What Argentina's Latest Crisis Means for Your Portfolio (and Gold)

Dear subscriber,

Argentina is collapsing again... And this time, it may mean something to your wealth.

After an economic golden age around the turn of the 20th century, Argentina has spent nearly a century in default.

It borrowed, spent, defaulted, and borrowed again in a cycle of poor economic policy, planning, and execution.

At Stansberry Research, we shook our heads when Argentina issued 100-year bonds in 2017... and actually found buyers at a yield of 8%.

As we wrote in a 2018 issue of Income Intelligence...

Argentina has spent more than 75 years in default. More recently, as we mentioned, the country defaulted in 2001, then made it to 2014 before defaulting again. And yet, it was able to issue bonds with a promise to pay back investors in 2117.

These bonds made no sense... The long duration meant the price of the bonds would fluctuate drastically with interest rates. And the likelihood that these bonds will pay off in full in 100 years was close to zero...

Still, the country offered $2.75 billion of debt and attracted $9.75 billion in orders. Shockingly, investors couldn't get enough.

Unsurprisingly, Argentina defaulted and had to restructure by 2020... only 97 years short of its 100-year goal.

Now, Argentina's at it again. This time, though, it's doing things a lot differently... And as I'll explain, it highlights a critical weakness in global markets.

Let's start with the news on Argentina...

This week, President Donald Trump's administration floated the idea of providing financial assistance to Argentina. Treasury Secretary Scott Bessent even outlined a variety of "stabilization" options on his X account. And reporters say there's been discussion of a $20 billion bailout.

Argentina just might need it.

The country's libertarian-minded president, Javier Milei, took over in 2023 with plans to radically overhaul the economy, removing many government programs and focusing on building a more free-market economy.

Whether Milei's plan was genius or folly depends on your own political beliefs. And I won't attempt to judge those here.

But both proponents and opponents admitted that Milei's "shock doctrine" would cause short-term pain – in particular, job losses and higher unemployment.

The open question was, if Argentina could push through the pain... would it lead to greater economic growth and opportunity down the road?

We likely won't find out... Argentinians and markets have lost the will to keep pushing.

The economy has stalled. The currency is spiking. And Argentina may need a lifeline to keep its economy from completely stalling out.

Ironically, this free-market experiment may end unless the libertarian president accepts a foreign government bailout.

But here's why even everyday investors with a few stocks and a 401(k) account should take heed...

The final call on Milei's plan didn't come from inside the country. It came from global markets ditching Argentinian bonds and crashing the peso.

That's what's sending Argentina's economy from slowdown territory into crisis mode...

Global investors no longer want to hold as much government debt as they did a few years ago... whether that be in Argentinian pesos or otherwise.

This is happening all around the world – in the U.S., in Europe, and beyond.

And you can follow this whole story by watching something simple... the interest rates on government bonds.

In the U.S., we're told that the Federal Reserve is cutting interest rates and that they'll continue to fall from here. Lower rates, of course, will make borrowing easier for consumers and the government... and that will shore up the economy.

However, most central banks only control one short-term rate. They can change the overnight rate. But the rate on longer-term borrowings, like 10-year bonds, is set by supply and demand.

Supply is set by governments – more deficit spending means greater supply. And demand comes from global bond investors.

If you look at the 10-year rate on U.S. bonds, it has remained steady, even though short-term rates are declining. Investors clearly aren't interested in buying government debt today...

You can measure this more directly by looking at the difference between 2-year bonds and 10-year bonds, known as the yield curve.

As you can see, the yield curve has stayed steady, even though the Fed is lowering short-term rates...

Perhaps you don't think the effect on the 10-year interest rate is too dramatic. I'll grant you that (for now).

But this analysis of U.S. rates mostly serves to set up a view of the state of global affairs... They're worse.

If you look at the bond rates on big, established countries around the globe, they're all flirting with their 10-year highs.

Look at the 20-year rates in Germany, France, the U.K., and Japan...

These aren't serial defaulters, either. These are traditionally "safe haven" nations with strong and stable economies.

This matters because higher interest rates create a problem for government balance sheets.

Higher rates mean higher borrowing costs... Therefore, it costs more money to service debts.

For example, the Committee for a Responsible Federal Budget projects $22.7 trillion in U.S. deficit spending between now and 2035. But if rates stay around 4.3%, rather than drop to the projected 3.8%, it would cost the U.S. an extra $1.6 trillion.

That's a huge 3.6% of national GDP.

Put simply, higher rates worsen national balance sheets and lead to even higher interest rates.

This whole phenomenon is the work of the "bond vigilantes."

Bond vigilantes are an unofficial group of investors who closely watch government debt levels and sell off bonds when countries spend too freely... punishing them with higher interest rates.

In the U.S., the Fed is trying to drive interest rates lower, but the bond vigilantes may not let it. They don't want it to be easier for the government to spend more money.

And looking internationally shows that this is a big, global matter. And it won't be easy for any single central bank to push interest rates lower.

Here's where that leaves investors...

The basic macro playbook says that if interest rates are falling, you should buy stocks and bonds. And lots of people are doing that... betting on higher asset prices because of lower rates.

But the Fed only has a certain amount of power. You'll need to watch the 10- and 20-year bonds to see if it follows its usual playbook... or if it takes a different route. It can only go lower if the bond vigilantes agree.

That begs the question... what should you be doing now?

We've said it many times in these pages: You want to own gold.

The macro scenario still points to gold. Global debt concerns favor gold. Lower interest rates favor gold. Fears of recession favor gold.

Central banks are still buying the precious metal today, sending gold on a dramatic breakout past all-time highs and toward $4,000 per ounce...

Outside of gold, the situation in interest rates should drive other precious metals and commodities higher, as well. Silver, copper, and others all play the same game. And they, too, are seen as safe-haven investments when the economy takes a turn.

You should also continue to focus on an internationally diversified portfolio. When the risk of monetary or fiscal decisions runs high, you don't want to rely on any single country to make the decisions that will benefit your wealth. Diversify your portfolio around the world.

These are the precise things we've been covering here at This Week on Wall Street. And we'll continue to do so as this plays out.

For now, watch those long-term rates and stay tuned.

You can watch our latest This Week on Wall Street video on our YouTube page by clicking the image below. This week, I bring in Stansberry Research's Brett Eversole to talk more about his big gold call. Be sure to like and subscribe to get more of our videos.

What Our Experts Are Reading and Sharing... 

• We've been asking our Stansberry Research analysts for weeks now how high they think gold can go. Turns out, a few factors go into finding that answer. Check out the Stansberry Digest for a helpful roundup of different gold outlooks from a handful of our analysts.
• Michael Cembalest from J.P. Morgan Asset Management wrote a great piece showing that AI-related stocks have accounted for 75% of the S&P 500's returns since November 2022.

• The "degenerate economy" refers to the rise of hyper-speculative investors and gamblers who call themselves degenerates. They enjoy "speculation as entertainment" and "investing as a sport" – and according to Howard Lindzon, the degenerate economy is going to get bigger.

New Research in The Stansberry Investor Suite...

How is the stock market doing so well when so many people seem to be struggling?

That's a question many people have...

About 67% of the workforce is living paycheck to paycheck today. That's up from 63% in 2024, according to PNC Bank's annual Financial Wellness in the Workplace Report.

And yet, you hear talk of resilient shoppers and stronger-than-expected retail sales.

You could call it a "K-shaped" economy – where different parts of the economy are growing at different rates... Or it could be a case of the "haves" and "have-nots."

As Mike DiBiase writes in this week's Stansberry Investor Suite research, the top 10% of Americans – those earning at least $250,000 a year – now make up about half of all spending in the U.S.

That means when you look at broad numbers like retail sales and economic growth, the overall picture is skewed.

This makes you wonder whether a recession is ahead... and if you should gather some protection for your portfolio.

Mike has found just that: a retailer with an outstanding business that not only caters to the have-nots... but is also recession-resistant.

This stock consistently makes the top of our Capital Efficiency Monitor, and the Stansberry Score ranks it in the top 0.18% of stocks.

Once you see what kind of business it's in, it all makes perfect sense.

Stansberry Investor Suite subscribers can read the entire report here.

If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our special package of research – click here.

Until next week,

Matt Weinschenk
Publisher and Director of Research

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