Dear Survivor,
Do not be misled by the temptation of a few extra basis points until you’ve done your due diligence on your margin of safety. On the chart below, you see the spreads of junk bonds (in blue) and investment-grade bonds (in red) over Treasuries. The spread is the difference in a bond’s yield compared to Treasuries. These spreads are measured in basis points (hundredths of a percent). So 100 basis points is 1 percent. Right now, the spread of junk bonds is 107 basis points above Treasuries, while the spread of investment-grade bonds is 99 basis points above Treasuries. Despite the additional risk of junk bonds, investors will only earn about 0.08% more today compared to investment-grade corporate bonds.
Another place you may be tempted to reach for some extra yield is bonds that go on forever. I’m talking about century bonds or even fifty-year bonds. There’s a place for these, but for many investors, the additional yield comes with a level of volatility they may want to fully understand before investing. Longer maturities mean higher duration, and that means larger price changes when interest rates change.
Private Equity Is the Next Big Thing Coming for YOU
Your Survival Guy agrees investors need to save ’til it hurts, but do not fall for private credit in 401(k)s or annuities. Both are going to be or are being pushed by the big players like BlackRock. No, thank you.
In his annual letter to shareholders, BlackRock CEO Larry Fink talked about the future of putting private assets (private equity and credit) into more portfolios. He wrote:
The future standard portfolio may look more like 50/30/20—stocks, bonds, and private assets like real estate, infrastructure, and private credit.
While that may seem appealing to some investors, having 401(k)s become a dumping ground for private equity and credit assets that institutional investors no longer care to own is not. Thankfully, Treasury Secretary Scott Bessent appears to be putting the guardrails on this. Bessent recently gave a speech at the Dallas Economic Club, followed by a Q&A session, during which he discussed private equity and credit coming for 401(k)s. He discussed the issue with Ray Washburne, who asked him about the shadow banking economy. Here’s a transcript of this part of their conversation:
Ray Washburne: Yeah. Okay. Let’s shift real quick and talk about kind of the shadow banking economy that’s happened, because in the country right now, Blue Owl, people like that that have come along. That there are a lot of commercial bankers in here that are now having to compete with unregulated capital out there. What’s your view on how that’s grown so much in, really, the last really five years or so? And that’s unregulated outside of your roots.
Scott Bessent: Yeah. So, it’s really been about 10 years. And I think a lot of it… And again, I was also a financial institutions’ analyst in the early part of my career. So I followed the regulated banking system, the insurance companies, SNLs, when there were SNLs. And I think private credit developed as a regulatory arbitrage, because post-Dodd-Frank, the regulatory straitjacket around our regulated institutions was so tight. Making loans became very difficult. The big got bigger. We lost more than 50%, 50 of our small and community banks, because it went from too big to fail to too small to succeed. And I think this growth outside the system, at Treasury, we have been pushing for loosing of the regulatory straitjacket. Oliver Wyman’s words of not Treasuries. They believe that our changes in regulation, that I don’t change the regulations. I guide them through a convening mechanism as the chair of the financial, the Stability and Oversight Council. But OCC, control of the currency, FDIC, and the Fed, that’s probably created 2.5 trillion of new borrowing capacity. So, 2.5 trillion of new borrowing capacity for the regulated industry. So now, private credit has a competitor. What we are concerned about and/or what our focus is, doesn’t have to be a concern, is what is the relationship between private credit and the regulated sector? So, our private credit funds borrowing from the regulated sector. You saw there was a transaction yesterday where Blue Owl sold a tranche of their loan portfolio to three pension funds and a captive insurance company. So, that’s moving it into the regulated industry. And you see almost every one of the private credit companies has a regulated entity. So now, Treasury gets involved. So, we are concerned. I am concerned with watching how does this get to the regulated financial system. I, as maybe some people in this room did successfully predicted, and unfortunately successfully predicted the subprime crisis that then turned into a banking crisis. And you could see these CDOs and exotic instruments on bank balance sheets. So, our job is to make sure that the regulated system is not affected by private credit. And we’ll see. I think the private credit has been an exciting new feature. I think it bridged the gap, especially during the tough and tight regulatory times. I think that they were there during COVID, when some of the banks were frozen, and I hope that they’ve been prudent in their loan portals.
Ray Washburne: But a lot of the private funds are doing extend and pretend. We see that a lot in the real estate industry, where a commercial bank would have to call a loan and they’re pushing out. And then even in the private equity side, the continuation funds that they have that aren’t sunsetting, they continue them on. Isn’t that just pushing problems off into the future that as a secretary of the Treasury, you have to look at it and go, “What is really going on behind the curtain?” That you don’t really get a chance to look at.
Scott Bessent: We have the ability to peel back the curtain. And-
Ray Washburne: Even on a private equity deal?
Scott Bessent: Oh, sure. I wouldn’t… They had…
Ray Washburne: Be careful. A lot of them are out here. [inaudible 00:34:59]
Scott Bessent: When you get a call, “The secretary of the Treasury wants to come and see you,” you can return the call. But again, that we want to gauge, could it have any effects on the overall economy? Thus far, it’s been very additive. But again, how does it affect the regulated system? We want to prevent contagion. The other thing that I would say, and everyone in private credit/private assets should listen to this, because at Treasury, we are part of the rulemaking process for private assets going into retail. And this administration, led by Treasury, is committed that the individual investors will not become the dumping ground for residual.
Ray Washburne: You’re talking about the 401(k) plans. So, specific.
Scott Bessent: The 401(k) plans specifically. That if there is something rotten, it is not going to be handed to the individual investors. And we are a hundred percent with my colleagues at the Department of Labor committed to that. And look, it’s everyone’s advantage that should individual investors be able to diversify into private assets, definitely. But if the timing is bad, if there are a set of mal actors, if intentions are bad, then it will be one of these things that it will be blocked for a generation. So we want to do it in a safe, sound, and smart way, both for the private equity firms and most importantly for the American investing public.
Ray Washburne: Wall Street’s looking at this at trillions of dollars going to be unleashed into things that normally, they weren’t able to invest in real estate and things like that. So there is a thought that valuations in hard assets are going to go up because now, people have access to the small dollar investors can go in there. But you’re right is are the fees laid on it so heavy by the big firms and things like that? But you can’t really regulate that.
Scott Bessent: We can’t regulate that. But what we can think about, some things to think about, perhaps private investors shouldn’t get a continuation fund. If you weren’t in the original fund, then a private equity firms shouldn’t put 401(k)s into a continuation fund. If there’s a credit that’s already in your private equity business and you do a follow-on loan, then maybe that’s not appropriate … It may be just de novo loans to new entities would be more appropriate. So again, we want to make sure that the 99% of good actors do not get polluted by a couple of bad actors that it seems to happen every couple of decades.
Bessent and the Trump administration may not be in power forever, so you need to keep your eye on your 401(k) and what assets are available.
There’s Nothing Wrong with Making Money Slowly
You know, there’s nothing wrong with making money slowly. Your Survival Guy learned that a long time ago, when I didn’t even appreciate its importance, scooping ice cream during junior high and high school. That’s where I learned about customer service. That the customer always expects it, even if it’s for a $.25 cone. Simple to understand, harder to provide.
When you make money slowly, lessons are instilled repeatedly, one cone after another. When you make money slowly, you appreciate it. You know how long it took to make it, and you wonder if it’s too much trouble for people like you to get some help. When you call 1-800-HELP, you don’t want to be tangled up in a phone tree the size of Disney’s Tree of Life. Money is stressful enough. Having your questions answered should not be.
When Your Survival Guy was making money slowly (and it was slow), I received an education worth more than any B-School course—learning the power of five words: “How can I help you?”
Are you being treated like royalty? If not, how can I help you? Email me at ejsmith@yoursurvivalguy.com.
Survive and Thrive this month.
Warm regards,
“Your Survival Guy”
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P.S. During recent Congressional testimony, Secretary of the Treasury Scott Bessent was asked if he had the authority to bail out bitcoin. Specifically, he was asked if he has the authority to order banks to buy bitcoin, to which he replied in the negative.
Congressman Sherman: “Does the Treasury Department…have the authority to bail out Bitcoin?”
Bessent: “I am secretary of the Treasury, I do not have the authority to do that.”
Bitcoin owners have suffered some deep price drops recently, with prices for the cryptocurrency falling as low as $60,074.80 at one point.
P.P.S. Your Survival Guy is a fan of generators for backup power, but today, there are alternatives and accessories you can add to improve your disaster preparation. Coupling a generator with backup battery power is becoming less expensive and easier. Battery backups like a Tesla Powerwall are always available and come with some benefits compared to generators. Those include:
- Less maintenance
- Quiet
- Can be coupled with solar to store power when it’s abundant (daytime) and use it when it isn’t (nighttime, or power outages).
The major downside of a system like that is expense, with Powerwalls starting at around $15,000. In many instances, you can get a whole-house generator installed for a similar amount or maybe less.
You don’t need a whole-house system to enjoy backup battery power. The market is full of new battery generators and solar generators that you can pre-fill and use to run the most important systems in your home in the event of an outage. Popular Mechanics says these are some of the best:
- Best Overall: Bluetti Elite 200 V2 Portable Power Station
- Best Value: Jackery Explorer 300 Plus Portable Power Station
- Best Whole-Home Backup: EcoFlow Delta Pro 3 Portable Power Station
- Most Versatile: Jackery Explorer 1000 v2 Portable Power Station
- Best Mid-Size: Ecoflow Delta Pro Portable Power Station
Here’s the caveat: these systems are great for getting you through a rolling blackout or a temporary grid interruption, but if you aren’t generating new power with a generator or solar to refill the batteries, a long power disruption will still affect you.
But long power disruptions in the United States are fairly uncommon. Last year, the Energy Information Administration (EIA) published the chart below detailing the average annual total hours of electric power interruptions per customer over the previous ten years before 2022. The number never breached nine hours.
Certain areas are more prone to power interruptions than others, so keep that in mind if you live in states with more remote areas or states with more violent weather patterns. You can see some of the hardest hit states on the EIA’s chart below:
Assess your risks and your budget, and make a decision that will help you keep the lights on as much as possible.
P.P.P.S. HondaJet has announced that its Elite II jet has been certified by the FAA to be the first production model twin-turbine very light business jet with emergency autolanding capabilities.
The company announced in a press release:
- Emergency Autoland (EAL) is designed to enable HondaJet Elite II aircraft to land autonomously in an emergency situation where the pilot has become incapacitated
- Federal Aviation Administration (FAA) certified EAL for U.S.-registered HondaJet Elite II
- Honda Aircraft Company is pursuing certification of EAL in other international markets
GREENSBORO, N.C., Feb. 4, 2026 – Honda Aircraft Company announced that the HondaJet Elite II has become the first production model twin-turbine very light business jet certified to equip Emergency Autoland (EAL), following certification of the system by the Federal Aviation Administration (FAA). The installation of this technology has been highly anticipated by owners and operators of the HondaJet Elite II based in the United States, and Honda Aircraft Company is pursuing certifications from regulatory agencies in other markets to offer the same value to international customers.
“Adding Emergency Autoland to the HondaJet Elite II demonstrates our commitment to delivering new value to our customers,” said Honda Aircraft Company President & CEO Hideto Yamasaki. “I’m proud that our team is fulfilling on this promise by offering Emergency Autoland and giving our HondaJet Elite II customers greater peace of mind during every flight.”
About Emergency Autoland
As the name Emergency Autoland implies, the EAL system is designed to enable the aircraft to land autonomously in an emergency situation where the pilot has become incapacitated. The system may be initialized either by pushing a button to engage the EAL, or by automated monitoring systems, which can detect pilot unresponsiveness that may render EAL activation appropriate. When active, the EAL system automatically transmits an emergency code and conducts radio calls to alert air traffic control to the emergency. EAL-equipped aircraft can autonomously evaluate weather, terrain, fuel, and runway dimensions to select the optimal diversion airport, configure the aircraft for landing, navigate along the approach path, land the aircraft, and apply the brakes to a full stop on the runway. In
October 2024, the HondaJet Elite II became the first twin-turbine very light business jet to equip Autothrottle, a key technology related to the EAL system. Certification flight testing of EAL was completed in October 2025, paving the way for this latest achievement.
You might not want to have to rely on an auto-landing jet, but it would be nice to know the feature was there if you needed it.
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