January 2025, Chicken Little Portfolio Performance

Chicken Little still scared.

The source of Chicken Little fears is government malfeasance in the form of overspending and loose monetary policy. My prediction was, and remains, rising real interest rates lead to asset market declines. All parts of this thesis have come true except for US stocks. Interest rates around the world up, non-US stocks flat, Chinese housing collapse, but US stocks continue to go up.   

US Stocks are the last risky asset standing

Rising interest rates

My central thesis is that real interest rates will rise. Consider the case of Japan. 

In 2016, I predicted that Japanese interest rates were at an historic low, and would rise. At the time that I made this prediction, the Japanese 10-year bond rate was negative 0.30% - yes negative. See post - "Regime shift in the Japanese bond market." 

I was 100% correct in my prediction about Japanese interest rates. The 10-year Japanese bond rate has risen to positive 1.31% - the highest in fifteen years. 

Japanese Interest Rates have Risen

What is next for Japanese interest rates? My prediction: much higher real interest rates are coming. Why? Because, inflation-adjusted, real rates are still negative. 

JGB 10-year rate	1.31%
Inflation rate (January 2025)	2.70%
Real interest rate	-1.39%

The inflation-adjusted, real Japanese 10-year is still negative: -1.39%. Real rates over long periods of time have been positive 2-4%. However, markets tend to overshoot so real Japanese rates can move to above 5%. 

The rise in real interest rates is just getting started.

The situation in the rest of the world is similar to that of Japan. Interest rates have risen a lot, especially in nominal terms, but real rates are going to go much higher. In a much higher real interest rate world, assets prices have to get crushed. 

January 2025 performance

The Dow Jones Industrial Average gained 4.71% in January 2025. The Chicken Little Portfolio lost 0.25%. Another amazing month for US stocks and another stumble for Chicken Little.

	Jan '25	YTD
Chicken Little	-0.25%	-0.25%
Dow Jones Industrials	4.71%	4.71%

January 2025 was a great month for investors. Very tough to lose money by buying assets as all major asset classes rose. Bitcoin leading the pack with more than 11% in a month. Bitcoin continues to have been the best investment over every relevant time period. Gold coming in second in January with +6.74% and making new all-time highs on a daily basis. 

Asset	Symbol	Jan '25	YTD
Dow Jones Industrials	DIA	4.71%	4.71%
Non-US Stocks	EFA	4.80%	4.80%
Emerging Market Stocks	EEM	2.15%	2.15%
US Long-Term Bonds	TLT	0.49%	0.49%
Gold	GLD	6.74%	6.74%
Bitcoin	BTC	11.35%	11.35%

February 2025 portfolio position

Chicken Little is not only positioned for collapse, but maintaining a big short position anticipating imminent financial disaster. The only move in the portfolio in January was to re-purchase a moderately-sized position in precious metals: gold & silver. I would like to own some crypto but believe there is still a huge speculative premium. 

Previous month's report          Subsequent Month's report

	Chicken Little	Dow Jones Industrials
2025 (through January)	-0.25%	4.71%
2024	3.30%	14.71%
2023	2.05%	15.80%
2022	-5.88%	-7.06%
2021	5.11%	20.69%
2020	8.04%	9.27%
2019	9.03%	24.82%
2018	1.27%	-3.63%
2017	4.57%	27.72%
2016	-1.92%	16.08%
2015 (April through Dec)	-2.49%	-0.27%
since inception (3/31/15)	24.10%	203.20%