JD Straight Up - 27Oct25 - Cycles

Cycles

Drulard Family Capital Fund

Fortnightly Macro View

JD Straight Up:

S&P 500 at 6875 – up 3% from 6658 two weeks ago - all-time highs

VIX at 16 – down 16% from 19 two weeks ago

10yr Treasury yielding 4.00% (down 1% from 4.05% two weeks ago)

Agg (US Aggregate Bond Index) at 101.21 – up 1% from 100.46 two weeks ago

Gold at 4005 per oz (up 1% from 3976 two weeks ago)

Crude Oil (WTI) at 61 per barrel (up 4% from 59 two weeks ago)

Bitcoin at 114k (down 1% from 115k two weeks ago)

JPM shares at 304 (down 1% from 308 two weeks ago)

Deutsche Bank shares at 33.94 (down 4% from 35.31 two weeks ago)

Truist shares at 44.63 (up 4% from 42.99 two weeks ago)

Blackstone shares at 153.85 (down 3% from 157.78 two weeks ago)

Magnificent 7 Index at 426 (up 6% from 404 two weeks ago)

US unemployment: at 232,000 in latest claims – down 1% from 235,000 two weeks ago

EUR at 1.17 USD (up 1% from 1.16 two weeks ago)

GBP at 1.33 USD (flat from 1.33 two weeks ago)

Macro Environment

US inflation reported at 3% despite 2% target while EU records 2.2% inflation.  Ceasefire persists in Gaza.  War continues in Ukraine.  US continues trade negotiations with biggest counterparties including Canada and China.  Headlines continue to question AI bubble.  Indices set new record highs.  US government shutdown reaches day 27.

Macro View

Key questions loom around which cycle we are in and where we are in that cycle.  Capitalism is cyclical.  It is arguably the most effective mechanism for growth and prosperity (if not equality), but it is undeniably cyclical.  It is driven by animal spirits and instincts and runs in waves.  Just because this is an unnaturally long cycle does not mean it is going to turn into a perpetual one.  There will be a reset.  It might be years from now or it might be hours from now, but it is going to happen.  Right before it does there will be a choir of pitched voices explaining how this time is different.  They will sing about the marvels of unique technology and innovation.  They will harmonize on democratization of markets and the ushering in of a new era unlike anything before.  All the singing will not be able to stop the reset.

Relevance

We recently tripped a key dynamic where the country with the biggest economic output in the world is now spending more on servicing its debt than on defense.  This represents a turning point for many empires in history and goes well beyond a guns or butter decision to a capital structure one.  The US is highly levered and it and its corporations are making a large, highly levered bet that the productivity of AI will prove so transformational as to reduce the cost of capital and ultimately reduce leverage.

Of likely greater concern is the dynamic in past empires where the working class ended up servicing the debt while the upper class played the role of lender.  This is the dynamic that ultimately unraveled with catastrophic consequences in nearly every case.  Disparity of wealth grows and compounds under this dynamic until the working classes comprehend and rebel against it.

Head Scratchers

1 - Is the US on an inevitable track to increasing disparity of wealth where the rich are holding more and more of the bonds that finance the government while the working class are paying the taxes and suffering the austerity necessary to maintain solvency?

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#28- 27Oct25