Good Day… And a Fantastico Friday to one and all! I know, I know it’s Friday and there’s normally no Pfennig today, but… I have a special treat for you today! And I couldn’t wait until next Tuesday, for Monday, I’m traveling to my winter home for a week… As you all are aware, Battle Bank is my new home for the Pfennig…
And Frank Trotter is the President of Battle Bank and the man responsible for moving me over to his Bank! So, the team is back together again! Well, Frank wrote a piece for the Pfennig, and I decided that it will be a special Friday edition of the pfennig… So, here’s Frank;
Way back in 1995 Chuck and I were on the International Markets Trading Desk at Mark Twain Banks. Chuck was the head of Trading, and I made mostly unsuccessful attempts to herd the cats.
It was a sophisticated bond shop. Over on the domestic side they were trading complex mortgage-backed issues and providing advise to firms well above our mid-size bank.
On our International Markets desk we were certainly the only firm we knew of focused on providing retail investors the opportunity to diversify outside the US dollar in WorldCurrency™ deposits and bonds.
Back then, the US 10-Year Treasury wasn’t just a benchmark—it was the undisputed king of the world. 👑
Best credit. Pretty much the lowest borrowing rates. “Risk-Free Rate”
If you wanted to buy debt in Australia, Canada, or the UK, you weren’t just looking at the coupon and currency; you were looking at the spread to the US 10-year.
In 1995, the US 10Y yielded around 6.57%. But look at some of the alternatives:
Australia was paying a massive +249 bps premium
The UK’s 10-year was 1.69% higher than the US.
Italy? They were paying a staggering 560, 5.60% higher than the US.
In those days, the US was the ultimate “Safe Haven.” Our fiscal house was perceived as the sturdiest on the block, and the rest of the world had to offer significantly higher yields just to compete for capital.
The US budget was headed for a surplus.
For those of you unfamiliar with the term “surplus” that means that the US would collect more revenue than it spent. Of course, there were still off-income statement obligations but just imagine.
Fast forward 30 years to 2026.
The script has flipped in a way few of us on that 1995 desk would have believed. Many, maybe most “major” economies now have lower borrowing rates than the US.
What changed?
One administration after another piled on the debt and ran increasingly larger deficits. Social programs, the military-industrial complex that Eisenhauer was so correct about, and now the interest payments are about to become the largest budget item.
Naturally I was delighted with the various tax cuts – the chance for smaller government and all that. But each tax cut came with a spending increase. Not the right way to run a business, and especially a national treasury.
The bond market just trades value as they see it. What does relative inflation look like in the country? What’s the fiscal situation? What are the prospects for growth? How much does the country need to borrow?
The traders add it all up and there’s a number in their head. Millions of participants voting with a buy or a sell.
With a ballooning national debt and a shifting global landscape, the US Treasury is no longer the benchmark it once was. We aren’t the ones demanding a premium anymore; we are the ones paying it to keep the lights on. 📉
When you look at the 1995 spreads compared to 2026, you don’t just see numbers—you see the story of a deteriorating financial lead. The “Risk-Free Rate” is feeling a lot more “Risk” than it used to.
Today of course this has all changed. Pulling 10-year Treasury yields from Thursday (check for an update in today’s financial press):
US 4.34%
Canada 3.49%
Germany 2.99%
Italy 3.71% – seriously, Italy
Switzerland 0.32%
Of course there are a few with higher rates.
UK 4.92%, Australia 4.92%, and places like Brazil, Mexico, India and others where investors need serious incentive to provide a loan.
It’s our viewpoint that over the next decade it’s likely that the US dollar will decline. I didn’t say crash. I didn’t say become irrelevant. Just decline.
Last year overall it fell about 10%.
These days people are apparently uninterested in double digit returns and it appears the market is overlooking the impact of currency moves. After all there’s the stock market that seems to be headed to the moon. Precious metals, which I suspect most of you reading the Pfennig hold, are skyrocketing.
But a word to the wise. Double digit returns ,if they were to continue, can compound nicely to double in just over 7 years. Sounds like a nice compartment in a diversified portfolio.
Obviously, I should disclose that each of these items can decline and these investments aren’t suitable for everyone. Maybe the rest of the world falls apart. Maybe something like the current war in Iran becomes World War III – who knows? Also, precious metals are not FDIC insured and both foreign currencies and precious metals can lose value due to market price adjustments.
If you are interested in exploring alternatives for your portfolio, along with learning about the risks head over to Battle Bank where we give you can explore the opportunity to invest in precious metals and over 20 foreign currencies. Of course there’s a downside to all these investments so consider that carefully before taking action. I’m just a guy that works at Battle Bank and these aren’t necessarily the opinion of the bank.
Chuck Again… Thank you, thank you, thank you (in my best Gomer Pyle voice ) Frank for this piece… I had extended an offer to Frank some months ago that any time he felt like writing; to just fire it off to me and I’ll use it!
That’s it for today… make sure you are on Battle Bank’s waitlist… They will take care of you! I personally know several of the employees at Battle Bank, and they are great!Little Feat take us to the finish line today with their song: Dixie Chicken… (the live version!) Now, go out and have a Fantastico Friday today, and Please Be Good To Yourself!
Chuck Butler (With Frank Trotter)