Category: Insight

By John Heneghan with research assistance by Grok and Gemini AIs

The term “Debasement Trade” has been trending on social media sites and on financial news networks between October 5th and October 9th, 2025, suggesting something noteworthy within the collective consciousness.  The significant increase in search and discussion volume corresponds with major market movements and macroeconomic events in early October 2025:

• Gold, silver, and bitcoin have reached recent record highs.
• Ongoing U.S. government shutdown has raised concerns about fiscal stability.
• U.S. dollar has been experiencing a noticeable decline.

The ‘Debasement Trade’ is surging, driven by a perfect storm of policy anxiety over government debt, inflation, and weakening confidence in fiat currencies generally.  Investors more broadly may be preparing for a new global monetary policy regime and financial system necessitated by the clash between government largesse (fraud, waste and abuse) and technological innovations that hold the promise of controlling this beast.

The “Debasement Trade” is defined as any investment strategy where individual and institutional investors move their money from fiat currencies, such as the U.S. dollar, into hard or scarce assets that are perceived as more stable stores of value. Residents of developing nations, like Argentina, Brazil, China, India and Zimbabwe, have learned the tricks of the debasement trade the hard way over the centuries. In theory, hard assets are somewhat insulated from devaluation by governments through excessive money printing.

Recent Performance for Debasements

Global currency debasement has propelled investment capital toward tangible, inflation-resistant assets in 2025. Hard assets like gold and precious metals serve as classic hedges against fiat erosion, while gold miners and strategic mineral plays amplify leverage to underlying commodity price trends. Spot prices for gold and silver have hit multi-year highs, outpacing broader equities, while miner ETFs have leveraged operational efficiencies and margin expansion from falling input costs like oil.  Broader precious metals have surged 45–65% YTD, with miners outperforming spots due to equity-like upside in a low-rate environment.

The following table of year-to-date (YTD, Jan 1–Oct 9, 2025) and last 12 months (L12M, Oct 9, 2024–Oct 9, 2025) performance reflects this “debasement trade,” with central banks diversifying reserves into gold (now the second-largest global reserve asset) and demand surging for uranium and rare earths tied to energy transitions and defense and technology supply chains. These hard or real assets have decisively outperformed both the S&P 500 and US Aggregate Bonds.

As we’ve covered in four monthly newsletters starting in April, 2025, we developed an internal strategic materials fund (basket or sleeve of securities) called Forge Ahead to align with these perceived long-term structural trends of the U.S. strategic sourcing of raw materials. We developed Forge Ahead sleeve because we were uncomfortable taking the easy thematic path with the Rare Earth/Strategic Minerals ETF (REMX). We were uncomfortable with REMX’s historical Chinese company exposure of 30% to 40% since China is the U.S. primary adversary in this economic competition.

As a quick reminder, the building blocks for Forge Ahead were as follows:

1. Strategic Materials – Rare Earth Elements (REEs), Semiconductors, and Lithium. Strategic materials like rare earths are vital for defense and technology but are heavily reliant on foreign supply.
2. Critical Materials – Cobalt, Graphite, and Aluminum. Critical materials like cobalt are essential for batteries, yet their domestic supply chains are vulnerable.
3. Essential Materials – Steel, Copper, and Cement. These essential elements are the building blocks for manufacturing plants and related infrastructure.

Forge Ahead is comprised of sixteen natural resource equities with position sizes ranging from 3% to 7.5% within the sleeve.  Client model allocations to the Forge Ahead basket roughly range from 3% to 7% depending on client risk tolerance with more risk tolerant accounts receiving a higher allocation.

Servant client portfolios were generally deployed to Forge Ahead securities in mid-July.  We are tracking a proxy Forge Ahead portfolio that is up 17.5% from its hypothetical deployment through the business close on October 9^th.  Like REMX ETF’s performance year-to-date and over L12M, performance gains in the short life of the Forge Ahead sleeve have been broad-based, led by Lynas Rare Earths Limited (LYSDY) up more than 100% followed by gains of 30% or more by MP Materials (MP), Alpha Metallurgical Resources, Inc. (AMR), Albemarle Corporation (ALB) and Southern Copper Corporation (SCCO).  (Past performance of this hypothetical Forge Ahead sleeve is not necessarily indicative of future performance, nor actual client account performance achieved using this strategic allocation.)

Insights from Investment Luminaries

Prominent investment voices have been echoing this debasement narrative, viewing real assets as essential portfolio anchors amid eroding trust in fiat currencies. While X posts from Ray Dalio and Paul Tudor Jones were sparse on specifics, their recent public statements (interviews, writings) align with a 1970s-style inflationary regime redux.

• Ray Dalio (Bridgewater Associates Founder): In early October 2025, Dalio likened today’s environment to the early 1970s—high debt, supply shocks, and monetary easing—urging investors to hold “more gold than usual” as the premier hedge against debasement and geopolitical risks. Dalio emphasized gold’s uniqueness as a bulwark in a “changing world order.”
• Paul Tudor Jones (Tudor Investment Corp Founder): Jones, in October 2025 interviews, called 2025 “so much more potentially explosive than 1999” due to bull market froth and policy-induced inflation, recommending a mix of gold, cryptocurrencies, and tech stocks for the rally’s “blow-off top.” He sees gold as a core inflation hedge, noting ingredients for a “massive rally” in real assets before any peak, amid deficit-fueled dollar weakness.
• JPMorgan Analysts: Dubbed the “debasement trade” in October 2025, citing flows into gold, silver, Bitcoin, uranium, copper, and shipping as unprintable assets amid Washington gridlock and yen/dollar slides.

Confirming Statements from U.S. Treasury

Importantly, Scott Bessent, confirmed as U.S. Treasury Secretary in early 2025, has been vocal on fiscal-monetary mismatches exacerbating debasement, aligning with investors’ real-asset pivot. His rhetoric since his February appointment as Treasury Secretary underscores policy risks without endorsing specifics, but hints at potential structural shifts in U.S. fiscal and monetary policy.

• Scott Bessent: In a September 2025 critique, Bessent lambasted the Fed’s Quantitative Easing policies for creating “perverse incentives for fiscal irresponsibility” and widening wealth gaps via “wealth effect” policies—implicitly fueling debasement fears that have boosted gold. Earlier, in February 2025, he hinted at exploring a “new gold exchange standard” to counter dollar erosion, noting gold’s role as a “gauge of monetary debasement.” On Bitcoin (another debasement trade proxy), Bessent demurred in August (“We’re not buying that… yet”) but acknowledged bitcoin’s real asset-like appeal amid U.S. policy volatility.

With gold’s market cap increasing $8.9 trillion year-to-date in 2025 and bitcoin market cap increasing another $1.0 trillion, even a modest “debasement trade” allocation would significantly enhance the performance traditional 60/40 stock-bond portfolio. Servant Financial client portfolios have long held, meaningful allocations to gold, bitcoin and other inflation-hedges for their unique portfolio diversification benefits against the universal, yet unseen tax from inflation and fiat currency debasement.  The more recent addition of the Forge Ahead sleeve has added another hardened weapon against currency debasement and geopolitical risks.

This is our last Materials in Focus newsletter. Once again, a reminder below that we categorized raw materials into three investment-relevant groups:

1. Strategic Materials – Rare Earth Elements (REEs), Semiconductors, and Lithium
   Vital for national defense and advanced technologies, yet heavily reliant on foreign supply chains.
2. Critical Materials – Cobalt, Graphite, and Aluminum
   Essential for energy storage and transportation, with vulnerable domestic sourcing.
3. Essential Materials – Steel, Copper, and Cement
   The foundational components of industrial infrastructure.

Spotlight on Essential Materials: Steel, Copper, and Cement

Research suggests that demand from hyper scaled AI data centers, electrification structures, and shipbuilding could increase domestic steel consumption by 2-4 million tons annually through 2030. This equates to a 1-3% CAGR for domestic steel. Similar to other raw materials China dominates global steel production with approximately 54% market share. Our research for “National Champions” identified U.S. Steel (since acquired by Nippon Steel), Nucor Corporation, Worthington Steel, and Arcelor Mittal.

One raw material input to make steel, depending on method used, is metallurgical coal. Metallurgical coal is primarily used in basic oxygen furnaces (BOF), while smaller quantities can be used in electric arc furnaces (EAF). Given cleaner energy regulations and goals domestically, the United States produces the majority of its coal (70%) by EAF process and the other (30%) by BOF. The opposite is the case in many other countries, like Japan (Nippon steel). Details of the Nippon Steel / U.S. Steel acquisition include a National security agreement which gives the standing Presidential administration authority to appoint a board member and a non-economic “golden share” giving veto power over certain production and staffing decisions. The deal also required Nippon to make significant investments in U.S. facilities.

Since our last newsletter, the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. The act contains a number of tax provisions that promote investment in domestic production of raw materials and manufacturing. One provision is an expansion on the list of 45X credits for critical minerals production to include “metallurgical coal” effective in 2026 tax year. If unfamiliar with this credit, it is generally 10% of production costs (excluding labor and overhead), although with metallurgical coal the credit is 2.5%.  In addition to metallurgical coal, the previously approved list of minerals eligible 45X credits at the 10% rate includes several natural resources familiar to newsletter readers – aluminum, cobalt, graphite, lithium, titanium, and, of course, a number of the rare earth elements.   For 45X production tax credit purposes, it doesn’t matter if the coal is used domestically or exported overseas. Given the tax credit and investment of Nippon Steel in US facilities (including basic oxygen furnaces), we thought Alpha Metallurgical Resources and SunCoke Energy were also contenders in the steel sector for taking advantage of the changing geopolitical landscape.

Another element providing some tailwinds to the domestic steel producers is the increases on Section 232 tariffs on steel and aluminum, up from 25%. (Section 232 Tariff Increase)

With regard to our next essential material copper, global demand is expected to increase at a CAGR of 2-3% through 2035. The executive order Section 232 investigation on critical minerals and derivative products put a recent spotlight on copper. President Trump has suggested on social media that the investigation will result in copper materials and products getting a similar 50% sectoral tariff starting in August. (EO: Section 232 Investigation) Its not a surprise that China does the majority of copper refining ~40% globally.  Freeport-McMoRan Inc. and Southern Copper Corporation are two companies we think worth paying attention to.

Lastly, global demand for cement is expected to increase at a CAGR of 4-5% through 2033. China leads global supply of cement with an approximate 51% market share. But the United States domestic production meets about 80-85% of domestic demand, leaving only 15-20% imported from other countries. Canada leads US cement imports with ~40%. A few domestic companies we are watching are Vulcan Materials Company and Martin Marietta Materials.

Nucor Corporation (Ticker: NUE)

• Location: HQ in Charlotte, North Carolina. Operates 300+ facilities across U.S., Canada, and Mexico. Major steel mills in Alabama, Indiana, and Texas.
• Focus: Leading steel producer specializing in carbon and alloy steel products and steel recycling.
• Use Case: Supplies steel for construction, automotive, energy and heavy equipment.
• Strategic Edge: Largest U.S. steel producer with a low-cost, vertically integrated model.
• Website

Worthington Steel (Ticker: WS)

• Location: HQ in Columbus, Ohio. Operates 30 facilities across U.S., Canada, and Mexico. Key processing plants in Ohio, Michigan, and Alabama.
• Focus: Processes and distributes flat-rolled steel products for automotive, construction and industrial applications.
• Use Case: Supplies steel for construction.
• Strategic Edge: Spun off from Worthington Industries in 2023, WS leverages a customer-centric, value-added processing model with just-in-time delivery.
• Website

ArcelorMittal (Ticker: MT)

• Location: HQ in Luxembourg City, Luxembourg. Major facilities in Europe, North America, Brazil, and Asia.
• Focus: World’s second largest steel producer, offering flat and long steel products and a smaller mining segment for iron ore and metallurgical coal.
• Use Case: Supplies steel for construction, automotive, and energy sectors.
• Strategic Edge: Global scale and diversified portfolio provide cost advantages and supply chain control.
• Website

Alpha Metallurgical Resources (Ticker: AMR)

• Location: HQ in Bristol, Tennessee. Operates 20+ metallurgical coal mines and preparation plants primarily in Virginia and West Virginia.
• Focus: Produces metallurgical coal for steelmaking, with minor thermal coal output.
• Use Case: Metallurgical coal is critical for coke production, used in BOF for steel.
• Strategic Edge: One of the largest U.S. metallurgical coal producers.
• Website

SunCoke Energy (Ticker: SXC)

• Location: HQ in Lisle, Illinois. Operates cokemaking facilities in Illinois, Indiana, Ohio, Virginia and Brazil, with logistics terminal in the U.S.
• Focus: Produces high quality coke for steelmaking and provides coal logistics services.
• Use Case: Coke is essential for steel production. Logistics services handle coal and other bulk materials for industrial clients.
• Strategic Edge: One of the largest U.S. coke producers with long term contracts ensuring stable revenue.
• Website

Freeport-McMoRan (Ticker: FCX)

• Location: HQ in Phoenix, Arizona. Operates several open pit copper mines in North America, two molybdenum mines in Colorado, and one mine in Indonesia.
• Focus: Leading international mining company specializing in copper, gold, and molybdenum. World’s largest publicly traded copper producer.
• Use Case: Supplies copper for electrical infrastructure, construction, and industrial applications.
• Strategic Edge: Operates long lived, geographically diverse assets with significant reserves.
• Website

Southern Copper Corporation (Ticker: SCCO)

• Location: HQ in Phoenix, Arizona. Operates primarily in Peru and Mexico with exploration projects in Chile, Argentina and Ecuador.
• Focus: One of the largest integrated copper producers, focusing on copper mining, smelting, and refining with by products like molybdenum, silver, and zinc.
• Use Case: Supplies copper for electrical applications, construction, and infrastructure.
• Strategic Edge: Industry leading low-cost production. Large copper reserves and expansion projects.
• Website

Vulcan Materials Company (Ticker: VMC)

• Location: HQ in Birmingham, Alabama. Operates 400+ facilities, including 240 aggregates quarries, 130 asphalt plants, and 70 concrete plants, across 22 U.S. States and Mexico.
• Focus: Largest U.S. producer of construction aggregates. With additional production of asphalt and ready-mix concrete.
• Use Case: Aggregates and concrete are critical for cement intensive construction
• Strategic Edge: Extensive U.S. quarry network provides proximity to high demand markets, reducing transport costs. Long-life reserves ensure supply stability.
• Website

Martin Marietta Materials (Ticker: MLM)

• Location: HQ in Raleigh, North Carolina. Operates 350+ facilities, including 200 aggregate quarries, 120 asphalt/concrete plants, across 28 U.S. states and the Bahamas.
• Focus: Major producer of construction aggregates with additional operations in asphalt, ready mix concrete and magnesia-based chemicals for industrial applications.
• Use Case: Supplies aggregates and concrete for cement heavy infrastructure.
• Strategic Edge: Diversified portfolio and strategic acquisitions expand market reach.
• Website

Example of National Champion Playbook

We believe recent corporate events with respect to rare earth producer MP Materials (MP) featured in our May article Strategic Materials in Focus – Rare Earth Elements and Lithium are instructive of this Administration’s National Champions strategy for domestic producers of strategic, critical, and essential materials.

• July 10, 2025 – MP Materials Announces Transformational Public-Private Partnership with the Department of Defense to Accelerate U.S. Rare Earth Magnet Independence
• July 15, 2025 – MP Materials and Apple Announce $500 Million Partnership to Produce Recycled Rare Earth Magnets in the United States
• July 16, 2025 – MP Materials Announces Commencement of Proposed $500 Million Public Offering of Common Stock
• July 17, 2025 – MP Materials Announces Pricing of Upsized $650 Million Public Offering
• MP Materials stock price rose 40% for the trading week ended July 18, 2025.

In addition to the Administration providing direct financing and facilitating additional financings from supply dependent corporate end users, we believe the Administration will also use tax and tariff policies to promote domestic production.   Tariff policies are mostly self-evident, but within the OBBBA there is a little know provision that encourages domestic production of natural resources, manufacturing, and other production activities.  The OBBA includes a Special Depreciation Allowance for Qualified Production Property.  Think of this as the Build Baby Build provision.

The act allows an additional first-year depreciation deduction equal to 100% of the adjusted basis of “qualified production property (QPP).” Under prior law, owners of nonresidential real property had to depreciate the cost of such property over a 39-year period. A “qualified production activity” is defined in the OBBBA as manufacturing, production (e.g. agricultural production and chemical production) or refining of a “qualified product” which is generally defined as tangible personal property.   Construction of QPP must begin between January 19, 2025, and January 1, 2029; and be placed in service before January 1, 2031.

Forge Ahead

This piece wraps up coverage of our rigorous work to develop an internal Strategic Materials Fund (basket of securities) to align with these perceived long-term structural trends of the U.S. strategic sourcing of raw materials.  We’re pleased to announce that we’ve named this client portfolio sleeve Forge Ahead. Forge Ahead is comprised of sixteen natural resource equities with position sizes ranging from 3% to 7.5% within the sleeve.  Client model allocations to the Forge Ahead basket roughly range from 3% to 7% depending on client risk tolerance with more risk tolerant accounts receiving a higher allocation.    Servant client portfolios were deployed to Forge Ahead this past week beginning on Monday with incremental deployment on Friday.

“I don’t believe in pessimism.

If something doesn’t come up the way you want, forge ahead.”

~ Clint Eastwood

In our last edition, Together We Build: Reindustrialization of America, we explored how historical industrial policies can inform a modern investing methodology in the face of shifting global dynamics. As a reminder, we categorized raw materials into three investment-relevant groups:

1. Strategic Materials – Rare Earth Elements (REEs), Semiconductors, and Lithium
   Vital for national defense and advanced technologies, yet heavily reliant on foreign supply chains.
2. Critical Materials – Cobalt, Graphite, and Aluminum
   Essential for energy storage and transportation, with vulnerable domestic sourcing.
3. Essential Materials – Steel, Copper, and Cement
   The foundational components of industrial infrastructure.

Spotlight on Strategic Materials: Rare Earth Elements & Lithium

This article zeroes in on two highly strategic materials: Rare Earth Elements (REEs) and Lithium. Both are integral to a wide array of technologies, ranging from electric vehicles (EVs) and renewable energy systems to defense equipment and medical devices.

Research suggests rare earth elements (REEs) demand is led by magnets (~33% in 2025), used in automotive, renewable energy, and electronics, with a projected growth rate of 10-12% CAGR by 2032. For example, the rare earth neodymium highlighted in the periodic table above is used to produce magnets used in various everyday applications in audio equipment, mobile phones, and disk drives, and is vital in wind turbine assemblies.  Similarly, lithium demand is dominated by electric vehicles (EVs) at ~38% in 2025, with key sectors including energy storage and consumer electronics, growing at ~18.9% CAGR by 2032.

The U.S. Department of Energy (DOE), in its April 2020 report Critical Materials Rare Earths Supply Chain, identified 17 elements as “rare earths.” These elements are now center stage in national security discourse, as highlighted in a series of recent Executive Orders aiming to revitalize domestic mining and refining capacity.

A Strategic Vulnerability

Currently, China controls over 90% of global rare earth refining and over 60% of global rare earth mining. This dominance poses a significant strategic risk, leading the U.S. to pursue vertical integration of domestic supply chains for critical minerals.

📄 Executive Order: Ensuring National Security and Economic Resilience

Investing in the Future: ETF vs. Direct Exposure

Initially, we considered the VanEck Rare Earth and Strategic Metals ETF (REMX), which offers broad exposure to companies involved in strategic minerals. Its geographic spread is diverse—about 18% U.S. and 10% China. However, in light of the geopolitical landscape, we opted to dig deeper into the individual holdings to identify U.S. and allied “national champions.”

Here are four companies that stand out:

US Rare Earth Elements

MP Materials (Ticker: MP)

• Location: Mountain Pass, California
• Focus: Only active U.S. rare earth mining and processing site
• Use Case: EVs, wind turbines, defense
• Strategic Edge: Central to U.S. policy goals; competes with Chinese dominance
• Website

Lynas Rare Earths (Ticker: LYSDY)

• Location: Australia (mining), Malaysia (processing)
• Focus: Rare earth oxides for permanent magnets
• Use Case: EVs, electronics
• Strategic Edge: Non-Chinese alternative, government-backed supply chain diversification
• Website

⚡ Lithium

Albemarle Corporation (Ticker: ALB)

• Location: U.S. HQ with global operations (Chile, Australia, U.S.)
• Focus: Lithium, bromine, and specialty chemicals
• Use Case: EV batteries, grid storage
• Strategic Edge: Integrated operations, policy-aligned U.S. producer
• Website

Sociedad Química y Minera (Ticker: SQM)

• Location: Chile
• Focus: Fertilizers, iodine, and lithium
• Use Case: EV batteries
• Strategic Edge: Vast lithium reserves, low-cost production
• Website

Looking Ahead

As the U.S. government intensifies efforts to secure critical mineral supply chains, investors have an opportunity to align with long-term structural trends. Companies like MP Materials and Albemarle stand to benefit from federal support and shifting global sourcing patterns, while allies like Lynas and SQM offer diversified, non-Chinese exposure.

Servant Financial’s investment research is ongoing on these materials vital for America’s industrial resurgence.  Our intention is to develop a thematic internal fund, or basket of securities, comprised of competitively well-positioned companies with the most attractive risk-adjusted return potential.  Our next newsletter issue will cover critical materials, followed by essential materials, and wrap up with disclosure of the composition of our Strategic Materials Fund.

📄 Executive Order: Unleashing America’s Offshore Critical Minerals
📄 Executive Order: Measures to Increase Domestic Mineral Production