Value Investing with Sven Carlin, Ph.D.|22. Aug.
This Is Big - Interest Rates Up, Interest Costs Up!
Rising Bond Yields – The Key Risk for the Next Decade
The speaker argues that higher long-term interest rates (e.g., US 30-year Treasury at 4–5 %) will dominate the next 5–10 years, not AI. The era of ultra-low rates (2002–2021) is over, and debt levels have exploded.
The Long-Term Debt Cycle- According to Ray Dalio, we are approaching the painful phase: when debt service becomes unsustainable, deleveraging is inevitable.
- Currently, governments, private equity, and real estate keep refinancing rather than repaying debt – a Ponzi scheme.
- The average deficit is now 6 % of GDP (sustainable would be ~3 %).
- Net interest payments have tripled from $0.5 trillion to $1.5 trillion in four years. By 2030, they could reach $2 trillion (100 % of the current deficit).
- The US is essentially borrowing to pay interest – a textbook pyramid.
- Inflation erodes debt nominally but hurts the poor most. The promised 2 % inflation has not been achieved in the last six years.
- Politicians hope AI will solve the debt problem – the speaker calls this delusional.
- Massive AI capex (data centers etc.) mirrors the 2007 subprime bubble. If it bursts, GDP could collapse because AI investments are currently propping up the economy.
- Scenario: If the S&P 500 dividend yield rises from 1 % to 2 % (as in 2012), that implies a 50 % drop; at 4 % a 75 % drop.
- Mark Spitznagel warns of an 80 % crash. The speaker notes the bull market started in 1982 (44 years old) and is overdue for a major correction.
- Safety: 5-year Treasuries (~4.3 %) or 2-year (~4 %) offer nominal stability.
- Check your own risks: Is your mortgage fixed? Would your business survive a spike to 15 % rates?
- Focus on value investing: Solid companies that can weather a crisis.
- If uncertain: just wait until panic erupts – but be prepared to act.
Bottom line: Record debt, rising rates, and an overheated AI bubble could trigger the biggest debt crisis in decades. Investors should make their portfolios crisis-proof.
