This blog is slated for release in early February, a couple weeks into Trump’s new term, a couple weeks without College Football, we’ve all had some time to adjust, and the sky hasn’t fallen just yet, eh?

We’re bringing back I-Dog Capital’s Monthly Update! While these will no longer be my only blogs on this website, I like the monthly format. It should give us a regular interval to take stock of what’s changed in the economy, and also how the fund performs. Before you panic, I’ve changed the presentation somewhat. Hopefully this year we won’t have such a rigid presentation like in 2024’s editions.

This month, I thought it might be pertinent to muse a bit about how financial markets might perform in 2025, under trump’s second first year in office. Even now as this blog is set for release, we await our first tariff announcements, the first shots of trade war 2.0. It’s worth our time to muse about how we think markets might perform under more protective economies.

As always, I am not an investment advisor, and none of this is investment advice. I-Dog Capital is my personal fund, of which I share my trades and strategies to give you insights into how hedge funds and big investors operate. You retain the choice of not listening to a word I say, and I will not be upset. However, I do hope that you find what I have to say interesting, and I hope it adds value to your life.

I-Dog Capital – January 2025

A new year brings with it a fresh new year-to-date performance. And coincidentally, you might now be wondering, wait, didn’t Ian stop those monthly updates last year once his trades went south?

Yes, dear Reader, you would, strictly speaking, be accurate. I did take some big losses around July from the Intel trade, and I didn’t post any more updates since then. However, as anyone worth your time and mental capacity should act, I worked the rest of the year to cut those losses, and by the time December rolled around, I was closer to breakeven again.

I ended 2024 having contributed $5,190 into the fund, and having lost $410. An annual performance of -7.89%, compared with the S&P 500’s 24.99% performance in that time. Not good at all, of course. But with it, lessons learned and strategies refined, and ready to do much better in 2025.

2024 Annual Results can be found here: https://docs.google.com/spreadsheets/d/1GTzo2HVLOMk_QN41YNM85o2oe0zt1Ja34X4FKUzv1Ss/edit?usp=sharing

Now, for 2025. Rather than listing every trade and boring you half to death, I have created financial statements that I periodically update, and will attach to every monthly edition. They will include details of ending investment positions, and cash activity, presented in a standard accounting format. Hopefully you’ll appreciate the chart-addition format as opposed to the previous one: I know I sure do when I read things.

In January, I-Dog Capital achieved a 4.12% return. That compares with the S&P 500 returning 1.97% in that time. We did this by sticking to the strategy I created the fund for:

– Finding trades that offer high theta premium at attractive underlying strike prices
– Taking profits, not chasing profits.

I employ a weekly option-selling trade strategy on stocks I follow, understand, and am comfortable owning. All trades are secured, meaning I sell options on full positions of 100 shares’ worth, for example, I wait until I have 100 shares, or the equivalent cash value, of an underlying stock before I sell an option on that stock. And, I stick to the parameters of my 2x margin account, targeting a return per weekly trade of 1%.

Nearly all realized profits this month were from trades on non-tech, real-economy stocks, such as Verizon, Dow Chemical, and Pfizer. I also sold a call option on my long $IBIT call, and I bought another share of $BIL, the short-term government bond fund. I now have 11 shares of $BIL, and am still using it as a functional clearing account, as my broker doesn’t pay interest on its cash account.

You can find 2025 results here: https://docs.google.com/spreadsheets/d/1AlpXZqthITwc02z2ylA402QNuM5lTixIyrEN0nzFQgs/edit?usp=sharing

Future Outlook

Now that that’s out of the way, we can focus on the meat on the bone.

On some level, all investment decisions are a decision of priorities. Would you rather hold on to your cash, or part with it for the promise of a future reward? Whenever you buy a stock, bond, other currency, real estate, or other asset, you are making the conscious decision to seek a higher utility through that exchange than you would have just holding and spending your cash, whether that utility come from monetary, physical, mental, or other sources.

This is a huge part of why the Yield Curve is positive, and why inflation is a necessary thing in small amounts. People make these decisions with the belief that their money is worth more today than it will be tomorrow, so more money tomorrow will be needed to buy the same goods or services today. This is the most core belief to all economics and financial markets, and when turned into opportunity via things in our history such as the fractional reserve lending regime, was the main driver of the Industrial Age and most growth in the US since our founding. If for no other reason than the population grows, the money supply and inflation must also rise, however slowly. The resulting rate of inflation is the “hurdle rate” that we must at least meet, if not exceed, as investors if we want to not lose money in Real terms.

In that same line of thinking, all investments are supposed to be Inflation Hedges, with varying levels of risk. On the scale from savings accounts to equities and beyond (which I have written about previously), investors approach these options primarily with the goal of preserving their principal position, or hedging their position to inflation. Additional reward comes only after that; nobody likes looking at losses, human beings are a risk-averse bunch.

I do not expect these underlying market dynamics to change. If anything, I expect them to only become more structural, as we gradually lose what ties that bound society together, and devolve into the baying hedonistic pig-like state of nature we spent so long trying to evolve past. But I digress.

All of that to say, human nature is inescapable, and we should embrace it.

With that in mind, let’s go into some specific asset classes and talk about how they might perform in this Brave New World of finance. We’ll start with stocks.

Here’s a chart of the S&P 500 from mid-2019 to the day before the inauguration 2025. As you can see, stocks go up most of the time. Common Stock available to purchase on registered stock exchanges represent shares of companies, that allow the owner to:

– Vote on the company’s management, usually annually
– Receive a proportional portion of the profits (or losses) the company generates, paid directly to the owner, or added to the company’s retained earnings
– Sell that stock at a desired date in the future, at the prevailing price on that future date

So, as companies can more easily pass their rising costs through to end-users while the stockholder is entitled to the profits, they should have the relatively easiest time managing inflation, and so all else being equal, their stock prices shouldn’t be susceptible to inflation the same way cash is. They are the most common inflation hedge. You can compare this chart to last issue’s, and overlay the period of high inflation from 2021-22 to the S&P’s performance. The stock market dipped about 20% in 2022 as a result of the inflation. But starting in 2023, when inflation started to abate, the market started ripping higher again. It didn’t even draw down to its pre-Covid highs during 2022, that’s how relatively well stocks held up.

Do I think that stocks will continue to do well under a protectionist regime? The answer is complicated and is derived from a great many factors that this issue will not go into. I am not here to comment on mass deportations, foreign wars, and other non-directly-economic factors at play. What I will do, however, is present this analysis as a sort of balancing act. Let’s roll all these factors for another day up into one “side” of the equation, and call that the “negative” side. Obviously here we must analyze from the position of what is “good for business” rather than from our own centers of moral fortitude, and if you have a negative side, there must also be a “positive” side.

CEOs far and wide have very quickly sided with trump and the maga agenda. Starting from the very top, our Silicon Valley and other tech overlords, from Bezos to Zuckerberg, have bent the knee so quickly and with such force that trump needed to re-do the tile. DEI offices are being closed, bankers are saying r****d to each other again, there’s been a general sense that trump will be the bog-standard republican president he almost was in his last term, focusing on cutting regulations, taxes, and generally making it cheaper to run a business. The Professional Managerial Class loves that stuff. We’ll call this the “positive” side. Whether you believe this is actually true or not, is irrelevant for this purpose.

All of this is well and good, but tariffs seem to fly in the face of making anything cheaper, no? Any future tax cut would surely be outweighed by the raw materials increase of tariffed products, surely. I will endeavor to explain tariffs many times I’m sure, in the perhaps near future. But in assessing how the business community is reacting to tariff threats and announcements, it’s almost as if nobody actually believed what trump was saying. The PMC has focused on the supposedly good things that tariffs may bring, while completely ignoring the downsides, similar to how they ignore those negative factors above. Maybe they figure they can get a waiver for their specific company or products once tariffs are enacted, or maybe they’re all in cahoots about it, trying to fool you. Maybe not.

But right now, I view the stock market as evenly balanced today between the “positive” and “negative” sides, with tariffs being the deciding factor in whether the scale falls one way or the other. And as far as 2025 is concerned, I do believe that most “experts” here are decidedly on the positive side. So, I am bullish for stocks in 2025. This may change.

Bonds are a different story entirely. I approach bonds differently to other fund investors, who want to trade bonds the way they trade stocks. Bonds do allow you to do that, but they work in a different way.

Here’s a chart of the 10-year Treasury Bond yield from the beginning of 2016 to just before the inauguration 2025.

Bonds are instruments that trade off of their interest rates. Bonds are promises between a lender and a borrower to lend some money today, pay the lender some interest over the life of the bond for the privilege of being lent that money, and at the end of the bond’s life, repay all the original money. As a standalone financial instrument, bonds can be bought and sold, and they have prices. But those prices come from the interest rate the bond pays, and the price movement is determinant of the rate movement.

For example, Let’s say the interest rate R, set by the Fed, is 5%, and I own a bond that pays 5% over 10 years. All else being equal, my bond is worth 100, or Par Value, because I am receiving the exact same interest as a new bond issued today would pay.

-If the Fed lowers rates to 4%, and my bond still pays 5%, the market interest rate decreased, but the price of my bond just increased to 101, or 1 Above Par Value, because I am now receiving 1% more in interest than a new bond issued today would pay.

-The same is true in the inverse, where if my bond pays 5% and the Fed raises rates to 6%, I will be making 1% less in interest than a new bond issued today would pay, so my bond is now worth 99, or 1 Below Par.

For this reason, bonds are much more susceptible to moves in interest rates, and as a result, in changes to inflation. We are in a period where inflation will likely rise going forward, so if you want to buy bonds for trading purposes, you might be out of luck. As interest rates increase, bond prices decrease, because the interest they pay will be worth less.

However, if you desire a safer store of value for money you want to not touch, and you want the highest interest rate for that purpose, keep an eye on bonds. A couple weeks ago, we came very close to 5%-handles on the long end of the Treasury Yield Curve (10, 20, 30yr bonds). It’s not inconceivable to suggest that if protectionist-led inflation gets out of hand, we could see rates higher than that. And Uncle Sam always pays his debts. If the stock market historically averages 8% per year, and a 30-year treasury bond comes up at 7%, depending on your age and financial situation, that may be an attractive investment.

As we get further out into less common markets, like currency markets, the analysis begins to turn from purely economic, to one of political economy. I believe that Covid changed a lot that we fundamentally understood about the global economy. and America’s place in it. We are not just the spending sponge of the world (26% of the world economy in 2023), we are also increasingly the place where the world’s educated turn to, when their own countries turn authoritarian and do authoritarian things. We see this in the wave of Russian nationals immigrating to Europe and America in early 2022. We see it in the waves of Chinese, Sri Lankan, Venezuelan, Colombian, and other immigrants as they surge trying to cross our southern border. America is increasingly a beacon of stability in the world, one that is needed on a grand scale.

Not political or societal stability, we’ve shown our ability to fracture and destroy ourselves in those arenas just as good as anybody else. But our institutional stability, our court systems and open markets and levers of accountability, our open elections and accompanying audits, our ways of managing and exporting our currency, even down to the amount of meetings and press conferences our leaders have and the questions they are subject to. These are the things that make America stable, our institutions. So long as these do not decay, America and the Dollar will be strong relative to other countries & currencies.

The recent inflation episode revealed a few other things to us as well. Notably, that for all Americans love to complain about how they’ve got it so bad, as it turned out, inflation was far worse, and perhaps even still is worse, in many other parts of the world. Other central banks had a lot more trouble reining in their own inflation, partly because they have to rely on what the Fed does. The best example of this is China, where after trying radically different policy than America in Covid’s immediate aftermath, suffered a snap-back crisis of deflation and financial collapse, and had to adjust radically back to orthodox policy, which they’re still trying, and which has most likely pushed back Chinese economic ascendance for a decade.

What am I trying to say here? Basically, I believe the Dollar will be in higher relative demand, by more people, as America remains the largest home for immigration, and as other countries’ monetary affairs are increasingly overshadowed by ours. I am bearish other currencies, and thus bearish other countries’ bonds, as well.

But a special note before we wrap up, about precious metals, and precious-er virtual-er metals…

I have never traded Gold, I have sparingly traded Silver, and I have dabbled in Bitcoin. All through ETFs. I do not recommend cryptocurrency in general under any circumstance, but I do think there is a scarcity play to be had in this area, if you’re willing to throw caution and consequence to the wind. I’ll talk about bitcoin a bit here, most of it will sound familiar (from way back in 2017: https://millennialeconomist.com/2017/11/04/whats-going-on-with-bitcoin/).

There are only a maximum of 21 million bitcoin that can ever be in existence, and over the years people have lost theirs, making the new maximum lower than that. Since 2017, my opinion of the underlying technology, its fundamentals, the use people will derive from it, has absolutely not changed. I still hate it. But, to go back to something I slipped in earlier, our society is losing the ties that bind us together. We are resorting back into our baser animal instincts, more of our lives are being monetized, basically humanity is becoming more tribal, less societal, and more nakedly greedy. A consequence of this is we will become increasingly prone to gambling, having now learned or not appreciated enough a system where we can make money by adhering to a set of rules.

Coincidentally, recently, some governments have started to buy bitcoin, some companies have as well, and the more that that happens, the more of a scarcity play bitcoin may be. Assuming the demand for it doesn’t rapidly decrease (are there more stupid people in the world today compared with years ago?), my strategy for 2025 regarding bitcoin is to let the simpletons keep bidding it up, but I will take advantage when I can. I have a long call option outstanding on $IBIT, the Bloomberg SPDR Bitcoin Spot ETF, and I intend to use it to sell short calls against. The same sort of fund strategy pitted against a new asset. For the record, I am not bullish on crypto, and I do still see it as a giant speculative bubble that serves no purpose. But, if the animal spirits are truly to be unleashed, then I want some of that action. There may be a case here for precious metals as well, but I’m not making it today.

Again, none of this is investment advice, I am not telling you to make any choices based on this post. But I do hope that it adds some depth to your own analysis of what our economy might look like at the end of this year. I do not make any attempt here to analyze what the years 2026-2028 might look like, your guess is as good as mine there. But we’re in 2025, and if we can learn anything from trump’s last term, it’s that the calmest we’ll likely see markets comes in his first year in office, depending on what he does of course. No one can know for sure.

I do hope you enjoyed I-Dog Capital’s January 2025 issue. I will release a new monthly issue every month with my results, but going forward, will not limit posting to just these. Stay tuned for the next issue, where depending on the response to February’s tariff announcements, we may just do a deep dive into how tariffs work. You’ll soon be as tired of them as I am. Until next time, stay healthy, and always remember, Take Profits, Don’t Chase Profits!

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