Investing in a Debasement Regime | Warren Pies

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Oct 11, 2025

Warren Pies, founder of 314 Research and macro strategist, delves into the implications of a 'debasement regime' for investors. He explains the shift in focus from protecting principal to safeguarding purchasing power. Warren discusses the role of fiscal policy in driving this change and the current labor market's troubling dynamics. He addresses the potential for a bull market in the S&P 500 and the significance of gold in this climate. The conversation also covers portfolio strategies beyond traditional models and the future of AI in shaping the economy.

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INSIGHT

Debasement Mindset Replaces Deflation Fear

Investors have shifted from fearing principal loss to fearing loss of purchasing power, marking a new "debasement" mindset.
This psychology pushes allocations into hard assets, managed futures, and away from a strict 60/40 framework.

ADVICE

Widen Your Investment Menu

Expand beyond 60/40 by holding hard assets, managed futures, and other diversifiers.
Keep these assets available so liquidity flows can rotate into them when debasement trends accelerate.

INSIGHT

Cyclical Slowdown Within A Secular Debasement

Cyclical and secular dynamics can diverge: secular debasement persists while cyclical growth may decelerate.
Tariffs and a fading wealth effect explain uneven retail/service data and a muddle-through economic outlook.

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Warren Pies joins Excess Returns to discuss why he believes we’ve entered a “Debasement Regime,” what that means for investors, and how it differs from the post-GFC deflationary era. He explains the psychology behind this shift, how it’s changing market behavior, and what it means for asset allocation, gold, bonds, small caps, and the Federal Reserve. This conversation covers macro strategy, portfolio construction, and how investors can adapt to a world focused on protecting purchasing power rather than principal.

Main topics covered
• The shift from deflation to debasement and what defines this new regime
• Why protecting purchasing power is replacing the fear of losing principal
• Fiscal policy, deficits, and how politics drive the debasement dynamic
• The cyclical vs. secular forces shaping markets today
• Labor market analysis and the idea of “malignant stasis”
• How bonds fit in a debasement era and when they hedge equities again
• Valuations, bubbles, and why Warren sees room for the S&P 500 to rise further
• Gold as the key debasement asset and how to manage the trend
• Portfolio construction in a 60/40-is-dead world
• AI, productivity, and the longer-term implications for growth and inflation
• What could ultimately break the debasement regime

Timestamps
00:00 Debasement vs. deflation and the new investor mindset
07:40 Fiscal deficits, policy shortcuts, and the debasement channel
10:25 Reacceleration or illusion: the cyclical economic outlook
16:42 The labor market’s “malignant stasis” and what it signals
21:17 How Warren values bonds and equities in this environment
29:34 Bond vigilantes and the likelihood of a true bond revolt
34:00 Valuations, bubbles, and the path to S&P 7,000
38:27 Why small caps remain a short against large caps
41:37 Value stocks, energy, and timing hard asset rotations
45:08 Gold’s breakout and how to manage the position
50:00 Portfolio construction in a debasement era
54:32 AI’s potential to reshape productivity and demographics
57:13 What could end the debasement regime
59:46 Managing risk with technicals and conviction with fundamentals