Investing From Paper Money to Things

Another half-decade is in the books…and2025 has brought new challenges and opportunities for investors. Predicting thefuture might seem like the golden ticket to infinite profits, but historyreminds us of its cunning twists and turns.

Lessons From the Past

“History repeats itself, but in suchcunning disguise that we never detect the resemblance until the damage isdone.” —Sydney J. Harris

“Those who cannot remember the past arecondemned to repeat it.” —George Santayana

The 2010s surprised most of us. U.S. stocksrallied throughout the decade, sustained by low interest rates andunprecedented monetary stimulus. Emergency-era monetary policies persisted farlonger than anyone anticipated, and while inflation remained subdued for muchof that time, wealth inequalities and asset price bubbles grew significantly.Investors profited simply by sitting in U.S. equities.

Fast-forward to 2025, and we find ourselvesin a vastly different economic environment. Inflation, once considered dormant,has returned with renewed vigor. Interest rates, suppressed for decades, arenow rising to combat soaring prices. For investors, this shift demands arethinking of strategies, particularly as the purchasing power of moneycontinues to erode.

The Decline of Fixed Income Returns

Since interest rates peaked in 1981 underFed Chair Paul Volcker’s fight against inflation, they have steadily fallen.The returns on 10-year Treasury bonds illustrate this dramatic decline:

• 1980s: $140,000 annual income on     $1,000,000 invested
• 1990s: $80,000 annual income
• 2000s: $50,000 annual income
• 2010s: $40,000 annual income
• 2020s: $7,000 annual income

While inflation rates remained low duringmuch of this period, the value of money steadily depreciated, reducingpurchasing power. The Federal Reserve’s quantitative easing (QE) policies andbalance sheet expansion—now exceeding $12 trillion in 2025—have prevented assetprice collapses but at the cost of fostering unsustainable debt levels. Thispolicy environment has favored debtors while punishing savers.

Rising Inflation and Dollar Devaluation

Inflation—once subdued—has returned as adominant force in the global economy, spurred by supply chain disruptions,geopolitical tensions, and a massive increase in fiscal spending. The FederalReserve's efforts to curb inflation have led to higher interest rates, but thedevaluation of the U.S. dollar remains an ever-present risk. Such a scenariowould erode the real value of government debt but devastate the savings andwealth of those holding dollar-denominated assets.

For investors, cash and traditionalfixed-income securities are increasingly unattractive, as their yields fail tokeep pace with inflation. In this new economic paradigm, the focus must shiftfrom paper assets to tangible, inflation-resistant investments.

Investing in “Things”: Hard Assets andResources

The last decade favored paper assets suchas stocks and bonds, driven by low inflation and index investing. This trendled to extreme market valuations, where a handful of large-cap stocksdisproportionately drove returns. However, as inflation accelerates andmonetary policy tightens, a new trend is emerging: investing in tangibleassets, or “things.”

Why Tangible Assets?

1. Resource Shortages: Global demand     for natural resources, from energy to minerals, continues to rise. Supply     constraints create opportunities for investors in resource-rich     industries.
2. Inflation Hedge: Hard assets such     as real estate, commodities, and infrastructure projects tend to retain or     increase their value during inflationary periods.
3. Energy Transition Opportunities:     While renewable energy adoption is growing, traditional energy sources     like oil and natural gas remain critical and undervalued. High oil prices,     coupled with the slow adoption of electric vehicles (EVs), create a     compelling investment case.

Opportunities in Energy and NaturalResources

The Myth of Peak Oil Demand

Despite optimistic projections about arapid shift to green energy, traditional fossil fuels still dominate the globalenergy mix. EVs, while growing in market share, make up less than 2% of theglobal car fleet in 2025. The notion that we’ve reached “peak oil demand” ispremature, and high oil prices are making energy investments attractive onceagain.

Investing in Hard Assets

Our Tax Advantaged Energy Fund (TAEF) wasdesigned to capitalize on this trend. The fund focuses on:

• Direct Energy Investments: These     long-term, hard assets provide cash flow, are immune to inflation, and     offer substantial tax benefits.
• Tax Advantages: Through accelerated     depreciation and other incentives, investors can offset a significant     portion of their income.
• Inflation Protection: Energy assets     tend to appreciate during periods of rising inflation, making them a     reliable store of value.

The Shift in Investment Strategy

The 2020s marked a turning point forinvestors. The deflationary trends of the past decade are giving way to aninflation-driven environment where tangible assets—not paper money—offer themost promising opportunities. Natural resources, real estate, infrastructure,and energy investments are positioned to benefit from this new paradigm.

For investors looking to adapt, the key isunderstanding the macroeconomic forces at play and positioning portfolios tocapture the upside of resource scarcity, inflation protection, and hard assetappreciation.

Conclusion

The economic landscape of 2025 demands ashift in investment thinking. As the era of cheap money and low inflation comesto an end, tangible assets provide a hedge against the twin threats ofinflation and dollar devaluation. By focusing on hard assets and resource-basedinvestments, investors can safeguard their wealth and capitalize on theopportunities presented by a rapidly changing world.