I never thought the Treasury bond debate would take over my X feed and become the most discussed trade in markets, but here we are

Yesterday's discussion about US debt topping $40T and debt to GDP approaching 130% brought out a lot of default fears. So I wrote a short paper on it (link below). The quick version is that 130% isn't a cliff for a country that issues its own currency, and the nuance matters for anyone consuming in USD, holding cash equivalents or govt bonds. Start with the balance sheet. Federal debt held by the public is about $35T. US household net worth is about $196T, roughly 6x GDP and 5x the federal debt. And a big chunk of that wealth is the federal debt itself, sitting in portfolios as safe savings. Federal debt is large, but the asset side of the ledger is massively larger and is the main thing that allows such large govt debts in the first place. The uniquely wealthy and productive asset side is what makes the USA very different from almost every other country in the world. Now the mechanics. The government funds its spending by taxing and borrowing from the wealthiest economy that ever existed. That's a massive collateral and revenue stream supporting the debt. And unlike a household or Greece, it can create the currency its debt is in. So the real risk to a bondholder isn't getting stiffed in nominal terms. It's getting paid back in dollars that buy less. Hyperbolic narratives about default gloss over the balance sheet AND the mechanics that make the USA unique. But debt to income is high and rising, Cullen! Of course it is. That risk is real and should be measured with nuance, not panic. But the historical utility of debt to GDP ratios as a predictor of default is mixed at best and useless at worst. History backs this up. About half of all sovereign defaults since 1970 happened with external debt below 60% of GNP. The UK hit 252% in 1946 and never defaulted on its own currency debt. And we all know the Japan story. Hyperinflations are driven by collapsing output and debts owed in foreign currencies, not by crossing a debt ratio. And the popular "51 of 52 countries defaulted above 130%" stat comes from a report that counts inflation and devaluation as "default." Its own examples list wars, revolutions, droughts and export collapses as the causes, and the actual missed payments were on foreign currency, gold standard or euro debt. Debt to GDP wasn't even the causal factor! And those causal factors aren't what the USA faces today. It doesn't borrow in a foreign currency and it isn't losing a world war. The bigger risk isn't default or hyperinflation. It's that aging, inequality and technology keep dragging on growth and prices, pushing debt higher as the govt fills an inequality gap the private sector won't. That leaves a fragile economy with sticky inflation that's exposed to disinflationary shocks. The distinction is important, and hyperbole doesn't help anyone untangle the risks. For portfolios, default hits all bonds, but persistent above-target inflation hits long bonds the most. So the question isn't whether to own USD or Treasuries. It's how much duration you own, matched to real liabilities, and how to diversify around that for the inflation protection long-term T-bonds can't provide. Full paper: ria.disciplinefunds.com/2026…

Will 5.0% be the ceiling for the nominal Treasury yield? Maybe not, but for bond investors the risk-reward math has gotten considerably better. The 5% yield provides such a good cushion that if the 10-year yield were to fall 100 bps, an investor would make 11.9%, while only losing 1.9% if the yield were to rise to 6%.

bond convexity and bond math more broadly is crazy man: "The 5% yield provides such a good cushion that if the 10-year yield were to fall 100 bps, an investor would make 11.9%, while only losing 1.9% if the yield were to rise to 6%."

Let's put this in balance sheet terms because a lot of this talk is just a fallacy of composition in which the sovereign debt crisis crowd only looks at the debt side of things and ignores the fact that the asset side has also boomed. There is no balance sheet in the world that is healthier than the aggregate US economy's. It's not even close. Here's a chart of household and non-profit net worth relative to public debt. The reason the public debt isn't a worry is because the total assets of the private sector are gigantic and growing fast. The reason rates haven't changed much in the last 20 years is because the balance sheet the US government taxes has remained incredibly strong.

Lots of scary talk in bonds these days, but it's mostly recency bias. Since 1960 the 10 year yield has averaged 5.8%. We're at 5% - below average. If you'd fallen asleep 20 years ago and woke up today you'd think nothing happened in the bond market the entire time. Ignore all the sovereign debt crisis talk. Inflation expectations are adjusting to something more historically normalized. Carry on.

You have to be out of your mind to buy more long Treasuries after another fade like that back to its lows while the news cycle is about as bearish as it's been. But also...

I did not have this on my bingo card. If anything, I thought Meta was headed in the opposite direction. Muse truly changed the trajectory of the entire company overnight.

I've been thinking about this chart for a few days now. The lesson is simple: go run a scan for specific stocks that fit your criteria, and you may find some rather epic trades that could ramp into end of year.

This is very interesting as I can’t tell if it means biotech as a sector is about to ramp or if Anthropic is now the leader in biotech, and the entire sector is about to get pulverized. Should make for a good trade once that’s understood

One of those hot takes that isn’t discussed enough: Controlled inflation is a sign of progress Example: mother nature is quite literally tearing down each and every home by the day. Rain, weather, and more is all trying to slowly erode a home. Only inflation makes it possible to maintain as the value exceeds the consistent repair costs. In that sense, inflation is the driver of progress. Everyone is only ever taught inflation is bad. But the point is there are different subsets of inflation and some are of course bad, but others are net economic drivers. Have to learn the difference There’s a reason why the greatest inflationary cycle corresponds with the greatest technological boom

Real ones remember this

I will return to this paragraph by C. S. Lewis at least once a week until the day I die

A couple years ago, Mikala Sposito applied for a work ethic scholarship from my foundation. She asked for $2,700.00 to help realize her dream of becoming a welder. (Actually, her first dream was to become an Olympian. As a kid, she excelled at horseback riding, dance, soccer, and track, but not quite at the Olympic level. So, Mikala adjusted her dream and focused on something within her reach. Precisely the kind of commonsense approach to making a living we try to encourage.) Toward that end, Mikala filled out the application, jumped through all the necessary hoops, and signed the S.W.E.A.T. Pledge, as all applicants must. According to our internal ranking system, which is inherently subjective and relative to each batch of new applicants, Mikala scored a 94, and was awarded $2,100.00, or roughly 80% of what she asked for. This is typical of the average percentage awarded to an excellent applicant. As a rule, we almost never award the entire amount requested. We want our recipients to have some skin in the game, and we encourage all applicants to apply for additional scholarship funds elsewhere, which Mikala did. But in this case, if I had it to do over again, I think I’d have awarded Mikala the full $2,700.00. Why? Because this woman is precisely why I award work ethic scholarships in the first place, as recent headlines prove. Headlines all over the country that identify Mikala Sposito as the sole welder to represent Team USA in the upcoming @WorldSkills Competition in Shanghai. This is a very big deal. The World Skills competition is often referred to as the Olympics of the skilled trades, so it looks like Mikala’s dream is coming true after all. And it seems to me her journey is worth a brief encapsulation. Before she applied for a scholarship from mikeroweWORKS, Mikala demonstrated an affinity for welding in SkillsUSA. As a senior at Dexter High School, she won 1st Place at the SkillsUSA Michigan high school competition and went on to place 14th nationally. Then, as a freshman at Washtenaw Community College, she repeated her success by taking 1st Place in the Michigan college division. She then advanced to nationals, where she finished 8th in the country. That earned her an invitation to the Team USA pre-trials, which whittled the nation's top 16 young welders down to three. At the final USA Weld Trials at the Robotics Technology Park in Huntsville, Alabama, each competitor was evaluated on precision, safety, technical execution, craftsmanship, and multi-process capabilities under extreme time constraints. Mikala Sposito took the Gold, officially becoming the first woman to represent the United States in welding at WorldSkills. Next week, she’ll face off against the absolute best of the best from all over the world. I should point out that Mikala would prefer it if the press didn’t make a big deal of her gender, and I completely understand. (She’s a welder – not a “weld-her.”) But today, the industry is in desperate need of proof that women can and do excel in the trades. Nationally, just 4.3% of tradespeople are female. At mikeroweWORKS, our female applicants are closer to 20%, but I assure you that percentage could be much higher. Companies are anxious to recruit talented welders of any gender, and women need to understand and believe the opportunities are real. Mikala prove that in spades, and I want to offer her my sincere congratulations, and invite all of you to do the same. Because Mikala Sposito is exactly what our country needs a lot more of. People who understand that talent is never enough to compensate for laziness. In her application, she wrote, “Hard work beats talent any day of the week, and nobody is going to outwork me. Period.” She also connected with every point of the S.W.E.A.T. Pledge but said the final tenet resonated with her the most. “Some people choose to be lazy. Some people choose to sleep in. I choose to work my butt off.” My favorite quote, however, is Mikala’s response to seasoned professionals who see her wield a torch and call her a “natural.” “I’m not a natural,” she says. Far from it. And none of this came easy. I worked and trained 60-80 hours a week for two years to get here.” Regardless of what happens in Shanghai, the job offers are already piling up, including the most recent from SpaceX. She hasn’t graduated yet, but the future looks bright, and I for one would not bet against her. PS. I never do this, but since my name is in the title of the foundation, I suppose I can. Mikala – please accept the additional $600 you requested from mikeroweWORKS two years ago. Shanghai is expensive, and since you’re representing all of us, we’d like to provide you with a little walking around money. The check is in the mail. Now…go get the gold!

Could you imagine if all this time a company like GM was sitting on the best manufacturing capabilities far beyond cars and into things like defense, robotics, and beyond. Would be the company’s biggest catalyst in decades

September 17th, 2001 - we went back to work. #NeverForget H/t Jeff Berger for the pic. RIP - John Geiger, Tom Healy & Mark Nichols.

The implications of a machine and cost like this are enormous. $100 to catch the most deadly disease. Say it saves 400k people annually who then are able to live 10 more years. After 20 years, the impact across society and economics is enormous in the amount of pure human potential that is preserved. This is what giga bullish long-term trends are made of.