One of the longest-running antitrust cases in U.S. history is finally in the final innings.

After two decades of litigation, Visa and Mastercard have reached a new settlement with merchants who sued them in 2005 over “swipe fees”—the 2-2.5% cut card networks take on every transaction.

The claim was simple: Visa, Mastercard, and major banks conspired to fix these fees at artificially high levels, violating antitrust laws. If approved, this settlement could fundamentally change how credit cards work in America.

The Problem Merchants Were Fighting

Every time a customer swipes a credit card, the merchant pays an “interchange fee” to process the transaction. For most cards, that’s 2-2.5% of the purchase price.

Merchants argued these fees were rigged. They claimed Visa and Mastercard colluded with banks to keep rates artificially high while forcing merchants to accept all cards—including expensive premium rewards cards—through the “honor all cards” rule.

Translation: If a business wanted to accept any Visa card, it had to accept every Visa card, even the ones with 3% fees subsidizing airline miles for wealthy customers. Merchants couldn’t steer customers toward cheaper payment options. They were stuck.

Why It Took 20 Years

This wasn’t the first attempt at a settlement. In 2012, Visa and Mastercard proposed a $7.25 billion deal. Courts rejected it. In March 2024, another settlement failed. The problem? Judges ruled the deals didn’t provide enough actual changes to business practices—just cash payouts that didn’t fix the underlying system.

Merchants wanted structural reform, not just money. They wanted the freedom to choose which cards to accept and how to price them.

What’s in the New Deal

The proposed settlement is valued at $38 billion in “injunctive relief”—lawyer speak for forcing companies to change how they operate.

Fee reductions: Visa and Mastercard will cut interchange fees by 0.1 percentage points for five years and cap standard consumer card rates at 1.25%.

Merchant flexibility: The bigger change—merchants now get the freedom to:

• Surcharge credit card transactions (pass the fee to customers)

• Refuse certain high-cost card categories, like premium rewards cards

For the first time, businesses can push back on the “honor all cards” rule. They can say no to expensive cards or add a credit card fee at checkout.

What This Actually Means

Merchants now have two new options:

1. Pass the fee to customers. That 2-2.5% swipe fee? Businesses can add it as a surcharge at checkout. Your $100 purchase might now cost $102.50 if you pay with a credit card.

2. Refuse high-cost cards. Premium rewards cards like the Chase Sapphire Reserve or American Express Platinum charge merchants higher fees to fund those travel perks. Now, merchants can simply say no to those cards.

If you carry a flashy rewards card, you’re now at risk of being told “we don’t accept that here” at checkout.

This comes at an interesting moment. The same day the settlement was announced, Square revealed that all 4 million of its merchants can now accept Bitcoin as payment.

Payment infrastructure and financial technology are changing rapidly. The mainstream adoption of stablecoins and blockchain technology is at the forefront of this shift. Breaking up the Visa and Mastercard monopoly? That’s the first step toward a future where merchants have real alternatives.

Stablecoins could fit seamlessly into this new system—offering instant settlement, lower fees, and no card network middleman. We’ll explore what stablecoins are and how they work in the next piece.

Stay curious. Follow the money. Have fun.

This graph has been going viral online. Since 1970, the S&P 500 has vastly outperformed housing. But let’s break down what this actually means in dollar terms.

The 20-Year Reality Check

Let’s compare two scenarios over 20 years (2005-2025) using the chart data.

Scenario 1: Buy a $500,000 house with $50,000 down and a 4% interest loan. After 20 years of paying dead costs (interest, property taxes, maintenance, insurance) that don’t build equity, the house sells for $1,050,000 based on the chart’s 2.1x housing appreciation. Net gain (profit) after subtracting 20 years of dead costs and building some equity? $177,000.

Scenario 2: Rent and invest that $50,000 in the S&P 500 instead. Rent a similar home for a lower monthly cost and invest the extra monthly cash in the market. Based on the chart’s 5.8x S&P growth, the portfolio after 20 years? $840,000.

You’d have 4.7x more wealth—and it’s completely liquid.

(For detailed math breakdown, see Appendix below)

So why do we believe homes are investments?

How We Got Here

In the 1950s, banks and insurance companies had massive cash reserves sitting idle. They needed borrowers. But nobody wanted 30 years of debt.

So they made a deal with the government.

The pitch: “Help us create demand for mortgages(debt). Make homeownership patriotic. Make it the American Dream.”

The government’s incentive: Post-WWII economic recovery. Get soldiers into homes. Stabilize the economy.

The banks’ demand: “We’ll lend—but only if you guarantee it.”

The government agreed. FHA (Federal Housing Administration) backing made mortgages risk-free for lenders. Banks couldn’t lose.

Life insurance companies like Prudential tripled their real estate investments post-war. Suburban developments became profit machines—high returns, zero risk, government-backed.

The result: A propaganda machine telling Americans that owning a home equals success. Banks won. The government got economic growth. Homeowners got debt.

Why Prices Kept Rising

Post-2008, the government doubled down. They subsidized DEMAND—not SUPPLY.

Homebuyer assistance programs, low interest rates, printed money flowing to buyers. But builders didn’t proportionally increase construction.

What happens? More money chasing the same number of houses. Prices skyrocket.

Think of luxury watches. Rolex doesn’t make more when demand increases. Prices just rise because supply stays constrained.

Housing worked the same way. Government money inflated prices artificially.

Why It’s About to Collapse

Three forces are colliding:

Demographics: Birth rates falling. Boomers own ~60% of homes. As they die, kids inherit and want cash, not houses. So a mass selling of homes is coming.

Policy Reversal: New federal government policy is pushing the cutting of subsidized demand while deregulating supply. Faster permitting, fewer restrictions.

AI Construction: Building is getting cheaper and faster. Supply surges while your locked capital sits idle in depreciating boxes.

Result: More homes. Fewer buyers. Less government money. Prices fall.

And while capital is trapped in single-family homes, AI-driven companies are optimizing margins, compounding profits, and creating wealth for shareholders who kept their cash in liquid assets. A liquid asset is one that can be quickly/easily sold when cash is desired

The exceptions?

1. Specific neighborhoods like Atherton, Beverly Hills, Malibu—places where zoning boards protect wealthy homeowners by blocking new supply.

2. Investment properties generating rental cash. This analysis focuses on primary residences—the house someone lives in and pays a mortgage on.

The Bottom Line

A single family home isn’t wealth. It’s debt masked as an asset.

The banks sold debt disguised as a dream. The government inflated the price to stimulate the economy. Both are reversing.

In an age where AI allows corporations to optimize, compound, and capture profits at unprecedented scale, capital needs to be where the growth is—in businesses, not boxes.

The companies leveraging AI are creating wealth. Homeowners are watching equity evaporate while cash sits locked in 30-year debt loops.

Unless it’s in one of few ZIP codes in the US that will restrict supply, a house is a depreciating consumer durable.

Finance is zero-sum, there is always one winner and one loser. When banks lend, they win. Who loses? The homebuyer.

Stay curious. Stay liquid. Have fun.

Appendix: The Detailed Math

Scenario 1: Buy the House

Purchase: $500,000 house, $50,000 down (10%), $450,000 mortgage at 4%

Monthly dead costs (interest at 4% + property tax, maintenance, and insurance at 1% each of purchase price): $2,450/month that doesn’t build equity

Over 20 years, these dead costs total $590,000.

During that time, you pay off ~$167,000 in principal (equity).

At sale (house appreciated 2.1x per chart):

• Sale price: $1,050,000

• Remaining mortgage: ~$283,000

• Gross equity: $767,000

• Minus dead costs: -$590,000

• Net: $177,000

Scenario 2: Rent + Invest in S&P 500

Initial investment: $50,000 into S&P 500

Monthly: Rent for $2,500/month (vs. $3,400 homeownership costs). Invest the $900 difference.

After 20 years (S&P 5.8x per chart):

• Initial $50,000 → $290,000

• $900/month compounding → ~$550,000

• Total: $840,000 (liquid)

Result: $840,000 vs. $177,000 = 4.7x more wealth by renting and investing

The 2008 financial crisis that “nobody saw coming.” Brexit that couldn’t possibly happen. The 2016 election that was “in the bag.” The 2024 election that was “too close to call.”

For decades, we’ve turned to the ivory tower for answers. Economists, pollsters, and pundits with fancy degrees telling us what would happen next. And for decades, they’ve been flat out wrong with no consequence.

Why? Because talk is cheap. They had nothing to lose by being wrong.

In October 2025, Wall Street saw the future. Intercontinental Exchange (ICE), owner of the famed New York Stock Exchange, invested $2 billion in Polymarket (a popular prediction market) at an $8 billion valuation. This was ICE recognizing that prediction markets are the future of forecasting—for elections, markets, and everything else the experts claim to predict.

An economist named Friedrich Hayek figured this out in 1945. He argued that knowledge isn’t concentrated in universities or think tanks. It’s scattered across millions of people, each holding fragments of insight about their corner of the world. No single expert, no matter how credentialed, can see it all.

Markets, Hayek said, are truth-telling machines. They take those scattered fragments and turn them into a single signal. A price. Not an opinion. Not a forecast from someone with a book deal. A number that someone bet real money on.

Stock markets have done this for centuries—pricing companies, economies, and inflation. But they couldn’t price everything else. Elections. Wars. Geopolitical negotiations. Whether a movie flops or Xi Jinping gets ousted. Now they can.

How It Works

Prediction markets are simple. You bet on whether something will happen. If you’re right, you win. If you’re wrong, you lose money.

When your own money is on the line, truth matters. Experts on TV will be back next week with a new take. Bettors lose their money and disappear.

Here’s how it works. Say a market asks: “Will Russia and Ukraine sign a peace treaty by June 2026?” Shares are trading at 30 cents—the crowd thinks there’s a 30% chance.

Then you spot something others missed. Maybe you follow Ukrainian Telegram channels and see diplomatic language softening. You think a deal is more likely than the market believes.

So you buy 1,000 shares at 30 cents ($300 total). If the treaty happens, you make $1,000.

When you buy, the price rises. Your purchase pushes it to 35 cents. A defense analyst sees the same signals, buys more. Now it’s 50 cents. More information gets priced in. The price hits 85 cents.

You bought at 30 cents. Shares are now 85 cents. You could sell now and pocket 55 cents per share ($550 profit). Or hold until resolution and collect the full dollar ($700 profit) if you’re right.

Each trade reflects what people know and what they’ll risk. The price becomes truth.

In 1907, statistician Francis Galton attended a country fair where he had 800 people guess the weight of an ox. Individual guesses were all over the place—some wildly high, others absurdly low. But when Galton calculated the average of all 800 guesses, it was nearly perfect. The crowd, collectively, knew something no single person did.

Prediction markets are Galton’s ox at scale. Digital. Real-time. With money forcing people to mean it.

The Evidence

In 2024, the U.S. presidential election was supposed to be a toss-up. Every poll had it at roughly 50-50. “Too close to call,” the experts said.

But the money told a different story. Polymarket had it at 65-35. The money was right. The polls weren’t.

A Vanderbilt study confirmed it. Prediction markets outperformed traditional polls, especially in swing states where uncertainty was highest.

But this goes beyond elections. Polymarket tracks Fed interest rate decisions, whether world leaders will resign, if conflicts will end, and even box office winners. Any binary outcome where people have scattered information becomes predictable when you aggregate everyone willing to bet on it.

The reason is simple. Prediction markets aggregate everything. Polls, expert opinions, insider knowledge, gut instincts. All of it gets priced in. And unlike pundits who face no penalty for being spectacularly wrong, bettors lose money. Consequence sharpens judgment.

What It Means

Hayek was right. Dispersed knowledge beats centralized authority.

The ivory tower doesn’t get to decide what’s true anymore. Not when millions of people with skin in the game are willing to bet against them.

ICE’s $2 billion investment is validation. As their CEO put it, they’re “blending the NYSE, founded in 1792, with a revolutionary company pioneering change.”

This is how the world will price uncertainty from now on.

The future isn’t experts telling you what to think. It’s following where the money goes. Because when people risk their own cash, the price tells the truth. And the truth doesn’t care about credentials.

Stay curious. Follow the money. Have fun.

The merchant of death became the Nobel Peace Prize. The corporate bully became the global health hero.

Before you read another headline or form another opinion about someone, ask yourself: Who wants me to see it this way?

Because perception is engineered. And once you see the playbook, you’ll catch it every time.

Let’s start in 1998.

The U.S. government takes the richest man in the world to court for running an illegal monopoly. For three years, Americans watched Bill Gates defend tactics that killed companies and eliminated thousands of jobs. Microsoft’s strategy had a name: Embrace, extend, extinguish. Copy your rivals, then bury them.

Gates strangled competitors. Netscape died because Microsoft bundled Internet Explorer for free and waited for Netscape to starve. WordPerfect, gone. Lotus, gone. His emails used phrases like “cut off their air supply.”

By 2001, Gates was the face of corporate greed—the bully with infinite money who played dirty and won.

Now Google “Bill Gates.”

First page: Philanthropist. Vaccine distribution. Malaria eradication. Global health hero.

What changed? Did Gates become a different person, or did someone just build a louder story around him?

The Accidental Blueprint

In 1888, Alfred Nobel read his own obituary by mistake. A French newspaper confused him with his dead brother. The headline: “Le marchand de la mort est mort.” The merchant of death is dead.

Nobel invented dynamite to make construction safer. Before dynamite, workers used liquid nitroglycerin to blast through rock. It was wildly unstable—a bump, a spark, even heat could trigger an explosion. Nobel created a controlled explosive that wouldn’t detonate by accident.

That’s what he intended.

But anarchists bombed cafés with it. Armies stockpiled it. Terrorists used it in massacres. It became a tool of death and destruction. The obituary wasn’t wrong. It was just unmanaged.

Nobel had something most people never get: a preview of his legacy. He saw exactly how the world would remember him. As the merchant of death.

He had eight years to change it.

So he built a new story. One so loud it would drown out the old one.

Engineering a New Legacy

In 1895, Nobel rewrote his will. When he died, 94% of his fortune would fund annual prizes in physics, chemistry, medicine, literature, and peace.

Not peace efforts. The Nobel Peace Prize.

He created an institution. A one-time gift gets forgotten, but an annual event lives forever. He named it the opposite of what he was known for. Dynamite equals death. Nobel equals peace.

He built a perception machine by letting others rebuild his reputation. Every laureate thanks Nobel. Every headline reinforces prestige. The prize becomes the story. Dynamite fades.

The first prizes were awarded in 1901. By the 1920s, “Nobel” meant excellence. The dynamite? Ancient history.

A Century Later

Bill Gates found the same playbook.

In 2000, while the antitrust case raged, Gates launched the Bill & Melinda Gates Foundation. Not a donation, but an institution. He attached his name to the opposite of what he was known for. Microsoft meant monopoly. The Foundation meant saving lives.

Media covered the wins. Beneficiaries thanked Gates. “Philanthropist” became his identity. By the 2010s, a new generation found health initiatives, not courtroom scandals.

Same playbook. Same result. Different century.

When It Fails

The Sackler family, owners of Purdue Pharma, knowingly pushed dangerous opioids that killed hundreds of thousands. Their response? Slap their name on museum wings.

It didn’t work. Museums ripped the names down.

Why? They didn’t build a machine. Nobel and Gates built institutions. The Sacklers just wrote checks. No foundation. Just money trying to paper over damage.

And timing was wrong. Nobel had over a century of distance. Gates had two decades. The Sacklers barely had ten. Victims were still alive. Pain too fresh.

Your New Lens

Legacy isn’t what you did. It’s what people look at.

This game is being played constantly. Billionaire announces a foundation—what are they distracting from? Company sponsors a cause—what does their business actually do? Politician champions an issue—what’s the incentive?

Next time you see a headline or donation announcement, ask:

What’s the premise? Why am I seeing this now?

What’s the incentive? Who benefits if I believe this?

What’s missing? What am I not being shown?

Perception isn’t random. It’s engineered.

Nobel proved you can architect your legacy with money and patience. Gates proved it still works 130 years later.

Once you see the pattern, you can’t unsee it. And the next time someone tries to manage your perception—whether it’s a billionaire, a colleague, a brand, or a government—you’ll catch it.

Everyone consumes information. What sets you apart is discernment. In a world where AI floods us with content, the ability to question what you’re shown is essential.

Stay curious. Stay discerning. Have fun.

Machines have always been specialists; what’s changed is twofold: power and control.

Power: AI systems (software + computers) and robots can now run long chains of complex steps with very low error, and they’re improving at a breakneck pace. Give a machine a narrow, well-defined job and it drills it to near perfection. It can also carry the work end to end: a stack of documents scanned in seconds, key facts pulled, a response drafted, forms completed, next steps queued. In the physical world, robots lay out, measure, and repeat with steady precision.

Control: And now we can steer these specialist machines with plain language—short prompts or full sentences—typed on a phone or keyboard, or spoken aloud as a voice command.

In short: computers and robots can now execute multi-step tasks, over and over, with error rates that keep dropping. That is the structural shift.

My remix above of the classic evolution image asks a simple question: did our evolution take a pit stop at the desk? Maybe the next step is getting back on our feet—talking to tools while we do the parts only humans do well.

That’s the shift that favors generalists. A specialist is a scalpel—perfect for a precise cut. A generalist is a Swiss Army knife—built for changing situations. We still need scalpels, but when technology accelerates change, one fixed skill isn’t enough—the advantage belongs to people who learn quickly, communicate clearly, and connect fields.

Generalist = Someone who knows enough across fields to connect them, follow curiosity, and create freely.

Where the pressure is highest (at a glance)

• Admin, ops, accounting, HR: about 28.9 million people in the U.S. (office/administrative plus business/financial roles). These jobs run on forms, data, and repeatable processes—software automates those first.

• Legal support and lawyering: about seven years to become a lawyer (four years of college, three years of law school) plus bar prep. AI already drafts contracts, reviews documents, and speeds up research.

• Construction: around 8.3 million employed. Automation now helps with layout, tying rebar, laying bricks, mapping a site, and checking progress.

• Medicine (training vs. tech): surgeons often train 13+ years after high school. Radiologists complete a one-year internship and a four-year residency, often with a fellowship. Pharmacists typically spend six to eight years earning a degree.

  • What AI and robotics are doing now:

    • Imaging: AI screens for cancers faster and, in many programs, more accurately than human-only reads—and reduces the time doctors spend reading scans end to end.

    • Surgery: robot-assisted systems handle more of the precise movements, so fewer hands are needed on the instruments and there are fewer slips from fatigue.

    • Pharmacy: prescription-safety tools check the full record, flag risky drug combinations, and suggest safe doses—cutting medication mistakes.

  Many predict medicine will become solely oversight-driven, with doctors reviewing and approving AI and robotic work rather than regularly practicing medicine.

This is where Layman comes in: a place to learn where complex ideas become simple, so you can learn faster and become more versatile for a future that favors generalists.

Each week, you will receive a research-driven article that roams widely, spanning science, history, business, technology, the arts, and everyday life. Communicated with clarity and brevity. It is free and will always be free.

Subscribe to The Generalist’s Almanac and get the first issue next week.

Stay curious. Stay human. Have fun.

The S&P is currently trading at ~23×.” —Howard Marks

1. What exactly are you buying with the S&P 500?

2. What is a “valuation”?

3. Why do people expect 10% a year? And most importantly, what the hell do we do about this clear warning sign?

What you’re actually buying

When you buy an index fund in your 401(k) or an ETF like VOO/SPY, you’re buying a basket of large-cap U.S. companies. It’s market-cap weighted, so you own more of the giants and less of the smaller names. Many plans also offer funds that aren’t the literal S&P 500 but hug it—“U.S. Large Cap Index,” “Total Market,” or “Enhanced” versions with tiny tilts (often a touch more tech/Nasdaq). You’re still buying an index-like basket designed to track—or try to beat—the benchmark by a 1-2%.

Also worth knowing: today’s S&P is heavy at the top—a handful of mega-caps drive a large chunk of the index. That concentration is part of why valuations look stretched.

What “23×” means

“23×” is the price-to-earnings (P/E). It tells you how many dollars investors pay today for $1 of next-year earnings from that basket.

• At 23×, you’re paying $23 for $1 of expected earnings.

• If earnings boom, paying up can still work.

• If growth slows or the multiple falls back toward normal, your return gets squeezed.

As of late August, major trackers peg the forward P/E around ~22–23; which is elevated versus history.

Why people expect “~10% a year”

That’s the long-run average total return for U.S. stocks over many decades. Useful for textbooks, but it blends cheap and expensive eras. When you start at a high multiple, the next decade has historically landed below that 10% expectation.

Caption: Forward P/E uses the next 12 months of expected earnings. Shiller CAPE uses the past 10 years of real (inflation-adjusted) earnings. Forward looks ahead; CAPE smooths history.

What the pros are doing (receipts, not advice)

Warren Buffett/Berkshire Hathaway have been signaling “expensive” with their feet:

• 11 straight quarters as a net seller, selling $212 billion of stocks.

• Cash ≈ 57% | Stocks ≈ 43% . As of Q2 2025, Berkshire held about $344B in cash and T-bills and ~$258B in disclosed public stocks—roughly 57% cash / 43% equities. Those T-bills are earning interest while they wait.

Howard Marks/Oaktree have been clear in 2025 memos/interviews: institutional playbooks are tilting toward bonds/credits at these equity valuations—collect yield while waiting for better prices.

Bill & Melinda Gates Foundation Trust boosted its Berkshire stake by ~40% in Q2 2025 (13F). Another datapoint of capital moving to “index-with-a-brain.”

Where your money sits matters

This is what’s happening out there, not personal advice.

• 401(k): Menus are limited. Most people are choosing among U.S. index funds and bond/credit funds. In 2025, a lot of smart money has tilted toward credit (higher yields, less equity risk) inside constrained menus. That’s the positioning right now. FactSet Insight

• Roth IRA / taxable brokerage: More flexibility. Here’s the framing many investors use for Berkshire (BRK.B): it’s a “better S&P 500” in the sense that you’re buying broad U.S. business exposure plus a prudent allocator. In a high-valuation tape, a typical do-it-yourself move would be to trim a third to a half, hold more cash, and wait. That’s precisely what Berkshire has been doing: roughly half in public stocks, roughly half in cash/T-bills, actively re-deploying only when prices make sense. In effect, you’re hiring Buffett’s discipline—an active S&P-like core that earns yield while waiting and can pounce when valuations reset. Buffett and Co. are better investors than us.

Depends on who you are (time-horizon reality check)

• Retiring in <10 years: The 10-year lens matters most here. Starting at ~23× historically maps to low-single-digit 10-year outcomes, and you have less time to average through drawdowns; creating a higher risk of portfolio losses.

• 20–30 years of runway: You’ve got time to absorb bad decades and let compounding do its thing. Rich starting points still tend to mean a bumpy first act, but the long run blends multiple cycles. You will likely not lose money, but will miss outsized gains.

Rule number #1: Admit when you’re wrong and adapt.

Rule number #2: Don’t fight what the market is telling you. Swim with the flow of money.

Reminder: Avoid concentrating your wealth in individual stocks. For stock investing, allocate at least 80% to a broad index fund and limit stock picking to 20% or less of your portfolio. Beating the market typically requires luck, extensive time and analysis, or insider information. Retail investors are best positioned by investing in longer economic cycles, shifting from index funds to bonds to commodities(i.e. gold) over elognated time horizon to optimize returns and manage risk. “Long Beta, and live your life”—I’ll expand on this in a future letter.

Everyone—and their mother (including me)—assumed that Trump would enter office with one goal: fueling the stock market to new highs, as every president has. We were wrong. It’s common practice for administrations to measure the success of a presidency by the net gain of U.S. markets during their term. Why? Well, you, me, and your neighbor (voters) all have 401(k)s. Numbers go up = happy voters. The opposite has proven to be true. Trump has shocked the market—and frankly, the world.

Federal Spending: To understand why, first let’s understand what has been propping up the stock market in the past 2–3 years: federal spending! The Biden administration fueled one of the largest federal spending regimes with bills like the Inflation Reduction Act. These actions act as a stimulus to the economy, boosting investment, profits, and asset prices. When a business (like the federal government) spends more money than it makes, would you want to loan them money? No! So, people, governments, and pensions sold U.S. debt (bonds) and moved their money to risk assets (stocks, crypto, etc.), which is a key reason why interest rates have been so high. Remember, there’s a finite amount of money in the world, and it flows from place to place. No one wants to loan money to a business that’s losing money every month—$129 billion a month… for the U.S. federal government!!! See the image below where reciepts = revenues and outlays = expenses for one month….

Bloomberg News: "Trump has famously obsessed over the stock market as a real-time referendum on his presidency. But now, with Musk and Treasury Secretary Scott Bessent in his ear at the start of his second term, much of the attention has shifted to another benchmark—the 10-year Treasury bond yield."

Austerity: The market didn’t believe Trump had the guts to cut federal spending in an economic theory called austerity. But he has made it clear his mission is not a higher stock market; it’s lower interest rates. And austerity is the only way there. The “Fiscal Dominance” image below illustrates the vicious cycle we’ve been in since 2008. Unless the U.S. economy endures the short-term pain of tightening our belt, the balloon keeps getting bigger. It’s what must be done for our kids’ kids to ever have a chance at economic prosperity, but every president has kicked the can down the road, not wanting to be responsible for crushing asset prices (401(k)s).

Why? Well, look at the chart below. The green line (M2) is the total supply of dollars in the world (yeah…they printed a lot during COVID). The red line is the net worth of the wealthiest Americans, and the blue line is the middle- to lower-class wealth. All the money printing has been benefiting one class by pouring it into assets, and who owns assets? The wealthy. Money printing (QE) flows into the economy through the purcasing of assets, equities/bonds, which props up markets. So, recall the death spiral image above—what’s the circle to the left of “Larger Fiscal Deficits”, “More Money Printing….”? That’s the critical step that needs to be broken. Austerity does that by reducing the fiscal deficit (government losing money), so that new money doesn’t need to be printed, which would further widen the wealth gap.

Trump’s administration has been on a cost-cutting spree, and it shows no sign of slowing. Moreover, the announced tariffs will also add to the revenue side of the U.S. government business. The market has responded to this change, sending a new, strong signal through the reduction of interest rates. The 10 year yield is down .5% in just one month. The U.S. government for the first time in ~ 20 years could move into a balanced budget (revenue = spending). Now, people, governments, and pensions are interested in loaning the U.S. government money (buying U.S. bonds) again. And what will they sell to buy the debt? Risk assets! This results in interest rates coming down, but stock prices will likely stagnate with limited upside.

Buffet Indicator:

Warren Buffett has spoken for years about his key indicator for U.S. stock market health. The indicator looks at the total market cap of U.S. stocks versus the U.S. Gross Domestic Product. The indicator is a ballpark measure of how expensive stocks are at any one point in history… It’s now sitting at ~210, i.e., 2.1 standard deviations. “If the ratio approaches 200%, as it did in 1999, you are playing with fire.” —W. Buffett . See the curren ratio below, at 211%.

So, what has Buffett been doing? Well, he has been selling stocks at a record level and has raised his cash pile to record levels. Why do we care what Buffett is doing? Making money in the markets is a function of two things: intellect or information. You don’t need both. Buffett manages so much value in assets that he has access to information months and even years before you and me. He famously met with the Japanese Federal Reserve chair and miraculously divested from his Japanese assets before the famous yen carry trade unraveling in 2024.

So, what do we do? Overall, this is a time to be tactical and protect your piggy bank. The austerity cycle will likely take 8–18 months to fully flesh out. In that time, it’s best to store your wealth in stable assets that either earn yield or have constrained supply.

Bullish(Buy): $TLT(US bond etf), Gold, $BTC

Best of Luck and as always DONT SAVE IN DOLLARS.