On My Radar - Early In The Final Stage
June 13, 2025
By Steve Blumenthal
“May Israel achieve the safety, security and peace of mind by destroying the means and personnel that threaten their existence and may many in Iran who have been yearning for freedom for decades from the repressive regime finally get a chance to live it.”
— Peter Boockvar, Boock Report June 13, 2025
I’m sure you are aware of Israel’s strategic strike on Iran’s top commanders, nuclear scientists, and nuclear sites. Bloomberg reported that the strike on Iran’s largest nuclear enrichment site in Natanz, Iran, showed no sign of breach.
Kyle Bass posted on X, “The International Atomic Energy Agency (IAEA) reports that Iran's accumulation of highly-enriched uranium rose by almost 50% to 409 kilograms over the last three months, which could quickly be enriched to form the core of about 10 nuclear bombs.” Having grown too close to having a functional nuclear weapon, Israel stuck to eliminating the threat. Successful? We don’t yet know.
My friend Renè Javier Aninao wrote yesterday about a low probability of any pre-emptive Israeli military strikes against Iran before or even after this coming Sunday’s U.S.-Iranian delegations meeting in Muscat, Oman. It was to be the 6th round of negotiations with the Iranians. That meeting is now cancelled.
Iran has waged war with Israel through its various Middle East proxies. They are a malicious actor and a state sponsor of terrorism that must never be allowed to possess a nuclear weapon. Israel felt the Iranians were too close to a nuclear weapon. It struck Iran’s nuclear enrichment program and eliminated Hossein Salami, the commander-in-chief of Iran’s Islamic Revolutionary Guard Corps.
The immediate risk is retaliation, escalation, and all-out war.
Perhaps the wonderful Iranian people are near the end of the brutal mullahs’ regime. My friend Peter captured it perfectly, “may many in Iran who have been yearning for freedom for decades from the repressive regime finally get a chance to live it.” You are in my prayers.
Oil prices have spiked, gold is near a record high, bond yields are higher, the dollar is stronger, and stocks are lower.
Let’s talk a quick look at this week’s inflation print. Though seemingly irrelevant in the face of the news, the U.S. Consumer Price Inflation data came in lower than expected in May. Bloomberg did a nice job summarizing this week’s print.
“Breaking inflation into its four main components — food and energy, and the remaining goods and services — in our regular chart from the ECAN function on the terminal shows minimal change.
Services continued to dominate, with energy being negative and food being positive.
Core goods, the most affected by tariffs, saw inflation tick up, but not to a level that’s discernible:
Nothing that moves the needle in terms of Fed policy response. The Fed will likely stay on hold through the summer.
Grab a coffee and find your favorite chair. Paul Tudor-Jones was on Bloomberg this week. He discussed his recent investment competition results with Bill Ackman winning and Stan Druckenmiller placing third. He is predicting that Trump will appoint a dovish Fed Chairman in six months. He explored various investment implications and suggested that the U.S. is on an unsustainable fiscal path, requiring creative solutions to manage its growing national debt. He predicts a steepening yield curve, with short-term rates falling and long-term rates rising. He favors gold, bitcoin, and stocks.
I also listened to Jeffrey Gundlach’s interview at the Bloomberg Global Credit Forum this week. It was excellent. You’ll find my bullet point summary below. And, Ray Dalio’s book has just been released. You’ll find a short must-read below from the debt mystro himself. Buckle up, my friend, buckle up!
On My Radar:
Paul Tudor Jones: Gold, Bitcoin, and Stocks
Jeffrey Gundlach: Interest Expenses Untenable
How Countries Go Broke: The Big Cycle In a 5-Minute Read
Trade Signals: Update - June 12, 2025
Personal Note: Happy Father’s Day
See Important Disclosures at the bottom of this page. Reminder: This is not a recommendation to buy or sell any security. My views may change at any time. The information is for discussion purposes only.
If you like what you are reading, you can subscribe for free.
Paul Tudor Jones: Gold, Bitcoin, and Stocks
Jones was interviewed last week at Bloomberg. The following is a link to the replay, along with my bullet-point notes.
Bloomberg, YouTube
Key Macro Investment Points:
1. US Deficit and Fiscal Policy:
The US is facing significant budget deficits, projected at 6% or more of GDP. Sees them out "as far as the eye can see."
He believes the "Big Beautiful Bill" (referring to fiscal spending) is a "genius in branding" but fiscally unsustainable.
To balance the budget, he estimates that it would require massive cuts (e.g., 6% across Social Security, Medicaid, and defense) and significant tax hikes (e.g., a 49% top income rate, a 1% wealth tax, and a 40% capital gains rate).
He warns that at some point, the bond markets will "call BS" on governments playing chicken with them.
The market is starting to recognize that the “interest expense is untenable,” given the $2.1 trillion budget deficit and sticky interest rates.
The average coupon on Treasuries has risen from below 2% to pushing 4%, and as old bonds mature and are reissued, the problem "continues to build."
He believes the "reckoning is coming" regarding the $37 trillion national debt.
2. Interest Rates and the Federal Reserve:
Paul Tudor Jones anticipates "substantially lower front end rates" and expects a new Fed Chair within six months who will be "uber dovish."
He argues that the playbook for a fiscally constrained nation with high debt-to-GDP is to lower interest rate costs by appointing a very dovish Fed Chair.
The goal is to run "lowest real rates possible" and have inflation running "hot" to get out of a debt trap, similar to what Japan is doing.
He points out that the Fed started cutting rates in September 2023, and the long Treasury bond's yield has gone up significantly since then, indicating a "paradigm shift."
He suggests that the long-term Treasury bond is no longer a "legitimate flight to quality asset."
3. Yield Curve:
He believes the yield curve is going to steepen, probably to a historically steep level, due to the Fed cutting short-term rates dramatically and investor concerns that deficits will boost yields on longer-duration Treasury bonds.
While it's been a "slow moving train," he thinks it "has to work" in the long run.
4. US Dollar:
He expects the dollar to be "lower" due to dramatically cut short-term rates.
He estimates the dollar could be around 10% lower than its high a year from today.
He notes a "paradigm shift" in which foreign investment money is no longer flowing into the US as it has in the past, and the dollar is declining as a result of the money leaving. The net investment position of foreigners investing in the US has grown to over $25 trillion, and some of that could now flow out.
5. Investment Strategy:
He recommends considering increasing allocations to non-dollar investments.
For an ideal portfolio to fight inflation in a debt trap scenario with negative real rates, he suggests a combination of gold, Bitcoin, and stocks.
He sees a clear roadmap of low real rates and hot inflation.
He is currently "very uninvolved in the long-term Treasury Bond."
He anticipates a point where quantitative easing (QE) on long-term treasuries will be announced when rates become "uncomfortably high" (around 6%, he guesses). When this happens, he advises buying long-term treasuries "as much as you possibly could," expecting a significant rally.
6. Equities:
In a scenario where the bond market demands fiscal responsibility, stock multiples will not be as high as they are currently.
However, currently, with the world seemingly "okay with kicking the can down the road" on fiscal deficits and expectations of lower short-term rates with a new Fed Chair, he leans "long" on stocks if he expects rates to be 3% in 12 months.
He notes that the biggest threat to the stock market has been fiscal profligacy, as well as the bond market's tolerance of it.
7. Artificial Intelligence (AI):
He is "embracing" AI from an investment perspective.
He highlights how AI has democratized quant modeling, reducing the previous barrier to entry that large firms had.
He views AI as the "most disruptive technology in the history of mankind."
Benefits: He sees immense potential for AI in education, particularly for low-income children, by providing individual tutors.
Concerns: He raises serious concerns about the safety and stability implications of AI:
Elon Musk warned of a 20% possibility of AI wiping out humanity.
Estimates of 10-20% unemployment in 1-5 years due to AI displacing white-collar jobs.
He is alarmed by a "moratorium on AI regulation" within the "Big Beautiful Bill," meaning no guardrails.
He suggests that libertarianism can be as much of a threat to society as socialism, particularly in the context of unchecked AI.
He questions how to distribute AI's productivity gains "in a socially beneficial fashion," noting that capitalism is good at maximizing productivity but "really bad" at distributing income equitably. This wealth disparity leads to social fragility and a crisis of trust.
He believes there needs to be thoughtful consideration on how to distribute these productivity gains, suggesting ideas such as a token for every model used or taxing robotics.
8. Social and Political Landscape:
He attributes increased social divisiveness and a "crisis of trust" in the country to wealth disparity.
Sources: Bloomberg, YouTube
Jeffrey Gundlach: Interest Expenses Untenable
Gundlach was interviewed last week at Bloomberg’s Global Credit Forum. The following is a link to the replay, along with my bullet-point notes.
Source: Bloomberg, YouTube
Gundlach discussed gold's increased mainstream appeal and the unusual behavior of the U.S. dollar and Treasury yields. He emphasised the growing U.S. debt situation and shifts occurring in foreign investment capital flows. He discussed technology and private credit markets, while highlighting historical parallels and warning about potential market reversals and systemic risks he expects in 2027-2028.
Following is a concise bullet point summary of his Gundlach’s views on the macro investment environment and its implications:
US Fiscal Situation is Unsustainable:
The US is running a $2.1 trillion budget deficit, leading to unsustainable interest expenses.
The average coupon on Treasury bonds has risen from below 2% to nearly 4%, and this problem "continues to build" as older bonds mature and are reissued at higher rates.
The market is beginning to recognize that the long-term Treasury bond is not a "legitimate flight to quality asset."
He believes a "reckoning is coming" regarding the $37 trillion national debt.
Interest Rates and the Fed:
He anticipates "substantially lower front end rates" in the future.
The Fed cutting interest rates has not caused the long bond to rally as it historically would; instead, the 10-year yield went up after the initial rate cut in September 2023, and the yield curve is steepening.
He predicts a point where the Fed will need to intervene with Quantitative Easing (QE) on long-term Treasuries, possibly when the 10-year rate reaches an "uncomfortably high" 6%.
When QE is announced for long bonds (that’s when the Fed starts buying long-term Treasury bonds to drive yields lower), investors should buy them "as much as you possibly could," expecting a significant rally (e.g., 20 basis points, or a 100 basis point drop in yield). SB here: Bonds gain in price when yields fall.
Currency Markets (US Dollar):
The dollar index typically rises when the S&P 500 experiences corrections, but this time, the dollar fell when the S&P 500 dropped by almost 20%, indicating that "things are behaving differently."
He said there is a "tremendous paradigm shift" where money is no longer flowing into the United States as it has in the past.
The net foreign investment position in the US has grown from ~ $3 trillion 15-17 years ago to over $25 trillion, and it's "not inconceivable" that some of this $25 trillion could move out.
He suggests that non-US investments are outperforming, and dollar-based investors should increase allocations to non-dollar investments, as it's "already working."
Equities:
The stock market's valuation (forward P/E) is "incredibly uninteresting" and even "more overvalued today" than at its all-time high in February/March, due to falling earnings estimates.
He anticipates a "great buying opportunity" in equities but doesn't know exactly when it will happen. Perhaps in 2027-2028.
He sees parallels between the current market and 1999 (the dot-com bubble for AI) and 2006-2007 (the credit event).
Momentum trades, such as the current tech stock rally, often "overshoot on the upside."
Credit Markets (Private Credit):
He has systematically reduced his allocation to below-investment-grade credit to its lowest level ever at DoubleLine.
He believes private credit is analogous to the CDO market in the mid-2000s, characterized by "tremendous issuance" and "acceptance," but also complexity and illiquidity. He advises caution.
The argument that private credit is less volatile is invalid because it's not marked to market.
He views private credit as a place where forced selling will occur, citing Harvard University's reported liquidity problems and the need to sell private equity interests at a discount.
He expects a "break" in the credit market where bonds drop significantly (e.g., 30 points), creating buying opportunities when forced selling occurs.
He believes 2027-2028 will likely be a "window of tremendous opportunity" as the Treasury problem becomes more apparent. SB here: That aligns well with our thinking around the potential timing of what Scott Bessent calls “a global grand reordering” and Mauldin calls “the great reset.”
Gold:
Gold has become a "flight to quality asset."
Central banks, which previously sold gold, have now bought it all back, contributing to its recent price surge.
He views gold as a "real asset class" for investors, no longer just for speculators.
Gold has outperformed Bitcoin year-to-date.
Geographic Investment Themes:
You can “hide to a certain extent” by investing in non-US markets.
He strongly recommends investing in India as a long-term theme due to its demographic profile similar to China 35 years ago, and its potential to benefit from supply chain shifts.
He advises buying India and "don't open the statement" for a long time, suggesting it's a multi-decade investment.
The S&P 500 has stopped outperforming the MSCI Europe and is underperforming year-to-date.
He is beginning to introduce foreign currencies into their funds for dollar-based investors, as selected emerging market equities offer both growth and currency translation benefits.
Sources: Bloomberg, YouTube
How Countries Go Broke: The Big Cycle In a 5-Minute Read
Ray Dalio, Founder, CIO Mentor, and Member of the Bridgewater Board
June 3, 2025
“Early in the final stage of this big debt cycle, the market action reflects this dynamic via interest rates rising led by long term rates, the currency declining especially relative to gold, and the central government's treasury department shortening the maturities of its debt offerings because of a shortage of the demand for long term debt.out pain.”
— Ray Dalio, Principles for Navigating Big Debt Crises
Today my latest book, How Countries Go Broke: The Big Cycle, is being released. This note is to share what it says in a nutshell. To me, what matters most is conveying understanding at this critically important moment, so I want to pass the key ideas in extreme brevity in this note, as well as comprehensively in the book, and leave it to you decide how deep you want to go.
Where I'm Coming From
I have been a global macro investor for over 50 years, have bet on government debt markets for nearly as long, and have done very well doing that. While I previously kept to myself my understanding of the mechanics of how big debt crises transpire and the principles I use to navigate them, I'm now at the stage of life where I want to pass these understandings along to help people. This is especially true now as I see the U.S. and other countries headed toward having the equivalent of economic heart attacks. That led me to write How Countries Go Broke: The Big Cycle, which comprehensively explains the mechanics and principles I use, and this very brief summary of the book.
How the Mechanics Work
The debt dynamics work the same for a government as they do for a person or a company, except that the central government has a central bank that can print money (which devalues it) and it can take money away from people via taxes. For these reasons, if you can imagine how the debt dynamics would work for you or a business you run if you could print money or get money from people by taxing them, you can understand the dynamic. But keep in mind that your goal is to make the overall system run well, not just for yourself, but for all citizens.
To me, the credit/market system is like the circulatory system, bringing nutrients to all parts of the body that make up our markets and economy. If credit is used effectively, it creates productivity and income that can pay back the debt and interest on the debt, which is healthy. However, if it isn't used well so it doesn't produce enough income to pay back the debt and the interest on the debt, debt service will build up like plaque that squeezes out other spending. When debt service payments become very large, that creates a debt service problem and eventually a debt rollover problem as holders of the debt don't want to roll it over and want to sell it. Naturally that creates a shortage of demand for debt instruments like bonds and the selling of them, and naturally when there is a shortage of demand relative to supply that either leads to a) interest rates rising, which drives markets and the economy lower, or b) the central banks "printing money" and buying debt which lowers the value of money which raises inflation from what it would have been. Printing money also artificially lowers interest rates, which hurts the lenders’ returns. Neither approach is good. When interest rates rise because the selling of debt becomes too large to curtail and the central bank has bought a lot of bonds, the central bank loses money, which hurts its cash flow. If this continues, it leads the central bank to having a negative net worth.
When this becomes severe, both the central government and the central bank borrow to make debt service payments, the central bank prints money to provide the lending because the free-market demand is inadequate, and a self-reinforcing debt/money printing/ inflation spiral ensues. In summary, the classic things to watch are as follows:
1) The amount of government debt service there is relative to government revenue (which is like the amount of plaque in the circulatory system),
2) The amount of the selling of government debt there is relative to the amount of demand for government debt (which is like the plaque breaking off and causing a heart attack), and
3) the amount of central banks' governments printing money to purchase government debt to make up the shortfall in demand for government debt relative to the supply of government debt that needs to be sold (which is like the doctor/central bank administering a heavy dose of liquidity/credit to ease the liquidity shortage, producing more debt which the central bank has an exposure to).
These all typically increase in a long-term, multi-decade cycle of rising debt and debt service payments relative to incomes until that can't continue because 1) debt service expenses unacceptably crowd out other spending, 2) the supply of the debt that has to be bought is so large relative to the demand to buy that debt that interest rates have to rise substantially, which sends the markets and the economy down a lot, or 3) rather than allow interest rates to rise and the bad markets/bad economy outcome to happen, the central bank prints a lot of money and buys a lot of government debt to make up for the demand shortfall, which sends the value of money down a lot.
In either case, the bonds have a bad return until the money and the debt eventually become so cheap that they can attract demand and/or the debt can be cheaply bought back or restructured by the government.
That is what the Big Debt Cycle looks like in a tiny nutshell.
Because one can measure these things, one can monitor this debt dynamic happening, so it's easy to see problems approaching. I’ve used this diagnostic process in my investing and I’ve kept it to myself, but I’m now explaining it in detail in How Countries Go Broke: The Big Cycle because now it is too important to keep to myself.
To describe it more specifically, one can see debts and debt service payments rising relative to incomes, the supply of debt being larger than the demand for it and central banks dealing with these things happening by being stimulative at first by cutting short term interest rates and then by printing money and buying debt, and eventually the central bank losing money and then having a negative net worth, and both the central government and taking on more debt to pay the debt service and the central bank monetizing the debt. All these things lead toward a government debt crisis which produces the equivalent of an economic heart attack that comes when the constriction of debt-financed spending shuts down the normal flow of the circulatory system.
Early in the final stage of this big debt cycle, the market action reflects this dynamic via interest rates rising led by long term rates, the currency declining especially relative to gold, and the central government's treasury department shortening the maturities of its debt offerings because of a shortage of the demand for long term debt. Typically, late in the process when this dynamic is most severe, a number of other seemingly extreme measures are put into place like establishing capital controls and exerting extraordinary pressures on creditors to buy and not sell debt. This dynamic is explained much more completely in my book along with lots of charts and numbers to show it happening.
The U.S. Government’s Situation in a Tiny Nutshell
Now, imagine that you are running a big business called the U.S. government. That will give you a perspective that will help you understand the U.S. government’s finances and its leadership’s choices.
The total revenue this year will be about $5 trillion while the total expenses will be about $7 trillion, so there will be a budget shortfall of about $2 trillion. So, this year, your organization’s spending will be about 40 percent more than it is taking in. And there is very little ability to cut expenses because almost all the expenses are previously committed to or are essential expenses. Because your organization borrowed a lot over a long time, it has accumulated a big debt—approximately six times the amount that it is bringing in each year (about $30 trillion), which equals about $230,000 per household that you have to take care of. And the interest bill on the debt will be about $1 trillion which is about 20 percent of your enterprise’s revenue and half this year’s budget shortfall (deficit) that you will have to borrow to fund. But that $1 trillion is not all that you have to give your creditors, because in addition to the interest you have to pay on your debt, you have to have to pay back the principal that is coming due, which is around $9 trillion. You hope that your creditors, or some other rich entities, will either relend or lend it to you or some other rich entities. So, the debt service payments—in other words the paying back of principal and interest that you have to do to not default—is about $10 trillion, which is about 200 percent of the money coming in.
That is the current condition.
So, what is going to happen? Let’s imagine it. You are going to borrow the money to fund the deficit whatever that deficit is going to be. There is a lot of argument about what it’s going to be. Most of the independent assessors of the situation project that the debt in 10 years will be $50-55tn (which will be 6.5-7 times revenue), because there will be $20-25tn of additional borrowing. Of course, in ten years, that will leave this organization with more debt service payments squeezing out spending and more risk that there won’t be enough demand for the debt it has to sell without a plan to deal with this situation.
That’s the picture.
My 3 Percent 3-Part Solution
I am confident that the governments’ financial condition is at an inflection point because, if this is not dealt with now, the debts will build up to levels where they can’t be managed without great trauma, and it is especially important that this operation happens while the system is relatively strong rather than when it is weak. That is because when the economy is in a contraction, the government’s borrowing needs increase a lot.
From my analysis, I believe that this situation needs to be dealt with via what I call my 3 percent, 3-part solution. That would be to get the budget deficit down to 3 percent of GDP in a way that balances the three ways of reducing the deficit which are 1) cutting spending, 2) increasing tax revenue, and 3) lowering interest rates. All three need to happen concurrently so as to prevent any one from being too large, because if any one is too large, the adjustment will be traumatic. And these things need to come about through good fundamental adjustments rather than be forced (e.g., it would be very bad if the Federal Reserve unnaturally forced interest rates down). Based on my projections, spending cuts and tax revenue increases by about 4% each relative to current planning, and interest rates falling by about 1-1.5% in response, would lead to interest payments that are lower by 1-2% of GDP over the next decade and stimulate a rise in asset prices and economic activity which will bring in much more revenue.
Some Commonly Asked Questions and My Answers to Them
There’s a lot more in the book than I have the space to get into here, including a description of the “overall big cycle” (consisting of debt/money/credit cycles, internal political cycles, external geopolitical cycles, acts of nature, and advances of technology) that drives all the big changes in the world, my thoughts on what the future likely looks like, and some perspectives on investing during these changes. But for now, I’ll answer some of the common questions I’ve gotten while talking about the book and invite you to check out the full book if you want to go deeper.
Q1: Why do big government debt crises and big debt cycles happen?
Big government debt crises and big debt cycles happen and can easily be measured by 1) the amount of government debt service there is relative to government revenue rises to the point that it unacceptably squeezes out essential government spending 2) the amount of selling of government debt there is relative to the amount of demand for government debt becomes too large so interest rates rise causing markets and the economy to decline, and 3) central banks responding to these conditions through lower interest rates which reduces the demand for the bonds which then leads central banks to print money to purchase government debt which devalues the money. These things typically increase in a long-term, multi-decade cycle until they can't continue anymore because 1) debt service expenses unacceptably crowd out other spending, 2) the supply of the debt that has to be bought is so large relative to the demand to buy that debt that interest rates have to rise a lot which sends the markets and the economy down a lot or 3) the central bank prints a lot of money and buys a lot of government debt to make up for the demand shortfall which sends the value of money down a lot. In either case, the bonds have a bad return until they become so cheap that they can attract demand and/or the debt can be restructured. One can easily measure these things and see them moving toward an impending debt crisis. It comes when the constriction of debt-financed spending happens, like a debt-induced economic heart attack.
Throughout history these debt cycles have occurred in virtually every country, typically several times, so there are literally hundreds of historical cases to look at. Said differently, all monetary orders have broken down and the debt cycle process I'm describing is behind these breakdowns. They go back as far as there is recorded history. This is the process that led to the breakdowns of all reserve currencies like the British Pound and the Dutch Guilder before the Pound. In my book, I show the most recent 35 cases.
Q2: If this process happens repeatedly, why are the dynamics behind it not well understood?
You’re right that it’s not well understood. Interestingly, I couldn't find any studies about how this happens. I theorize that it is not well understood because it typically happens only about once a lifetime in reserve currency countries—when their monetary orders break down—and when it happens in non-reserve currency countries, this dynamic is presumed to be a problem that reserve currency countries are immune to. The only reason I discovered this process is that I saw it happening in my sovereign bond market investing, which led me to study many cases of it happening throughout history so I that I could navigate them well (such as navigating the 2008 global financial crisis and the 2010-15 European debt crisis).
Q3: How worried should we really be about a “heart attack” debt crisis in the U.S. when waiting for U.S. debt issues to blow up. People have heard a lot about the pending debt crisis that never came? What makes this time different?
I think we should be very worried because of the previously mentioned conditions. I think that those who worried about the debt crisis happening before, when conditions were less severe, were right to worry about it then because addressing it earlier could have prevented the conditions from getting so bad, like warning against smoking and eating poorly early. So, I theorize that the reason this issue isn’t more widely worried about is both because it isn’t well enough understood and because there is a lot of complacency that has developed as a result of the premature warnings. It’s like someone with a lot of plaque in their arteries who is eating a lot of fatty food and not exercising saying to his doctor, “You’ve warned me that bad things would happen to me if I didn’t change my ways, but I haven’t had a heart attack yet. Why should I believe you now?”
Q4: What could be the catalyst for a U.S. debt crisis today, when will it happen, and what would such a crisis look like?
The catalysts will be a convergence of the previously mentioned influences. As for the timing, it can be hastened or postponed by policies and exogenous factors, like big political shifts and wars. For example, if the budget deficit is lowered to about 3 percent of GDP from what I and most others project to be about 7 percent of GDP, that would reduce the risks a lot. If there are exogenous big shocks, it will come earlier, and if there aren’t, it will come later or not at all (if it is managed well). My guess, which I suppose will be a bad one, is that it will come in three years, give or take two, if the course we’re on is not changed.
Q5: Do you know of any analogous cases of the budget deficit being cut so much in the way you describe and good outcomes happening?
Yes. I know of several. My plan would lead to a cut in the budget deficit of about four percent of GDP. The most analogous case of that happening with a good outcome was in the United States from 1991 to 1998 when the budget deficit was cut by five percent of GDP. In my book, I list several similar cases that happened in several countries.
Q6: Some people have argued that the U.S. is generally less vulnerable to debt-related problems/crises because of the dominant role of the dollar in the global economy. What do you believe those who make that argument are missing/under-appreciating?
If they believe this, they are missing an understanding of the mechanics and the lessons of history. More specifically, they should be examining history to understand why all prior reserve currencies ended being reserve currencies. Stated very simply, currency and debt have to be effective storeholds of wealth or they will be devalued and abandoned. The dynamic I am describing explains how a reserve currency loses its effectiveness as a storehold of wealth.
Q7: Japan—whose 215% debt-to-GDP ratio is the highest of any advanced economy—has often served as the poster child for the argument that a country can live with consistently high debt levels without experiencing a debt crisis. Why don’t you take much comfort from Japan’s experience?
The Japanese case exemplifies and will continue to exemplify the problem I describe, and it demonstrates in practice my theory. More specifically, because of the high level of the Japanese government’s over-indebtedness, Japanese bonds and debt have been terrible investments. To make up for a shortage of demand for Japanese debt assets at low enough interest rates to be good for the country, the BoJ printed a lot of money and bought a lot of Japanese government debt which led to holders of Japanese bonds having losses of 45% relative to holding US dollar debt since 2013 and losses of 60% relative to holding gold since 2013. The typical wages of a Japanese worker have fallen 58% since 2013 in common currency terms relative to the wages of an American worker. I have a whole chapter on the Japanese case in my book that explains it in depth.
Q8: Are there any other areas of the world that look particularly problematic from a fiscal standpoint that people may be underappreciating?
Most countries have similar debt and deficit problems. The UK, EU, China, and Japan all do. That is why I expect a similar debt and currency devaluation adjustment process in most countries, which is why I expect non-government produced monies like gold and bitcoin to do relatively well.
Q9: How should investors navigate this risk/be positioned going forward?
Everyone’s financial situation is different, but as general advice, I suggest diversifying well in asset classes and countries that have strong income statements and balance sheets and are not having great internal political and external geopolitical conflicts, underweighting debt assets like bonds, and overweighting gold and a bit of bitcoin. Having a small percentage of one’s money in gold can reduce the portfolio’s risk, and I think it will also raise its return.
The views expressed here are my own and not necessarily those of Bridgewater.
Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. Current viewpoints are subject to change. Views are those of Howard Marks and not necessarily Steve Blumenthal’s nor CMG’s.The information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Trade Signals: Update - June 12, 2025
“Stay on top of the current market trends with Trade Signals.”
“Extreme patience combined with extreme decisiveness. You may call that our investment process. Yes, it’s that simple.”
– Charlie Munger
Market Commentary:
Watch the 10-year and 30-year Treasury yields, As Well as the Dollar
About Trade Signals
Trade Signals is a paid subscription service that posts the daily, weekly, and monthly trends in the markets. It is free for CMG clients.
TRADE SIGNALS SUBSCRIPTION ACKNOWLEDGEMENT / IMPORTANT DISCLOSURES
The views expressed herein are solely those of Steve Blumenthal as of the date of this report and are subject to change without notice. Not a recommendation to buy or sell any security.
Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only. Current viewpoints are subject to change. Please note that the information provided is not recommended for buying or selling any security and is provided for discussion purposes only.
Personal Note: Happy Father’s Day
“We are not humans having a spiritual experience.
We are spirits having a human experience.”
- Teilhard de Chardin
“You don’t have a soul. You are a soul.”
- C.S. Lewis
Most days, I feel like a human having a human experience. Some are excellent. Some, a grind. But through it all, there’s joy and grounding in the anchor I feel with my family.
Lately, I’ve been feeling a bit off-center. The following reminder from “The Carolina Way” by the legendary Dean Smith helped me regain some balance:
10 Life Lessons from Dean Smith - the Carolina Way
Stay humble, stay hungry. "A lion never roars after a kill."
What's done is done. "What to do with a mistake - recognize it, admit it, learn from it, forget it."
Give credit where credit is due. "I do believe in praising that which deserves to be praised."
You've got to care to lead. "The most important thing in good leadership is truly caring. The best leaders in any profession care about the people they lead, and the people who are being led know when the caring is genuine and when it's faked or not there at all."
Act with honor and integrity. "Good people are happy when something good happens to someone else."
At the end of the day, it's just a game. "If you make every game a life and death proposition, you're going to have problems. For one thing, you'll be dead a lot."
Surround yourself with winners. "I would never recruit a player who yells at his teammates, disrespected his high school coach, or scores 33 points a game and his team goes 10-10."
Value what's most important. "As soon as you try to describe a close friendship, it loses something."
Lead by example. "A leader's job is to develop committed followers. Bad leaders destroy their followers' sense of commitment."
Never underestimate teamwork. "Play hard. Play smart. Play together."
Source: The Daily Coach
It was a full week. I spent some time in NYC - dinner with a manager we respect and a due diligence meeting the next morning. I'm always on the lookout for investment ideas with an edge that can help our families navigate through uncertainty, like what we discussed in today’s letter. Sometimes, I feel like I’m on Shark Tank: a constant stream of pitches, and only a few make it through. This one has me excited.
And finally, if you're lucky enough to be a father, Happy Father's Day.
Call your dad. Tell him a favorite memory. And if, like my father, he’s no longer here, close your eyes and be with him in spirit. Tell him the story anyway: he’ll love to hear it. I bet he’s still with you and probably sitting right next to you.
For dad, it’ll be a cold Michelob Ultra, and for me, an ice-cold IPA.
Wishing you a wonderful Father’s Day.
Kind regards,
Steve
You can share this letter on X by clicking here.
You can share this letter on LinkedIn by clicking here.
Subscribe to OMR for free by clicking the photo.
Stephen B. Blumenthal
Executive Chairman & CIO
CMG Capital Management Group, Inc.
75 Valley Stream Parkway, Suite 201, Malvern, PA 19355
Private Wealth Client Website
CMG Customer Relationship Summary (Form CRS)
Metric-Financial, LLC Customer Relationship Summary (Form CRS)
Stephen Blumenthal founded CMG Capital Management Group in 1992 and serves today as its Executive Chairman and CIO. Steve authors a free weekly e-letter entitled, “On My Radar.” Steve shares his views on macroeconomic research, valuations, portfolio construction, asset allocation and risk management. Author of Forbes Book: On My Radar, Navigating Stock Market Cycles.
Follow Steve on X @SBlumenthalCMG and LinkedIn.
IMPORTANT DISCLOSURE INFORMATION
This document is prepared by CMG Capital Management Group, Inc. (“CMG”) and is circulated for informational and educational purposes only. There is no consideration given to the specific investment needs, objectives, or tolerances of any of the recipients. Additionally, CMG’s actual investment positions may, and often will, vary from its conclusions discussed herein based on any number of factors, such as client investment restrictions, portfolio rebalancing, and transaction costs, among others. Recipients should consult their own advisors, including tax advisors, before making any investment decision. This material is for informational and educational purposes only and is not an offer to sell or the solicitation of an offer to buy the securities or other instruments mentioned. This material does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors which are necessary considerations before making any investment decision. Investors should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, where appropriate, seek professional advice, including legal, tax, accounting, investment, or other advice. The views expressed herein are solely those of Steve Blumenthal as of the date of this report and are subject to change without notice.
Investing involves risk.
This letter may contain forward-looking statements relating to the objectives, opportunities, and future performance of the various investment markets, indices, and investments. Forward-looking statements may be identified by the use of such words as; “believe,” anticipate,” “planned,” “potential,” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular market, index, investment, or investment strategy. All are subject to various factors, including, but not limited to, general and local economic conditions, changing levels of competition within certain industries and markets, changes in legislation or regulation, Federal Reserve policy, and other economic, competitive, governmental, regulatory, and technological factors affecting markets, indices, investments, investment strategy and portfolio positioning that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties, and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Investors are cautioned not to place undue reliance on any forward-looking statements or examples. All statements made herein speak only as of the date that they were made. Investing is inherently risky and all investing involves the potential risk of loss.
Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CMG), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CMG. Please remember to contact CMG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CMG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice.
No portion of the content should be construed as an offer or solicitation for the purchase or sale of any security. References to specific securities, investment programs or funds are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations to purchase or sell such securities.
This presentation does not discuss, directly or indirectly, the amount of the profits or losses realized or unrealized, by any CMG client from any specific funds or securities. Please note: In the event that CMG references performance results for an actual CMG portfolio, the results are reported net of advisory fees and inclusive of dividends. The performance referenced is that as determined and/or provided directly by the referenced funds and/or publishers, has not been independently verified, and does not reflect the performance of any specific CMG client. CMG clients may have experienced materially different performance based upon various factors during the corresponding time periods. See in links provided citing limitations of hypothetical back-tested information. Past performance cannot predict or guarantee future performance. Not a recommendation to buy or sell. Please talk to your advisor.
Information herein has been obtained from sources believed to be reliable, but we do not warrant its accuracy. This document is general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purposes.
In a rising interest rate environment, the value of fixed-income securities generally declines, and conversely, in a falling interest rate environment, the value of fixed-income securities generally increases. High-yield securities may be subject to heightened market, interest rate, or credit risk and should not be purchased solely because of the stated yield. Ratings are measured on a scale that ranges from AAA or Aaa (highest) to D or C (lowest). Investment-grade investments are those rated from highest down to BBB- or Baa3.
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
In the event that there has been a change in an individual’s investment objective or financial situation, he/she is encouraged to consult with his/her investment professional.
Written Disclosure Statement. CMG is an SEC-registered investment adviser located in Malvern, Pennsylvania. Stephen B. Blumenthal is CMG’s founder and CEO. Please note: The above views are those of CMG and its CEO, Stephen Blumenthal, and do not reflect those of any sub-advisor that CMG may engage to manage any CMG strategy, or exclusively determines any internal strategy employed by CMG. A copy of CMG’s current written disclosure statement discussing advisory services and fees is available upon request or via CMG’s internet web site at www.cmgwealth.com/disclosures. CMG is committed to protecting your personal information. Click here to review CMG’s privacy policies.
