering its exact opposite is the perfect job description for every elected official on the planet.

It was ironic that I was in Texas to film a special presentation with 12-term former U.S. congressman and staunch defender of liberty, Dr. Ron Paul.

Here I was, after a night of receiving the opposite of what I was promised, talking with a man who has delivered on his promises more consistently than any other representative since Davy Crockett (who refused to vote "yes" on anything not expressly provided for in the Constitution).

Paul voted "no" on new government spending, foreign interventions, and new government regulations so many times that they called him "Dr. No" in Congress. He was often the lone vote against the constant encroachment of big government. Paul has the type of integrity that has all but evaporated in modern politics.

You'll learn all the details of our presentation soon enough, but the theme is the frightening degree to which the U.S. government is interfering in the economy and financial markets today.

Our timing was pretty exquisite...

The U.S. recently announced two major financial-market interventions and has gone crazy spending taxpayer money to prop up at least 30 companies.

Just a few weeks ago, the U.S. participated in the largest currency intervention in Japan's history outside of 2011.

You see, on July 23, the Japanese yen hit a 40-year low of nearly 164 yen to the dollar, according to data compiled by Bloomberg.

The Bank of Japan panicked, selling U.S. Treasurys to get dollars to buy the yen and prop up its value.

Japan spent as much as $85 billion over July 30 and 31, and possibly more on August 3, according to research by Goldman Sachs.

The yen snapped back to 157 to the dollar but continued declining once it was over. It's around 160 to the dollar today.

Japan has about $1 trillion in U.S. dollar foreign-exchange reserves, and Japanese officials have made it clear they won't hesitate to use them again to prop up their currency.

But in the future, Japanese authorities have said they'll use the Federal Reserve's Foreign and International Monetary Authorities ("FIMA") Repo Facility. That's a program that lets FIMA account holders sell their Treasury holdings to raise dollars, with the promise to repurchase those Treasurys back at a future date.

In short, the repurchase feature lets a central bank or other Fed raise dollars to do what they need to do, paying the dollars back in the future. The global financial system mostly runs on U.S. dollars, and FIMA is a way for Treasury bondholders to rent them.

Those of us who signed up for free-market capitalism expected the market would be allowed to give us the price signals we need to live our lives, make our investments, and plan for the future. When it's not allowed to do that, you'd better have a sturdy financial roof over your head, because sooner or later, it's going to rain nails.

Not only did the U.S. help the Japanese intervene...

In 12 days, the U.S. will start intervening in its own sovereign financial markets...

On August 19, the U.S. Treasury announced it will double the size of its purchases of 10- to 30-year U.S. Treasury bonds from a maximum of $2 billion per operation to at least $4 billion from September 9 to November 4. It was already out there buying Treasurys. It's just going to buy twice as much now.

Legendary billionaire trader Stanley "Druck" Druckenmiller penned a Wall Street Journal editorial pointing out that the intervention is a mistake. There is no panic in the U.S. Treasury market. It is simply doing what markets do. Bond markets tell you what they think of a particular creditor. If that creditor's finances are feeling a little stress, it demands a higher interest rate from them. As Druck said...

Inflation is 3% to 4% and has been above the Fed's target since 2021. Unemployment is 4.1%, full employment by any definition. The deficit is running near 6% of gross domestic product, a number America has never before produced in peacetime at full employment. The national debt crossed $40 trillion the same week [the] Treasury intervened. Net interest will exceed $1.1 trillion this fiscal year, more than the defense budget.

The 10-year Treasury yield was below 4% on February 27, the day before the Iran war started. Since then, it has been as high as 4.7%. The market saw what Druckenmiller sees, and it priced 10-year bonds accordingly. The bond market wasn't panicking. It was just clearing its throat, as Druckenmiller put it.

The situation in the U.S. bond market today is nothing like the British market in September 2022. Back then, the government had announced a new budget with tax cuts and massive borrowing plans, which caused long-dated U.K. government bonds to go into freefall. The government stepped in and bought tens of billions of pounds worth of bonds, saying it would do whatever was necessary to stabilize markets. The episode ended Prime Minister Liz Truss' term in office.

The British bond intervention was a typical government action when a market is in panic mode. The U.S. market is not in panic mode and shouldn't be increasing bond purchases.

Treasury Secretary Scott Bessent sounded like a frustrated value investor when he told a CNBC interviewer:

We believe that the yields don't reflect the underlying fundamentals.

He might be right, but that's not his call. Markets work, and the U.S. Treasury market is functioning just fine. There's no panic. Yields aren't going through the roof. No need to fire up the nail gun.

But the main thing Paul and I talked about wasn't financial-market interventions...

The biggest concern is corporatism...

That's when companies are technically in private hands, but the government has invested and has a substantial amount of influence in and control of their affairs.

Since President Donald Trump took office in January 2025, the government has acquired stakes in at least 30 companies. We've written about the White House's investment in public companies – like critical mineral miners and domestic semiconductor producers – for "national security" reasons here and here.

Paul is aghast at this blatant assault on the free markets that made our country the richest and greatest in the world (once upon a time, anyway). And I completely agree that this is not how capitalism works.

Companies are supposed to live and die by their own ability to compete in the world, not be propped up by the government. When the government favors one company, it disfavors others. It's effectively playing a game of picking winners.

Perhaps I shouldn't be surprised. After all, our government also sent our rare earths production capacity to China. Richard Nixon's brother Edward encouraged and incentivized it in the 1980s to fulfill a sophomoric environmental vision. He effectively threatened Unocal, the company that owned the Mountain Pass rare earths mine and processing facility in California, telling it to avoid environmental liabilities by letting China do the processing. The move opened a window for Chinese dominance, and time did the rest.

Personally, I don't know one single investor who wishes for more government involvement. Most of the folks I know want a lot less government interference.

Paul and I also agreed that everything the government invests in today increases the likelihood that those same investments will need to be bailed out in the future. It will be just like the financial crisis in 2008.

Paul also pointed out that corporatism is potentially worse than socialism. In socialism, we all see what's happening and nobody calls it capitalism. In corporatism, if the government's interventions fail, folks will blame it on capitalism... and we'll get all manner of socialist and other extreme government outcomes as a result. Corporatism is by far the more insidious threat.

It's no coincidence that the current issue of The Ferris Report deals with the government's substantial financial support for the U.S. mining industry. Again, I don't like it, but it's the hand we've been dealt as investors. And as it turns out, it's creating opportunities in good companies.

While it's clear from today's Digest that I don't like what the government is doing, I also realize that it doesn't matter. As investors, our job isn't to fume (okay, maybe a little). It's to figure out the investment implications of the government buying up stakes in companies and to exploit whatever opportunities are available. I did that with mining, and I'll look for ways to do it in other industries the government has invested taxpayer money in.

The details are for paying subscribers, but I'll share the following insight from the current Ferris Report:

The need to engage dozens of foreign countries, invest government money in foreign assets, and bolster U.S. mining schools shows that the government understands how far behind the U.S. is in the mining sector.

In order to make American mining great again, it has no choice but to plow hundreds of millions of dollars into foreign companies and the U.S. companies developing foreign mining assets.

These tailwinds are opening up a slew of possibilities for a U.S. mining revival.

It's the standard irony created by government intervention. "Making U.S. mining great again" means investing in foreign companies and developing foreign mining assets. But I expect the government to resemble the Motel 6 clerk and deliver the opposite of everything it promises us.

In the above excerpt, it might sound like I'm thrilled that the government is putting taxpayer money into the mining sector. I'm not. I'm acknowledging reality. When the government is throwing money around, it's rational to want to get in the way of some of it.

Ferris Report subscribers and Stansberry Alliance members can find my latest issue here.

Finally, it seems perfect that, as I sit typing these words on my flight back home from Texas, a flight attendant in front of me is banging the daylights out of something. Is it something frozen? Some bit of equipment that's stuck? I don't know. But it makes me wonder if she has a relative in the motel business.

New 52-week highs (as of 8/27/26): Altius Minerals (ALS.TO), Alpha Architect 1-3 Month Box Fund (BOXX), Cambria Emerging Shareholder Yield Fund (EYLD), Global X MSCI Greece Fund (GREK), Illumina (ILMN), IQVIA (IQV), VanEck Morningstar Wide Moat Fund (MOAT), Okta (OKTA), Roivant Sciences (ROIV), Twist Bioscience (TWST), Ternium (TX), and Waters (WAT).

In today's mailbag, thoughts on the settlement from Meta Platforms' social-media-addiction case, which Digest editor Corey McLaughlin wrote about yesterday... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Where are the parents???? When my kids were young they were not allowed to watch certain shows or have cell phones till they were older. That was the rules.

"As parents we did not allow them to become addicted to any social media. End of story." – Subscriber Stephen S.

Good investing,

Dan Ferris
Somewhere over America
August 28, 2026