The Balboa Brief: The Currency of Trust (April 2026)
"Someone is sitting in the shade today because someone planted a tree a long time ago."
— Warren Buffett
Rock, Paper, Oil
In the years leading up to the Civil War, some of the earliest speculators in American history took a peculiar interest in a slick, slimy black substance known as "rock oil." Samuel Kier had been drilling for salt water in western Pennsylvania, intending to produce salt, but to the detriment of his entrepreneurial efforts, oil kept seeping into his wells and ruining the brine. To Kier, oil was both useless and plentiful. Knowing that local Indigenous peoples used it for therapeutic purposes, he decided to bottle the annoyance and sell it. He called it "Kier's Rock Oil," priced it at fifty cents a bottle, and opportunistically marketed it as a curative for everything from rheumatism to deafness (Bhu Srinivasan, Americana).
By the time Edwin Drake drilled the first commercial oil well in Titusville in 1859, prospectors had begun to grasp that the substance might have a use beyond patent medicine. Through the Civil War years, oil supply was so abundant (and transport so primitive) that crude sold for as little as ten cents a barrel at the wellhead and many times more anywhere else. Early American teamsters stepped into the gap, hauling barrels by wagon to where demand was highest. Prices were determined less by supply curves than by rumor, weather and road conditions, and the speculation of what a future buyer may pay.
A century and a half later, less about the oil business has changed than one would imagine. The global movement of oil remains a profitable business, a major input cost, and a constant source of price pressure. The Strait of Hormuz, which carries roughly 20% of the world's oil, remains largely closed this month. The average price for a gallon of California gas is above $6. The geography is different. The underlying mechanics, less so.
What is easy to forget is that rock oil was not the first oil to power American industry. While Samuel Kier was selling tonics in Pennsylvania, an entirely different oil business was at the peak of its power: whaling. Whale oil, rendered from the blubber of sperm whales, was the primary fuel for lamps in nineteenth-century America and a critical industrial lubricant. New Bedford, Massachusetts was the wealthiest port in the country, built almost entirely on the back of it. Within fifteen years of Kier's first bottle, kerosene refined from rock oil had collapsed the whale oil market, and an industry that had defined a generation of American commerce was effectively over.
Buffett's old line about planting trees and sitting in the shade is the one we tend to quote, while the inverse is rarely told.
"Someone is sitting in a pile of sawdust today because their tree got chopped down by something they didn't see coming."
— Daniel Tyler Holt
Things change and markets recalibrate quickly. The systems we trust to remain stable are often closer to obsolescence than they appear.
Old Copper Nose
When King Henry VIII ran out of money in the 1540s, having spent his treasury on expensive wars and famously expensive royal habits, he did not raise taxes. Instead he did something a little more crafty: He cheated the silver currency. He ordered the Royal Mint to mix base metals, primarily copper, into coins that had previously been 100% pure silver. The denomination did not change, but the underlying composition was silver-coated copper.
As the coins circulated and were handled, the thin outer layer of silver wore off the high points of the King's portrait, and the most prominent spot was his nose. The reddish copper underneath began to show through, and over time the coins took on a dull, discolored cast. People began calling Henry "Old Copper Nose."
The Henry VIII story is among the oldest lessons in monetary history. When the issuer of money breaks the promise of what that money represents, the market responds. The mechanism does not depend on whether the issuer admits anything. It depends only on trust.
What is money, after all? It does not have to be silver, or gold, or paper. For more than two hundred years across the North American interior, it was a beaver pelt, with everything from muskets to wool blankets priced against it. A pelt held its value because everyone in the trade agreed it did. Money is whatever a society agrees to denominate trust against, and the history of fiat is the history of those agreements being tested.
I wrote about this dynamic in February's issue, Value Without Permission, where I discussed the pace at which central banks have been accumulating gold. Central banks have been net buyers of gold for several consecutive years, at price levels that would have been considered extraordinary a generation ago. It appears they are diversifying away from one another's paper.
How did the U.S. dollar become the world's reserve currency, anyway? Not by vote. Bretton Woods in 1944 looked like a multilateral negotiation, but it was really a ratification of facts already on the ground. The United States held most of the world's gold, ran a robust financial system with real checks and balances, and stood across the ocean from a Europe still in rubble. The dollar was crowned because there was no one else to crown. That position went largely unchallenged for seventy years, and the benefits are not subtle: cheaper borrowing, an information edge, persistent foreign demand for Treasuries, the ability to settle global trade in one's own paper. When you write the rules, the rules tend to favor you.
Seventy years is a long time, but not forever. The first serious challenge to the arrangement is now visible, and like the copper showing through Henry's silver, it is not arriving as an announcement. China and Russia are settling oil in yuan and rubles. The BRICS have built the New Development Bank as an alternative to the IMF. Central banks from Warsaw to Singapore are accumulating gold at a pace that would have been considered eccentric a decade ago. None of this is a coup. It is the slow accumulation of evidence.
The sharper question for investors is not when or whether the dollar will be replaced. The question is whether the United States will inflate away its debt the way many indebted sovereign countries in history have. Raising taxes and cutting deficit spending each have their own set of political friction. This leaves firing up the printing press as the path of least resistance.
Which leads to an uncomfortable question of its own. Where does an investor hide to preserve buying power when the typical hedges aren't working as intended? Stocks, bonds, and physical bullion, once reliable counterweights, have spent much of the past three years moving together in lock step. Within equities, a striking share of the market's gains trace back to a handful of mega-caps. Many indices are largely weighted toward a single thematic bet on a few hyperscalers.
The answer I keep coming back to is quality compounders with pricing power. Where the Crown debased the coin, a great business does the opposite. It quietly delivers more value per dollar of revenue than its competition, year after year, and passes inflation through to the customer without losing them on the way out.
Pricing power is the ability to raise prices in line with, or ahead of, inflation. It tends to live in specific places: consumer brands with category dominance, payment networks that take a small cut of trillions in transactions, and healthcare franchises with patent or regulatory moats. It also lives in mission-critical software embedded in customer workflows, real assets with contractual price escalators, and products with no real substitute, or the other half of a duopoly. Think of the businesses you cannot easily live without and would not switch from over a small price hike. Those tend to be the ones. It tends not to live in commodity producers, capital-intensive cyclicals, or businesses the customer can leave with a single, unapologetic click.
The temptation in this kind of environment is to overcorrect. To point at stock market all time highs and sell everything for gold. To assume the dollar is finished. To time the regime change. None of that is required, and most of it is wrong. The accumulation of debasement evidence is slow, the timing is unknowable, and history rewards investors who adjust the composition of their portfolios more than those who try to abandon them in one sweeping motion.
The right adjustment for any individual portfolio depends on the variables a newsletter cannot solve for: time horizon, income needs, tax situation, what is held away, and frankly what lets you sleep at night. Those are different conversations for every household, and they are the conversations I am working through with clients now. If we have not had yours yet, that is the call worth scheduling.
By Daniel Tyler Holt
Principal | Holt Investment Partners
Disclosures: Holt Investment Partners is a Registered Investment Adviser
Data sourced from Bloomberg, U.S. Treasury, CME FedWatch, and publicly available market data, as of April 2026. The Balboa Brief is for informational purposes only and does not constitute a recommendation to buy or sell any specific security or asset class. This column does not constitute investment, legal, or tax advice. The views expressed are as of April 2026 and are subject to change based on market and other conditions. Certain statements may be forward-looking and are not guarantees of future results or events. Investment in stocks, bonds, and other securities involves significant risk, including the potential loss of principal. Past performance is no guarantee of future results. Advisory services are only offered to clients pursuant to a written agreement where Holt Investment Partners LLC and its representatives are properly licensed or exempt from licensure.
