August 20, 2025
Dear Investors and Friends,
Last month, we discussed the United States' growing debt burden and the limited levers available to policymakers. When governments can’t, or won’t, raise taxes or cut spending, they often choose the more subtle path: monetizing the debt and allowing inflation to do the heavy lifting.
This process increases nominal GDP, which makes the debt-to-GDP ratio appear healthier, even if real economic output isn’t improving. It’s a politically palatable solution, but it comes with important side effects.
That brings us to this month’s topic: If inflation is being used to manage the debt problem, and if nominal GDP is rising while real purchasing power stagnates, then what does that mean for asset prices, and for investors?
Specifically, why might the stock market rise even when the economy doesn’t? And how can investors tell the difference between real growth and financial illusion?
The Illusion of Market Strength
The headlines are upbeat. The S&P is near all-time highs. Real estate is holding strong. Even gold and Bitcoin are up. On the surface, it looks like a broad-based market rally, and for many investors, it feels like their portfolios are doing well.
But this raises a deeper question: Is the market really going up? Or is the dollar going down?
When the value of the currency declines, it takes more dollars to buy the same asset. That means prices rise, even if the underlying asset hasn’t actually increased in real terms. This is especially true in environments like today’s, where governments are printing money, suppressing interest rates, and carrying massive debt loads.
As Ray Dalio put it: “When your currency goes down, it looks like your assets are going up.”
In other words, nominal asset prices can rise even when the real economy is stagnating. The illusion of growth is driven not by productivity, but by inflation and currency debasement.
Real vs. Nominal: Why the Distinction Matters
Imagine a portfolio that grows by 10% in a year when inflation is 8%. Your real return is just 2%.
Now imagine that same portfolio grows by 10%, but inflation is 10%. In that case, your purchasing power hasn’t improved at all. You feel wealthier, but in real terms, you’ve simply stood still.
This is why understanding the source of asset price gains is so important. Rising prices may reflect economic growth. But they may also reflect a falling denominator: the dollar itself.
Lessons from History
The 1970s offer a clear case study. Inflation surged, the dollar weakened, and asset prices rose in nominal terms. But real wealth creation was far more elusive. Investors who failed to adjust for inflation often mistook survival for success.
We may not be in the same decade, but the forces shaping today’s market feel familiar: fiscal deficits, financial repression, rising asset prices, and declining real yields.
Integrated Management for a Distorted Landscape
In a world where nominal gains can mask real losses, discipline and integration matter more than ever.
At Roosevelt Capital Management, we’ve long played offense in the most defensive part of client portfolios, fixed income. We focus on building resilient bond strategies that preserve flexibility, generate income, and protect purchasing power. Our proprietary tools, laddering discipline, and ongoing optimization processes help ensure that every dollar you allocate to bonds is working intelligently on your behalf.
Looking Ahead
As inflation lingers and policy remains loose, markets may continue rising in nominal terms. But true wealth preservation requires a deeper lens, one focused not just on price charts, but on purchasing power, liquidity, and long-term objectives.
Real wealth isn’t measured by account balances, it’s measured by what those balances can buy. Thoughtful institutions and endowments understand this. When managing permanent capital, they evaluate success by one simple equation: Is our portfolio return consistently exceeding our spend rate plus inflation?
It’s a quiet but powerful discipline. Most investors only watch their return relative to spending, and overlook inflation. But over years and decades, inflation compounds silently, and erodes wealth invisibly. One day, they wake up and realize: we’ve lost ground.
The savvy investor, whether individual or institution, frames success in real terms: Am I growing or at least maintaining my purchasing power?
That’s the lens we use at Roosevelt Capital Management. Whether we’re managing liquidity, building bond ladders, or advising on overall strategy, our goal is the same: to help you protect what you’ve built, navigate what’s ahead, and grow wealth that holds its value, not just in dollars, but in what those dollars can do.
Warm regards,
David and Mike
Disclaimer
Roosevelt Capital Management LLC is a registered investment adviser. The information presented is for educational purposes only and is not intended to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
Past performance is not indicative of future performance. Principal value and investment return will fluctuate. No guarantees or assurances that the target returns will be achieved, or objectives will be met are implied. Future returns may differ significantly from past returns due to many different factors. Investments involve risk and the possibility of loss of principal.
While all the values used in this report were obtained from sources believed to be reliable, all calculations that underly numbers shown in this report believed to be accurate, and all assumptions made in this report believed to be reasonable, Roosevelt Capital Management LLC neither represents nor warrants the values, calculations or assumptions and encourages each prospective investor to conduct their own review of the audits, values, calculations and assumptions.