Rising geopolitical tensions may weaken dollar recycling as Gulf states deepen ties with Beijing, keeping base rates higher. This comes as private credit—now a key absorber of capital—shows growing stress. Higher funding costs, redemption limits, and valuation gaps in BDCs signal the credit cycle is turning. With inflows slowing and capital absorption weakening, the system is entering a late-cycle phase where credit expansion stalls and pricing begins shifting from models to market reality.
Honda’s dividend yield is nearing 5%, prompting interest as the author observes markets and begins a position in JD Industrials. A video of Honda’s C-1 solid-state battery line highlights a focus on continuous manufacturing and roll-to-roll processes to reduce costs and dry-room requirements. As EV strategies shift toward cheaper vehicles, Honda may deploy solid-state batteries first in motorcycles—where it has strong market share—before scaling to cars.
Remember how oil interests lobbied against nuclear during the 1970s embargo, and now push against solar and wind? Oil lost electricity; now natural gas faces the same threat. Nuclear acts as a decoy—baseload, expensive, and not flexible. Wind, solar, and EVs disrupt variable demand and transport. Energy transitions repeat: oil → electricity, gas → electricity, oil → transport. RINSE / REPEAT.
From the 17th century, Caribbean sugar fueled European wealth via plantations reliant on enslaved labor. Napoleonic Wars, slave revolts, and embargoes disrupted trade, while Europe’s sugar beet offered a cheaper, local alternative. Similarly, today EVs, renewables, and local energy reduce dependence on oil and natural gas, slashing costs and reshaping global energy markets—history repeating itself in technological disruption.
Archives reveal that today’s financial “innovations” like 0DTE options are not new but echoes of past bubbles. From the South Sea Bubble to tulip mania, markets repeatedly combine leverage, low upfront capital, and option-like payoffs. These structures attract broad participation and create fragility. The pattern is clear: different instruments, same dynamics—leverage and optionality driving cycles of speculation.
The credit cycle is turning as capital absorption weakens in riskier, non-bank institutions. Rising funding costs are stressing these lenders, pushing credit spreads higher—especially in CCC debt. Early signs now extend to consumers, with delinquencies rising and securitization declining. As conditions tighten, fragile, debt-dependent structures begin to unwind, marking a transition from expansion to contraction.
Energy price shocks from war don’t reinforce fossil fuels—they accelerate their decline. As seen after the Russia conflict, higher oil and gas prices drove rapid EV adoption and faster renewable substitution across major economies. With cost curves falling, each new shock strengthens the transition rather than reversing it.
Wars are not deflationary, especially for the U.S., where high debt and deficit monetization create inflationary pressures. Bond rallies during crises are often knee-jerk reactions, not true signals. With heavy short-term issuance, repo stress, and structural deficits, markets may misread conditions. If conflict persists, risks shift toward inflation and potential instability in the U.S. bond market.
Most investors misunderstand credit. Henry Thornton didn’t—and his framework still explains every boom and bust. Credit begins with trust and drives real commerce when used productively between merchants. But consumer debt and monetary expansion create only the illusion of wealth. We built a new way to read these ideas: live video commentary embedded directly in the text. Experience it free: https://www.graphcall.com/execute?task=NavigationPage&g=a6a94914-086f-4092-8c44-22a888bde0a0