Shock warning from the Raven…
With US bond yields soaring to record levels, well-known analyst Quoth the Raven (Chris Irons) warns of an unforgiving economic "slaughter" drawing near. Explosive borrowing costs and astronomical debt levels threaten to shatter the stock bubble, making a sweeping crash mathematically inevitable. When the underlying mathematics of the market assert themselves, Wall Street will confront an unprecedented financial "wrath of God." Specifically, as Quoth the Raven vividly writes: "Rather than hedge my bets and say the AI bubble could burst in 6 to 10 months… which I still believe… I moved to a crystal clear statement: if the bond market continues to act like this, equity markets will be slaughtered. And when I say slaughter, I mean something akin to the wrath of God. This is not even a particularly complex theory. After all, if I can articulate it, it cannot be. It is simple math." As noted, US Treasuries faced intense pressure on Wednesday, September 24, sending the 10-year Treasury yield roughly 14 basis points higher to 5.11%, after touching an intraday peak of 5.14%, its highest level since 2007.
Bond sell-off accelerates
The 30-year yield rose to approximately 5.4%, while the 2-year yield reached nearly 4.9%. This marks the latest leg of a bond sell-off unfolding over months, with 10-year yields alone gaining roughly 35 basis points in September and long-term borrowing costs settling at levels not consistently seen since before the Global Financial Crisis. Inflation fears, federal borrowing requirements, surging crude prices, and expectations of additional rate hikes by the Federal Reserve continue to fuel this movement. In other words, the bond market keeps attempting to deliver a warning, while equity investors insist on burying their heads in the sand. Yet the bond market is not the stock market. You cannot gamble on it using call options, you cannot ignore it, and you cannot manipulate it—at least not without massive ramifications. US stock markets command a total valuation of approximately $70 trillion, but they ultimately rest atop the cost of capital set within the Treasury market.
The mathematical reality of rising rates
US government debt alone exceeds $30 trillion, and those yields dictate mortgage rates, corporate borrowing costs, private equity financing, government debt service, and ultimately how much investors should pay for a dollar of future corporate earnings. Equities can ignore this math for a time. They cannot ignore it forever. It is that simple: as long-term interest rates continue to rise, virtually every major calculation across the financial universe degrades simultaneously. The discount rate used to value stocks rises, reducing the present value of future earnings. Mortgages become pricier. Corporate debt becomes costlier. Private equity deals and private credit arrangements… [much of which is already completely FUBAR, even if it hasn't shown yet]… become harder to structure. Highly leveraged corporations must refinance debt at significantly higher interest rates. Consumers pay more to borrow, and the US government pays more to service its vast mountain of debt. Rising rates act as a slow, methodical wrecking ball for everything built upon cheap money. "Essentially… the entire economy of the last two decades—especially after the Fed went full MythBusters during COVID, refusing to accept economic reality and substituting its own by swaddling everything in $4 trillion of freshly printed money—a literal crap sandwich, because bonds are becoming increasingly attractive competitors to stocks," the analyst points out, continuing: "Of course, there is no alarm sounding to mark an immediate stock market crash, but there is a breaking point where accumulated pressure causes structural failure. If current trajectories persist, that breaking point will undoubtedly arrive before the end of the year. Let us not forget that we enter this experiment carrying a borderline comical volume of debt. Total US federal debt has surpassed $40 trillion. The CBO expects the government to run a deficit of roughly $1.9 trillion in fiscal year 2026, with debt held by the public near 101% of GDP. Net interest payments by the federal government are projected to hit $1 trillion this year, with CBO forecasting $2.1 trillion by 2036. We are already borrowing immense sums partly to pay interest on money previously borrowed, even as the refinancing rate on that debt keeps rising. It is simple math. The Federal Reserve reports that total non-financial domestic debt reached roughly $84 trillion in the second quarter: $21.4 trillion in household debt, $24 trillion in corporate debt, and $38.7 trillion in government debt. Every additional ratchet of the interest rate screw matters when applied across such gargantuan figures."
And what if we bought even more?
Then we turn to Wall Street, where the apparent response to historically expensive equities was: "What if we bought even more using borrowed money?" FINRA margin debt stood at roughly $1.45 trillion in August, up roughly 37% year-over-year, having touched an all-time peak of $1.50 trillion in June. Leverage works brilliantly—until it stops working. As stocks rise, collateral values expand, investors borrow more, and those borrowed funds drive equity prices higher still.
The unwinding of financial leverage
Now reverse those vectors. Stocks drop, collateral values contract, margin calls start pressing, and investors are forced into liquidation. Forced selling generates further selling, turning a standard correction into a cascading avalanche. Finally, this is where I suspect a fundamental conceptual error is taking place. Market participants have spent the past 15 years assuming we would ultimately return to the post-GFC regime: zero interest rates, endless unlimited liquidity, cheap leverage, and central bank bailouts underpinning asset prices. What if we never return to that world? What if this is the moment of reckoning?
QE1 launched in 2008. What followed was successive quantitative easing programs, zero rates, negative rates abroad, COVID fiscal stimulus, trillions in government spending, and one of the largest expansions of financial assets and leverage in recorded history. For years, figures like Peter Schiff and other critics of monetary policy argued that we weren't eliminating the consequences of excess debt; we were merely deferring them. Perhaps the bill has finally arrived. As Schiff says, this might be "The Real Crash." The private credit market is already offering small previews. Consumers are hardly sitting atop a Fort Knox either. Americans hold roughly $18.8 trillion in household debt, including $1.26 trillion in credit card balances and $1.71 trillion in auto loans. Roughly 7% of existing credit card balances transitioned into severe delinquency on an annualized basis during the second quarter. Now compound all of that with higher interest rates.
Speculative bubbles amid tightening conditions
Yet against this backdrop, financial markets somehow decided this was an opportune moment to abandon reason entirely. AI infrastructure is increasingly financed through massive debt loads, lease obligations, guarantees, and special-purpose vehicles. Recent reports have identified hundreds of billions of dollars in AI exposure backed by guarantees designed to keep liabilities off Big Tech balance sheets, while broader estimates for off-balance-sheet obligations linked to the AI ecosystem reach trillion-dollar levels. The bond market is beginning to price this in, with credit default swaps for major hyperscalers blowing out to new historical highs.
The case of SpaceX
Meanwhile, SpaceX was recently valued in market transactions at nearly 100 times its annual revenue. Then there is the crypto ecosystem, a multi-trillion-dollar universe whose fundamental necessity remains elusive… and whose systemic risks are multi-layered in ways few fully comprehend. This is what concerns me most about the current landscape. We do not have cheap equities, low leverage, and fortress balance sheets absorbing slightly higher rates. We have massive public debt, staggering household debt, heavy corporate borrowing, record leverage, strained private credit liquidity, speculative AI investment, crypto, inflated valuations, and investors conditioned over two decades to expect a Fed bailout at the first sign of trouble. Now raise the risk-free benchmark rate across this entire edifice. And keep raising it. Something must—and will—give. In fact, if Treasury yields continue climbing, I anticipate multiple structural components failing simultaneously. That scenario could escalate into something resembling the "wrath of God." Not because I am predicting an apocalypse, but because a massive accumulation of leverage rests atop asset prices built for cheap money, while the bond market now threatens to make money expensive again. There is, of course, one major caveat: bond markets can rally.
If inflation cools, economic growth slows, and long-term yields fall significantly, the pressure dissipates. Discount rates drop, refinancing concerns ease, and high stock valuations become easier to defend. This whole process could be kicked down the road once more. However, if long-term rates continue climbing and the market accepts that Treasury yields above 5% are a structural regime rather than a temporary anomaly, I do not see how the current financial architecture holds together. It will be a massive wreck. Perhaps a market crash on a scale we have never witnessed. At that juncture, I still anticipate the ultimate resolution will involve yield curve control or similarly aggressive central bank interventions. If policymakers cap Treasury yields while inflation and fiscal deficits remain uncontained, gold prices could surge out of control. My long-term projection of $10,000 gold would appear far less absurd. Yet people miss the fundamental point: there is no bailout until there is something that urgently requires saving. That means pain comes first. Potentially tremendous pain. My investment posture has become straightforward. If the bond market stabilizes, we can re-evaluate. If yields keep rising from here, an immense stock market crash becomes increasingly difficult to avoid. Not due to apocalyptic doom-mongering, nor because Peter Schiff has been calling for it for 20 years. Because ultimately, regardless of how many financial gymnastics Wall Street invents, the math eventually wins.
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