US government debt now totals $31 trillion, which equates to roughly $240,000 per American household. That's bigger than the average mortgage balance. Many economists believe debt and deficits don’t matter. We believe they do. It leaves Washington in a precarious position as it balances competing policy objectives (namely curtailing inflation, while maintaining economic stability). The bank failures of last month, we fear, make this balancing act even more precarious. Steve and I recently sat down to discuss what this means. What is the most likely path forward? Steve posits that Washington has two realistic policy choices. Yet, there is one “Hail Mary” path that we can hope for. You can listen or watch by clicking above. Although we are hoping for the “hope” path, we believe it unlikely. We thus believe the best investment policy is to remain thoughtfully diversified with a flexible and adaptable mindset. Yours in the Field, Frank Byrd, CFA IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Markets are actually up following last week’s scary bank runs. Does that mean things are OK? What does this mean for investors? This week Steve and I sat down to discuss these questions. The following video summarizes what we know – and what we don’t know. Rich Bank, Poor Bank It is worth emphasizing that we just witnessed the second and third largest bank failures in US history. Then the second largest Swiss bank fell. Markets are up, yet we do not believe this drama is over for reasons discussed in the video. Be sure to listen to the end where I emphasize the importance of financial advisers being independent of their custodians (rather than employed by them). Please reach out if you have questions or want to discuss any concerns you have regarding your own bank or custodian. Yours in the Field, Frank Byrd, CFA IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

“Just as individuals are born, mature, breed, and die, so do societies and civilizations and governments.” ― Frank Herbert, Children of Dune If there's one thing we're particularly thankful for, it is our diverse group of clients and friends who help us better understand - and appreciate - the world around us. Thank you for being one of those! One thing we are NOT thankful for is that US consumer prices jumped over 6% in October – the biggest jump in over thirty years. Investors seem to believe these price surges are temporary and will fade as bottlenecks loosen up. We worry, however, that there is wage inflation underway that may prove enduring. If that does prove to be the case, this may ultimately drive broader consumer prices higher than markets and Washington expect. Below we explain why … and why it matters to investors. People Are Not Commodities No question that many consumer and commodity prices, such as used cars and computer chips, are temporarily inflated. They will likely decline as bottlenecks eventually open up. Wages are another matter. They’re sticky. Try giving your employee a pay cut. That won’t go over well. Falling prices at the grocery store can induce good feelings and spur greater economic activity. Falling wages can induce very bad feelings – and can crush economic activity. October’s inflation surprise was broad based across many core categories. Wages, however, did not keep pace. In other words, real wages fell. We do not believe this is sustainable. In a recent Fielder note, we pointed out that real estate and stock prices have risen roughly in line with the money supply over the very long term. Wages did too – at least until 2008. Ever since, wages have not kept up with the money supply growth. Wages vs. Money Supply Growth Closing the Gap The arrival of Covid has sparked changes in the labor force. As a result of both natural economic forces and public policy changes, we believe this gap may be in the early stages of closing. Last quarter saw the highest jump in wages and salaries for private businesses in almost two decades. Real wages may have fallen, but nominal wages rose materially higher. Employment Cost Index This data is consistent with repeated anecdotes we hear regarding labor shortages across industries and geographies. Wages amount to over 40% of US GDP,* so labor is an important “price” in our economy. If a structural wage inflation is now underway, it is reasonable to worry that it may ultimately drive consumer prices higher. (To be clear, we are not making a near-term inflation call. The next 12 months are too hard to predict since falling commodity prices could more than offset near-term wage increases. Our focus - and worry - is on longer-term inflation.) Don’t expect to hear this kind of concern from the Fed or policymakers. They rationally fear that inflation expectations matter. If the public begins to fear inflation, that alone could drive prices higher. (A kissing cousin to toilet paper hoarding.) Why You Should Care Markets are pricing in very low inflation over the next decade and beyond. (For the wonks among you, the 10-year breakeven inflation rate is 2.6%.*) A surprise uptick in inflation expectations, commensurate with falling risk appetites, could be very bad for stock and bonds. Some investments, on the other hand, could do quite well. Fielder believes it is paramount that investor portfolios are thoughtfully constructed in a forward-thinking way. To be clear, the road is likely to get bumpy from here. We should all prepare for volatility ahead. It is paramount that you know what you own, and why you own it. Only then will you have the peace of mind to ride out the storms inevitably ahead. We appreciate any contrary or additive thoughts you might wish to share. Our thoughtful clients and friends, like you, are our most valuable asset. (And that’s not inflated!) Happy Thanksgiving! Yours in the Field, Frank Byrd, CFA Steve Korn, CFA *Source: Federal Reserve, St. Louis (FRED) ____________________________________________________________________ MPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

On the Money: “What amazes me more than any spectacle of boom-and-bust is our capacity as a species to witness speculative bubble inflating and bursting – or, to have read about the most notorious case studies, such as Tulipomania or the South Sea Bubble – and yet fail to remember the inevitable outcomes.” -- Ace Greenberg, former CEO of Bear Stearns (from his memoir, The Rise and Fall of Bear Stearns) “It’s a frightening thought, Frank” The ultimate signpost -- that’s what flashed to the world last week. The Federal Reserve completely caved. What does this mean? Is it a good thing? How should we be positioned? Last week I discussed these questions with my partner Steve Korn, Fielder’s Chief Investment Officer. You can listen to our conversation HERE. Here are some of the highlights: Steve Korn: “The Federal Reserve is in the process of doing something that's never been done before in the terms quantitative tightening. This extra three trillion dollars that they added to their balance sheet they're now slowly taking that away… And the ramifications of which no one knows what may happen. So we're in uncharted waters with respect to the Federal Reserve pulling back the punchbowl … and I would argue that what we saw in December was the start of that. … In December the current Federal Reserve Chairman Jay Powell made some comments to suggest that he would not at all change the quantitative tightening and the path they're on… (But) after the market gets wonky, and stocks are down, and assets are down … he reversed course… Now rate hikes are kind of on hold… So it is a complete reversal… If we thought that our government was going to be conservative and take a moral high road, yesterday put a nail in that coffin. They are going to continue to support asset prices and markets, because not doing that could lead to complete chaos... Frank Byrd: Governments don't get elected by cutting benefits and raising taxes. The path of least resistance is to stimulate and accept higher inflation, which of course is a slippery slope… Steve Korn: With the baby boomers now starting to retire … we are just demographically entering a period where our spending naturally is going to go up a lot more… Does the government now get religion and take the moral high road? And do we have to have increases in taxes? Definitely possible if Democrats take charge in 2020. But do we reduce spending? I'm skeptical personally. But that path would be highly deflationary into rising debts… I just don't think it's the likely outcome. Or the second path is we keep spending, whether we raise taxes or not, and our Federal Reserve and our government effectively continues to use the printing press to create more dollars to put more money into the system... and assets are off to the races…. we keep growing… So what do you do? Right? What do you do if the federal government can prop up asset prices?... The dirty little sin is the retiree who is just clipping coupons on fixed income or (living off of) utilities dividend stocks thinking that they're safe. They are completely wrong footed if that's the case. The value of their income will be eroded away. And ironically that person would be better served, although much more volatile, to own assets that will inflate with the asset inflation… There you'd want to be in real assets. You want to have real estate, equities… Frank Byrd: So the question is, looking forward, what do we expect to happen? … The key question that we all have to ask ourselves is: Do you believe that assets -- and by that, I mean stocks, bonds, real estate ... stuff ... owned stuff -- Do you believe assets or cash will outperform in the decade ahead? That's the key question. What do you believe? … We believe that central banks will succeed in their global coordinated efforts to debase cash. Steve Korn: It's a frightening thought, Frank. It's really frightening. Frank Byrd: And that means you want to own stuff - whether it's companies -- public or private -- stocks -- whether it's real estate -- stuff -- assets.... You can listen to our full conversation here: HEAR FULL AUDIO Importantly, we discuss why one should prepare – and potentially hedge – against higher volatility in asset prices. Further, we share thoughts on whether it makes sense to sit on the sidelines and wait for a chance to buy assets at cheaper prices. Please reach out if you’d like to discuss how to best position your own affairs for a more volatile, inflating world. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.

“When the collective consciousness stops believing growth can be created by money and debt expansion, the entire medium will fall apart violently, otherwise it will continue to be real.” -- Artemis Capital Management (Letter to Investors, July 2018) Happy Thanksgiving. Today I'm just thankful markets were not down again yesterday! As you relax (hopefully) over the coming days, here are a few observations to ponder . . . Observations The Fed’s balance sheet has grown 400% since the 2008 Financial Crisis. Early this year, the Fed began shrinking its balance sheet. Since January, it’s declined by ~7%. The S&P 500 is down about 10% from September's highs, following a similar decline in January/February of this year. Quantitative Easing (QE) was a huge experiment. It’s never been done before. Quantitative Tapering (QT) is a huge experiment. It’s never been done before. QT is just starting. Markets are acting differently. The Fed's Balance Sheet - Tipping Point? We believe that since 2008 the main driver of rising stock markets, bond markets, real estate – of just about all assets – has been the unprecedented liquidity injection from central banks globally. The problem is that this party is winding down. This year the Fed has begun withdrawing the punch bowl. The Trump tax cuts have helped keep the party going. Folks are still dancing. The question is what happens next year when we lap the tax cuts, and the music stops? I'm not the only one worried. Last week Paul Tudor Jones warned that we are in the late stages of a global debt bubble. Earlier this year, JP Morgan CEO Jamie Dimon said, "I don't want to scare the public, but we've never had QE… We've never had the reversal. Regulations are different. Monetary transmission is different. Governments have borrowed too much debt, and people can panic when things change." More recently, Stanley Druckenmiller said that he was on "triple red alert" over liquidity concerns in the face of rising interest rates. If the Fed’s loses control of its QT experiment, this could lead to quick change in investors’ collective consciousness. With that would come a new reality of squeezed liquidity, risk aversion, and with that, lower securities prices. Maybe a bear market in the large growth companies is underway. Maybe not. Regardless, now is a good time to rethink your portfolio structure. Markets like this are a good reminder of the need to diversify -- not merely to play defense but to play offense. We welcome the opportunity to help you review and rethink the structure of your family’s portfolio. Our New Partner Fielder is experiencing a bull market of its own. I’m proud to announce that Stephen Korn, CFA is joining Fielder as a Partner. Steve and I met 20 years ago as students at Columbia Business School. Ever since, I have considered Steve one of the smartest people I know. He is also a good person. I trust his character. I trust his intellect. I trust his judgment. It is an honor that he has chosen to join us in building Fielder. You can learn more about Steve’s background HERE. We are excited to have him on board. There couldn’t be a better time to have someone like Steve on your team to navigate this increasingly complex world. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.

Bargain? Or Devil's Bargain? No one asked for falling securities prices for the Holidays, but that’s what we got. Then we've had to endure the endless barrage of media interviews with Cassandras preaching that the end is near. What should you do? Pull in the reins and get more conservative? Or step up and get more assertive? Before doing anything, breathe deeply. A calm awareness of reality is what we need. Reality Repression The past few years we have written and spoken of our worries concerning “financial repression” at the hands of central banks. This, we have repeatedly emphasized, has artificially depressed interest rates and inflated asset prices. In plain English, financial repression has deprived retirees of income. Concurrently, it has inflated the prices of stocks, bonds, homes, farm land, and even art. Three years ago, we wondered why so few seemed bothered by financial repression. “The Fed’s zero interest policy is literally stealing from grandmothers. How is this not considered theft of the highest order? How is the term ‘financial repression’ not repeated daily on the front page of the New York Times?” ("End Financial Repression Now", Oct. 2015) The repression is now ending. As rates rise, this releases some of the hot air levitating asset prices. Will Fed Chairman Powell raise them more? Does he have the stomach for it? Markets surely do not. This is the drama that we're all seeing play out on our brokerage statements. Bad Choices Financial repression has forced us all into a devil’s bargain: Either pay up and invest at inflated prices or sit in cash and lose to inflation. Which is the lesser evil? To answer that, here’s the key question we must ask ourselves: Do you believe that cash or assets will perform better over the next ten years and beyond? We believe that central bankers will succeed in their efforts to debase cash. They have the will and the means to succeed. And they must succeed. Debasing cash (whether by inflation, currency debasement, or both) may not be the “high road”, but it is the easy road. Governments globally have made long-term promises they cannot afford to keep, and the bill is coming due. Hence the explosive growth in government debt. Debasing cash allows governments to pay their ballooning debts -- not in real terms, of course, but in nominal terms. Sitting in cash or investing in inflated markets both sound like bad choices. And they are. But choose we must. As the Rush song goes, “If you choose not to decide, you still have made a choice.” We believe the optimal choice is to balance and own some of both. This needs to be done thoughtfully, proactively, and in a way tailored to each client's unique cash flows, objectives, and temperament. Own It Ultimately, you want to own real assets (companies and real estate), acquired over time. The key here is to “own it”. You want real equity in things you understand. Although the market price of your assets will fluctuate (at times violently), it is your best chance for preserving your relative wealth and buying power in the years ahead. How much equity is enough? As much as your situation and temperament allow. Everyone needs some cash and fixed income. The optimal amount may be 20% of a client's assets. Yet, it may be 80% for another client. Every client is different, and so every portfolio should be different. What to Do Now? Stock prices are now a bit cheaper. For some investors, this should be a good thing. For others it should be a non-event. For those still in the accumulation phase: Lower prices should be a blessing for you. You can now buy earnings at a lower price than before. For those in the harvesting phase: (Those spending the income from their portfolio.) Lower stock prices should be a non-event for you. This presumes that you're spending all of your dividends and will not need to liquidate stocks for spending needs in the foreseeable future. Note the emphasis on "should be" above. This assumes that you have a thoughtfully constructed portfolio and Investment Policy. This helps you be calmly proactive in such markets, rather than frantically reactive. More broadly we believe investors should consider the following in this environment: Avoid “return-free-risk”. Jim Grant uses this clever twist on “risk-free-return” to describe investments that offer very little potential upside, yet entail substantial downside risk. Don’t be tempted by higher yielding alternatives today. We do not believe you’re paid for taking credit risk. We’re thus avoiding most low-rated (junk) bonds and high-dividend stocks. Maybe these will offer compelling value in the future, but not today. It's “return-free risk”. Accordingly, we prefer U.S. treasuries and high-grade municipal bonds. Be happy being short. Short-term rates have risen a lot, long-term rates have not. This “flat yield curve” means that the greatest “value” is in shorter-to-intermediate term bonds. (Except with municipals, which we believe offer some compelling value in longer maturities.) Think globally, act globally. Though cheaper, US stocks today are like a sale at Bergdorf’s: less expensive, but no bargain. International stocks, however, are more interesting. Even before the recent pullback, international stocks were not expensive by historic standards. Now they’re even cheaper. We thus see more value in international stocks than US stocks. Consider hedging where appropriate. For certain investors in certain circumstances, it makes sense to explore the use of a tail hedge. Don't go "all in". Sitting 100% in cash is not a good idea. Nor is rushing “all in” into stocks and bonds (even at these lower prices). The rational solution is to diversify. Own quality assets (stocks, real estate, etc.), which over the long-term should grow ahead of inflation. At the same time, based on your cash flow needs and time horizon, ensure an adequate allocation to cash and bonds to allow you to both weather a severe downturn as well as to give you buying power to buy earnings streams at depressed prices should they go on sale. But …. Don’t be cute. Maybe you’re planning to just sit on the sidelines, believing you’ll jump in at a better time. Careful. History is not on your side. The odds are not on your side. Your odds are far higher acquiring and holding an owner’s earnings stream over many years – even if you don’t buy them at bargain prices. You need to be in the game, not on the side-lines. Have a plan and stick to it. Be sure you have a good coach (adviser). It won’t be easy in this new environment. To win, you’ll need to play both good offense and good defense. As always, let us know if we can help. We're here for you. Very best, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.

“In the 1950's and 1960's, political leaders enjoyed much more public trust than they do today, enabling tougher economic decisions to be taken. The budget deficit culture, from which the western world is still trying to free itself, is symptomatic of a loss of political authority.” -- Peter Warburton, Debt & Delusion (1999) You’ve probably never heard of Peter Warburton, but he wrote one of the best books I’ve ever read on the nature of money and credit: Debt & Delusion. He wrote it in years leading up to the cresting of the epic credit bubble that popped in 2008. The book is hauntingly prophetic. Peter is one of those lonely economists who actually understands that supply matters. No surprise, perhaps, that he hails from the frozen north of England. He’s a true independent thinker, to whom I am indebted for helping shape my own framework on money, credit and inflation. I met with Peter last week during his visit to New York, and as always, he got my wheels turning. His expertise and nuance on credit markets is particularly relevant. There is more debt today in the economy than before the 2008 financial crisis. (This is the case just about any way you measure it – domestically, globally, in real terms, in nominal terms, as a % of GDP, etc.) There is no one I know who has thought more deeply and creatively than Peter on this subject. Two Key Questions Peter contends that there are major structural forces gathering that threaten to break up the framework to which we have grown accustomed. There is potential for much more inflation than we have known for some time. There are two key questions that Peter says we must each answer: Do you believe today’s low interest rates are naturally low or artificially repressed? Do you believe that central banks have adequate control? Your answer to these questions should be reflected in your portfolio. If you believe that rates are at a natural level and/or that central banks are in control, you should feel comfortable that securities prices (stocks and long-term bonds) are rationally valued at today’s levels. If, however, you believe – or even suspect – that current rates are artificial and that the Fed may not ultimately be in full control, you should ensure your portfolio is properly balanced, or hedged, to defend against a potential shock to stock and bond prices now “priced for perfection”. Today’s prices are near historically high levels – levels that do not appear to contemplate the potential for a surprise pick-up in interest rates, inflation, or risk premiums. Two Competing Theories Peter explains that there are two competing theories explaining the nature of today’s extraordinarily low interest rates. One contends that they’re natural, a result of a “savings glut”. The alternative theory holds that rates are artificially repressed. Proponents of each would summarize them in this way: “Savings Glut” – Excessive rates of savings globally have resulted in a glut of capital chasing a limited supply of opportunities. This over-supply of savings naturally led the price of money (interest rates) to fall. “Financial Repression” – Government has orchestrated an unnaturally low cost of capital in order to foster an economic expansion fueled by debt. The result is that we have built a huge credit structure, which has inflated the prices of assets (financial and real estate). Cause (or Effect?) Effect (or Cause?) Source: FactSet; “Debt per Capita” refers to total nonfinancial sector credit market liabilities The implication of the Savings Glut framing is that capital was built up as a result of prudent behavior. There’s simply an excess of savings and a dearth of opportunities to put it all to work. The implication of the alternative framework, Financial Repression, is that we have been profligate. We have committed income that we have not yet earned, and we are representing a level of demand that we cannot sustain. The fear of this unsustainability is putting a downward pressure on interest rates from a policy perspective. Our asset prices are thus conditioned on the ability to maintain this credit structure. Why This Matters It matters greatly which of these explanations you believe better reflects reality. If you accept the Savings Glut narrative, then you accept today’s low interest rates as natural. If you believe the Financial Repression narrative, then you believe that today’s low interest rates are artificial and that central banks’ interventions have distorted the risk/reward equation in the economy. Today’s interest rates thus reflect extreme monetary policy rather than the natural order of things. This challenges the central bank orthodoxy. Even for those with this contrarian view, it is an uncomfortable thought that, to normalize the system, central banks are going to have to stand down and get out of the way. If, say, you believed that the natural real rate is 1%, and on top of that you expect inflation to be 2%, then interest rates shouldn’t be higher than 3%. But… if we don’t really know what the real rate truly is, and we instead look to the history of real rates post a recovery, we should expect closer to 2-2.5% real rates at the end of the cycle. Not many investors are prepared for this much of a shock. For 50 years, the 10-year government bond rate has assimilated the nominal growth rate of the economy. If Trump, against expectations, gets the infrastructure spending bill passed in addition to the tax bill, he’ll have unleashed a fiscal beast. A pick up in nominal economic growth would thus imply a pick-up in nominal bond rates. This implies a higher discount rate, and that, in turn, implies lower asset prices. What do you believe? We believe it will pay to have an opinion … and a portfolio positioned to reflect it. Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.

Investors’ sentiment today is even more negative than during COVID.* The fear is that Fed Chairman Powell will transform into Paul Volcker and raise interest rates dramatically to crush inflation. No wonder stock markets are down significantly (the NASDAQ is down over 30% from its highs). In the following video, we share our variant thinking on how investors might be mistakenly interpreting the inflation threat. A Differentiated View This is not That 70’s Show. Investors are mistaken in using the playbook of that period to solve today’s challenges. The 2022 mess is very different from the 1970s mess. We observe indications that inflation is in the process of rolling over, which should give the Fed cover to resume its easy-money policy later this year. Just in time for elections. Washington is aggressively trying to slow the economy. It is working. There are now multiple observations that the economy is slowing.** The money supply (M2) is even shrinking. If the money supply and consumer spending shrink relative to output, that implies disinflation, if not deflation.*** If by the late summer or early fall, we begin to see price inflation slow, we believe the Fed will signal a return to its earlier easy-money policies. At the first whiff of that, market prices would likely rise quickly. This would position Biden to declare victory over “Putin’s inflation”, just in time for the November elections. Illusion of a Fix The scenario above would create the illusion that the problem is fixed. Near term, that may appear the case. But it won’t be. Washington’s dirty secret is that it wants – and needs – inflation. The reason is that it’s in a debt trap. That means it cannot allow interest rates to go much higher. That would raise the interest cost of servicing the government’s growing debt. That would crowd out spending on critical things in the federal budget. Ultimately this would return Washington to its earlier policy playbook: 1) Monetizing its debt (the Fed buying US government bonds to fund our deficit) 2) Keeping nominal interest rates low (so Washington can keep its interest payments at a manageable percent of its budget) 3) Tacitly allow higher inflation target (high single digits, perhaps higher?) Is This sustainable? Of course not, at least not over the very long term. Ultimately, years into the future, there must be a reset. That’s a big topic for another day, but for now, suffice to say that we want to own assets going into a reset. That gives far better odds of preserving our real wealth than holding I.O.U.’s (cash and bonds) denominated in the currency of a failed government. Of course, everything above could ultimately prove incorrect. There are wild cards such as Ukraine's impact on energy prices. We should not try to predict the future. We should instead observe, and based on what we see, position in way that we believe stacks the odds in our favor. Today we observe Washington actively crushing consumer demand and shrinking the money supply. Its playbook is to crush inflation before the fall elections. So far it appears to be working. Our earlier advice thus remains: own a diversified mix of quality assets, and hold on. The ride will be bumpy. Ultimately, we believe this gives us the highest odds of preserving our wealth through the coming inflation. For more color, be sure to watch/listen to our discussion HERE. Yours in the Field, Frank Byrd, CFA Steve Korn, CFA *AAII Sentiment Survey, Bull-Bear Market Spread. June 17, 2022 (Factset) **For a good summary, see Multiple Indicators Signal Slowing Economy” ,Josh Mitchell and Bryan Mena, Wall Street Journal, 6/17/22. *** In other words, if money supply (M) and velocity (V) fall relative to output (Y), this implies lower price inflation (P). IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this email or any attachments. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.

Amen of the Week From Jack Ma, founder and executive chairman CEO of Alibaba, on the flawed logic behind today’s brewing trade war: “The U.S. has a structural trade deficit with China because of the market forces of comparative advantage: Economies produce what they are best at making and import other things… American economic policy for the past 30 years encouraged U.S. companies to outsource labor-intensive manufacturing to China and other Asian countries while retaining the most valuable parts of American ingenuity: innovation, technology and brand… As a result, China became the world’s largest exporter, with a significant trade surplus. American consumers benefited from low prices and American corporations made giant profits. There’s no better example of a beneficiary of this symbiotic relationship than Apple. The company designs the iPhone and develops proprietary chips and software in California… While countries like South Korea and China collect revenue from selling components and assembling the final product, Americans make almost all of the profits. Apple’s $48 billion of profits in fiscal 2017 will not make it into the balance-of-trade calculation.” Bonus Runner up From Peggy Noonan, one of Reagan’s speechwriters: “Often when I speak people ask, at the end, about Ronald Reagan. I often say what I’ve written, that a key to understanding him was that he saw himself in the first 40 years of his life—the years in which you become yourself—as an artist. As a young man he wrote short stories, drew, was attracted to plays, acted in college, went into radio, and then became a professional actor. He came to maturity in Hollywood, a town of craftsmen and artists. He fully identified with them. The thing about artists is that they try to see the real shape of things. They don’t get lost in factoids and facets of problems, they try to see the thing whole. They try to capture reality. They’re creative, intuitive; they make leaps, study human nature. It has been said that a great leader has more in common with an artist than with an economist, and it’s true.” Chart of the week I'm not sure this image does justice to the striking numbers underlying it. Since 2008, the population of age 65 & older Americans has increased by about 25%. It's the aging of the Baby Boomers. Meanwhile, we're having fewer babies. Stat of the week People over 65 years old will outnumber children by 2035. (Per the US Census Bureau) Why this matters: If the population of productive workers slows – or worse, shrinks – this creates a tough headwind to the economy. That means productivity must increase by more than enough to compensate. I’m an optimist that longer term this can happen with the proper policies in place, but it’s sobering to see that productivity has also stagnated since 2008. So we need to either work harder/smarter, have more babies, or do more to open our borders to the world's best and brightest. A mixture of all 3 sounds like a good recipe to me! Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.

Amen of the Week “If the freedom of speech is taken away, then dumb and silent we may be led, like sheep to the slaughter.” - George Washington Happy President’s Day! We recently published Fielder’s latest investor letter: "The Best Defense". Here are a few excerpts ... “Welcome to another bear market… The Russell 2000 (the small cap index) and the MSCI EAFE (international index) have both fallen by over 20% since July… I’m not losing sleep over the fact that we’re in a bear market. Ugly markets are nothing new to me. During the market declines in 1990, 1997, 2000, and even 2008, I felt a cleansing – as if lower prices were wiping out the excesses and creating some compelling buying opportunities. Today, however, I have a different feeling – an uneasy feeling… there are secular changes afoot that deeply disturb me… There is no easy path back to normal… The most important price in our economy, interest rates (the price of money), has long been under government control. Now central bankers are adopting more aggressive price distortions: going from zero to negative interest rates. This is Twilight Zone stuff. Soon you may actually have to pay your bank or broker for the privilege of depositing (lending them) your money. Some banks' customers already are. This Financial Repression is unjust to savers, it retards economic growth, and it destabilizes society. Yet, it is the “easy” way out politically for governments to nominally meet their promises to entitlement recipients and creditors… Ironically, the best way to protect yourself against this pessimistic outlook is to adopt an optimist’s attitude. Yes, there is an assault coming upon owners of capital. Your best defense, though, is a strong offense. Read the full letter HERE. An Ode to a Great Founder Today we commemorate George Washington. (For those of you under the age of 40, you probably never learned anything about him in school. He’s the guy on the dollar bill.) As bleak and uncertain as the future looks today, just imagine how much worse it must have seemed back in George's day. America’s greatest years of growth and progress were also its messiest and most volatile. Pessimists of the day surely seemed wise for their worry. There was constant threat of war, accelerating inflation, and even a Whiskey Rebellion, of all things! Through it all, there were people who tuned out the negative noise and focused on building and investing in the great enterprises. The prosperity that our society enjoys today owes everything to those naive souls – the optimists who didn’t know any better than to look for and expect the best. These kind of people will always exist. May Washington’s beloved homeland continue to attract and retain them! Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

“… be fearful when others are greedy and greedy only when others are fearful." Warren Buffett, Berkshire Hathaway annual letter, 2004 Negative surprises like we’ve seen this past week are always concerning. Even more so when the stock market is expensive. Today it is very expensive. That does not necessarily mean that it will go down tomorrow. What it does mean is that stocks are likely to do less well in the decade ahead. The price-to-earnings ratio of stocks is now 30x, double its historic average of 15x. This means that stocks are today priced near the same level as the 1929 market peak, just before the Great Depression. Since then, there’s only been one other time that the market’s value has been higher: 1999, the height of the internet bubble.* The problem is that too many investors (and their advisers) assume that the stock market’s high past average returns (of ~10% per year) will continue into the future. This ignores today’s higher price paid. The price you pay for an investment up front is one of the primary determinants of your ultimate return on that investment. It’s no different than shopping for antiques. If you find a bargain, you can make a great return on the purchase of a not-so-great chair. Conversely, if you overpay for an item – even for a vintage Baccarat vase – your return will be poor, perhaps even negative. Meb Faber wrote a great report emphasizing this point.** If you look at the 10 best decades of stock market returns, the average price/earnings of the S&P 500 at the beginning of the period was 10x. If you then look at the 10 worst decades of stock returns, the average price/earnings at the beginning of the period was 23x. (Remember, it’s 30x today.) What, then, should we do? Avoid stocks? No. Stocks are still one of the best ways to preserve the value of your assets over time against inflation. In an earlier note, I’ve emphasized that the longer your holding period, the less important price paid becomes. If your time-horizon is well over a decade, and if you do not plan to draw on your portfolio for income for a long time, then you’re likely fine with a very heavy allocation to stocks. (Our man Warren Buffett recommends such.) Yet if you have a shorter term horizon or need to draw income from your portfolio, today’s high valuations suggest you need a lower-than-typical allocation to stocks. How much is that? Everyone’s circumstances are different, and thus, the answer to “how much in stocks?” varies person to person. We are happy to help you calculate the optimal allocation to stocks given your own circumstances and in light of today’s high stock valuations. Yours in the Field, Frank Byrd, CFA * As measured by the cyclically adjusted price/earnings ratio of the S&P 500 (according to research by Robert Shiller, Yale University). As an aside, I’d point out that the S&P 500’s price/sales ratio is today even higher than 1999’s level. **Mebane Faber, “Global Value: Building Trading Models with the 10-Year CAPE”, Cambria Quantitative Research, Issue 5, August 2012. Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder.

Amen of the Week: Twelve years ago I attended a dinner meeting where Warren Buffett spoke to investors. He said something that still resonates with me today -- especially on days like we've seen this past week: “The way people have built fortunes has been by analyzing what businesses will look like in three to five years, not by forecasting short-term stock prices.” - Warren Buffett Do you really know what you own and why you own it? Chances are your adviser has your money “asset allocated” among a dozen or more ETF’s or mutual funds, through which you may own over 500 individual stocks collectively. Basically, you own the market. This “own-a-bit-of-everything” approach has worked well the past three decades, as securities markets have broadly risen. Realize, however, that one driver of these returns has been the steady decline in interest rates. Finance 101 teaches that as interest rates fall, financial assets (stocks and bonds) inflate. In recent years, interest rates have been artificially depressed, and so one could conclude that stock and bond prices are artificially inflated. If all markets have been similarly affected, it begs the question whether the “market portfolio” is true diversification. A school of fish might have a thousand fish, but it moves as one school. Likewise, if you own a thousand securities, you really own one thing: a market basket of financial assets. Should your life’s savings be riding on a market bet? Maybe it’s time to stop driving with the rear-view mirror and take a more forward-looking, focused approach. Should we talk? Yours in the Field, Frank Byrd, CFA Disclaimer: While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein. This information is intended only for the recipient of this email. Under no circumstances should this report be shared with or forwarded to anyone else without the express permission of Fielder. ​