When Everything Comes Together: Debt, Inflation, Oil… and Geopolitics
Even before the deeply unsettling escalation in the Middle East — specifically Israel’s strike on alleged nuclear targets in Iran — we were working on an analysis about something else. About what we are currently watching most closely: disrupted supply chains, rising tariffs, and their impact on inflation.
What we’re seeing in the markets is extraordinary. Yields on U.S. Treasury bonds with maturities over 20 years are approaching 5%. In a world of slowing economic growth and high global debt, that’s an exceptionally high and hostile level for growth assets. The labor market remains relatively strong, but signs of a slowdown are growing, and inflation data revisions have been negative — even though the latest figures surprised to the upside.
Now let’s piece the mosaic together:
Major shifts are underway in the debt markets. Countries like China and Japan — traditionally the largest holders of U.S. Treasuries — are facing their own domestic challenges, ranging from a property crisis in China to a devastating combination of debt and weak growth in Japan. Both countries are sitting on significant unrealized losses on their bond holdings and are in need of liquidity.
When the U.S. lost its AAA credit rating, these positions began to be reallocated. Paradoxically, Germany emerged as one of the biggest buyers of U.S. debt. Why? Partly for security reasons, and partly due to currency diversification.
Bond sell-offs are putting pressure on the dollar, which is weakening. And while a weak dollar might seem like a problem at first glance, it’s actually positive for the global economy — especially for emerging markets.
What’s happening between Israel and Iran, according to all major players, is only the beginning. Voices from both Tel Aviv and Tehran suggest the situation will escalate further. If analysts' warnings (e.g., from JP Morgan) come true, we could see oil at $120 per barrel and inflation back at 4–5%.
In such a case, the Fed would be paralyzed. Instead of cutting rates, it would be forced to raise them — which would:
crash the bond market (bonds would keep falling),
put even greater pressure on the U.S., which would have to buy its own debt,
and in an extreme scenario, the U.S. might have to “break” the stock market to stabilize its currency and interest rates.
Does that sound extreme? Yes. But not impossible.
A weak yen and expensive oil is a deadly combination for Japan. A country that imports nearly all of its energy is suffering a sharp currency decline while also carrying one of the highest debt loads in the world (260% of GDP).
What’s happening?
The carry trade is unwinding — investors who borrowed cheaply in yen to buy higher-yielding dollar assets are closing those positions.
The Bank of Japan is being pushed toward currency interventions, further undermining confidence in the system.
This brings us to a term straight out of a derivatives textbook: credit event.
If confidence in bonds or a currency collapses — whether in Japan or elsewhere — a payout on Credit Default Swaps (CDS) could be triggered. In other words: the market admits the debtor can’t pay. And that would ripple through every global market.
When all these forces come together — geopolitics, monetary policy, oil markets, currency wars, supply chain disruptions — they paint a complex picture. But not one without opportunity. In a situation this multifaceted, strategic positioning and active portfolio management are more valuable than ever.
Continuation: Strategic Allocation – Why We Do What We Do
That’s why we are actively hedging the risks described above across our portfolios. This is not theory — this is active management in practice.
One of the key components playing a crucial role in this environment is silver.
Silver is trading at a 13-year high, and based on both our technical and fundamental analysis, there’s room for further growth. It’s not just about inflation — it’s also about structural demand from the energy sector (especially solar panels and batteries), and rising geopolitical tension, which historically supports precious metals as safe havens.
Our minimum target price? $40 per ounce. And that’s still not the ceiling.
Bonds – Yes, We Believe in Them. And We Know Why.
It might seem paradoxical that we also hold long-duration bond positions while the yield curve keeps rising and the market prices in potential stagflation. Yes, in the short term, that means open losses — we won’t sugarcoat that. But our approach is not focused on weeks or months. We look beyond the horizon of these events.
There will come a moment when the Fed is forced to cut rates — not by choice, but by necessity to revive the economy. And at that point, long-dated bonds will become one of the highest-yielding asset classes.
Double-digit returns won’t be a fantasy — they’ll be a historically repeated scenario in similar macroeconomic cycles.
The Shift Has Already Begun.
Whether we look at markets, politics, or central banks — everything is connected. Our role is not only to understand this, but to act ahead of the curve. That’s why the portfolio we hold today is no accident. It’s the result of interpreting patterns that most are only just beginning to notice.
Futuro: Technology, Uranium, and “Shovels for the AI Gold Rush”
Our strategy in the tech segment — within the Futuro portfolio — is both defensive and growth-oriented.
We’re continuously taking profits from tech positions when the market allows, and reallocating capital into sectors where we see asymmetric upside potential. One of those sectors is uranium and uranium mining companies.
We see uranium as a long-term energy megatrend with decades of growth ahead. Combined with soaring electricity demand driven by data centers and AI, we’re looking at potential returns in the tens or even hundreds of percent over the long run.
But we’re not blind optimists in this bet. The AI boom is still in its infancy.
While headlines compete over who builds the most powerful model, we’re interested in infrastructure: chips, computing centers, robotics. In short, companies that are “selling shovels during the AI gold rush.”
OpenAI has said that more than 1.5 million businesses are already using its tools. This is just the beginning. Once AI reaches robotics and the physical world, another revolution begins. But it will be a gradual process — one that demands infrastructure, capital, and energy.
Our goal is to accumulate positions consistently and calmly.
The Greatest Weapons Are Patience and Cash
In an environment full of uncertainties — geopolitical, currency-related, or market-based — one thing remains certain: liquidity is king.
That’s why we maintain a larger-than-usual cash reserve. Not because we can’t find anything to buy, but because we want to be ready to act on attractive prices of attractive companies.
History teaches us that it’s precisely in these moments — when markets swing, sentiment is low, and headlines scream — that the best investment opportunities are born.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investments in financial markets involve risks, and it's important to conduct your own analysis before making any investment decisions.