Rates Higher for Longer
Jeremy G. Philips@jgphilips
+1.0%
since Oct 3
The idea
I think deficits and sticky inflation keep pushing rates higher over the next year or two, squeezing long bonds and pricey growth names while rewarding anyone earning more or holding real assets as rates climb. I'm expressing it three ways: financials that benefit from higher rates, energy and commodity producers that inflation lifts directly, and gold plus bitcoin as a hedge against government paper, with a small direct position that gains if long-term rates rise further.
What it owns
- Oil, copper and fertilizer prices tend to climb when inflation stays hot. · Freeport-McMoRanIt is a major copper producer and copper prices tend to rise alongside sustained inflation in the real economy., Exxon MobilIt is an oil and gas producer whose earnings correlate closely with crude prices, which tend to climb when inflation persists., ConocoPhillipsIt is an oil producer with a pure exploration and production model, making its earnings track crude prices tightly when inflation keeps energy expensive., BHP GroupIt extracts iron ore, copper and other commodities whose prices tend to rise when real asset inflation accelerates and government paper loses purchasing power., CF IndustriesIt makes fertilizer, a commodity whose prices track natural gas and agricultural inflation, benefiting when broader price pressures persist., SLBIt provides oilfield services and gets paid when energy producers expand drilling budgets, which happens when sustained inflation keeps crude prices high.29%
- Gold, silver and bitcoin hold value when government spending erodes trust in paper money. · SPDR Gold SharesIt is an exchange-traded fund holding physical gold, the traditional escape from currency debasement when deficit spending and inflation erode purchasing power., BitcoinIt is a fixed-supply digital asset that attracts buyers when government spending concerns mount, though it tends to swing more sharply than traditional hard assets., Agnico Eagle MinesIt is a gold miner whose earnings leverage the gold price, amplifying gains when gold climbs as a hedge against currency debasement., NewmontIt is the world's largest gold miner and its earnings amplify gold price movements in both directions, dependent on sustained debasement concerns., iShares Silver TrustIt is an exchange-traded fund holding physical silver, which follows gold in inflation cycles but tends to move more sharply in scares about currency debasement.28%
- Banks, brokers and insurers earn more interest income when rates go up. · JPMorgan ChaseIt is the largest U.S. bank and earns wider lending margins when rates climb, with profits tied directly to the gap between loan yields and deposit costs., Interactive BrokersIt holds enormous customer cash balances and earns interest income on them, so each rate increase flows nearly straight through to earnings., Wells FargoIt is a bank whose earnings depend primarily on lending margins, which expand when interest rates move higher across the yield curve., Bank of AmericaIt funds operations with low-cost deposits and earns market rates on loans, widening its margin as rates rise in the broader economy., ChubbIt collects insurance premiums upfront and invests them, so higher interest rates increase annual investment income on its float.28%
- One position that gains directly when long-term interest rates rise. · Simplify Interest Rate Hedge ETFIt is an exchange-traded fund structured to gain value directly when long-term interest rates rise, serving as the purest expression of the rates bet.5%
- Cash10%