Searching for the Yellow Bicycle: Where Rational Capital Can Still Go to Work

May 22, 2025

When trust thins, people look for shelter.

This week we received a quiet but telling move with the Federal Reserve stepping back into the bond market without formal announcement or fanfare. No one quite knows why—but the pattern is familiar. A central actor enters the scene. Narratives shift. Market signals blur further.

In moments like these, people want something that feels steady. Tangible. Outside the fog.

But what counts as “safe” isn’t so clear anymore.

The Flight to Illusion

When systems feel unstable, the most natural instinct is to retreat to what seems like timeless truth. For many, that means gold.

Gold has a long memory. It doesn’t depend on central banks or quarterly earnings. It holds symbolic weight. But it also comes with practical friction. It produces no cash flow. It must be stored, insured, and converted. If you need to move fast, gold often can’t move with you.

Others turn to crypto. The appeal is different—freedom from institutions, decentralization, potential for explosive upside. But volatility remains extreme. Regulation is unresolved. And many investors still don’t understand the underlying mechanics, making conviction hard to sustain.

Some flee to cash. That feels safe—until inflation quietly erodes it. Others go private, chasing yield and “uncorrelated” returns. But most private investments still sit downstream from the same macro pressures affecting public markets.

So where does that leave us?

With a question hiding in plain sight: what does safety mean now?

What Actually Endures

Safety, for most of history, hasn’t been a product. It’s been a posture.

People who thrive in unpredictable environments tend to:

• Own real assets or businesses with healthy margins and long runways
• Keep leverage manageable
• Work with partners who don’t need to be the smartest person in the room
• Stay oriented toward solvency, not trend
• Focus on what compounds quietly

In other words, they find the yellow bicycle.

The yellow bicycle is rarely flashy. You won’t find it on the cover of a magazine. It doesn’t try to beat the Fed at its own game. It doesn’t promise certainty. It simply shows up every morning to carry you forward.

In investment terms, that often means:

• Companies with real cash flow, good governance, and pricing power
• Select credit strategies with low correlation to crowded trades
• Portfolios that balance risk and durability—not by chasing returns, but by resisting overreaction
• Managers who think in decades and speak in sentences you can understand

It’s easy to overlook, especially in an era that rewards loudness. But it’s where rational capital can still go to work.

When the Lights Flicker, Stay Steady

There is always a temptation to overreact when signals become hard to read. That’s when discipline becomes more valuable than prediction.

The Fed’s quiet return to the bond market may mean nothing. It may mean everything. We’ll know only in hindsight. In real time, we still have choices. And our choice at Somerset is to seek resilience.