Dear Reader,

Understanding the direction of our financial world is crucial, whether we’re aware of it or not. The global bond market, valued at approximately $133 trillion, predominantly consists of government debt, with the US leading, followed by China and Japan.

As it becomes clear that repaying these colossal debts is nearly impossible, bondholders are selling off their positions. They’re reallocating their funds to assets with better growth potential, specifically:

1. US Equity (Stock) Markets: Worth about $51 trillion.
2. Gold: Valued at roughly $14 trillion.
3. Bitcoin: With a market cap of around $1.35 trillion.

Of these, Bitcoin is unique due to its finite supply. When stock prices rise, companies often issue more shares, diluting shareholders’ value. When gold prices increase, mining intensifies, putting downward pressure on prices. However, Bitcoin has a hard cap of 21 million coins, with only 1.3 million left to be mined, making it a scarce resource.

As money shifts from bonds to these assets, bond prices drop, and yields rise. Higher yields make it more expensive for governments to issue new debt and for businesses and consumers to access low-interest loans, slowing economic activity.

Governments often respond by printing more money to buy bonds, a tactic that can dilute the value of the currency. This is done in complex and often obscure ways to prevent public awareness of currency devaluation.

Key Takeaways:

1. The traditional 60/40 stock/bond portfolio is losing its effectiveness in preserving and growing purchasing power.
2. To keep yields low, governments will continue to inflate the money supply, ensuring there are bond buyers.
3. The three noted asset groups (stocks, gold, and Bitcoin) are likely to remain in a secular uptrend as money flows away from bonds.

I hope this summary provides some clarity.

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On Healthy Relationships

Switching gears, here’s a simple guideline to gauge whether someone might be beneficial or harmful to your well-being:

An emotionally healthy person seeks to serve others, while an emotionally unhealthy person seeks to be served.

An emotionally healthy individual sees your thoughts, worries, and hopes and has the capacity to care for and encourage you. In contrast, an emotionally unhealthy person primarily sees what they can gain from you, lacking the capacity for genuine care.

Here’s to striving for emotional health and brighter days ahead for all.

Until next time,

A.L. Childers

Thought of the Moment: Great leaders eat last.