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Today’s Bullets:

• 🧮 How Do You Measure the Richest Person Ever?

• 💸 The Number Nobody Can Actually Spend

• 🔑 How the Ultra-Rich Turn Paper Into Cash

• 💰 What This Means for You and Your Money

Inspirational Tweet:

“Officially the first trillionaire in human history.”

That crossed my feed Friday morning, along with countless other posts with similar sentiment. In fact, it’s pretty much the only thing people on Twitter were talking about all day.

For the first time in history, a trillionaire has been minted, so to speak.

And it made me think about how someone becomes so insanely wealthy.

Forget a trillion dollars, let’s start with a billion.

I grew up middle class in a small town in upstate New York. Modest. Nobody that I knew had money like that, not anywhere close. Then, in my twenties, I landed on Wall Street. Suddenly surrounded by and trading in millions of dollars daily.

Eventually I began to see multi-millionaires and billionaires do things with money I had no idea were even possible. Things I didn’t know were necessary, until I saw for myself why people with that much actually need them.

Before we get into that, though, let’s step back and ask a few questions that may already be on your own mind.

Is a trillion today even bigger than the billion that crowned the first man ever to hit that mark, a hundred years ago? If almost none of that trillion is money Musk could actually spend, how does he live like the richest man alive? And perhaps the most important question on your mind: what does the way these people really handle their money tell you about handling your own?

All good questions. And ones we are going to answer, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a look at what the biggest number in history is really worth, with this Sunday’s Informationist.

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🧮 How Do You Measure the Richest Person Ever?

To begin, let’s go back to the last time this happened.

September 29, 1916. Newspapers across the country woke up and crowned a man the first billionaire in history. Not because he had sold anything or cashed a check. His shares of Standard Oil had simply soared, somebody did the calculation, and the number crossed ten figures for the first time anyone had ever seen.

His name was John D. Rockefeller.

Sound familiar? It should.

If you grew up like me, then you would have heard the phrase, “What do we look like the Rockefellers?” any time you asked for something that was not in the budget. More than a century later, the name still means rich beyond reason. That is how completely a single fortune can stamp itself onto a country.

Rockefeller was crowned the richest man alive by a moving stock price, on paper, before he sold a single share. A hundred and ten years apart, Musk on Friday and Rockefeller in 1916 earned their crowns the exact same way.

The Breakup That Backfired

Now, the wrinkle. Five years earlier, in 1911, the Supreme Court ordered Standard Oil broken into 34 separate companies, the most famous forced breakup in American business history. The government meant to cut Rockefeller down to size. Lo and behold, just like almost every single other government-driven intervention, it backfired, spectacularly.

The reason is worth understanding, because the same piece of market machinery is still in use today.

Rockefeller owned about a quarter of the old trust, so when it was split, he received a quarter of the stock in every one of the 34 pieces. Then something strange happened once those pieces traded on their own. Investors added them up and found the parts were worth far more than the whole had ever been.

A giant, opaque monopoly sitting under a legal cloud is hard to price, so the market discounts it. Cut it into clean, separately traded companies, and that discount melts away. Suddenly investors could see exactly what each piece was worth, and they bid them up. Within two years the combined value of the “Baby Standards“ had doubled.

By 1913 his fortune was pushing $900 million, and within a few years the press would hand him the billion-dollar crown we started with.

Wall Street has a name for what happened to him. Unlocking the sum of the parts. The very same argument gets made in boardrooms and antitrust fights to this day.

The breakup meant to humble him made him richer than ever.

oops.

The Rulers

Alright, back to the question of the day. Is Musk’s trillion actually bigger than Rockefeller’s billion?

Depends entirely on the ruler you use. And there are three of them, each one fairer than the last.

The Raw Ruler

A trillion is a thousand billions.

Inherently, you know this is a flawed comparison. Line the two up and Musk wins a thousand to one. Except that tells you almost nothing, because a 1916 dollar and a 2026 dollar are not the same animal, and neither are the two economies they lived inside.

The Inflation Ruler

Then adjust for it. Ask what Rockefeller’s billion would buy in today’s money. Britannica runs that math and gets about $30 billion, which makes Musk roughly thirty-five times richer.

Closer to fair, but still bent.

The dollar has fallen even harder than the official inflation figures admit, so that $30 billion is, if anything, light. But the bigger flaw is what it ignores: the economy Rockefeller loomed over was a tiny fraction of today’s.

The Economy Ruler

Now the only question that is truly apples to apples. How big was each man’s fortune against the entire economy of his day?

In 1916, the whole United States produced about $48 billion in Gross Domestic Product, or GDP. Rockefeller’s billion was therefore around two cents of every dollar in the country.

Today the US economy runs about $32 trillion in GDP. Musk’s trillion comes to roughly three cents of every dollar.

Good God, man.

In any case, two cents then. Three cents now. That is the honest comparison, and look how far it sits from where we began. The raw numbers scream a thousand to one. Inflation says thirty-five. Measured against the economy each man actually stood on, it is three cents against two.

Musk is still ahead. But three-to-two is a different universe from a thousand-to-one.

The dollar is a piece of chewed gum, at best. As it stretches and stretches, the “richest man in history” changes right along with it.

Even once you pick a ruler, though, two things stay true about Musk’s trillion that were never quite true about Rockefeller’s billion.

First, he can’t actually spend most of it.

And it is a fundamentally different kind of wealth than the kind that made Rockefeller rich.

Let’s walk through each of those to understand how and why, and then we will talk about how this all may relate to you and your own financial situation.

💸 The Number Nobody Can Actually Spend

Start with that first claim. He cannot spend most of it.

To see why, you have to know where the number even comes from. Because nobody counted Musk’s money on Friday. They calculated it. A net worth headline is a math problem, and once you can see the equation, the whole illusion comes apart in your hands.

Where the Number Comes From

Every net worth figure you have ever read rests on one piece of arithmetic. Take the price of the last single share that traded, and multiply it by every share a person owns. That is the entire formula. Wall Street has a name for it: mark to market. You take whatever the market last paid, and you mark the whole pile to that price.

Watch it happen in real time on Friday.

Before the opening bell, SpaceX was a private company with no public price at all, and the trackers pegged Musk somewhere in the high hundreds of billions. Then SpaceX shares, ticker SPCX, started trading. They priced at $135, opened around $150, and by the close had run to $160.95.

Musk owns roughly 4.8 billion of those shares.

Do that multiplication and, by CNBC’s tally, the listing piled more than $180 billion onto his fortune in a single session. He crossed a trillion dollars somewhere in the middle of a Friday afternoon.

Now ask the question that actually matters. What did he do that day to earn that $180 billion?

In certain corners of Washington, the answer is “nothing,” and the follow-on is that a number this size is really just untaxed cash the government ought to be helping itself to.

Senator Elizabeth Warren’s Ultra-Millionaire Tax Act, back on the table this spring, would tax a billionaire’s net worth directly, the paper figure itself, whether a single share has been sold or not.

It’s a seductive idea to gain votes, right up until you understand what the number actually is.

Musk didn’t pull that $180 billion out of a vault, because there is no vault.

The market simply slapped a public price tag on a company he already built, the calculator multiplied that tag across his pile, and his number leapt. He sat there and watched it happen, the same as you or I would.

Here’s an important part of that tally.

The price that re-marked all 4.8 billion of his shares was set by the last shares to trade. Maybe a few million changed hands at $160.95. That one price then got stamped onto every share behind it, including the billions that never moved an inch all day. The marginal share, the very last one to sell, sets the official value of every share standing behind it.

You already know this feeling. Open your brokerage app tonight. The number it shows you runs on the exact same metric: the last price someone paid for the stock, multiplied by however many shares you happen to hold. You didn’t sell anything. Nobody handed you cash. A screen multiplied two numbers and called it your wealth.

Musk’s trillion is your brokerage balance with a few more zeros, built the very same way.

Well, let’s be honest. A lot more zeroes.

Try to Cash It In

Which leads straight to the trap. That marked price only holds as long as nobody tests it.

Picture the other side of every trade. At any given moment, a stock has only so many buyers standing there willing to pay near today’s price. Traders call that market depth: the stack of real, live bids waiting in the order book. Sell a hundred shares and you barely scratch the top of that stack. The price doesn’t budge. Sell ten thousand and you start eating down through it.

Now try to sell 4.8 billion.

There is no wall of buyers that deep. Not even in the neighborhood.

No. You blow through every bid sitting near $160, then every bid below that, and below that, chasing the price down with your own selling the entire way. The act of cashing out destroys the very price your trillion was marked at. By the time you’d unloaded any serious chunk of it, the shares still in your hands would be worth a fraction of where they started.

And it gets worse, simply because of who he is. Musk heading for the exit is not a quiet transaction. The moment the market so much as smells him reaching for the door, every other holder sprints for it first.

Bloomberg put it plainly this week: he cannot cash this fortune out like a checking account, and even a hint of him dumping SpaceX or Tesla could crater the price overnight.

I concur.

The trillion, then, is real and unreal at the same time.

Real, because the arithmetic is honest and the shares genuinely exist.

Unreal, because the figure survives on one condition only, that he never seriously tries to turn it into money. The largest paper fortune ever printed, holding its shape right up until the instant someone asks it to become cash.

A Different Kind of Rich

Here is where Musk’s trillion and Rockefeller’s billion part ways for good.

Rockefeller’s wealth paid him. Standard Oil and the 34 companies that came out of it were gushers of cash, and they sent him a steady river of dividends, his cut of the profits, mailed out quarter after quarter whether the share price climbed, sank, or sat dead still. He could light cigars with the cash flow and never once touch the underlying stock. His fortune was a claim on oil already pumped, refined, and sold. Money that existed, in hand, today.

Now, a fair objection. Of course Musk gets paid. Salary, bonus, the works, like any chief executive.

Let’s split two things that get tangled together. A dividend is a return on ownership, the company passing its profits back to everyone who holds the stock. A salary is pay for the job. Most executives collect both.

Musk collects neither in cash. And this is where he turns out to be the exception that proves the whole point.

Neither company pays a dividend. SpaceX never has, and Tesla has never paid a single cent of one in its history.

As for his actual paycheck, that Tesla package shareholders approved back in November, the one the headlines breathlessly call a “trillion-dollar pay deal,” is built entirely out of stock options, twelve tranches of them, with no salary, no cash bonus, and no time-based stock attached (it’s right there in Tesla’s own filings).

They pay out only if he hauls Tesla’s market value from roughly $1.5 trillion toward $8.5 trillion over the next ten years. SpaceX ran the identical play this year, handing him a billion fresh shares that vest only if the company is worth $7.5 trillion and there are a million people living on Mars.

Yes Mars. I am not making that up.

Which means the richest man in history draws no dividend and takes essentially no cash salary. Every last dollar of that trillion, his “pay” very much included, is made of the same stuff: equity. Shares. The exact paper we just spent this whole section watching him fail to turn into spendable cash without setting fire to it.

And the reason these companies hand him stock instead of a fat dividend check comes down to what kind of companies they are.

A growth company exists to be fed.

SpaceX pulled in $18.67 billion in revenue last year, up a blistering 33%. And the more it sold, the more it lost. As the chart shows, the losses on its core business widened right alongside the revenue, from under a billion dollars to nearly three billion in a single year. The faster it grows, the more cash it swallows.

At least for now.

In direct contrast, Rockefeller’s billion was a claim on a business minting money right then and handing it over. Musk’s trillion is a claim on what his companies might someday become, a wager that the future shows up and pays.

One man owned a printing press for cash. The other owns a brilliant, ravenous promise.

That distinction is going to matter enormously when we get to your own money in a bit. Tuck it away for now.

Which leaves us with a strange knot. The richest man who has ever lived sits on a fortune he can’t spend without wrecking it, attached to companies that don’t send him a dime to live on.

Then how on earth does he, or anyone with wealth shaped like his, actually live?

Because they certainly do. The ultra-rich buy the yachts and the islands and the influence without ever, as far as the public record shows, selling the golden goose out from under themselves. They cracked this exact riddle generations ago, and the answer is quieter, and a good deal stranger, than almost anyone would guess.

Let’s walk into that room next.

🔑 How the Ultra-Rich Turn Paper Into Cash

Welcome to the room.

This is the part I have watched up close for most of my career, and it is the answer to the riddle we just tied off. A man with a trillion dollars he cannot sell, attached to companies that pay him nothing, still buys the islands and funds the rockets. How exactly?

He borrows.

Buy, Borrow, Never Sell

The whole strategy fits in three words, and the estate lawyers have framed them so effectively, they have built entire, and incredibly lucrative, careers around them.

Buy, borrow, die.

Buy assets that grow. Borrow against them when you need cash to live. Never sell if you can possibly help it, and let the next generation sort out the rest.

The genius hides in that middle word. Borrow.

When you sell a stock that has climbed, you hand the government a slice. Sell a billion dollars of stock you bought cheap, and a couple hundred million can go straight to the IRS as capital gains tax, gone, before you have spent a dime of what is left.

A loan plays by entirely different rules, and this is the hinge the whole game swings on. Borrowed money comes to you tax-free. You have to pay it back, so the law treats it as a debt, and a debt is not income. No gain, no tax. You can borrow a hundred million dollars against your shares tomorrow morning and owe the Treasury exactly nothing on it.

You keep the asset. You pocket the cash. And the taxman waits at a door you simply never walk through.

As for the die part, that is the closer. Under current US law, when assets pass to your heirs, their cost basis resets to the market value on the day they inherit. A lifetime of gains that was never taxed, because it was never sold, resets for tax purposes. The estate clears the outstanding loans, the heirs keep the asset, and the capital-gains bill nobody ever paid quietly disappears.

That is the whole reason the strategy ends on that particular word.

The Loan That Lives on Your Shares

Here is the actual machinery, the part everyday people don’t get a chance to see.

The vehicle has a name: a securities-backed line of credit, an SBLOC for short. The private banks dress it up with grander titles for their biggest clients, pledged asset lines and the like, but it’s essentially the same animal.

Here’s how it works:

You pledge your shares to the bank as collateral → the bank opens a credit line against them, and → you draw on it like an enormous checking account

The stock never leaves your name. You still own every share, still keep any upside, still hold the votes. The bank simply gets a claim on them if you stop paying.

How much will they lend?

A portion of the collateral’s value, set by the loan-to-value ratio. Against a big, liquid, blue-chip holding, that amount can run well north of half the value. The richer and more diversified you are, the better your terms, because the bank sees a safer pile to lend against.

Here’s the key, though.

The first dollar is always the hardest to borrow. After that, money gets cheap.

You want to see who runs this play better than almost anyone alive? The man this whole letter is about.

Musk has used his own stock as a cash machine for years, right out in the open in Tesla’s filings. Back in 2020, the proxy showed he had borrowed roughly $515 million against 265 million Tesla shares, which had a market value on that date of $52.9 billion, more than 100 times the amount of the loans (per the Institute for New Economic Thinking’s read of the filings).

Sounds like a lot to borrow until you do the math. Just look at the ratio.

A half-billion-dollar loan, secured by fifty-three billion dollars of stock. The loan is a rounding error against the collateral behind it.

And he continues to run the same playbook. Tesla recently disclosed Musk had pledged roughly a third of his Tesla shares to secure personal loans, with the board capping what he can actually draw against them at the lesser of $3.5 billion or 25% of the value of the stock.

And he funds his life the same way he built his fortune. Without selling a thing.

The Engine Underneath It All

Now the piece that turns a clever tax maneuver into something close to a wealth machine. Longtime readers, you can already feel where this is headed.

Debasement.

When you borrow, you lock in a debt denominated in today’s dollars. A fixed number.

The melting ice cube itself.

Like I have said before, it does not matter who is in office, who is at the helm of the Fed, the reality is the math. And the math is ugly.

Year after year the dollar gets debased, quietly bleeding purchasing power, and that fixed debt you owe shrinks right alongside it in real terms. You end up repaying tomorrow’s cheaper dollars on a loan struck in today’s more valuable ones.

See, the very same debasement that eats away at the dollar tends to lift the price of the scarce, real asset you borrowed against. The stock. The Bitcoin. The land, the building.

Look at what that combination does. Your debt melts. Your collateral climbs. You are, in plain terms, short the currency and long the real thing, and the spread between the two is yours to keep.

That is the quiet engine humming under a great deal of generational wealth: a loan against an appreciating asset, serviced by a steadily depreciating dollar.

And once you get to a certain level of wealth, banks will just start to lend to you based on your balance sheet alone. It’s called an unsecured line of credit. I watched my hedge fund boss draw from an unsecured line of credit to the tune of over $20 million. No assets pledged against it, no collateral. Just the strength of his personal balance sheet and a promise to pay it back.

But of course he was also borrowing against actual securities and investments in private equity. Massive amounts of collateral to play with and borrow against.

God only knows what that total tally was. I wasn’t privy to that one.

What a world, eh?

The Catch, Because There Always Is One

Before anyone files this under free lunch, hear the other half, because it is the half that wrecks people.

You’ve heard me say it before. Loud and unabashed.

Leverage cuts in both directions.

The entire structure rests on the collateral holding its value. Let the asset fall far enough and the bank issues a margin call: post more collateral, or we sell yours to cover the loan, right now, at the worst possible moment, straight into the very weakness that triggered the call.

It is not hypothetical, even for Musk.

When Tesla stock has slid hard, a deep enough fall could push his pledged shares toward exactly that margin-call line, the same trapdoor that sits under anyone running this play. And for all his aversion to selling, when he needed real money to close the Twitter deal, even he had to unload billions of dollars of Tesla stock to get it done. The master of never-sell, forced to sell.

That, my friends, is the bill leverage always eventually sends.

Hear me clearly on what this is. It is the machine the wealthy actually use, laid bare. Not a recommendation. I am not telling you to phone your broker about a line of credit, and that margin-call story is precisely why.

I am showing you how the gears turn, so that the next part, the part about your money, lands with both eyes open.

Because the surprising thing is how much of this very same machine may already be sitting in your own life. You might even be running a piece of it without realizing.

Let’s go find it.

💰 What This Means for You and Your Money

Start with the biggest thing most people own. The roof over your head.

If you own a home with a mortgage, you are already running a small, quiet version of the exact play we just watched the billionaires run.

Look at the pieces.

You bought an asset that tends to appreciate. You borrowed against it, the mortgage, instead of paying all cash. And you have no intention of selling it to fund your life. Buy, borrow, don’t sell.

Sound familiar?

Now add the part that turns it into an engine.

Your mortgage is very likely a fixed number, locked at the rate you signed years ago. The dollar, as we have established, melts relentlessly. Every year it gets debased a little more, and every year the real weight of that fixed payment gets a little lighter. The $2,500 you owe the bank this year is the same $2,500 you will owe in 2034, except 2034 dollars will buy noticeably less.

You are repaying a yesterday-sized debt with tomorrow-sized dollars.

Meanwhile, that same force tends to push the price of the house itself up over the years.

Look at what you pulled off, quite possibly without ever thinking about it. Your debt is quietly melting. Your asset is quietly climbing. You, the ordinary homeowner with a thirty-year fixed, are short the dollar and long a real asset, the very same position Musk holds with his pledged shares.

Smaller, yes. The same machine, though. Almost exactly.

Now, the usual caution, and you have heard me say it a hundred times. I cannot and will not tell you what to do with your own money. My job here is to help you see the dollar clearly. Because the very same debasement you feel as a pickpocket at the grocery store wears a second face. On your savings, it is a slow leak. On a fixed-rate debt held against a real asset, it works quietly in your favor.

Learning to see both faces at once is the whole point.

Two Questions to Keep in Your Pocket

Set Musk aside for a moment. The reason we walked through any of this is so that the next time a giant number lands in front of you, yours or anyone else’s, you can take it apart yourself. Two questions do most of the work.

First. What is the ruler?

We opened this letter learning that Musk’s trillion and Rockefeller’s billion only mean something once you choose what to measure them against. Raw dollars said a thousand to one. Inflation said thirty-five to one. Set against the whole economy each man stood on, it came down to three cents against two.

Same two men. Three completely different verdicts.

Hold your own numbers to that same test. A portfolio that “doubled” over a decade did what, exactly, after inflation? A gain of 4% in a year when inflation ran at 5% moved you which direction, honestly?

What I’m saying is, the number on the screen tells you very little on its own. The ruler you measure it against tells you the rest.

Second. What is it a claim on, and could you actually spend it?

Every asset you own is a claim on something. A dividend stock or a rental property is a claim on cash showing up today. A growth stock, a stake in a private company, even Bitcoin, those are bets on a bigger tomorrow. Each has its place.

Knowing which one you are holding tells you whether it will ever feed you or only ever grow.

Then the harder half, the half Musk’s trillion just taught us.

Could you turn it into real money if you had to, without wrecking the price on the way out the door?

A few hundred shares of Apple, easily. Your house, slowly and expensively. A large, concentrated position in your own company’s stock, maybe not without the market moving against you the whole time you sold. Wealth on paper and wealth you can spend are two entirely different animals, and the distance between them has humbled people far richer than you or me.

Back to the Crown

Which brings us right back to where we started.

Is Elon Musk really the richest human being in history?

The honest answer is that there is no clean answer, and now you understand exactly why. Line up enough rulers and the question splinters into a dozen different ones.

By raw dollars, he laps the field and everyone who ever drew breath.

Against the economy he stands on, he sits a whisker ahead of a man from 1916.

And measured by what he could actually walk into a bank and spend tomorrow, the honest figure is a small slice of that trillion, the very same bind Rockefeller was in a century before him.

The crown was only ever the hook that got us in the door.

What you carry back out is the better prize. You can read a giant number now and put the right questions to it. You understand why the richest man alive borrows rather than sells, and why the same dollar that nibbles at your savings can quietly help retire your mortgage. And you can look at your own modest balance sheet and recognize the very same machine, turning slowly, that runs the largest fortunes on earth.

Nice and easy, as always.

Which brings me to the short list of things I will be watching in the days ahead.

👀 What I’m Watching This Week

A quick word before the list. Every Sunday, paid subscribers find this same forward look in their inbox: the handful of things I'm tracking, and why they matter for your money. Today it's open to everyone. Glad to have you reading it.

• Warsh’s first meeting, the decision Wednesday at 2pm. The rate is a near-lock hold at 3.50 to 3.75%. What matters is everything riding alongside it: the fresh dot plot, the new projections, and Warsh’s first press conference as Chair. Does the plot push the first cut out to 2027, or leave September open? His tone sets the table for the rest of the year.

• The 20-year bond auction, Tuesday. Long-end supply landing the same day the Fed sits down and Tokyo reports. The 20-year is a clean stress test of real appetite for long US debt. I’m watching the tail, the bid-to-cover, and the foreign bid. A soft auction into two central bank meetings is how a long-end wobble starts.

• The Bank of Japan, deciding the day before the Fed. The bigger story for our long end may be in Tokyo. The BOJ meets June 15 and 16, its scheduled checkpoint on how fast to taper its own bond buying. With the yen pinned near 160 and the 10-year Japanese Government Bond (JGB) near 2.6%, just off an all-time high, the risk is simple: climbing Japanese yields pull Japanese capital home out of US Treasuries, thinning demand for our debt right as we sell that 20-year. Watch the yen and the JGB.

• The consumer and housing, Tuesday into Thursday. The last real read before the Fed speaks: May retail sales around Tuesday, housing starts just behind. Retail sales show whether the consumer, nearly 70% of this economy, is still spending. Housing shows what high rates are doing to the corner we spent this letter inside. Jobless claims land Thursday, the last data before Friday’s holiday.

• The paper trillion itself. A fitting close. This is SPCX’s first full week trading publicly, the first real price discovery for the stock that minted the world’s first trillionaire. Does the mark hold above a trillion, or do a few red days hand the crown back? Either way, a live lesson in what we just covered: paper wealth is only ever worth the last price someone paid. An observation, plain and simple.

That's it. I hope you feel a little bit smarter knowing what Musk's trillion is really worth, why he can't simply spend it, and how the world's biggest fortunes get borrowed against, never sold.

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Talk soon,

James✌️

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🙌 One topic. Exposed and explained so you can make better decisions with your money. Like a simple walk down Wall Street.

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DISCLOSURE

As many of you already know, I co-manage the Bitcoin Opportunity Fund, and I sit on the board of Strive Inc (NASDAQ: ASST), a Bitcoin treasury company. The fund and I personally own Bitcoin, along with shares and securities of several companies that are known as Bitcoin Treasury Companies, including Strategy (MSTR), and Strive (ASST).

And none of what follows is investment advice. I cannot tell you what to do with your money, and I never will. Everything here is for education, and for thinking a little more clearly about the world. The decisions are yours. Do your own work, and where it counts, talk to your own advisor.

Now, let’s get to it.

Today’s Bullets:

• 🔋 What the Power Law Actually Is

• 🧮 The Math Behind the “Support” Line

• 📉 Where the Floor Really Sits (And What a Wick Below It Means)

• 🤔 How I Use the Power Law (And What I See at $60K Bitcoin)

Inspirational Tweet:

“The bottom is in.”

That went out to the timeline a couple of days ago, right before this latest leg down.

That kind of bold call can wind up looking prophetic or foolish. Of course, the comments on that post are polarizing, either in support or with criticism. The worst of them exclaim that the Power Law just snapped.

It’s broken, totally invalidated or just about to be...

The one important mathematical floor under this whole asset has finally given way.

So which is it?

I was watching my screen Friday afternoon when Bitcoin printed a five handle for the first time since February. Fifty-nine thousand, one hundred and eleven dollars. It clawed its way back over sixty within minutes, and as I write this it sits at $61K, down over 3% on the day and more than half off the high it set last October.

Ouch, indeed.

Now, there is no shortage of ways to think about where Bitcoin “should” be. S-curves. Exponential adoption curves. Stock-to-flow, may it rest in peace. Metcalfe’s law. Rainbow charts. Take your pick.

But there is one model I keep coming back to, year after year, drawdown after drawdown. If you’ve been following me, you’ve heard me talk about it before.

The Bitcoin Power Law.

And the question burning up my feed today, the one filling my inbox, the one maybe sitting in the pit of your stomach right now, is a simple one.

Has the Bitcoin Power Law been broken?

Some say we are testing the floor. Some say we have already fallen through it. Either way, the same fear hangs over all of it. If the Power Law fails, the long-term map a lot of us have been navigating by is suddenly worthless.

So is it true? Has sixteen years of almost eerie consistency finally cracked? And if Bitcoin is sitting here at sixty grand, scary as that feels, what is the model actually telling us about where we are and what comes next?

All good questions. And ones we are going to answer, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a clear-eyed look at the one Bitcoin model I trust, and whether today’s sell-off broke it, with this Sunday’s Informationist.

Partner spot

After 17 years, bitcoin is still widely misunderstood. You get it, but what about the bitcoin blind spots you don’t know you have?

Unchained just released Rethink Bitcoin → a free interactive course covering the protocol, savings, custody, and network effects across 12 lessons and 21 interactive figures. This is the kind of thing you wished existed when you were learning, and the new best resource for those just beginning the journey.

For the friend or family member who won’t sit through 12 lessons, we partnered with Atlantic Re:think to make a short film for the curious featuring Natalie Brunell, Natalie Smolenski, and our CEO Joe Kelly. Not the crypto story. The bitcoin story.

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🔋 What the Power Law Actually Is

Pull up a normal Bitcoin price chart and it looks like an emergency room EKG. Spikes. Crashes. Flatlines. Then off it goes again. Sixteen years of what appears to be pure chaos.

Now change one thing. Take that same chart and compress the price axis onto a logarithmic scale.

I know, I know. Before your eyes glaze over with the thought of math on a Sunday morning, just stick with me for a moment

The Log Scale

A log scale simply measures percentage moves instead of dollar moves.

Here’s the easiest way to think about it. On a normal chart, every tick up the price axis represents the same number of dollars. So Bitcoin going from $100 to $1,000 looks like a tiny blip at the bottom of the screen. Bitcoin going from $10,000 to $100,000 looks like a gigantic spike. Both are 10x returns, but the second one looks massive compared to the first one.

Like so:

And yeah, like a patient waiting for a heart transplant.

Log scale corrects for that.

Every step up the axis represents the same percentage gain. Bitcoin going from $1 to $10 covers the same vertical distance as Bitcoin going from $10,000 to $100,000. Because to your wallet, they were the same thing. You multiplied your money by ten either time.

When we switch that chart to log scale, the whole picture changes. Now it's measuring percentage moves, the way your wallet actually feels them.

Like so:

By switching to log scale, the chaos starts to settle.

And then, when you plot time on the x-axis in log scale too, all that violence resolves into something almost calm. A price chart that seems anchored to a single straight line, climbing up and to the right.

That is the Bitcoin Power Law.

All that mania and volatility falls into line along a single rising trend, with a tightness that is incredibly rare in financial markets.

There’s a number we use to describe how well a line fits the data, called R-squared. Most market “models” would kill for an R-squared of 0.7. Bitcoin’s Power Law sits north of 0.95, across sixteen years and six orders of magnitude of price.

In plain English: for all the drama and declarations of death, Bitcoin has been climbing the same staircase the entire time.

The math is simple to state.

Price grows in proportion to time raised to a power, somewhere around the sixth. You do not need to love algebra to feel the point. Bitcoin’s price has scaled with its age in a strikingly regular way, the same way a lot of things in nature do.

And that is the part that hooked me years ago. The physicist who formalized this, Giovanni Santostasi, showed that the same kind of pattern shows up all over the natural world. The way a city’s infrastructure scales with its population. The way an animal’s metabolism scales with its body size. Bitcoin, it turns out, behaves less like a stock and more like a growing network. Or a growing organism.

Why? One word. Adoption.

As more people, more companies, and now even governments come to hold Bitcoin, the network grows, and the price grinds its way up that long, predictable curve. And every single time it has crashed, and it has crashed violently, again and again, it has eventually fought its way back to the line.

Incidentally, I broke this all down in a full issue back in 2024, charts and all. If you want the deep version, it’s right here: What is The Bitcoin Power Law?

For today, hold onto one thing above all else. The Power Law is a long-term trend. A map of the path Bitcoin has walked, and the gravity it keeps falling back toward. Next Tuesday lives somewhere else entirely.

Which brings us back to the question setting the whole timeline on fire.

That straight line, the one Bitcoin has more or less tracked for sixteen years, is the Power Law. One line. A trend. So when everyone screams that we are “breaking support,” the first thing to nail down is what that “support line” even is. Is it part of the Power Law at all, or something somebody bolted on top of it?

Because the answer is what separates an ordinary Bitcoin scare from a real emergency. It decides whether sixty grand is Bitcoin standing on the floor or falling clean through it, where that floor actually sits, and whether the one model so many of us navigate by is truly cracking, or doing precisely what it has done for sixteen straight years.

So let’s settle it.

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A quick disclosure before we begin.

You know I never hide the ball, so here it is, plainly. I co-manage the Bitcoin Opportunity Fund, and I sit on the board of Strive Inc (NASDAQ: ASST), a Bitcoin treasury company. I personally own Bitcoin, along with shares and securities of several companies you will see named in today’s letter, including Strategy (MSTR), Strive (ASST), and the preferred shares STRC and SATA. The fund holds some of these names too.

So when I write about Bitcoin, or about the treasury companies built on top of it, read it knowing I have real skin in this game. I want that on the table before you read another word.

And none of what follows is investment advice. I cannot tell you what to do with your money, and I never will. Everything here is for education, and for thinking a little more clearly about the world. The decisions are yours. Do your own work, and where it counts, talk to your own advisor.

Now, let’s get to it.

Today’s Bullets:

• 📉 The Great Disconnect

• 🔥 The Hot Ball of Money

• 💎 What the Strong Hands Are Doing

• 🦅 Where This Goes From Here

Inspirational Tweet:

Unless you’ve been completely unplugged from investing and the markets for the last six months, you know that just about every major asset on earth has been on an absolute tear.

The Nasdaq, S&P 500, Mag 7s, gold, silver, Korean stocks, Japanese stocks…you name it, it’s up.

Everything, of course, except Bitcoin.

That asset is actually down nearly 40%.

And like today’s inspirational post from Bull Theory says, people are starting to wonder what the heck the problem is with Bitcoin.

Believe you me, I’ve had moments of wonder myself. Let’s be honest, watching this thing bleed for six straight months has been a bit exhausting.

Bloomberg headlines read like a coroner’s report. Twitter/X replies are wall-to-wall people calling for zero or declaring it a Ponzi-scheme ready to implode. Even some of the battle-worn diehards are quietly wondering if this time really is different.

So let’s say the quiet part out loud. Why is Bitcoin the only thing in the red while the entire world rips higher? Is someone or some funds manipulating it? Or worse, is it actually broken? And the question underneath all of it, the one that’s actually keeping you up at night: if you own it, should you be worried?

All good questions, and ones we will answer, nice and easy as always, here today.

So, pour yourself a big cup of coffee and settle into your favorite seat as we dig into and diagnose just exactly what has been going on with Bitcoin in this Sunday’s Informationist.

Partner spot

After 17 years, bitcoin is still widely misunderstood. You get it, but what about the bitcoin blind spots you don’t know you have?

Unchained just released Rethink Bitcoin → — a free interactive course covering the protocol, savings, custody, and network effects across 12 lessons and 21 interactive figures. This is the kind of thing you wished existed when you were learning, and the new best resource for those just beginning the journey.

For the friend or family member who won’t sit through 12 lessons, We partnered with Atlantic Re:think to make a short film for the curious featuring Natalie Brunell, Natalie Smolenksi, and our CEO Joe Kelly. Not the crypto story. The bitcoin story.

Join the Newsletter

📉 The Great Disconnect

To begin our Bitcoin diagnosis, we need to go back to the date that I believe was the start of it all.

You guessed it. October 10th. At the start of that day, Bitcoin was trading at $121,717. By the end of the day, it had crashed to $104,998 before settling to close at $113,014.

Good golly, Miss Molly.

We will get to what happened that day and the reasons behind it, but first let’s look at what has happened since.

Not a whole lot of winning, that’s for sure.

I mean, today Bitcoin is sitting at $73K. That’s a drop of about 40% in just over six months. Measured all the way from the top, the peak-to-trough drawdown is about 52%.

Now set that next to everything else.

Gold, higher. Silver, even after its pullback has been on an absolute rocket. The Nasdaq and the S&P, printing new records. Small caps, the Mag 7, Korean and Japanese stocks, all of it green, and some of it green in a way we haven’t seen in years.

One red line of Bitcoin. The rest of the screen, green.

And you know how it works in investing, especially with retail and mainstream media. The negativity eventually feeds on itself. Every down week becomes a whole new batch of “Bitcoin is dead” headlines. Every bounce that fails becomes fodder for the critics and skeptics. Yahoo and CNBC wheel out the same guy who’s been calling Bitcoin to zero for as long as anyone can remember.

You know who I’m talking about. This guy.

In any case, we’re not going to get into the gold versus Bitcoin debate here. We know exactly what Peter’s motivation has always been, and we know he’s just full of Schiff.

But Bitcoin has given him plenty of ammo lately. The lower it goes, the louder the bears get, the heavier the fatigue sets in, and the more the good information gets buried under garbage takes. A whole lot of disinformation dressed up as analysis. And right now, it’s everywhere.

But step back from the noise for a second.

Price is kind of a funny thing. It tells you exactly what happened and absolutely nothing about why. A 40% collapse and a 40% rotation look identical on a chart. They feel identical in your gut. Telling the two apart takes some skill and usually some experience.

It’s a bit of a game, really.

Because money has to go somewhere. It never sits still. When Bitcoin fell 40% while gold, silver, and every AI stock on the planet went vertical, that same pool of capital was doing exactly what it always does. Moving. Chasing. Piling into wherever the game looked hottest.

So before we even get to whether Bitcoin is broken, we have to answer a much simpler question first.

Where did all that money actually go?

When we answer that, we will have a much better idea whether this is something to genuinely worry about, or just something to wait out.

So let’s dig a bit, shall we?

🔥 The Hot Ball of Money

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Today’s Bullets:

• 🦅 What Warsh Just Walked Into

• 💥 The September Paradox: When the Fed’s Lever Broke

• 🚪 The Trap Doors Beneath His Feet

• 💰 What It Means for Your Money

Inspirational Tweet(s):

FED HIKE ODDS JUMP.

That headline blasted across financial Twitter Friday morning. Literally the same moment that Justice Clarence Thomas swore in Kevin Warsh as the new Chair of the Federal Reserve, in the East Room of the White House.

Translated: “Rate hikes are back on the table for the first time in over a year.”

Interesting.

Now look at this one.

That was the President of the United States, on the very same day, at a campaign rally in Suffern, New York.

“Housing’s all about interest rates.“

“Get the interest rates down, everybody’s going to be very, very happy.“

Rates coming down “very quickly.”

Same day, two diametrically opposed opinions blasted from opposite directions.

The market pricing hikes. The President promising cuts. A new Fed Chair sworn in between the two of them, the Bible still warm from his oath.

If you have been paying attention to bond markets or reading The Informationist, you are well aware that this rate hike conversation has been building for months. Quietly at first, pretty much ignored. Then the data turned and inflation reaccelerated. Oil spiked. And now, the possibility has gone from fringe theory to deeply real.

And now a few questions are hanging over many Americans this morning.

If Warsh actually pulls the trigger from here, what happens to my mortgage? My credit card APR? My home value, investment portfolio? My 401(k)?

And maybe the biggest question of all:

Does a Fed hike even still work the way it used to?

All good questions, super important. And ones we are going to answer, nice and easy as always, here today.

So, pour yourself a big cup of coffee, and settle into your favorite seat for a candid look at exactly what would happen if the Fed actually raises rates from here with this Sunday’s Informationist.

Partner spot

After 17 years, bitcoin is still widely misunderstood. You get it, but what about the bitcoin blind spots you don’t know you have?

Unchained just released Rethink Bitcoin → — a free interactive course covering the protocol, savings, custody, and network effects across 12 lessons and 21 interactive figures. This is the kind of thing you wished existed when you were learning, and the new best resource for those just beginning the journey.

For the friend or family member who won’t sit through 12 lessons, We partnered with Atlantic Re:think to make a short film for the curious featuring Natalie Brunell, Natalie Smolenksi, and our CEO Joe Kelly. Not the crypto story. The bitcoin story.

Join the Newsletter

🦅 What Warsh Just Walked Into

As we get into this today, try to picture the scene Friday morning.

The East Room of the White House. Two Supreme Court Justices in attendance, Clarence Thomas administering the oath and Brett Kavanaugh looking on from the audience. Jane Lauder Warsh, the new chairman’s wife, watching from the front. President Trump making the introductory remarks.

The most eyebrow-raising line from Trump, given his track record of publicly hammering Jerome Powell to cut rates? “want Kevin to be totally independent... Don't look at me, don't look at anybody, just do your own thing...”

Then Warsh took the podium.

His first words struck a particular note. Humble. Serious. The opening of a man who appeared to understand exactly what he was being handed:

“These duties are now mine, Mr. President, because of the trust you have placed in me. I accept them with gratitude and will strive every day to serve our fellow citizens well.”

Then he laid out his guiding philosophy, the lens through which he intends to run the most powerful central bank in the world:

“Our mandate at the Fed is to promote price stability and maximum employment. When we pursue those aims with wisdom and clarity, independence and resolve, inflation can be lower, growth stronger, real take-home pay higher, and America can be more prosperous.”

A few key words in there.

Price stability. Independence. Resolve. Lower inflation. Stronger growth.

That is the same language Paul Volcker used. Serious. Deliberate. Hawkish to its core.

By the close of trading Friday, Fed funds futures were pricing a 50 to 60 percent probability of a rate hike by early 2027. Better than a one-in-three chance before this year is even out.

It appears that the market heard Warsh exactly the way he intended to be heard.

But here is where things get a bit strange.

Look at what the institution Warsh just inherited has actually been doing for the last six months. (Note: this is not on Warsh. He literally got there yesterday. He has done none of it.)

Quantitative Tightening (the Fed’s process of letting bonds roll off its balance sheet and shrinking the money supply) formally ended on December 1, 2025. That was Jerome Powell’s last meaningful call before stepping toward the door. After nearly three years of unwinding, the Fed stopped letting bonds mature without replacement.

Then it went further.

On December 12, 2025, the Fed started actively buying T-bills again. $40 billion a month.

Ah yes, a new need for stealth liquidity always comes with a new acronym.

This one is RMP, short for Reserve Management Purchases.

Nifty.

In any case, the pace was trimmed slightly in April. But combined with mortgage-backed security reinvestments, the Fed’s balance sheet has still been growing by roughly $40 billion a month, every single month, right up to today.

That’s right.

For the last six months, while the Fed was holding the policy rate steady and lecturing the country about being patient on cuts, the balance sheet was growing. Quietly. Mechanically.

Now, before the word police come at me here, it is true that RMPs are not QE.

I agree. The distinction is fair.

Reserve Management Purchases exist to maintain bank reserves at “ample” levels, a lesson the Fed learned the hard way in September 2019, when reserves drained too low and caused great stresses on debt and Treasury markets.

The intent of RMPs is different from QE. The transmission is different. The Fed will tell you, loudly and accurately, that RMPs are just plumbing or maintenance, not stimulus.

Sure, sure, sure.

But the point that survives it is the one that matters.

See, even when the Fed is not trying to ease, even when the operation is purely technical, the balance sheet still grows. The institution has become a structural net buyer of Treasury debt just to keep the system functioning.

I do believe that Warsh has entered the arena with the best intentions, a clear philosophy, and a serious mandate. He also walked into a Fed that has been quietly expanding for six months running, before he ever set foot in the chair.

And that contradiction is about to get worse. Much worse.

Now we have to ask a question.

If the Fed has to grow its balance sheet by $40 billion a month just to keep money markets running under calm conditions, what happens when real stress arrives?

To answer that, we have to go back to one very specific Wednesday in September 2024. A Wednesday when the Fed cut interest rates by half a percentage point. The biggest opening move in any cutting cycle since the 2008 financial crisis.

And the bond market did something it was not supposed to do.

What happened that Wednesday, and across the hundred days that followed, may be the single most important event in US monetary policy this decade.

Why?

Because it told us, in real time, that the Fed’s most powerful tool no longer reaches the part of the curve that matters.

And it told us, by extension, that whatever Kevin Warsh does next, he is doing it with a broken lever. One that may do the exact opposite of what is expected of it.

💥 The September Paradox: The Fed’s Lever Broke

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Today’s Bullets:

• 🌍 The Synchronized Sell-Off

• 🗾 The Tokyo Comfort Blanket

• 🔀 Where the Japan Comparison Falls Apart

• 💱 The Real Adjustment Valve

• 💰 What It Means for Your Money

Inspirational Tweet:

Imagine showing up for your first day as CEO at a new job. You walk in, figure out where your office is, find the coffee machine, chat with your support staff, maybe start meeting your executive team.

Settled in now, you fire up your screens and immediately see twelve sovereign bond markets across three continents all in sync, all collapsing in real time.

But it’s no longer someone else’s problem. It’s your problem.

Because this is the US Federal Reserve, and you’re the new chair.

Welcome to the Thunderdome, Kevin Warsh.

On the sidelines, you may be tempted to chalk all of this up to a single headline. Iran. The Strait of Hormuz. Oil. Inflation. After all, those are the words you’ll see on every macro feed this weekend. On the front page of most mainstream media rags.

Yet the bigger story has been playing out across five years and three continents, quietly, while equities kept setting records.

And is now forcing us to ask the hard questions.

Like, what happens when bond markets across three continents move in lockstep, after five years of all moving the same direction?

Why does everyone in macro keep reaching for the “we’re all turning Japanese” analogy, and is the analogy actually right?

And most importantly, what does any of this have to do with you, your savings, and your investments over the next two years?

All good questions. And ones we’ll sift through nice and easy, as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a candid look at the global bond rout, and what it really means for your money, with this Sunday’s Informationist.

Partner spot

After 17 years, bitcoin is still widely misunderstood. You get it, but what about the bitcoin blind spots you don’t know you have?

Unchained just released Rethink Bitcoin → — a free interactive course covering the protocol, savings, custody, and network effects across 12 lessons and 21 interactive figures. This is the kind of thing you wished existed when you were learning, and the new best resource for those just beginning the journey.

For the friend or family member who won’t sit through 12 lessons, We partnered with Atlantic Re:think to make a short film for the curious featuring Natalie Brunell, Natalie Smolenksi, and our CEO Joe Kelly. Not the crypto story. The bitcoin story.

Join the Newsletter

🌍 The Synchronized Sell-Off

Heads up, we’re going to talk about some numbers here, but they’re super important, so just stick with me, and don’t worry. We’ll go nice and slow.

Let’s start with that three-bar chart in TFTC’s post above from Friday morning.

The US 30-year at 5.085%. The UK 30-year at 5.13%. The Japanese 30-year at 4.00%. Three markets, three continents, all hitting multi-decade or all-time highs in the same trading session.

And those numbers? Already stale.

Because by the time Friday’s closing bell rang, the US 30-year had climbed to 5.12%. The UK 30-year touched 5.85%, a level not seen since 1998. The Japanese 30-year hit 4.02%, a record for a country that spent the better part of three decades fighting deflation.

In other words, the selling accelerated through the session, ignoring headlines, ignoring Fed statements, ignoring everything.

Some of you may recall, twelve sovereign bond markets rising on one trading day is something we’ve seen before. Mini-versions popped up during European debt panics, during 2022’s gilt episode (I wrote about that one when it happened, when the Bank of England had to step in to save UK pension funds from a leveraged LDI cascade), and during the Fed’s hiking cycle in 2023.

What makes this one different is the geography.

A typical synchronized selloff has a center of gravity. In 2022, it was the UK. In 2013, it was the US Taper Tantrum. In 1998, it was Russia and then LTCM. The bond market reprices around a single distressed asset, and the rest of the world re-rates sympathetically.

This week, there is no center.

The UK 10-year jumped 17.9 basis points. Italy added 17.3. Greece, 16.3. France, 15.5. The US 10-year rose 11.5. Japan, 8.6. Every developed sovereign on the screen moved the same direction on the same day.

One direction. Three continents. No single distressed asset to blame.

This is what financial markets call a correlation event. And when the correlation lines up across sovereign issuers, the cause has to be structural and global, not country-specific. The bond market is pricing something the world has been moving toward for years. Friday was the moment everyone noticed at the same time.

Now, the 30-year is where the drama lives. Long-duration bonds always move the most when something fundamental shifts in expectations or term premium, because the math of duration amplifies every basis point of change. So when we want to see the move at its loudest, the 30-year is where we look.

The bond that does the actual structural work, though, is one maturity shorter.

The 10-year.

The US 10-year Treasury is the benchmark of benchmarks. It’s the reference rate for nearly every dollar-denominated borrowing decision on the planet: mortgages, corporate loans, sovereign credit pricing, valuation models, the entire concept of a “risk-free rate.” Every other country’s 10-year operates as the local equivalent for its own credit and lending cycle.

If the 30-year shows you the drama, the 10-year shows you the disease.

So let's look at the disease, starting a few years back.

Look at the period from 2019 through early 2022 on that chart. Those are the years when the world’s benchmark borrowing rates lived in suppressed territory.

The German 10-year sat below zero. So did France's. The Japanese 10-year was pinned near zero by the Bank of Japan's yield curve control program. The US 10-year, the global benchmark, traded around 1%.

Read that again slowly. The world’s benchmark borrowing rates were negative or near zero across most of developed Europe and Japan.

Yes. That’s right.

Investors paid governments to lend them money for years.

Then yields exploded.

Just in the past five years, the repricing has been violent:

• UK 10-year, up 431 basis points

• France 10-year, up 353

• Germany 10-year, up 328 (from below zero)

• Netherlands 10-year, up 324

• Spain 10-year, up 299

• US 10-year, up 295

• Italy 10-year, up 284

• Japan 10-year, up 263

Most developed-world benchmark rates have been repriced by three to four-and-a-half percentage points over five years. A magnitude of move that would have seemed implausible to anyone who lived through the 2010s.

This is what the world’s bond market has been quietly doing while everyone watched stocks: repricing what it costs governments to borrow money at the maturity that anchors every other lending decision on earth. The repricing has been compounding for half a decade. Friday’s session was the latest, loudest reminder.

So what is the bond market actually saying?

Two things. Loudly. To anyone willing to listen.

First, the era of essentially free money for sovereign borrowers is over and not coming back. Negative 10-year yields across the developed world were a symptom of unprecedented central bank intervention, and that intervention has now reversed.

Second, and more important: bond traders no longer believe central banks can control the long end of their own yield curves. Not the way they once could.

That second point is what makes this moment dangerous. It’s also where everyone in macro starts reaching for the same comforting comparison.

They look at central banks losing control of long yields, at debt loads only sustainable at suppressed rates, at governments that need their own bonds bought back, and they reach for the only modern example we have of a major economy that has lived through exactly that experience.

Japan.

The analogy seems to be everywhere right now. “We’re all turning Japanese.” It shows up in research notes, on macro podcasts, in panel discussions, in tweets from analysts I truly respect.

I must admit. It is a comforting comparison.

And it breaks down at the part that matters most.

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A note on disclosure before we begin.

I serve as an independent director of Strive Inc. (NASDAQ: ASST), the issuer of SATA. I am also co-managing partner of a fund that holds positions in both MSTR and ASST, and I personally hold or have exposure to MSTR, ASST, STRC, and SATA.

That means today's letter walks through two products that serve a similar purpose for investors, one issued by a company I sit on the board of, and one I do not. I have done my best to describe both honestly, on their merits, with the same lens applied to each. Where they differ in size, liquidity, yield, or risk, I have tried to name those differences plainly.

Nothing in this newsletter is investment advice. My job here is to walk you through how STRC and SATA actually work, so you can have an informed conversation with your investment advisor and decide for yourself whether either of them belongs in your portfolio.

Today’s Bullets:

• 🏦 What is Digital Credit?

• ✈️ Inside the Passenger Jet

• 🎯 Who STRC is Built For

• ⚠️ So What’s the Risk?

• 🎫 Should You Buy a Seat on This Jet?

Inspirational Tweet:

Picture a security that pays you 11.5% a year in monthly cash. Real money, hitting your account every month, while the share price barely budges. Boring chart, beautiful coupon.

Now picture the whole thing backed by Bitcoin.

Michael Saylor has named it Digital Credit and described it as a passenger jet in this week’s Inspirational Tweet above. The ticker is STRC. And honestly, it is the most interesting yield instrument I have laid eyes on in years.

Strategy was the first to issue one. Strive followed, with their version called SATA. Two flying jets now. Bitcoin investors have been pouring into both.

Meanwhile, the mainstream financial press has either been confused by them or simply dismissive of them.

Two camps. Same security. Opposite conclusions.

It is the kind of yield that should not exist. Sitting in plain sight. On a public exchange. And somehow, the people whose entire job is to evaluate yield instruments cannot decide if it is brilliant or a fraud.

Naturally, my inbox has been filling up with reader emails about it for months. Most asking some version of the same question.

Is this thing real?

Well this past Tuesday, I sat on Strategy’s Q1 earnings call as an analyst, where STRC dominated the discussion. Combined with what I have learned over the past year, sitting on Strive’s board while we engineered SATA, this morning’s letter is what I would tell a friend asking me to make sense of all of it.

But so you know: this is one of the longer letters I've written, because the topic deserves it.

So pour yourself a big cup of coffee and settle into your favorite seat for a walk through the new new world of Digital Credit with this Sunday’s Informationist.

Partner spot

After 17 years, bitcoin is still widely misunderstood. You get it, but what about the bitcoin blind spots you don't know you have?

Unchained just released Rethink Bitcoin → — a free interactive course covering the protocol, savings, custody, and network effects across 12 lessons and 21 interactive figures. This is the kind of thing you wished existed when you were learning, and the new best resource for those just beginning the journey.

For the friend or family member who won't sit through 12 lessons, We partnered with Atlantic Re:think to make a short film for the curious featuring Natalie Brunell, Natalie Smolenksi, and our CEO Joe Kelly. Not the crypto story. The bitcoin story.

Join the Newsletter

🏦 What is Digital Credit?

Before we get into the weeds, a heads up. Today, for simplicity, we are going to focus on STRC. The other digital credit security we mentioned, Strive’s SATA, has an almost identical structure. We will touch on it in a moment so you have the comparison, but to keep it simple, the main subject today is STRC.

Digital credit is a perpetual preferred share with Bitcoin reserves behind it. Three words doing the work on the front end, plus one new thing on the back end. Let’s break each one down.

Share. STRC is technically equity. You own a piece of the issuer (in this case, Strategy, formerly known as MicroStrategy). You can buy and sell it on the exchange just like any other stock.

Preferred. STRC has priority over common stock in what is called the capital stack. Senior debt sits at the top. Preferred shares in the middle. Common stock at the bottom, with whatever is left. In good times, this order is invisible. In bad times, the order is everything.

If you want the full walk-through of every layer in a company’s capital stack, I covered it in detail back in an early issue:

In Strategy’s case, the stack is relatively simple. The only debt on the balance sheet is convertible bonds, which sit at the top. Below the converts sit Strategy’s preferred shares, including STRC. At the bottom sit the common stockholders, the MSTR shareholders.

So STRC’s place in the capital stack: above the common stockholders, below the convertible bonds, alongside Strategy’s other preferred shares (aka prefs). Strong claim. Strong protection, especially if you are a believer in the long-term value of Bitcoin.

Why does this structure exist? It gives the issuing company the best of both worlds. Like equity, the company can defer the dividend in a tough year, though not without consequences, as you will see. Like debt, the cost of prefs is lower than issuing more common stock would be. And issuing prefs does not dilute common stockholders the way issuing more common shares would.

Everyone with me? OK. Now the math.

I know, I know. It’s Sunday morning, no math please. But hang in there, because…

Perpetual. The dividend on a preferred share is set as a percentage of its par value, not as a percentage of the price you paid. Just like a bond.

STRC has a par value of $100. The current dividend rate is 11.5% of par. That means STRC pays $11.50 per share per year in cash dividends, regardless of where the share is trading.

If you buy 1 STRC at exactly $100 (par), you paid $100 and receive $11.50 per year, which is an 11.5% yield on your money. Simple.

If you buy 1 STRC at, say, $90, you paid $90 and still receive $11.50 per year, because the dividend is set against par. Your yield is now $11.50 divided by $90, or 12.78%. You picked up an extra 128 basis points (1.28%) just by buying below par.

Better yet, if Strategy ever decides to retire the security at $100, they call it back, pay you par for each share, and you pocket the $10 capital gain on top.

This is the difference between nominal yield (the rate against par) and current yield (the rate against what you actually paid). A perpetual preferred is a unique instrument where you can gain extra yield just by being patient and buying below par.

For STRC, this matters less than it does for most preferreds, and you will see why in the next section.

Now the new piece. The Bitcoin reserves on the back end.

Until last year, every preferred share you could buy was backed by a traditional corporate balance sheet. A bank’s loan book. A REIT’s real estate. A telecom’s cash flow. The preferred dividend got paid because the underlying business made money.

Digital credit changes the asset on the other side. The collateral is Bitcoin, sitting on-chain, audited, public.

Strategy has issued other preferreds before STRC, with different structures and purposes. STRC is different. It is the only one engineered as a perpetual preferred with a variable-rate dividend, designed to hold its price near par and pay you a steady cash coupon. That structure is what makes it digital credit. The others are different instruments for different purposes.

A quick note on the other passenger jet, SATA.

Strive issued SATA as their version of digital credit last year. Structurally, SATA is virtually identical to STRC. The differences are size, liquidity, and yield.

Strive’s balance sheet is smaller and simpler than Strategy’s, with almost no debt. There is $496 million total outstanding SATA, and Strive (ASST) holds 15,000 Bitcoin worth $1.2 billion and $148 million in cash on the balance sheet.

This equates to 2.3 years of cash coverage of dividend obligations.

Because it is smaller, SATA itself is less liquid, and as compensation for that lower liquidity, SATA pays a higher dividend yield, currently at 13%.

Some readers may decide a blend of the two is the right answer for their portfolio. This would reduce single security risk and, at the same time, increase the yield captured on investment.

Everything we walk through next about STRC, the engineering, who it is built for, and where the risks live, applies to SATA in the same shape, with the differences in size, liquidity, and yield we just named.

OK, back to STRC as the running example.

So we have established three things. STRC is a perpetual preferred share. The dividend is paid in cash, against a par value of $100, at a current rate of 11.5%. And the asset backing the whole structure is Bitcoin reserves on the issuer’s balance sheet.

Which leaves the question that matters most.

How does Strategy actually pay 11.5% in monthly cash, sustainably, year after year?

Good question. Let’s dig into that next.

✈️ Inside the Passenger Jet

To get a clean answer, you have to book a seat on the airplane.

Saylor calls STRC a passenger jet for a reason. The whole point of a passenger jet is to be smooth. You sit down, you read your book, you have your coffee, the cabin barely shudders. Underneath you, hundreds of engineers and thousands of decisions are working very hard to make the ride feel like nothing.

STRC is the same idea, applied to a yield instrument.

Smoothness is the product. The engineering is what makes the smoothness possible.

There are four pieces of engineering that matter, and we are going to walk through each of them in plain language. The fuel. The autopilot. The airframe. The seatbelts.

By the end of this section, you should be able to answer the question on your own.

Let’s start with the fuel.

The Fuel: What STRC actually pays you

We covered the basic math in the last section. Par is $100. The current dividend rate is 11.5%. That equals $11.50 per share per year, paid out monthly in cash. Roughly ninety-six cents a share, every month.

Now scale that up to the issuer’s side of the ledger.

Per Strategy’s Q1 2026 earnings presentation, STRC has $8.54 billion in notional value outstanding. At 11.5%, that is $982 million of dividends that Strategy must pay annually. Almost exactly one billion dollars a year leaving the company, paid to STRC holders.

That is the fuel cost.

The question, of course, is where the company finds a billion dollars a year to keep the engines burning. We will get there in a minute. First we need to look at the second piece of engineering, because it is the piece that answers a question you may already be asking.

If STRC is just a preferred share, why does the price hardly move?

The Autopilot: The variable rate that holds the price near par

Most preferred shares trade like long-dated bonds. The dividend is fixed. So when interest rates rise, the price falls until the yield catches up to the new world. When rates fall, the price floats higher. The shareholder eats the volatility either way. Just like a bond.

STRC is built differently.

Strategy designed the dividend rate to be variable. Each month, the board has the right to adjust the rate. Per the prospectus, in Strategy’s own words, the stated purpose is to “maintain STRC Stock’s trading price at or close to its stated amount of $100 per share.”

Here is how it works in practice.

When STRC came to market in July 2025, the dividend rate was set at 9.0%. As of this month, May 2026, the rate is 11.5%. As STRC came under price pressure during its first nine months of trading, Strategy raised the rate, step by step, to attract demand and pull the price back toward $100.

Take a look at this chart since STRC was launched.

So, what do we notice?

The blue line is the passenger jet, a short ascent from IPO, then relatively steady cruise. The green one is the rocket ship coming back to earth and appears readying to launch again. The same balance sheet sits behind both. Two completely different rides on top.

Underneath the structure, the volatility is the same. Bitcoin still moves the way Bitcoin moves. And while the engineering does not erase that volatility, it does relocate it.

In MSTR common, the volatility lives on the price chart. Up huge, down huge, sideways for months, up huge again. Your ride is the volatility.

In STRC, the variable rate absorbs that same volatility and converts it into yield. The price stays anchored near $100. The dividend rate is what flexes. You receive your cash payout every month, and the share you bought sits roughly where you left it.

Same balance sheet underneath. Two different places for the volatility to land.

That is the trade. You give up the rocket-ship upside in exchange for a smoother ride and a recurring cash coupon. The volatility is still in the system. It just shows up on the dividend line instead of the price line.

Everyone with me? OK. Now the airframe.

The Fortified Airframe: What backs the whole thing

A jet is only as good as its airframe, and the digital credit airframe is unlike anything in the traditional preferred-share market.

Traditional preferreds are issued by businesses that produce cash. A bank’s loan book. A utility’s regulated cash flow. A REIT’s rent collections. The dividend gets paid because the underlying business produces the cash to pay it.

STRC’s backing is different.

Strategy is a Bitcoin treasury company. As of the most recent disclosures, Strategy holds 818,334 Bitcoin on its balance sheet, currently worth roughly $66 billion at today’s prices. That asset base is what sits behind the entire capital structure, including STRC.

That is the airframe.

Now back to the math: “How does Strategy pay 11.5% sustainably?”

Strategy’s own presentation deck, the one Saylor and his team walked the market through on the Q1 call this past Tuesday, uses two different assumptions about Bitcoin’s long-term annualized return for two different purposes.

When the deck builds the equity case (upside for MSTR holders), the model assumes Bitcoin compounds at 30% annually.

When the deck stress-tests the credit case (risks for STRC holders), the model uses a much more conservative 10% annual return.

STRC’s coupon is 11.5% of $100 par. Across all five preferred securities and the convertible debt, Strategy owes $1.488 billion per year in cash dividends and interest. That is the size of the bill.

As we said above, on the asset side, Strategy holds roughly $66 billion worth of Bitcoin. In the credit case, growing at 10% annually, that asset base produces around $6.6 billion of appreciation per year. In the equity case, growing at 30%, it produces $19.8 billion.

Per year.

Either of those numbers is multiples of the $1.488 billion annual obligation.

But wait. STRC’s 11.5% coupon costs 1.5 percentage points more than the credit-case Bitcoin return assumption of 10%.

This is precisely why Strategy holds $2.25 billion in USD reserve.

If Bitcoin entered a multi-year drawdown that meaningfully compressed the asset base, the reserve buys Strategy 18.1 months of full dividend coverage (per Strategy's own dashboard) to wait out the storm without selling Bitcoin or issuing new common shares (e.g., tapping the at-the-market or ATM facility) at unfavorable prices.

The structure works because of three things stacked on top of each other:

• A large asset base relative to the dividend bill ($66 billion of BTC)

• A USD reserve sized to bridge a drawdown ($2.25 billion cash)

• And, in the equity case, a Bitcoin growth rate (30% annual) that produces enormous spread over the dividend cost

The Seatbelts: What happens if something goes wrong

So far we have walked through the fuel, the autopilot, and the airframe. The fourth piece of engineering is the one that lives in footnotes and legalese.

The seatbelts.

STRC is a cumulative preferred share. That word is pretty important and worth understanding.

If Strategy ever defers a STRC dividend, the missed payment does not disappear. It accrues. Per the prospectus, “compounded dividends” accumulate on the unpaid amount, compounded monthly at the then-applicable rate, until the missed payment is made whole.

Also according to the prospectus, any accumulated unpaid STRC dividends must be paid in full before any dividend or distribution can be paid to MSTR common shareholders.

That’s the seatbelt, but in legal terms.

You may now be asking, Will the seatbelts ever come into play?

In a corporate structure with a $2.25 billion USD reserve and an asset base behind it that is many multiples of the annual obligation, the seatbelts may never be needed. But they’re written in, nonetheless, just in case the air gets unexpectedly rough from underlying turbulence.

One paragraph on taxes

Before we move on, a quick note on taxes, because for some readers this changes the picture meaningfully.

Holders of STRC don’t pay taxes on every dividend.

See, Strategy has classified STRC distributions as Return of Capital (ROC). ROC lowers your cost basis instead of being taxed as ordinary dividend income in the year you receive it.

For a high-tax bracket investor, that deferral is real money.

That said.

When you eventually sell, the lower basis means a capital gain, taxed at long-term rates if you have held the position more than a year. For a holder who plans to hold STRC long-term, the deferral can effectively turn an 11.5% Return-of-Capital distribution into something closer to an 18% taxable-equivalent yield in real-world terms.

Here’s a real world example, assuming STRC remains near or at par:

• Buy STRC at $100

• Hold for two years, receiving $11.50 in dividends annually for a total of $23.

• Pay zero taxes on dividends each year

• Sell STRC for $100

• Pay capital gains tax on $23

You can see how for long-term holders, this is advantageous, especially high-tax-bracket investors.

Two important caveats.

One. The classification is determined year by year based on Strategy’s earnings and profits position. What is true for 2025 is not guaranteed for 2026, and what is true for 2026 is not guaranteed for 2027.

Two. Your actual tax outcome depends on your situation, your bracket, and your accountant. I am absolutely not a tax expert, and my goal is here to walk you through how the instrument works, not to give you tax advice. Talk to your tax person before deciding what STRC means for you.

OK. So now you have been inside the passenger jet.

The fuel is real cash, an 11.5% coupon paid monthly. The autopilot is the variable rate that converts price volatility into yield volatility and keeps the cabin near level. The airframe is Strategy’s corporate balance sheet, comprised of 818,334 Bitcoin. The seatbelts are the cumulative protections written into the prospectus. And the math, drawn directly from Strategy’s own deck, holds together as long as Bitcoin keeps compounding at anything close to the 10% credit-case assumption Saylor uses in his own model.

That is the engineering.

🎯 Who STRC is Built For

So now we know how the passenger jet flies. The next question is the one that actually matters.

Is this jet for you?

Like any good piece of engineering, STRC was built with specific passengers in mind. It was not built for everyone, and the writers of the prospectus would be the first to tell you so. The honest answer to the “is it for me” question starts with recognizing yourself, or not recognizing yourself, in a few specific investor profiles.

Let’s first walk through who this is built for. Then we’ll talk about who it is not built for, because that part matters just as much.

Built for: The yield-replacement investor

This is the largest group of buyers, in my opinion, and probably the most natural fit.

You have cash. Maybe you sold something recently. Maybe you have always kept a meaningful slug in money market funds and short-duration Treasuries. Maybe you’re a retiree who needs the cash flow but is watching every traditional yield instrument leak ground to inflation in real terms.

You want your money to work and beat the rate at which the dollar is being debased.

If that is you, STRC was built with you in mind. The whole engineered structure exists to deliver a steady cash payment that compares favorably to anything in the traditional yield ladder, with price stability as the second feature.

Built for: The Bitcoin-curious income investor

You have read about Bitcoin for years. You believe the long-term thesis. You may already own some, in a small allocation, sitting quietly in cold storage or an ETF.

But you cannot bring yourself to ride MSTR common, because the volatility makes you sick to your stomach. And you cannot put a meaningful slug of your retirement into spot Bitcoin, because the swings would put you in front of your portfolio screen at three in the morning.

STRC gives you a way to participate in the Bitcoin treasury thesis without taking the Bitcoin treasury ride. You ride the passenger jet that flies over the same airspace as the rocket.

For a lot of Bitcoin-curious investors, this is the first instrument that actually lets them sleep through the night while still expressing the view.

Built for: The tax-aware investor

If you are in a high federal bracket, the Return-of-Capital treatment we walked through changes the comparison.

A high-bracket investor comparing a fully taxable yield instrument to STRC’s ROC distributions is not an apples-to-apples comparison. The deferral matters. For a long-term holder who plans to sit in the position, the after-tax math meaningfully favors STRC over comparable taxable yield products.

Note: if you have a CPA who pays attention to where your dollars actually land after tax, this is the kind of instrument they should be aware of.

Built for: The studious investor

This is the reader who reads prospectuses for fun. Or at least reads them seriously.

You read the cumulative-dividend language we walked through above and concluded that is real protection. You understand that STRC sits senior to MSTR common in the capital stack. You know what “perpetual” means and you know what “preferred” means. You followed the rate-on-rate spread reality and the role of the USD reserve, and you came away with a clearer mental model rather than a more confused one.

If you are that reader, STRC may belong in your portfolio because you actually understand it. Which, as we will see, turns out to be the most important qualification of all.

Now, who STRC is not built for

This part matters too. Maybe more than the part above.

Not for: The growth investor

If you are looking for a security that doubles or triples your money on a good Bitcoin run, STRC is the wrong tool. The whole design strips out price upside in exchange for price stability. The autopilot that keeps the price near $100 on the way down also keeps it near $100 on the way up.

If you want torque on the Bitcoin thesis, the rocket ship is MSTR common. STRC is the passenger jet. Boring on purpose.

A growth investor putting money into STRC and expecting the ride of MSTR common will be disappointed. That smoothness is the point of the design, not a flaw in it.

Not for: The “I want completely risk free” investor

Let’s be honest. There’s no such thing as completely risk-free. Not even US Treasuries can claim that.

But the fact is, STRC pays a high yield because it is taking risk.

This is the part Strategy itself takes pains to disclose on their own STRC information page. STRC is not a bank deposit. It is not FDIC insured. It is not regulated like a money market fund or a Treasury bill. And so, it is not a comparable apples to apples comparison.

If you need an instrument that absolutely cannot lose value, that has the explicit backing of the federal government, that comes with deposit insurance, STRC is not the answer. Treasuries are the closest answer. Money market funds are the easiest avenue for that.

The honest framing of STRC is a higher-yield instrument with real risks, engineered to manage those risks well, but no engineering can completely eliminate them.

Not for: The investor who cannot explain it

If you cannot explain to a friend at dinner in simple terms what STRC is and how it pays you, you are probably not ready to own it.

Not yet, anyway.

Digital credit is a category that did not exist a year ago. There is no shame in saying, this is new, I do not understand it well enough yet, I am going to keep reading.

The right answer for a reader in that position is to read this newsletter again, read Strategy’s own materials, talk to your financial advisor, and come back to the question in three months. The instrument is not going anywhere. The category is not going anywhere.

There is a real temptation to chase the yield without understanding the structure. If someone tells me, “I bought some STRC, can you help me understand what I own?” That order of operations is backward. Understand first. Buy second.

If you read this far and felt like the engineering made sense, you’re probably ready to make the decision. On the other hand, if you felt like you were drowning, don’t take it as a failure, it just means you need a bit more time to get it fully.

Where this leaves us

So who is STRC actually built for?

The yield-replacement investor who wants a coupon that beats inflation. The Bitcoin-curious income investor who wants the thesis without the ride. The tax-aware investor whose after-tax math meaningfully changes. The studious investor who has done the work.

Who is it not built for?

The growth investor chasing torque. The “I want risk-free” investor who needs FDIC. The reader who cannot yet explain it.

The one question we have yet to answer is the one all of those profiles are sitting with.

If the engineering is real, and the buyer profiles are clear, where do the actual risks live?

⚠️ So What’s the Risk?

The question every experienced investor asks before touching anything new.

Where do the downside risks live?

Every yield instrument trades risk for return. The 3.7% you get on a Treasury bill comes with arguably the lowest risk on the planet. The 11.5% on STRC comes with more. The trick is naming the risks honestly so you can decide what you are comfortable owning.

The Four Real Rewards

Yield. STRC pays roughly 11.5% in monthly cash. That is 400 to 700 basis points over what traditional preferred shares pay today. For an investor who has watched the traditional yield ladder fall behind the rate of monetary debasement (actual inflation), that spread is the whole point.

Smoothness. STRC's implied volatility runs around 6%. MSTR common's implied volatility sits near 59%, with realized volatility running in the 60s and 70s. Same balance sheet underneath, very different ride on top. The autopilot is doing its job.

Tax efficiency. Under the 2025 Return-of-Capital classification, an 11.5% distribution behaves more like 18% on a taxable-equivalent basis for a high-bracket holder. That treatment is set year by year, but for now, it is real.

Capital structure protection. Cumulative dividends. Seniority over MSTR common. A claim on the Bitcoin reserve in any wind-down scenario. The seatbelts we walked through are written into the prospectus.

Those are the four reasons people are buying it. Now let’s talk about what could go wrong.

The Four Honest Risks

Risk one: A multi-year Bitcoin drawdown.

Strategy holds a $2.25 billion USD reserve against $1.488 billion in annual dividend and interest obligations across all preferreds and convertibles. Per Strategy's own dashboard, that equals 18.1 months of full coverage on the dividend line, without touching the asset base at all.

Behind that reserve sits the asset base itself. $66 billion of Bitcoin. Per Strategy's dashboard, that asset base alone equates to 44 years of dividend coverage at current Bitcoin prices.

There has been plenty of drama on Twitter about this. On the Q1 call, Saylor named selling Bitcoin as one of the tools Strategy would use to secure the dividend if needed. Bottom line for STRC holders, having that tool explicitly available adds another layer of structural protection.

Knowable risk. Sized in the company’s own deck. Not a surprise.

Risk two: Capital markets access.

The whole digital credit machine runs on Strategy being able to issue new preferred shares when the time is right. New issuance funds Bitcoin purchases. Bitcoin purchases grow the asset base. The asset base is what backs the dividend.

If capital markets close to Strategy for any extended period, the issuance flywheel slows. Slower issuance does not break the structure on day one, because the existing asset base is already huge relative to the obligations. But over time, a permanently closed capital markets door changes the math the deck relies on.

This is the risk that depends most on factors outside Strategy’s control. A regulatory shift. A credit cycle. A reputational event in the broader Bitcoin treasury category.

I personally put this risk at low probability.

Risk three: Cumulative deferral.

In real stress, Strategy’s board has the right to defer the STRC dividend. The deferred payments accrue, compound monthly, and must be paid in full before MSTR common ever sees a dividend. So you eventually get made whole.

But during the deferral period, your monthly cash stops arriving. If you bought STRC because you needed the income, that interruption matters. The seatbelt protects your principal claim. It does not protect your monthly cash flow during the storm.

For a yield-replacement investor living off the coupon, that is a real consideration.

From a first-principles perspective, though, deferral is a highly unfavorable step for Strategy. It would likely impair their ability to use STRC as a source of liquidity going forward. So I put deferral at very low probability, and only as a last-resort action.

Risk four: Tax and regulatory classification.

The Return-of-Capital treatment is determined year by year based on Strategy’s earnings and profits position. What is true for 2025 is not guaranteed for 2026. What is true for 2026 is not guaranteed for 2027.

Beyond the year-to-year ROC question, the broader regulatory environment for Bitcoin treasury companies is still being written. The SEC, the IRS, and the banking regulators have all moved in friendlier directions over the last two years, but a future administration or a future enforcement priority could change the picture.

Possible? Yes. Likely in the near term? No. But it does belong on the list.

Where this leaves us

Four real rewards. Four real risks. All sized in Strategy’s own disclosures.

🎫 Should You Buy a Seat on This Jet?

So we walked through the engineering. We walked through who digital credit (STRC and SATA) is built for and who it is not. We walked through the rewards and the risks honestly.

Now the decision is yours.

I cannot make it for you, and I would not if I could. I walked you through the machinery, named the trade-offs, and told you where the real risks live. The rest is your call, your portfolio, your conversation with your advisor.

But one thing I want you to take with you, separate from the question of whether either STRC or SATA belong in your portfolio.

Digital credit is a category that did not exist a year ago. Right now there are exactly two instruments in it. STRC and SATA. A year from now, two years from now, more issuers may come to market with their own versions, their own structures, their own yields, their own wrinkles.

When that happens, the same plain questions apply.

Those four questions are the framework that survives this letter. They apply to STRC and SATA today. They will likely apply to the next digital credit instrument that is created. And likely for the one after that.

That is the gift of taking the time to understand a new instrument carefully the first time. So whether STRC or SATA end up in your portfolio or not, you now have what you need to evaluate the next one when it shows up.

That, more than anything else, is what I hope you take from this morning’s read.

One last thing before I let you go. Every Sunday, paid Informationist readers get 'What I'm Watching This Week,' a focused look at the data prints and market events that will set the tone for the days ahead. Here's a peek at what's on my radar this week:

What I’m Watching This Week

📌 The Number That Matters: April CPI, dropping Tuesday at 8:30 AM ET. The first inflation print Kevin Warsh will inherit when he takes the Fed chair on Thursday. A hot number puts immediate pressure on the rate path. A soft number gives him room. This print sets the entire backdrop for his confirmation week. (Source: BLS schedule.)

📌 PPI Wednesday, Import/Export Prices Thursday. Stack these against CPI for the cleanest read on whether inflation pressure is actually cooling or just sliding around between consumer and producer baskets.

📌 The Treasury curve. Watching the 2-year and 10-year for any Warsh-related repricing. If markets believe Warsh runs a more dovish shop than Powell, the front end moves first.

📌 Warsh sworn in Friday, May 15. Powell’s last day at the Fed. First public Warsh remarks could come within days. Markets will trade every comma.

📌 The MOVE index. Bond market volatility can spike around Fed leadership transitions. Watching for any unusual moves into and out of the swearing-in.

That’s it. I hope you feel a little bit smarter knowing how digital credit actually works, and ready to evaluate whichever instrument lands in front of you next.

This week, you got both the full deep dive and the full “What I’m Watching” list. That is exactly what paid Informationist subscribers receive every Sunday. If you want this in your inbox every week, join the paid family right here:

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Talk soon,

James✌️

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Today’s Bullets:

• 💯 The Triple Digit Mark

• 🎩 The Dynamic Debasement Duo

• 💸 The Tax You’re Already Paying

• 🍌 The Old Playbook

• 🧊 What Lies Beneath

Inspirational Tweet:

Congratulations, America! You just scored a hundred on the test. 🎉🥳🇺🇸

But let’s face it. It’s not exactly the hundred percent you want.

We could call it dubious honor, but no, that would minimize the reality of the situation, make it trite.

Because truth is, this is a truly dangerous dis-honor.

Something that the new Secretary of the Treasury and the incoming Fed Chair are both well aware of and, according to their words, somehow plan to fix.

Question is, how dangerous is the situation, truly? Can the debt tanker be steered back to safer waters? Or is America doomed to become a so-called banana republic?

All good questions, and ones we will sift through, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a candid look at where America actually stands, and what it means for your money, with this Sunday’s Informationist.

Partner spot

Are we in a typical four-year-cycle bear market with more downside to come, or will 2026 prove to be a deviation from the multi-cycle trend? James Check is back to break down what onchain data is revealing about the path into this downturn and how this market compares to prior ones.

Join Checkonchain and Unchained for a live presentation and Q&A exploring what signals matter most right now and how investors are thinking about positioning through uncertainty. Register to attend and receive early access to The Bitcoin Checkpoint report.

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💯 The Triple Digit Mark

Three months ago, on a stage at the Brookings Institution in Washington, the most credentialed monetary voice in America stood at a podium in front of an audience of economists and quietly delivered a warning.

Now, you may or may not know who Janet Yellen is, depending on how closely you follow this stuff.

You may recognize her though. Because she’s been around for a while. A loooooooong while.

In fact, she has held just about every important seat in the American monetary system. Berkeley professor of economics. President of the Federal Reserve Bank of San Francisco. Chair of the President’s Council of Economic Advisers under Bill Clinton. Vice Chair of the Federal Reserve under Ben Bernanke. Then Chair of the Federal Reserve from 2014 to 2018. And from January 2021 through January 2025, the 78th Treasury Secretary of the United States.

Good Lord. Nobody alive has held more of the levers of American money than Janet Yellen.

So when she stepped to that Brookings podium in early January and said this, sober and on the record:

“The preconditions for fiscal dominance are clearly strengthening.”

Yawn.

This is the kind of warning that economists put on the shelf and the rest of the world ignore. Academic language. Footnoted citations. Tweed jackets. Polite applause from the panel.

Most people heard the headline, moved on, and went back to their week.

Then, last Thursday morning, the US Treasury released a fresh accounting of where America actually stands.

• Publicly held debt: $31.265 trillion

• GDP for the prior year: $31.216 trillion

• The ratio: 100.2%

Or so they thought it was quietly released.

Because journalists, Ph.D. economists, and armchair analysts alike locked onto that 100% number like a meteorologist zeros in on a dangerous weather pattern forming.

Or maybe more appropriate, like a bloodhound discovering a key piece of evidence at the scene of a crime. This one financial.

Why, exactly?

Because, to put it simply, the country now owes more than it earns. For the first time since 1946.

And before we ignite a flurry of comments from the peanut seats, yes, debt-to-GDP briefly poked above 100% during the COVID lockdowns of 2020. But that was a single quarter, not a fiscal year. The economy was shrinking. Massive stimulus was flooding out the government doors. Once growth resumed and inflation pumped nominal GDP higher, the ratio fell back below the line.

2020 was, indeed, a bit of an anomaly.

Not this time.

But to understand why this milestone matters, we need to rewind about eighty years and visit the only other moment in modern American history when the country owed more than it produced.

In 1946, we had a reason. World War II had just ended, the country had spent four full years pouring everything it had into defeating actual fascism, and the bill came due. Enormous. Unprecedented. Roughly 106% of GDP at its peak.

That bill eventually got paid down. We will get to how, and why that matters now, in a moment.

For today, just hold one fact in your head. The last time America stood at this number, the country was emerging from the largest war in human history.

Today, that kind of excuse is nowhere to be seen.

Yes, there is a war in the Middle East. Yes, there are flashpoints from Ukraine to the Pacific. But none of them remotely compare to a four-year, full-population, factories-converted, rationing-cards-issued kind of war that the country mobilized for in the 1940s.

No total mobilization. No recession to fight. No emergency on that scale to point to. Just three decades of compounding deficits, two decades of zero interest rates, and one decade of pretending the math wouldn’t catch up.

Which brings us to the picture that has every analyst in America doing a double-take this week.

Take a moment with this one. Really study it.

Notice the shape. The line peaked in 1946 at 106%. Then it dropped, decade after decade, all the way down to 22% by 1974. That’s the postwar miracle. That’s the version of debt management we always tell ourselves we can do again.

Now slide your eyes to the right side of the chart.

That line is not falling.

No, it has been steadily climbing for almost two decades, with brief pauses for pretending. Two thousand eight. Twenty twenty. And now, here we are. Standing back on top of the WW2 line again, with one rather glaring problem.

No world war.

No miracle.

No demobilization story to tell our grandkids about how we paid it all down.

Just a country, looking around, and quietly noticing that the chart has gone red on the dashboard.

And here is the part that should give you pause.

On that Brookings stage in January, the woman now warning us about fiscal dominance had been holding the wheel for the past four years. Through every single quarter on the right side of that chart. Watching the line climb in real time, signing off on every refunding announcement, every quarterly forecast, every fiscal year that ended a little worse than the one before.

And while she had the wheel, she did not say the waters were dangerous.

She said they were “different.”

Which is the kind of thing every captain says, right up until the moment the ship hits something it should have seen coming all along.

And warning everyone about.

🎩 The Dynamic Debasement Duo

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Today’s Bullets:

• 🚬 Who Was Paul Volcker?

• 🔨 The Night the Fed Got Serious

• ⚖️ Why 1980 Let Him Do It

• 🔒 Why Today Won’t Let Anyone Do It

• 📉 Investment Implications

Inspirational Tweet:

Josh, always one for a good jab. And this one landed nice and square for good reason.

Because last week, Kevin Warsh sat before the Senate Banking Committee. The cameras rolled. The questions started. And Elizabeth Warren unleashed her usual unhinged tirade of accusations before the newly nominated Warsh could finish a single sentence.

Ah, yes. The Senate Confirmation Hearings. Pomp, circumstance, and full stage theatrics on display for the world to see. But even with the Warren verbal tornado, a different theme arose and caused more questions than answers from armchair analysts.

In short, is Warsh merely a Trump “sock puppet”, as Warren suggested, or would he be the new Volcker?

Because that’s the split right now. On one side, Democrats and the usual critics insisting he’s a political hire, picked for loyalty, ready to slash rates the moment the White House calls. On the other, a growing chorus of market voices hope he’s something else entirely. A tough, independent inflation fighter in the mold of the man who once saved the dollar.

Two sides. One nominee. Opposite conclusions.

But to even know what “the new Volcker” means, you have to know what the old Volcker actually did.

Which brings us to the questions. Who was Paul Volcker? What did he really do? And could anyone, Powell, Warsh, or the next person in line, do it again today?

All good questions, and ones we will answer, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a candid look at the most famous Fed Chair in American history, and why his shoes may be harder to fill than anyone thinks. It’s time for this Sunday’s Informationist.

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🚬 Who Was Paul Volcker?

Picture this.

It’s August 1979. A six-foot-seven man in a rumpled suit walks into the Federal Reserve building carrying a cheap cigar. Not a Cuban. Not a custom-rolled anything. A drugstore special.

His shirt collar curls up like a corn chip.

His shoes are as dull as an old wallet.

This is the man about to save the American economy.

Or destroy it. Depending on who you ask.

Paul Volcker didn’t look, act, or sound like a central banker. Born in Cape May and raised in Teaneck, he carried small-town sensibility rather than big city wisdom into the most powerful financial office on Earth.

Don’t get me wrong, he was educated. Maybe overeducated, for God’s sake.

Princeton for undergrad. Harvard for grad school. London School of Economics after that. But ask anyone who worked with him, and they’ll tell you the fancy degrees never quite took. He stayed stubborn, blunt, and allergic to nonsense his entire career.

And by 1979, America needed exactly that kind of man.

The Country Was Breaking

Let’s paint the scene, shall we?

Inflation was running at 11% and climbing. Gas lines stretched around the block. A gallon of milk cost more than it did the month before. And the month before that. Americans were losing faith in the dollar itself.

President Jimmy Carter had a serious, and growing, problem.

His Fed Chair, a genteel economist named G. William Miller, wasn’t cutting it. The markets didn’t respect him. Inflation didn’t listen to him. And the dollar was dropping against every major currency like it was a penny stock.

Carter needed someone the markets would take seriously.

He needed a bulldog.

So in July 1979, he called Paul Volcker into the Oval Office. Volcker was then the President of the New York Fed. He’d spent decades in Treasury, in banking, in and out of Washington. He knew where the bones were buried.

Carter offered him the job.

Volcker, being Volcker, didn’t jump at it. He told the President directly. If you want me, you’re going to get tight money. You’re going to get pain. You’re going to get an independent Fed that doesn’t answer to the White House.

Carter agreed.

And one of the great political miscalculations in American history was set in motion. Because the tight money Volcker was about to deliver would help cost Jimmy Carter his presidency.

But save the dollar.

The Man Behind the Cigar

Here’s what we need to understand about Volcker the human being.

He was cheap. Infamously cheap. His suits were rumpled. His apartment in Washington was small and cramped, a rental he kept while his wife stayed in New York for her health. He commuted home on the Eastern shuttle on weekends.

The cigar was an Antonio y Cleopatra, $1.20 for a drugstore six-pack. He smoked them throughout the day, much to the irritation of every senator and journalist who had to share a room with him. The Washington Post once published an op-ed calling his cigar habit “hideous.”

Volcker did not care.

He didn’t golf. He didn’t hobnob. He didn’t give speeches for six-figure fees.

Looking straight at you, Lizzy Warren.

No, Volcker wasn’t into any of that old money, old world social play.

Instead, Volcker liked to fish.

That was his thing. Fly-fishing, quietly, on rivers from Montana to Maine. Often alone.

When the Fed’s Kansas City branch was looking for a permanent home for its annual economic symposium, they picked Jackson Hole, Wyoming, in 1982. Specifically because the fly-fishing might draw Volcker out of the Washington heat. The Jackson Hole conference, now the most-watched annual Fed event, exists because of his hobby.

From the Volcker era to Powell, it’s become the main boondoggle for the annual Fed gathering ever since.

What He Actually Believed

Volcker had one economic conviction that guided everything he did.

Inflation was the cruelest tax.

Yes, my good sir. Yes it is.

And not metaphorical theft. Real theft. Every percentage point of inflation stole from savers, from workers on fixed wages, from retirees, from anyone who’d done the right thing and held dollars. He saw it as both a moral and economic failure of the government.

In his confirmation hearing, he told the Senate Banking Committee a line that should be etched on the Fed building itself.

“We will have to call the shots as we see them.”

That was it. No dressing it up. No hedging. Just a warning to everyone listening that the new Fed Chair wasn’t going to play politics. He was going to do what the data told him to do.

And what the data was telling him, in August 1979, was this.

It was about to get ugly. Like, Newark, New Jersey landfill ugly.

🔨 The Night the Fed Got Serious

Flash forward a few months, to October 6, 1979.

A Saturday.

The Federal Reserve doesn’t typically do anything on Saturdays. The markets are closed. The phones are quiet. Bankers are at their country clubs, economists are with their families, and the Eccles Building in Washington is mostly empty.

But not this Saturday.

Paul Volcker had just returned from Belgrade, where he’d attended the annual IMF meetings. And for three straight days, European finance ministers had hammered him about the same thing.

The dollar. It was collapsing.

Down 12% against major currencies since 1976. Foreign central banks were selling Treasuries. Investors were piling into gold, which had doubled in twelve months and would peak at $850 an ounce by January, the most violent flight from a reserve currency since the breakdown of Bretton Woods.

Volcker flew home with that message ringing loud and clear in his ears.

He landed on a Thursday. By Saturday, he’d called a secret, unscheduled FOMC meeting.

And at 6:00 PM that evening, with the sun going down over the Eccles Building, he walked into a press conference that would change the course of American economic history.

The Saturday Night Special

Here’s what Volcker announced that night.

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Today’s Bullets:

• 🚨 Paulson’s Warning

• 🏛️ The $15 Billion Not-So-Stealth Buyback

• 📉 Where the Buyers Went

• 🎰 How This Actually Ends

Inspirational Tweet:

If you’re like most people, you’re not spending your Wednesdays watching the Treasury market. Most people have jobs, families, and much better and more enjoyable things to do than track government bond auctions.

But this past Wednesday, two things happened you should probably know about. Quietly. On the same morning. For reasons that are not a coincidence.

The US government made a move that signals something in the bond market is shifting in the wrong direction. And a man who has been in the room for exactly that kind of moment went on Bloomberg to tell the world.

But what exactly shifted? Who is this Paulson character? And what does any of this have to do with your money, savings, and your retirement? I.e., why should we care?

Important questions that we will sift through, nice and easy as always, here today.

So, pour yourself a big cup of coffee and settle into your favorite seat for a walk through what the bond market is telling us this week with this Sunday’s Informationist.

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Are we in a typical four-year-cycle bear market with more downside to come, or will 2026 prove to be a deviation from the multi-cycle trend? James Check is back to break down what onchain data is revealing about the path into this downturn and how this market compares to prior ones.

Join Checkonchain and Unchained for a live presentation and Q&A exploring what signals matter most right now and how investors are thinking about positioning through uncertainty. Register to attend and receive early access to The Bitcoin Checkpoint report.

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🚨 Paulson’s Warning

Let’s start with exactly who we’re talking about, shall we?

Hank Paulson was the 74th US Treasury Secretary, serving from 2006 to 2009 under President George W. Bush. Before Treasury, he climbed the ranks of Goldman Sachs for nearly three decades before he became CEO for seven years.

Why does that matter?

Because Paulson is the man who ran the Treasury when the global financial system nearly collapsed. He approved the rescue of Bear Stearns, sat in the room when AIG imploded, and made the call to let Lehman Brothers fail.

Three days after Lehman went down, Paulson went to Congress with a three-page document and asked for $700 billion. That became TARP. The largest emergency financial intervention in American history at the time, and still the template for how Washington responds when credit markets seize up.

In short, Hank Paulson wrote the modern “break-the-glass” playbook. And he did it while watching banks fail in real time and central bankers pick up phones at all hours trying to keep the system functioning.

So when a man like that goes on Bloomberg Television’s Wall Street Week and tells the country to start preparing a new break-the-glass plan, it deserves attention.

Here are his actual words from Wednesday’s interview:

“We need an emergency break-the-glass plan, which is targeted and short-term, on the shelf, so it’s ready to go when we hit the wall.”

Paulson went on to describe what hitting the wall would actually look like:

“When you hit the wall and you’re trying to issue Treasuries and the Fed is the only buyer and the prices of the Treasuries are going down and interest rates are up, that’s a dangerous thing.”

Asked when the US would actually hit the wall, Paulson said bluntly, “When we hit it, it will be vicious.”

So, what is the worst-case scenario Paulson is describing here?

Put simply, it is one where demand for US government debt collapses, the Federal Reserve steps in as the emergency buyer, Treasury prices fall anyway, and interest rates spiral higher.

This is the shape of a sovereign debt crisis. The kind that has happened to Argentina, to Greece, to the UK in 2022. Paulson is asking whether it could happen here, and he is saying the US should have a plan at the ready.

Consider the numbers behind Paulson’s warning:

• Total US federal debt now stands at over $39 trillion, up more than $10 trillion in just the past five years.

• The marketable portion, the part that actually trades in the open market, is roughly $31 trillion and growing.

• The federal deficit has averaged roughly 6% of GDP for the past three years. That level is historically seen only during wars or recessions. We are in neither.

• Interest payments alone now exceed $1 trillion per year, larger than the entire defense budget (unless, of course, Trump gets his way, then both numbers are going much higher).

• The CBO projects US debt-to-GDP will hit a record 108% by 2030, surpassing even the post-World War II peak, (Total US Debt to GDP is already at 125%).

Paulson ticked through America’s advantages: biggest economy, strongest companies, energy independence, a safe neighborhood. Then he named the threat:

“Our challenges are debt, fiscal and political polarization.”

The man who ran Treasury when the modern financial system nearly failed is telling the country that the biggest threat we face is our own balance sheet.

Luke Gromen, a good friend and one of the sharpest independent minds in the macro space, said:

Henry Paulson Says US Should Prepare for a ‘Vicious’ Bond Crash - BBG, 4/16/26

Conspicuous in its timing, IMO. “Why am I reading this now?”

“Conspicuous in its timing.”

That was on Wednesday afternoon. To understand why Luke used those words, you have to know what happened this past week.

🏛️ The $15 Billion Not-So-Stealth Buyback

Here’s the state of the US Treasury market in one dramatic visual:

But now let’s talk about why this drama is becoming quite real.

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Today’s Bullets:

• 🎰 From Scratch-Offs to Super Bowls

• 📱 The Explosion

• 🫥 The Line That Disappeared

• 💵 The Question Behind All of It

Inspirational Tweet:

You’ve seen it. Everywhere, all around us.

The DraftKings ad before kickoff. The FanDuel promo during the podcast. Your Uber driver checking a Final Four parlay at a stoplight. Your buddy on Kalshi betting on the number of views of a MrBeast video.

Betting used to be something you only did in Vegas or Atlantic City. Maybe at the gas station, scratching a ticket while the guy behind you waited for a pack of Marlboros. Now betting is on your laptop, or worse…your phone, in your pocket, all day long.

And it happened so fast. Like quicker than a tax hike in California fast.

So what’s going on? How did we become a country where betting went from a weekend vacation to an all-day habit? What’s actually driving it? And what does this explosion tell us about the way money works right now?

Great questions that deserve serious consideration and answers, ones that we will sift through, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a walk through America’s love for wagers with this Sunday’s Informationist.

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The Downturn Advantage

Bitcoin’s volatility is its advantage. For long-term investors, volatility creates opportunities to build and refine positions over time. Mark Moss recently joined Unchained to explore how bitcoin fits into long-term strategy, and how downturns can be used to position more effectively.

The discussion covers:

• How bitcoin’s volatility can support long-term accumulation

• Why the current environment is putting pressure on traditional approaches

• How to think about downturns as opportunities for more intentional positioning

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🎰 From Scratch-Offs to Super Bowls

The year is 1972, and a nuclear engineer named Mike Kent got bored at work.

He was testing reactor designs at a Westinghouse facility in Pennsylvania, feeding punch cards into a mainframe computer. One day, he decided to use that computer to rank the strength of his company’s softball teams. Then he tried it on college football. Then the NFL.

He started comparing his computer’s predictions to the odds from local bookmakers. Guys named Primo and Bobo. It worked. He was winning.

By 1979, Kent quit his job, stuffed $100,000 cash into a brown paper bag, and drove to Las Vegas.

That’s how sports betting worked in America for most of its history. You had to physically go somewhere. You had to carry cash. You had to know a guy. Or a guy who knew a guy. There was friction everywhere, and that friction was the guardrail.

The only exception?

State lotteries.

Governments had quickly figured out that people will pay a voluntary tax if you package it as hope. A $2 Powerball ticket. A scratch-off at 7-Eleven. Today, 45 states run lotteries.

And look at the result.

Americans spent $109 billion on lottery tickets last year alone. More than they spent on concerts, movies, and books combined.

Ooof.

Still, the lottery was always slow money. Buy a ticket, wait for a drawing, lose, buy another one. The casinos were faster but still required a trip. Vegas. Atlantic City. The tribal gaming halls that popped up across 29 states after the Indian Gaming Regulatory Act of 1988.

All of it required you to show up.

But all that changed on May 14th, 2018.

Because that’s the day the Supreme Court struck down a federal law called PASPA that had banned sports betting in every state except Nevada. The ruling in Murphy v. NCAA told states they could legalize sports betting themselves.

That they did. Fast.

Sadly, Mike Kent died in a quad bike accident later that same year. The man who started it all with punch cards and a paper bag full of cash never saw what came through that door.

Last year, Americans wagered $167 billion on sports. Fifteen times what they bet the year the Supreme Court opened the door. And that doesn’t even count prediction markets, zero-day options, or crypto.

Something is driving all of this. And it isn’t just big companies or better technology.

Oh, it’s something much more troubling. Much worse, in a way.

📱 The Explosion

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Inspirational Tweet:

That chart went viral this week. Nearly 3 million people saw it.

Diamond prices have crashed to their lowest level this century.

Now, I hate to be the one to bring this up. Especially if you or someone you love recently spent a few months’ salary on a ring. I’ve been there myself, and I remember what that felt like walking out of the store.

But there’s something happening in the diamond market right now that I think you need to know about. And after digging into it this week, I’m convinced it has implications far beyond jewelry.

So, pour yourself a big cup of coffee and settle into your favorite seat for a look at the diamond industry’s stunning collapse with this Sunday’s Informationist.

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The Downturn Advantage

Bitcoin’s volatility is its advantage. For long-term investors, volatility creates opportunities to build and refine positions over time. Mark Moss recently joined Unchained to explore how bitcoin fits into long-term strategy, and how downturns can be used to position more effectively.

The discussion covers:

• How bitcoin’s volatility can support long-term accumulation

• Why the current environment is putting pressure on traditional approaches

• How to think about downturns as opportunities for more intentional positioning

Download the recent collaborative report from Mark Moss and Unchained, Retire Off Bitcoin: The Freedom Investor’s Guide, to access both the report and the full event replay.

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💎 The Greatest Marketing Campaign Ever Run

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Today’s Bullets:

• 📉 The Reversal

• 🔢 The Loop

• 🏛️ The One Outcome

• 💰 What It Means for Your Money

Inspirational Tweet:

If you’ve been watching the bond market recently, you’ve noticed something has shifted. Something that makes an already dangerous situation dramatically worse for the Treasury, for the Fed, and ultimately for you and your money.

As I implied above, the surprising rise in the expected Fed Funds rate sets up the story, but it leads to a host of questions.

Like, What happens to the Treasury when rates suddenly start going the wrong direction? What are they forced to do about it? And how does it end up affecting you?

All critical questions. And ones that all lead to one place. One outcome.

Today, we are going to pull back the curtain on what’s really happening with the US Treasury right now, why the situation just became significantly more dangerous, and where it’s all heading.

But don’t worry, we will do it nice and easy, as always.

So pour yourself a big cup of coffee and settle into your favorite seat as we explore the US Treasury’s growing nightmare with this Sunday’s Informationist.

Partner spot

The Downturn Advantage

Bitcoin’s volatility is its advantage. For long-term investors, volatility creates opportunities to build and refine positions over time. Mark Moss recently joined Unchained to explore how bitcoin fits into long-term strategy, and how downturns can be used to position more effectively.

The discussion covers:

• How bitcoin’s volatility can support long-term accumulation

• Why the current environment is putting pressure on traditional approaches

• How to think about downturns as opportunities for more intentional positioning

Download the recent collaborative report from Mark Moss and Unchained, Retire Off Bitcoin: The Freedom Investor’s Guide, to access both the report and the full event replay.

Download the Report

📉 The Reversal

First things first. That chart in my X post above? The one showing where investors expected the Fed Funds Rate to move in the near and longer term?

This is what it looked like just two weeks ago.

What do we see?

More than two rate cuts were expected by early 2027 (right side of chart). The implied overnight rate falling steadily from 3.65% down to just above 3% (left side).

For anyone who needs to borrow money, this was great news. Lower rates ahead. Cheaper financing on the way.

And nobody on the planet needs to borrow more money than the US Treasury.

Now look at the one from my post again:

Same chart. Two weeks later. The cuts have vanished. And in their place, the market is pricing in a hike.

If you caught last week’s issue, you know what triggered this. Iran. Oil spiking over $100, causing inflation to reaccelerate. A Fed that can’t cut. And a bond market that now thinks they may have to hike.

If you’re the Treasury Secretary reading these headlines, seeing these developments, you feel sick.

To understand why, we need to go back a few years. Because this crisis didn’t start last week. It started with a decision.

An astonishingly poor one.

By none other than former US Treasury Secretary Janet Yellen.

See, when Yellen became Treasury Secretary in 2021, she helped facilitate trillions of dollars being printed during COVID. Stimulus checks, PPP loans, direct payments. The printing press was running full speed.

She also had something no Treasury Secretary is likely to see again.

Interest rates at historic lows. The 10-year yielding barely 1%. The 30-year at 1.80%.

She had a once-in-a-generation window to term out the debt. (Translated: issue longer dated debt, like 7 or 10 or even 30-year Treasuries) Lock in those rates for decades.

She didn’t do it.

Instead, she kept borrowing short. Bills and notes that mature in months, not decades. Instruments that roll over constantly and refinance at whatever rate the market happens to be charging at that moment.

When rates are falling, that works fine. You keep getting cheaper deals.

When rates are rising, it’s a disaster.

Now, I know what you’re thinking. How was she supposed to know? How could anyone have predicted rates would go up so much? Should she have somehow anticipated this?

The answer is Yes.

Janet Yellen had been the Chair of the Federal Reserve. She sat in that seat and understood, better than almost anyone alive, what that kind of money creation does to inflation. She knew the risks. She saw them coming.

And she ignored them. Leaving the problem for the next Treasury Secretary to deal with.

Enter Scott Bessent.

Bessent took the job in January 2025. He had publicly voiced similar concerns about Yellen. But he also believed rates would continue to come back down, and that he could gradually shift toward longer maturities and stabilize things.

But then Powell stopped cutting.

Iran happened. Oil spiked. And inflation expectations reversed.

And those two charts above? That’s Bessent’s plan falling apart in real time. The rate relief he was counting on isn’t coming. It’s going the other way.

To be honest, I’d be surprised if he doesn’t just quit at this point, but let’s assume he doesn’t. Let’s assume he stays and does whatever he can to remedy the situation.

Then we have to ask, how bad is it, exactly? How much does the government actually need to borrow at these rates? And where does it all lead?

The answer is what makes this personal. For every one of us.

🔢 The Loop

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Today’s Bullets:

🏦 What the Fed Said vs. What Powell Revealed

📉 What the Bond Market Heard

🔺 The S-Word

💰 Where to Go From Here

Inspirational Tweet:

Six words, and possibly the Fed’s understatement of the century, uttered by Jerome Powell in what might be one of his final press conferences.

Acknowledging tension between rising inflation and a weakening economy, he also pushed back on a word that’s been increasingly floating around trading desks and financial media for weeks now.

Stagflation.

Powell: “I would reserve the term stagflation for a much more serious set of circumstances,” he said. “That was a 1970s term, at a time when unemployment was in double figures and inflation was really high and the Misery Index was super high.”

Fair point, Chairman.

He had a few more things to say about the 1970s comparison, too. We’ll get to those, as they are critical for today’s discussion.

But first, let’s see what happened over the next 48 hours.

Oil surged to $119. Gold futures dropped nearly 6%, 2-year Treasury yields spiked to almost 4%, and the yield curve flashed a pattern we haven’t seen since the spring of 2008.

So is Powell right? Is this just “tension between the goals?” Or is the bond market pricing in something the Fed is all but dismissing verbally?

What does it actually mean when inflation expectations double in three months? And if the Fed truly can’t cut and can’t raise, where does that leave your portfolio?

All good questions that deserve serious consideration and answers, ones that we will sift through, nice and easy as always, here today.

So, pour yourself a big cup of coffee and settle into your favorite seat for a look at the Fed’s tightest corner yet with this Sunday’s Informationist.

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The Downturn Advantage

The retirement system most people rely on was built for a different era—one of strong real yields, lower debt, and a stable monetary foundation. Today, inflation erodes purchasing power while taxes chip away at the savings meant to compound for decades.

Mark Moss joins Unchained for a live presentation and Q&A exploring how bitcoin is changing the retirement equation and why market downturns can create opportunities to help build generational wealth.

The event will cover:

• Why the traditional retirement model is under structural pressure

• How bitcoin changes the long-term retirement equation

• Why downturns can create opportunities for retirement planning

March 26 · 1PM CST · Live online · Free to attend

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🏦 What the Fed Said vs. What Powell Revealed

Let’s start with what the Fed officially told us on Wednesday.

The FOMC released its statement at 2:00 p.m. Eastern, and if you only read that, you’d think everything was under control. Rates held steady at 3.50% to 3.75%. Economic activity “expanding at a solid pace.” Inflation “remains somewhat elevated.” The committee is “attentive to the risks to both sides of its dual mandate.”

Measured. Clinical. Carefully worded.

Then Powell stepped to the podium for the Q&A. And the tone changed.

Every quarter, the Fed releases something called the dot plot.

I’ve written all about the dot plot before, and if you are unfamiliar with this chart or want a refresher, you can find out all about them here:

For the TL;DR people: It’s a chart that shows where each committee member expects interest rates to land by each year-end. Think of it as 19 people throwing darts at a monetary policy chart, more or less.

In any case, the median dot didn’t change from December. It still implies one possible 25-basis-point cut in 2026.

One cut. Maybe.

But the distribution shifted hawkish. Powell himself noted that four or five members moved from expecting two cuts down to one. And a growing number now see just one cut or none at all. In fact, 14 of 19 members are now in that camp, up from just 7 in December.

Meanwhile, the Fed’s own inflation projections moved in the wrong direction. In December, they forecast PCE inflation at 2.4% for this year. Three months later, that number is 2.7%. Core inflation? Same thing. Up from 2.5% to 2.7%.

Both trending higher, not lower.

Those might seem like small moves. A few tenths of a percent. But when you’re the Fed and your target is 2%, the difference between 2.4% and 2.7% is the difference between “we’re getting there” and “we’re going backward.”

And then came the line that turned heads.

Powell said, “There was discussion of a rate hike at this meeting.”

A rate hike. In 2026. After a year of cutting rates in 2025, and almost every investor in the world sitting on pins and needles, waiting for the next cut.

Powell said most participants don’t view it as the baseline scenario. But the mere fact that it was discussed at this meeting and the last one tells you something about where the Fed’s head is right now.

But it was another comment during the Q&A that really caught my attention.

When asked about whether the Fed could simply “look through” the oil shock, the way central banks have in the past, Powell acknowledged something that changes the balance entirely. He pointed out that inflation has now been running above the Fed’s 2% target for “five years.”

Five years.

The pandemic. The tariffs. And now an energy shock. One after another after another. Powell admitted that looking through this one is harder precisely because of everything that came before it.

The credibility cushion is thinner than it used to be.

And on the labor market? Deutsche Bank ran the numbers after recent BLS revisions and found that over the last three months, the economy has been adding roughly 6,000 jobs per month. Not 200,000. Not 100,000.

A measly six thousand.

But Powell went further. He pointed out that when you strip out government hiring and adjust for the BLS overcounting, “effectively there’s zero net job creation in the private sector.”

Zero.

Think about that for a moment. The Chairman of the Federal Reserve just told you the private sector has stopped creating jobs. He even gave it a name: “zero employment growth equilibrium.” And then added that “it has a feel of downside risk.”

In other words, the Fed Chair is telling us the floor might not hold.

OK. So let’s put this all together.

The official press release statement basically said everything is fine. But the Q&A told an entirely different story. Inflation projections rising. Rate hikes on the table. Five years of above-target inflation eroding the Fed’s ability to look through anything. And a labor market producing nothing.

Powell described this as “tension between the goals.”

Uh huh. I’d personally call it something else.

Exactly what the bond market seems to be calling it.

📉 What the Bond Market Heard

The day after Powell’s press conference, the bond market made its opinion crystal clear.

The 2-year Treasury yield, which is considered the market’s opinion on where Fed Fund rates should be, spiked as much as 21.8 basis points intraday, hitting almost 3.96%. That’s one of the largest single-day moves in the 2-year this year.

Now, if you’re not a bond person, that number might not jump off the page. But here is what it means.

The Fed’s current target rate is 3.50% to 3.75%. When the 2-year yield is sitting below that range, the market is essentially saying: cuts are coming, we expect rates to go lower.

When it jumps above that range?

The market is saying one of two things. Either the Fed needs to raise rates from here, or cuts are off the table for a long while.

Yesterday, that’s exactly what happened. A big, sudden shift in expectations.

But the 2-year yield on its own is just one signal. What made Thursday really stand out was how it moved relative to the 10-year yield.

See, under normal conditions, the 10-year yield sits comfortably above the 2-year. You expect to earn more for lending your money for a longer period of time.

Makes sense, right?

But when the 2-year rises faster than the 10-year, the gap between them compresses. In the bond world, this is called a bear flattening.

Super fancy term, I know.

In any case, back in early February, the gap between the 2-year and 10-year was about 74 basis points. But now look.

By Thursday, it had shrunk to 45. And if it goes negative, meaning the 2-year yields more than the 10-year, that’s a full inversion. And inversions have preceded every major recession in the last 50 years.

But for now, that compression is telling you two things at the same time.

Short-term rates are going up, which means investors are worried about inflation. And long-term growth expectations are going down, which means the economy is weakening.

Inflation and stagnation. At the same time.

You see where this is going.

Now, remember what Powell said about looking through the oil shock? That it depends on inflation expectations staying “well anchored?”

There’s a way to measure that.

The 1-year breakeven inflation rate compares regular Treasury yields to inflation-protected ones. The difference tells you what the bond market expects inflation to be over the next twelve months.

In mid-December, that number was 2.23%. Close to the Fed’s target. Calm. Anchored.

As of this week, it’s 5.38%.

In three months, near-term inflation expectations have more than doubled. The bond market has fundamentally repriced what it expects inflation to do from here.

This is the one condition Powell himself set for when the Fed can no longer “look through” an energy shock. And by his own measure, that condition is failing.

Meanwhile, fed funds futures are telling a similar story. The market is now pricing in roughly half a rate hike by the fall. No cuts until mid-2027. A full easing cycle not until late 2027 at the earliest.

So think about what the bond market is actually saying here. The Fed can’t cut. It might have to hike. Inflation expectations are cracking. Growth is fading. Stocks and bonds are falling together, hitting 60/40 portfolios on both sides.

I wrote about that exact dynamic recently, where normally uncorrelated assets suddenly start moving in the same direction. If you missed that one, I’d recommend going back and giving it a read.

Not to mention, stress in the private credit market has been intensifying.

So, let’s just say the economic situation is less than ideal.

So the official statement said the committee is “attentive to the risks.” The bond market heard something else entirely.

It heard the ingredients of a word that Powell obstinately refuses to use.

🔺 The S-Word

When pressed on the comparison during the Q&A, Powell was direct.

“I reserve stagflation for that, the word, for that period. Maybe that’s just me.”

OK. Let’s take him up on that. Let’s look at that period.

The 1970s stagflation crisis didn’t start with double-digit unemployment and 13% inflation.

No, no. It in fact started with an oil shock.

Interesting.

In October 1973, a conflict in the Middle East led to an OPEC oil embargo against the United States. Oil prices quadrupled in a matter of months. Inflation, which had already been creeping higher, accelerated. The economy, which had already been slowing, tipped into recession.

The Fed was stuck. Sound familiar?

They couldn’t raise rates aggressively because the economy was weakening. They couldn’t cut because inflation was running away from them. So they tried to split the difference. They hesitated. They waited. They hoped the oil shock was temporary.

Yeah, well. It wasn’t.

Then a second oil shock hit in 1979. And this one was triggered by…?

The Iranian Revolution.

History rhymes once again.

And so, inflation became embedded. Expectations shifted. Workers demanded higher wages. Companies passed costs through. The spiral that Powell referenced, the one that drove the Misery Index into the stratosphere, took years to build.

It accumulated.

Let’s be fair though. Powell is right about one thing. We are not in the 1970s. Unemployment is 4.4%, not 10%. Inflation is 2.7%, not 13%. The Misery Index today is a fraction of what Arthur Burns and Paul Volcker faced.

But consider where things stand right now.

An oil shock caused by a military conflict in the Middle East. ✅

A central bank that can’t raise rates without breaking the labor market and can’t cut without fueling inflation. ✅

Five consecutive years of above-target inflation eroding the Fed’s credibility to “look through” anything. ✅

Near-term inflation expectations that have more than doubled in three months. ✅

And a labor market with, in the Fed chair’s own words, “effectively zero net job creation in the private sector.” ✅

Here is what Powell and the Fed are up against:

Powell says he reserves the word stagflation for a much more serious set of circumstances. And I respect the distinction. The 1970s were brutal in ways that are hard to overstate.

But stagflation doesn’t arrive fully formed, of course. It builds, one shock at a time. One missed window at a time. One “we’ll look through it” at a time.

We’re clearly not in the 1970s.

But the question is whether we’re in the early innings of the same game, as this chart seems to suggest.

Looks pretty compelling at a glance, and if the bond market is any guide, the answer becomes even harder to dismiss.

Great. Now, what can we do about it?

💰 Where to Go From Here

If this is the environment we’re heading into, and the bond market seems to think it is, then the playbook matters.

So, let’s look at what actually worked the last time around.

During the stagflation era of 1973 to 1982, the S&P 500 returned roughly negative 2.5% per year after inflation (the real return). Long-term government bonds? About the same. Negative 2.5% real return.

If you were in the standard stock-and-bond portfolio, you lost purchasing power for a decade.

That said, two asset classes quietly outperformed.

US small-cap stocks returned about 5.9% per year above inflation during that entire period. And US housing returned about 5.5% above inflation, when you include both price appreciation and rental income.

Some of you may be asking, why small caps?

Well, a few reasons. Let’s look at them.

First, the S&P 500 entered the 1970s heavily concentrated in what was called the Nifty Fifty, a group of large-cap growth stocks with sky-high valuations. When the environment shifted, those stocks got hammered.

Sound familiar again?

If you look at today’s S&P 500, the concentration is arguably even worse. Instead of fifty dominant names, you’ve got seven.

Small caps, by contrast, tend to have more domestic revenue, more pricing power in inflationary environments, and lower valuations. They’re less exposed to the global growth slowdown and more responsive to the local economy.

And this year, the data backs it up. The Russell 2000 is down about 2.5% year to date. The S&P 500? Down nearly 5%. Small-cap value stocks are actually positive on the year. The rotation appears to already be underway.

Housing works for a simpler reason. It’s a real asset that can be used to generate income. Rents rise with inflation and property values tend to hold in real terms. So you can get inflation protection and yield at the same time. Of course, you don’t need to buy a building to get that exposure. Real estate investment trusts, or REITs, offer real asset exposure with the liquidity of a stock.

Now, what about gold?

Gold returned about 3.4% above inflation during the stagflation era. Respectable, but not the top performer. And this past week, watching gold drop nearly 6% in a single session, you might wonder whether it belongs in the conversation at all.

It does. And here’s why.

Gold sold off because the market repriced toward higher interest rates. When yields spike, money moves toward things that pay you to hold them. Gold pays nothing. So in the short term, a rate shock hits gold.

But zoom out.

Every stagflation in history has eventually been resolved the same way. The Fed holds and holds, until something breaks badly enough that they have to act. And when they act, they cut. They ease. They print.

That’s when gold does its best work. During the resolution. When the central bank reaches for the printing press because it has no other choice.

If you believe, as I do, that the Fed will eventually be forced to choose between fighting inflation and preventing a deep recession, and if history is any guide on which one they choose, gold’s long-term case is as strong as it’s ever been. One bad week doesn’t change that math.

And energy equities deserve a mention here too. If oil is the cause of the stagflationary pressure, energy stocks are a direct beneficiary. They profit from the thing causing the pain.

As we have seen these past few weeks.

So the framework I’d think about looks like this:

Places that have historically worked during stagflation:

• Small-cap value stocks (pricing power, domestic revenue, less concentration risk)

• Real assets with yield (housing, REITs, infrastructure)

• Energy equities (direct beneficiaries of higher oil)

• Gold and hard assets (for the eventual monetary response)

• Short-duration bonds or cash (preserve capital while rates are volatile)

Places to be cautious:

• Long-duration bonds (negative 2.5% real per year during 1973-82)

• Mega-cap growth at stretched valuations (concentration risk, the same vulnerability that sank the Nifty Fifty)

• Anything dependent on cheap financing

As for now, the economy is still functioning. The banking system is stronger than 2008. Powell may turn out to be right that this is just “tension” and not a full-blown crisis.

But the signals are real. The data is moving in the wrong direction. And the Fed, in its own words, is in a difficult situation.

And then there’s Bitcoin.

Bitcoin didn’t exist during the 1970s, so we have no stagflation track record to point to. But we do know this: Bitcoin has a fixed supply. No central bank can print more of it. No committee can vote to expand it. No emergency meeting can conjure it into existence.

If the stagflation playbook ends the way it always has, with the Fed eventually blinking and reaching for the printing press, then an asset with a hard cap of 21 million units and no central point of failure starts to make a whole lot of sense.

Gold has been the traditional answer to currency debasement for thousands of years. Bitcoin is the new one. And in an environment where the Fed is trapped, the bond market is repricing, and inflation expectations are becoming unmoored, sophisticated investors begin to overweight assets that can’t be debased.

Because when the Chairman of the Fed tells you the situation is difficult, it might be worth taking him at his word.

🔎 What I’m Watching This Week

📌 The Number: 5.38%. That’s the 1-year breakeven inflation rate as of this week. In December it was 2.23%. If this doesn’t start pulling back, Powell’s “well anchored” framework is failing by his own measure. (Bloomberg, USGGBE01 Index)

📌 The 2-year yield. It touched 3.96% intraday Thursday. If it holds above 3.75%, the market is telling you rate cuts are dead for 2026.

📌 Oil. Brent at $119 and WTI above $100. Two more weeks here and second-round effects hit everything from airline tickets to groceries.

📌 Fed speak. Multiple FOMC members scheduled next week. Listen for who echoes Powell’s “tension” framing and who starts breaking ranks.

📌 Private credit gates. Fund redemption windows are approaching quarter-end. If more gates close, the stress we covered in Issue #209 accelerates.

That’s it. I hope you feel a little bit smarter knowing what the Fed said, what the bond market heard, and how to think about positioning your portfolio if the S-word turns out to be more than just a 1970s relic.

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Talk soon,

James✌️

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Today’s Bullets:

• 🏦 What Is Private Credit, and Why Should You Care?

• 💣 The Dominoes That Started Falling

• 🔍 Why the Numbers Don’t Add Up

• 🛡️ What This Means for Your Portfolio

Inspirational Tweet:

If you’re a normal everyday person, you probably don’t think about private credit too often, if at all.

And why should you?

That’s for your pension fund or 401(k) manager to worry about. Until this last week. Because you’ve probably noticed that it’s been all over the news, seemingly everywhere you turn. If the article is not about war, it’s about private credit.

But what exactly is private credit? Why is everyone talking about it all of a sudden? Why should you care? And most importantly, how could it possibly affect your own investments?

All good questions and ones that we will answer, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a look inside the private credit market with this Sunday’s Informationist.

Partner spot.

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• How to orient your thinking around bitcoin’s long-term properties

• Common psychological traps to avoid during market downturns

• Practical accumulation strategies like dollar-cost averaging

• Ways to optimize savings, retirement accounts, and idle capital

A small minority will quietly make the moves that matter. We wrote 21 Moves to Make in the Downturn for that minority. If you’re serious about building a position that survives the next decade, start here.

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🏦 What Is Private Credit, and Why Should You Care?

Let’s start with the basics, shall we?

You’ve probably heard of private equity. Big firms like KKR and Apollo that buy entire companies, restructure them, and sell them for a profit. That’s private equity, a sector of investing with its own can of mark-to-market worms.

Private credit is different. It’s the lending side.

See, instead of buying companies, private credit funds lend money to them. Think of it as unregulated banks, operating in the opaque corners of the bankng world, and making loans directly to mid-sized businesses that can’t or don’t want to borrow from traditional banks.

This is why they’re often referred to as shadow banking.

It’s lending outside of the traditional banking system, beyond the reach of most banking regulations.

So why does private credit even exist?

Simple.

After super restrictive bank rules were enacted in the aftermath of the great financial crisis, fund managers saw an opportunity. They raised money from investors, from pensions, endowments, insurance companies, and wealthy individuals, and started making the loans that banks no longer would.

Higher interest rates. Flexible terms. And for the investors putting money in, attractive yields in a world where yields were close to zero.

Everybody won. The companies got their capital. The investors got their returns. The fund managers collected their fees.

And the market grew like black mold in a Houston basement.

FYI, I wrote all about shadow banking last fall. If you have not seen that newsletter or would like to revisit, you can find it here:

Today, including committed capital and leverage, the global market has ballooned to roughly $3 trillion. Larger than the entire global high-yield bond market.

Now here’s who’s actually in this market because this is where it gets personal.

Your pension fund is almost certainly allocated to private credit. If your 401(k) has an “alternative income” option, there’s a good chance it includes private credit. Life insurance companies are some of the biggest buyers. University endowments, too.

You may never have heard the words “private credit” before today.

But your retirement money has.

OK so far so good, right? Companies get loans. Investors get yield. What could go wrong?

Well, a lot of these funds were originally built with long lockup periods. You put your money in, it’s tied up for seven to ten years. The fund makes loans, collects interest, and when the loans mature, it returns your capital. The timelines match. Money goes in long. Money comes out long.

Makes sense.

But over the past few years, Wall Street got creative. They built a new kind of private credit fund. Perpetual funds. Evergreen funds. Names that sound like they’ll last forever.

And in a way, that’s the problem.

These funds have short lockups, sometimes just a year, sometimes none at all. After that, investors can request redemptions every quarter. There’s usually a cap, around 5% of the fund’s total value per quarter.

Sounds reasonable, right?

Here’s the catch. The loans inside these funds still last five to seven years. But unlike traditional funds, perpetual funds never stop lending. When an old loan gets repaid, the manager doesn’t hold that cash for redemptions. He recycles it into a brand new loan. More yield. More fees.

The wheel never stops spinning.

So now you have a fund full of five-to-seven-year loans that keeps making new five-to-seven-year loans, while promising investors they can leave every quarter through a 5% exit door.

When only a few people head for the door each quarter, the math works. The fund keeps enough cash on hand. Nobody notices.

But what happens when 7% want out? Or 9%? Or 14%?

The fund can’t call up its borrowers and say, “We need that $50 million back by Friday.” Those loans are locked. The cash isn’t there. It’s been recycled into new loans that won’t mature for years.

So the fund has two choices. Sell the loans at fire sale prices. Or shut the door.

It’s called putting up the gates.

When I wrote about private credit last fall, I flagged this structural mismatch. I said defaults could hit 5% if rates stayed high. They did.

But I also said contagion was unlikely.

I am now concerned about that last part.

Because over the past few weeks, the gates have started closing. And the names on the doors are unfortunately ones you know.

But the gates aren’t even the part that should worry you.

💣 The Dominoes That Started Falling

Read more

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Today’s Bullets:

• The Phone Call

• The Plumbing

• The Pattern

• The Playbook

Inspirational Tweet:

Let’s be honest. This tweet from Michael Gayed deserved a lot more than 10,000 views last week. Buried in a feed full of crude oil price and war-driven inflation worries, it was largely overlooked.

But that other number is the one that stopped me cold.

95%.

That’s how many asset classes are currently trading above their long-term trend. Not 50%. Not 75%. Ninety-five percent. A record.

Think about that. If you own stocks, bonds, real estate, commodities, or crypto, odds are you’re sitting on positions that are all above trend. At the same time.

So what happens when something breaks and everything expensive starts selling at once? Does your diversified portfolio actually protect you? What’s the recovery playbook?

All good questions, and ones we will answer, nice and easy as always, here today.

So, pour yourself a big cup of coffee and settle into your favorite seat for a deep look at what happens when there’s no safe haven, with this Sunday’s Informationist.

Partner spot.

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Bitcoin bear markets test your wits—and create opportunity for those prepared to act. Our new field guide, 21 Moves to Make in the Downturn, walks you through a clear, practical plan to steady your thinking, accumulate with discipline, and strengthen your long-term position while others lose focus.

Inside, you’ll learn:

• How to orient your thinking around bitcoin’s long-term properties

• Common psychological traps to avoid during market downturns

• Practical accumulation strategies like dollar-cost averaging

• Ways to optimize savings, retirement accounts, and idle capital

A small minority will quietly make the moves that matter. We wrote 21 Moves to Make in the Downturn for that minority. If you’re serious about building a position that survives the next decade, start here.

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☎️ The Phone Call

March 16, 2020.

I’m sitting at my desk, coffee barely touched, scanning the pre-market numbers. Futures are limit down. Again. The S&P has already lost 20% in three weeks and the bleeding won’t stop.

Then the email hits.

Our prime broker’s normal morning operational summary lands in my inbox. But today, the subject line is anything but normal.

“Immediate Margin Call Required.”

All in red.

I open it. Scan the margin summary first. Then the details.

My stomach drops.

A little background. Most individual investors use something called Reg T margin. It’s simple. Your broker lets you borrow roughly half the value of your stocks. You put up $100,000, you can buy $200,000 worth. 2-to-1.

Hedge funds play a different game. We use something called portfolio margining.

Instead of a flat 2-to-1 rule, the broker looks at your entire book as one unit and assigns each position a haircut.

Here’s how it works.

A haircut is how much value the broker shaves off when calculating what you can borrow against. Blue chips in calm markets might get a 5% haircut. So if you own $100,000 of Apple stock, you need at least $5,000 of capital in your account against that position.

Small number. Easy to cover.

Riskier stocks get bigger haircuts. But when the whole portfolio is diversified, the math works in your favor. Instead of 2-to-1 leverage, you might get 5, 10 or even 20-to-1. Put up $100 million, control over a billion in positions.

Without derivatives.

And if you have not worked in a hedge fund before, here is an important detail for you.

All of those haircuts are set by a black box that sits on the prime broker’s risk desk. Not yours. Theirs. They decide, day to day and sometimes minute to minute, how your portfolio can be margined. How much you can borrow. How much collateral you need.

And you agreed to it. Every hedge fund signs a portfolio margining agreement with their prime broker. You’re playing in their house, by their rules. Rules they can change whenever they want.

When markets are calm, this works beautifully. The portfolio manager diversifies strategically, the black box sees low risk. The book gets small haircuts. Everyone’s happy.

Until they aren’t.

Because when volatility spikes, that black box recalculates. And when it recalculates, the prime broker doesn’t call to discuss it. They send you a notice.

That’s what I was staring at.

Virtually every micro-cap position in the fund had been raised to a 100% haircut. Overnight. Zero borrowing value. Those positions were now dead weight on the books.

Regardless of how much confidence we had in them as companies, as far as the prime broker was concerned, they were dead weight.

Even our best investments, the blue chip holdings in the eyes of the prime broker, you know, big S&P Mag 7 type stocks, had been raised from 5 or 6% to 25 or 30%. Overnight.

One email. Every position. The entire margin structure of our fund had just been rewritten while we slept.

And then you do the math in your head. You realize the cascade. Because it’s not just one position that’s underwater. It’s the whole book. Every holding now requires more collateral than it did yesterday. Collateral you don’t have.

I pick up the phone and call the portfolio manager. Our chief investment officer.

Possibly the worst phone call I’ve ever had to make in my career.

This is where the hedge fund manager bypasses the portfolio managers and heads straight to the traders, telling them to sell. Ten percent. Twenty percent. Of everything. He doesn’t care what it is.

“We need liquidity. We need it now.”

The good positions. The bad positions. The hedges that were working perfectly. Didn’t matter.

In these moments, you sell what you can, not what you want to.

That’s what a correlation-to-1 event feels like from the inside. Like sprinting through a fire, every asset in your portfolio burning right alongside you.

And yes, that means Treasuries too. All of it fair game. Everything on the cutting table.

Because you just need one thing.

Cash.

Suddenly, a whole lot of it.

That was March 2020.

Fast forward to today.

A record 95% of asset classes are trading above their long-term trend. And margin debt just hit an all-time high of $1.28 trillion.

The conditions are lining up again.

So how does this actually happen? What breaks inside the plumbing that turns a normal selloff into a cascade where everything goes down together? Is there a pattern to the recovery? And what can you actually do to protect yourself before the next phone call comes?

Let’s get into it.

🔧 The Plumbing

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Today’s Bullets:

• The Firm That Never Tweeted

• The Rap Sheet

• The Grey Window

• What It Means for Your Money

Inspirational Tweet:

If you’ve been on Twitter this past week, you’ve probably seen one name dominating your feed.

Jane Street.

And unless you work on a trading desk, you probably haven’t heard of them.

But the accusations flying around right now are serious. Insider trading in the $40 billion Terra collapse. Rigging the Indian stock market. And manipulating Bitcoin’s price. Every single morning. At 10 AM.

The entire street has been buzzing about it. Even backstage at the Strategy Conference this past week, Michael Saylor, Phong Le, and Shirish Jajodia, Strategy’s head of treasury and the man executing their capital markets activity, and I were talking about it, trying to separate what’s real from what’s noise.

And these aren’t just Twitter conspiracy theories. Regulators in India have already issued a 105-page enforcement order. A bankruptcy estate filed a lawsuit in federal court. And now, legitimate questions about Bitcoin ETF mechanics are surfacing that go well beyond one firm.

So who is Jane Street? What exactly are they accused of? How do the Bitcoin ETF mechanics actually work? And what does any of this mean for your portfolio?

Fair questions. And ones we’re going to answer, nice and easy as always, here today.

So, pour yourself a big cup of coffee and settle into your favorite seat for a deep dive into the world of Jane Street with this Sunday’s Informationist.

**Please note: This newsletter was written before the weekend conflict in Iran. The prices and movements referenced are as of Friday’s market close.

Partner spot

The cracks in the foundations of money are becoming harder to ignore. Persistent deficits, rising debt, and central bank behavior are quietly reshaping how investors think about preservation and risk.

In my latest report, The Debasement Trade, I walk you through:

• Why debasement is structural, not cyclical

• How inflation and financial repression challenge familiar portfolios

• Why gold tends to move first—and bitcoin often moves further

You can download the report here:

Download

🏢 The Firm That Never Tweeted

Let’s start with who we’re dealing with. Get a sense of the players and the scene, shall we?

Jane Street was founded in 1999 by four traders who left Susquehanna International Group, one of the original quant powerhouses on Wall Street. Tim Reynolds. Rob Granieri. Marc Gerstein. Michael Jenkins.

They hung a shingle in New York and built something deliberately opaque. No CEO. No corporate hierarchy. Only about 40 people hold equity. The other 3,000 or so employees are compensated handsomely for keeping their heads down and their mouths shut.

How much are they paid, you ask?

Estimates put the average Jane Street trader compensation at about $900,000 per year.

Nice gig.

Though, one former employee has described the culture as an “anarchist commune.”

Hmmm. Noted.

Now the big numbers.

In 2024, Jane Street generated $20.5 billion in net trading revenue. Profit margins above 70%. They handle roughly 10% of all US equity trades. 14% of all US ETF trading volume. And nearly a quarter of all primary market Authorized Participant activity.

We’ll come back to that last one. It matters.

A lot.

Their Twitter account has 16,000 followers. They follow nobody. And check this out.

Some Twitter detectives have speculated that they recently deleted their entire history.

Fact is, they have never posted a single tweet. Not deleted. Never posted. That’s a $20 billion revenue firm that has, quite literally, never said a word publicly on social media.

Interesting.

Also, you may recognize a former employee. Sam Bankman-Fried worked at Jane Street before leaving to start Alameda Research and FTX.

Well, well, well. But it gets better.

In 2022, FTX invested $500 million in a little AI startup called Anthropic. Before the AI boom. Before ChatGPT. When FTX went bankrupt, those shares hit the auction block.

Who bought them?

Jane Street. $100 million worth.

Fast forward to today. Anthropic just raised at a $380 billion valuation. Some quick math tells us that $100 million stake is worth somewhere north of $3 billion.

Holy Mother of God.

So Jane Street knows how to make money. No argument there.

What is in dispute is how some of that money gets made.

Over the past year, three separate stories have emerged. A regulator in India documented a pattern of index manipulation. A bankruptcy estate filed a lawsuit alleging insider trading in the Terra collapse. And traders, myself included, have been watching a pattern in Bitcoin’s price that raises structural questions about how ETFs interact with the spot market.

India is the furthest along. SEBI issued its order and Jane Street posted $566 million in escrow while the appeal plays out.

Terra is an active lawsuit filed last week in federal court. Jane Street says the claims are baseless.

Uh huh, we will see.

Back to the Bitcoin ETF question, which is structural. No regulator has made any allegation. But the mechanics absolutely deserve a close look.

Three stories. Three different stages. Let’s walk through each.

⚖️ The Rap Sheet

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👉 And you can always check out the archives to read more of The Informationist.

Today’s Bullets:

• The Number Behind the Number

• 6% Club: The Club You Don’t Want to Join

• A Doom Loop Update

• What It Means for Your Money

Inspirational Tweet:

Ray Dalio has been talking about something that should honestly be getting a lot more attention than it has recently.

He laid out a simple target. A number that the US deficit needs to hit to avoid what he calls a debt crisis. And then he listed three levers that could get us there.

Simple enough. Except for one problem.

When you look at where that number actually is right now, and where it’s headed, you realize those three levers will not be enough. In fact, it’s not even close.

And the consequences of that? They touch everything. Your savings. Your mortgage. Your retirement. And if you’re still trying to build those things? It matters even more.

And this morning’s GDP report? It just made the math even harder.

So what is Dalio’s target? What’s the number everyone should actually be watching? And what does all of this mean for the US dollar and your money?

All great questions that deserve serious consideration and answers, ones that we will sift through, nice and easy as always, here today.

So pour yourself a big cup of coffee and settle into your favorite seat for a look at the number that nobody’s watching closely enough with this Sunday’s Informationist.

Partner spot

The cracks in the foundations of money are becoming harder to ignore. Persistent deficits, rising debt, and central bank behavior are quietly reshaping how investors think about preservation and risk.

In my latest report, The Debasement Trade, I walk you through:

• Why debasement is structural, not cyclical

• How inflation and financial repression challenge familiar portfolios

• Why gold tends to move first—and bitcoin often moves further

You can download the report here:

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🫣 The Number Behind the Number

You’ve probably seen the charts. US national debt held by the public just crossed $32 trillion. That’s about 100% of GDP. The total including intergovernmental holdings? $38.6 trillion.

Big numbers. Scary numbers. And they get a lot of attention.

And by the way, even that $38.6 trillion actually, severely understates the problem. When you add in unfunded liabilities for Social Security, Medicare, and Medicaid, the total obligation is over $175 trillion. The real mountain of debt may be more than four times what we’re counting.

But there’s a number behind that number. One that tells a much more urgent story.

Let me explain.

Debt-to-GDP tells you the size of the pile. How much has accumulated over the years. And yes, it’s a big pile. But it’s a snapshot. It tells you where you are at one moment in time.

What it doesn’t tell you is how fast the pile is growing. Whether it’s accelerating or slowing down. Whether the trajectory is getting better or worse.

For that, you need the deficit. Specifically, the deficit as a percentage of GDP.

Think about it like your credit card statement.

The balance is what you owe. A big balance is bad, but what really tells you if you’re in trouble? The monthly charges. How much *new* debt you’re adding each month relative to your income.

Or think of it like this:

The debt is the odometer, which tells you how far you’ve driven.

The deficit is the speedometer. It tells you how fast you’re going right now.

And right now, the speedometer is pinned.

The US ran a $1.83 trillion deficit in fiscal year 2024. That’s 6.3% of GDP.

Fiscal year 2025 came in at $1.78 trillion. About 5.8%.

And fiscal 2023? 6.2%.

Three straight years at or near 6%. Double Ray Dalio’s target.

The 50-year average? 3.8%. We’re running at more than 150% of the historical norm.

Now, you might be thinking, “OK, that sounds bad, but hasn’t the US run big deficits before?”

Yes it has. But never like this.

And to show you what I mean, let me introduce you to what we call the 6% Club.

♣ 6% Club: The Club You Don’t Want to Join

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