The 30-Year Bond Doesn't Lie

No one knows prices better than the market... The consequences of price controls... The Fed's massive price-control operation... What long-term rates show... The biggest oil-market disruption in history... Opportunities are coming fast...

Nobody knows what the price of anything should be...

I don't know. You don't know. No economist knows. No government bureaucrat knows.

There is simply no way to set reliable, meaningful prices for goods and services except through free trade in fair and open markets.

If you want to know what happens when government tries to take the market's place, just look at Venezuela. That country is one of the most egregious examples of government-directed price controls in modern history.

Despite the oil boom of the early 2000s, basic foods like milk, eggs, sugar, cooking oil, and pasta were nonexistent on store shelves. When they became available, they were rationed, and long lines formed to buy them. Buyers had their hands stamped to prevent them from buying more than they were rationed.

In 2011, former president Hugo Chávez created the National Superintendent of Fair Costs and Prices ("SUNDECOP"). The organization's purpose was to set prices across all parts of the economy. It monitored cost structures of companies and determined what prices they had to charge and how much profit they were allowed to make. It initially set prices for 19 product categories starting in 2012.

If a business violated government prices, it was subject to fines, asset seizures, and nationalization. The price controls expanded over time to cover most goods and services.

As if that weren't enough, Chávez's hand-picked successor, Nicolás Maduro, made things even worse. He sent the military into electronics stores to enforce discounted pricing, claiming, like every other misguided socialist fool, that he was cracking down on an "economic war" of spiraling prices.

His 2014 Fair Costs and Prices Law made selling regulated goods at unregulated prices and a host of other ill-defined crimes – including hoarding, speculation, boycott, and usury – punishable by imprisonment. Imagine going to jail for charging more than government prices.

You likely already know the consequences of all those price controls: chronic shortages of basic goods... long lines at supermarkets and other stores... a thriving black market... collapsing domestic production... and hyperinflation that eventually exceeded 10 million percent – rendering government prices completely meaningless. Companies stopped producing goods they couldn't sell profitably, making shortages even worse.

That's what happens when anything but free trade in fair markets sets prices. A market price is made up of the decisions of all the individuals and companies that buy and sell a particular product. There is simply no way any person, committee, or organization can replicate the hopelessly vast and complex myriad decisions.

Austrian economist Friedrich Hayek cut to the core of the issue when he wrote in The Fatal Conceit: The Errors of Socialism:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

I (Dan Ferris) have said it before, but it bears repeating. Humans didn't create markets. Markets are what happen when humans decide to coexist peacefully. We're in markets the same way fish are in water. Folks like Chávez and Maduro are like sharks trying to control the tides. It simply can't be done.

If you leave the market alone, prices become reliable signals of what consumers and investors want and don't want.

But there's an even larger, ongoing price-control operation than Venezuela...

It's being run by the U.S. Federal Reserve.

Interest rates are prices too. They tell you how much it costs a particular government, company, or individual to borrow money for a certain period of time.

The Fed controls short-term interest rates through its benchmark federal-funds rate (currently 3.5% to 3.75%), but not by decree. Instead, it pushes rates into its target range by buying and selling U.S. Treasury (and sometimes mortgage-backed) securities.

The Fed reacts to inflation and other data and generally targets lower rates when it believes economic activity is slowing. It targets higher rates when it believes economic activity is rising. That's what Chávez's bureaucrats at the SUNDECOP did. They monitored business activity and pretended to know what prices to set based on their observations.

Just like SUNDECOP, the Fed pretends it's the market. It substitutes its judgment for the unfathomably vast number of inputs and actions of millions of market participants. And, of course, U.S. central bank bureaucrats can no more get it right than Venezuelan bureaucrats.

Fed policy contributed to huge stock market bubbles in 1929 and 1999 to 2000, along with the housing bubble that peaked in 2006 and nearly wrecked the global economy, and probably a dozen other economic calamities over the past century or so.

To sidestep Fed policy and get a clearer picture of economic reality, investors need only check with the real market – the vast global network of investors and traders who buy and sell U.S. long-term Treasury securities.

The Fed doesn't manipulate long-term rates...

The 10-year and 30-year Treasury rates are set by a vast, global market. When people say, "the bond market doesn't lie," it's the longer end of the curve they're talking about – the market's verdict, not Fed policy.

The 30-year yield blipped above 5% on May 4 and quickly retreated. But on May 12, it exceeded 5% again and has been in a solid uptrend since then.

If you're a daily consumer of financial news, you've probably noticed the concerns of a growing chorus of analysts. I've seen it getting more and more attention over the past week or so.

That's because the 30-year yield hasn't traded consistently above 5% since August 2002. It went above 5% a couple of times over the past three years (October 2023 and May 2025). But it didn't remain above that level.

Three important conditions suggest it will remain above 5% this time... and possibly head higher.

The first is oil.

Since March 12, global benchmark Brent crude oil has mostly been $100 per barrel or higher. The market doesn't seem worried about $100 oil. But I bet it starts getting a lot more worried when oil hits $120 or more.

As I told Ferris Report subscribers this month, since the Iran war started, thousands of oil wells representing as much as 10 million barrels per day have been shut down in the Middle East. Many will never be restarted.

Without getting too deep in the weeds, you can't shut an oil well on and off like a kitchen faucet. When you shut it off too fast – say, because someone has started dropping bombs on your country – various types of chemical and geologic processes take place that can – and in many cases will – result in a permanent loss of the wells.

Oil prices will be higher for longer. That will weigh on inflation data, and the bond market will continue to notice, which will keep rates higher for longer.

The second reason I think the 30-year yield will remain above 5% is that the major inflation benchmarks have all remained solidly above the Fed's 2% inflation target since March 2021.

They've also all moved higher over the past two months, with Consumer Price Index inflation at 3.8% in April and Core Personal Consumption Expenditures (the Fed's preferred measure) at 3.2%.

Inflation is always the prime suspect behind big moves up in government bond yields. Yields go up when investors sell bonds because they don't want to lose purchasing power by holding an instrument that pays a fixed level of income.

The third reason the 30-year yield will likely stay higher for longer is printed for all to see in the minutes of the April Fed meeting. They indicate a clear bias toward raising rates.

The minutes twice noted that most of the Fed's 19 policymakers ("participants") were adjusting their inflation expectations higher:

The vast majority of participants noted an increased risk that inflation would take longer to return to the Committee's 2 percent objective than they had previously expected.

In the minutes' only other mention of the majority of policymakers, rate hikes ("policy firming") were mentioned explicitly, along with regrets about previously stating a bias toward rate cuts:

A majority of participants highlighted, however, that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent. To address this possibility, many participants indicated that they would have preferred removing the language from the postmeeting statement that suggested an easing bias regarding the likely direction of the Committee's future interest rate decisions.

They also noted a risk I've mentioned before: that the Iran war could last longer than expected, and even if it ended tomorrow, higher oil prices are here to stay.

Bottom line: Fed policymakers see inflation rising, and they're becoming hawkish. That means they're more likely to raise rates than cut them or leave them unchanged.

These conditions are happening simultaneously with massive – and climbing – U.S. debts and large fiscal deficits...

Besides its verdict on inflation, the 30-year bond yield is also a running commentary on the U.S. government's fiscal credibility.

A 30-year bond takes roughly one generation to pay off. So when its yield rises, the market is saying that, even if it doesn't think the government will spend and borrow too much in the short term, it doesn't trust it to curb either of those habits in the long term.

The 30-year bond is almost like a stock, meaning it's far more volatile than short-term bonds. A 90-day Treasury bill will barely fluctuate at all in price. But a 30-year or other long-duration bond can see its price drop 50% or more as the years go by.

If you have iron discipline, never touch your principal, and the bond gets paid off on schedule, you'll lose nothing in nominal terms (though you'll likely lose badly in inflation-adjusted terms). But it'll be a wild ride until then.

Because of its stock-like price movements, a 30-year bond also prices in extreme risks like, oh, I don't know... wars, regime changes, and geopolitical shocks. When things are bad, it sells off and yields rise.

In other words, with all that's happening right now, of course the 30-year bond is back above 5%. Nobody should have expected otherwise.

Putting a finer point on it, all three of the conditions we highlighted – high oil, inflation numbers, and growing Fed hawkishness – have been exacerbated by the same simple truth...

The Iran war is the biggest oil-market disruption in history...

It's not just an oil shock. As I told Ferris Report subscribers in the May issue (which came out on Wednesday), the Iran war is a massive reset to the global manufacturing industry. I expect it to influence the rest of my recommendations for 2026, and possibly into 2027 and beyond.

I believe folks will still be talking about it 20 years from now, just like they were still talking about the 1973 oil shock in 1994. That year, the Chicago Fed published an essay called "The 1973 Oil Crisis: One Generation and Counting." It begins by noting a sharp rise in oil prices in the first half of 1994, which generated headlines evoking a return to the era of high oil prices.

That's like our view of the great financial crisis today. It happened 18 years ago, but we're still looking for signs that another crisis is right around the next bend. And 18 to 20 years from now, we'll look back on the Iran war the same way. It'll shape our world for decades to come.

But it's not all bad news...

Just as the 1970s inflation and oil shocks generated substantial profits in oil and mining stocks, the Iran war has created opportunities in dozens of companies.

I'm finding stocks that have started uptrends, but whose latest financial results have yet to reflect the Iran war's higher oil and other commodity prices. I expect most of those big changes to happen by the end of the year. Some companies will suffer big losses. Others will see large increases in net income and free cash flow.

For example, the newest Ferris Report recommendation logged a large net loss in 2025, but I expect it to make a substantial profit in 2026, due almost entirely to Iran-war-related rises in commodity prices. It's a market-dominating producer of one of the most critical commodities in the global economy (one hardly anybody mentions anymore).

While the details are for Ferris Report subscribers only, I can tell you it makes one of the four critical ingredients of modern civilization: ammonia (fertilizer), steel, cement, and plastics. Our modern lifestyle is simply impossible without these ingredients, and they all require large amounts of fossil fuels like oil and natural gas, either for feedstock or as fuel to generate large amounts of heat.

Ferris Report subscribers can find my latest issue here. And if you don't already subscribe to The Ferris Report, click here to learn more.

And that's just one opportunity. I'm working from a list of more than a dozen industries, each with perhaps half a dozen companies that have already been – or will be – impacted by commodity-price increases and the dramatically reduced shipping traffic through the Strait of Hormuz.

The opportunities are coming at me almost too fast to vet them all, a problem I haven't had in a while.

I expect 2026 to be an incredibly high-return year for investors who can focus on all the ways the Iran war is reshaping global markets.

New 52-week highs (as of 5/21/26): Arm Holdings (ARM), Alpha Architect 1-3 Month Box Fund (BOXX), Datadog (DDOG), Linde (LIN), Plains All American Pipeline (PAA), Palo Alto Networks (PANW), State Street SPDR Portfolio S&P 500 Value Fund (SPYV), and State Street SPDR S&P Semiconductor Fund (XSD).

One quick note before the mail: We are off Monday for Memorial Day, and the U.S. markets will be closed. Following this weekend's Masters Series, we'll pick things up with our daily fare on Tuesday.

In today's mailbag, feedback on yesterday's Digest, which covered Nvidia's latest earnings report and market reaction... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Lots of people used to say Tesla was extremely over valued and was too expensive. Now it's Nvidia." – Subscriber Richard R.

Good investing,

Dan Ferris
Medford, Oregon
May 22, 2026