A Golden Break
A break from the book as I'm just not happy with Chapter 2 yet.
Summary
Efficient Market Hypothesis (EMH) and Writing Challenges: Struggling to write Chapter 2 of the book. If you’re here for that, go away.
Analysis of Trumpism and Historical Analogies: Trumpism as a shift from the U.S. as a "Good Power" to a "Great Power," drawing comparisons to historical cycles described in Neil Howe’s "The Fourth Turning" and ancient Rome’s Jugurthian War. The future of American democracy is a "Schrodinger’s Cat" — neither alive nor dead… or is it neither dead nor alive
Active Management, Tokenization, and AI Integration: There’s promise in tokenization and the development of sophisticated structured products that offer stability without traditional leverage. They highlight how AI, particularly ChatGPT, has enhanced productivity and efficiency in financial modeling and product development. Now we just need to tools of tokenization which are coming.
The Main Event (or is it Main Lament?)
I immediately cursed myself by arguing the book was progressing smoothly as I stumbled in Chapter 2 with attempts to explain the Efficient Market Hypothesis (EMH) without conveying the disdain reserved for later chapters. We’ve got to be fair to contemporary history, and I try to listen to my family when they tell me my writing is too dense — even when they are wrong. With that said, it’s written… just not well enough for release. “I am the very model of a modern major procrastinator!”
If you’re here solely for the book, I apologize. If you’re here for cogent analysis, I also apologize.
I feel I owe it to my readers to touch on Trump’s first month and a revisiting of “A Choice to Believe.” I’d also like to expand on a semi-cryptic tweet I shared on Friday:
And given the price action in gold, I figured it was worth using that as a framing tool for some thoughts on the future.
Let’s do Trump first.
Earlier this week, Ben Hunt of Epsilon Theory shared his thoughts in a provocative essay. While Ben is occasionally histrionic, I found the essay important as it introduces a key thought:
Trumpism is an embrace of America as a Great Power and a rejection of America as a Good Power, in all its forms, both domestic and internationally. More than that, it is an ideological embrace of America as a Great Power, that this is everything America should be, and an ideological rejection of America as a Good Power, that this is something America should never be.
I don’t think Trumpism is inherently evil. It’s the pursuit of great power for great power’s sake … good and evil have nothing to do with it. But I absolutely think this is a tragedy, because the pursuit of great power for great power’s sake transforms every American policy, both foreign and domestic, into a protection racket of one form or another.
This echoes a theme I introduced all the back in 2017, that the US had largely been a munificent (I understand this is debatable) “New Testament” empire historically and that the world was unprepared for the eventual emergence of an “Old Testament” US. ChatGPT 1o does a phenomenal job of summarizing the difference:
MWG prompt: “Please briefly compare the Old Testament and the New Testament as "styles" of governance”
“Overall, the Old Testament often describes a formal, law-centered national covenant directly governed by divine command. By contrast, the New Testament centers on a spiritual “kingdom,” focusing more on individual and communal ethics within any earthly political framework.”
This, unfortunately, feels right. In 2009, the world ridiculed Lloyd Blankfein for suggesting that ~“Goldman Sachs was doing G-d’s work.” Today, the Trump administration is powered by a similar belief. As I do not know the mind of god (or even believe in her existence, as I’ve freely shared), I cannot comment on the veracity of this belief. However, the theme of this transition echoes the work of Neil Howe’s “The Fourth Turning” as we shift from individualistic expression to communitarism. Once again, ChatGPT excels in summary:
Late Unraveling: Heightened Individualism
Before a Fourth Turning (the Crisis phase), society is often in an “Unraveling,” marked by skepticism toward institutions, cultural fragmentation, and an emphasis on personal freedom.
People prioritize self-expression and autonomy, while public trust in leadership declines. Political and cultural life becomes more fractious.
Onset of the Fourth Turning (Crisis)
A major crisis or threat (e.g., economic turmoil, war, social upheaval) erupts, leading to a collective realization that severe challenges can’t be overcome solely through personal initiative or weakly coordinated efforts.
The urgency of the crisis forces society to rally around shared goals or leaders, rediscovering a need for stronger institutions, unity, and cooperation.
Communitarian Surge
As the crisis deepens, people refocus on the common good. They increasingly accept constraints on individual freedom in favor of collective discipline (for instance, wartime rationing or coordinated public-health measures).
Government and major civic institutions gain renewed authority and legitimacy. Citizens exhibit greater willingness to make sacrifices and collaborate.
Post-Crisis High
If the crisis is resolved successfully, a “High” follows. This new era is characterized by confidence in rebuilt institutions, a strong sense of civic order, and optimism about the future.
Communal norms predominate, overshadowing the prior era’s more extreme individualism. Eventually, however, social and cultural awakenings down the road can again trigger a pivot back toward personal freedom.
To the extent I have resisted this type of analysis, it has focused on the bolded conditional statement — “If the crisis is resolved successfully, a “High” follows.” The layperson often treats cycles as inevitable, unintentionally relying on the Anthropic Principle to behave as “observers” rather than “actors.” The Anthropic Principle is primarily a cosmological concept — “We observe the universe as it is, because otherwise we would not exist to observe it.” Likewise, we observe history as fixed and can assume the future will play out similar cycles because if it had not occurred in roughly the manner it did, we would likely not be here to observe it. But my regular readers will almost immediately detect the same flaw as “passive” investing — we are not observers, we are ACTORS influencing the performance of these cycles.
While I am highly critical of the Austrian economists for their misunderstanding of the role of state and money, Ludwig Von Mises nails this one (again, ChatGPT 1o — detect a theme?):
each person remains an active agent, continually shaping outcomes by responding to market prices, resource scarcity, social norms, or crises.
Even in the midst of cyclical transitions, people can still innovate, cooperate, or deviate from the presumed cycle. Their decisions, in aggregate, can reinforce or redirect the course of events.
In 2016, Peter Thiel famously backed Trump as an “option” on breaking from the status quo. I believed he was right to do so, particularly due to my growing concerns around China. I believe that shift was important and necessary. In 2024, I voted for Trump for similar reasons, believing that the Biden administration had merely proven an interregnum against an inevitable change towards communitarism that over-emphasized the advancement of an elite agenda while ignoring the growing distress in the society they were elected to represent. As I said at the time, “I choose to believe” there is a better path than the one we are on. I do not, yet, regret my choice, although warning signs are multiplying.
I have been describing the current state of affairs as a “Schrodinger’s Cat” — we do not yet know if the Republic is alive or dead and cannot know without much more information. Interestingly, both Grok and ChatGPT concur. The comparison is made more fascinating in that Trump’s second administration is apparently not yet in ChatGPT 1o’s training materials.
MWG: “Is Trump gutting democracy?”
Grok:
Whether Donald Trump is "gutting democracy" depends heavily on one's perspective, as it’s a question steeped in political interpretation rather than a clear-cut fact. Critics argue that his actions—particularly in his second term as of February 23, 2025—threaten democratic norms. They point to his rapid reshaping of the federal government, including mass firings across agencies, a barrage of executive orders (nearly 70 in his first month, outpacing predecessors), and efforts to centralize power by sidelining Congress and the judiciary. Some see his alliances with figures like Elon Musk, who’s pushing aggressive bureaucratic overhauls, and his administration’s moves to freeze funding for democracy-supporting programs abroad as evidence of an authoritarian streak. They also highlight his rhetoric, like claiming "he who saves his country does not violate any law," as a justification for bypassing legal checks, echoing historical authoritarian playbooks.
On the flip side, Trump’s supporters argue he’s strengthening democracy by fulfilling the mandate of a duly elected leader. They view his dismantling of what they call an entrenched, unelected bureaucracy as a restoration of power to the people, not a subversion of it. His focus on national sovereignty, free speech (as he defines it), and economic policies like tariffs resonate with those who feel democracy had abandoned them to globalism and elite interests. Polls show his approval rating hovers around 44-47%, higher than in his first term’s early days, suggesting a significant portion of Americans still back his approach, even if 52% disapprove and a majority in some surveys worry he’s overstepping presidential bounds.
ChatGPT 1o (which is unaware Trump is in his second administration):
When evaluating whether Donald Trump is (or would be) “gutting democracy,” it is important to consider both the structural guardrails in the U.S. political system and Trump’s particular emphasis on loyalty and executive power. In a hypothetical second administration—especially informed by the perceived bureaucratic resistance of his first term—one might expect more aggressive moves to reshape the civil service, direct foreign policy with fewer interagency checks, and publicly challenge institutions deemed obstructive. Critics argue these actions would erode democratic norms and balance; proponents maintain that the Constitution’s checks and balances remain intact, keeping core democratic processes functional even if they are tested or strained.
And the more aware, but less thoughtful, ChatGPT 4o:
Trump is taking significant steps that could be seen as “gutting” democracy. His actions reflect a trend toward undermining institutional checks and balances, centralizing power, and reducing transparency and accountability in governance. While the U.S. democratic system has robust structural protections, the erosion of norms—particularly around institutional independence and the rule of law—poses a real threat to the stability of democracy.
The trajectory of these actions, if continued without effective institutional or public pushback, risks pushing the U.S. towards a more authoritarian model of governance. The ultimate impact on democracy will depend heavily on the response of other branches of government, the resilience of democratic institutions, and the public’s willingness to uphold democratic norms.
Unfortunately, I agree with all of these assessments. We simply do not know… yet. I am less concerned by the aggressive moves of the Trump administration to remove bureaucratic obstacles to policy choices, e.g. firing resistant public employees and replacing with loyalists, than I am by the general tone of the discussion and the mechanism of “misstatements” by which he appears to be advancing his agenda. I can defend the aggressive “blitzkrieg” by which Trump unseated traditionally Democrat strongholds like USAID as exactly the actions any incoming CEO would engage in were he hired to turn around a fading blue chip at the same time that I can intimately remember the outcome when “Chainsaw” Al Dunlap did the same with an undeclared focus on personal enrichment. It’s the same game.
I have often drawn comparisons to the fall of the Roman Republic (“The Storm Before the Storm,” Duncan 2018) rather than the fall of the Roman Empire (“The Decline and Fall of the Roman Empire,” Gibbon 1776). I continue to believe this is the correct analogy and would place us somewhere in the Jugurthian War, circa 112-104 BCE. The framing draws a powerful analogy between the late Roman Republic and contemporary American politics, with Donald Trump representing a domestic populist actor akin to Sulla or Marius (both of whom inspired a disaffected young Roman population towards increased militarism). This perspective aligns with broader socio-economic and political dynamics, particularly the rise of populism as a response to inequality, institutional decay, and economic dislocation.
The disillusionment of modern American voters mirrors that of late-Republic Romans. P.A. Brunt, writing at the precipice of another American crisis in 1966, laid it out well in his essay on “The Roman Mob.” A sizeable fraction of the US population appears content to allow anti-democratic measures to “save democracy”:
“In practice, the average Roman had little real political freedom anyway. His power lay not in the ballot box, but in participating in mob activities, although these were often manipulated by unscrupulous leaders for their own benefit. Especially during the Republic, the mob could often make or break Rome’s leaders” (Brunt 1966)
As is hopefully clear from this overly long segue, “I do not know.” But I do know that the lack of knowledge and certainty creates distress and that we are at an unstable point in history. It can go either way. I believe we have a clue in the price of gold relative to risk assets. The infamous Dow/Gold chart (augmented with the S&P500 overlay to highlight that it largely doesn’t matter which index you choose) suggests an unfavorable outcome:
But there I go, assuming cycles are inevitable. “Dumbest man alive,” what can I say?
When I echo Socrates (“The only true wisdom consists in knowing that you know nothing”), my advice to readers immediately gravitates to the future philosophers Bill S. Preston, Esq, and Ted “Theodore” Logan… These two great gentlemen are dedicated to a proposition which will be true in their time, just as it's true today:
“Be excellent to each other.”
My wife and I know many female midshipmen at the Naval Academy. All are excellent officer candidates and wonderful people. The inevitable backlash was my key fear during the woke/DEI craziness under the Biden/Harris/unnamed player administration. I have no opinion on the qualifications of Lisa Franchetti. Pete Hegseth and Trump have the right to make the changes they want. But the unintended effect is to scare the HELL out of young women in the Navy. That is not an admirable goal and is far from “being excellent to each other.” Please remember this when you consider the current actions.
And don’t forget...
And now for the cryptic tweet…
“The old world is dying, and the new world struggles to be born: now is the time of monsters,” Antonio Gramsci, Prison Notebooks (1930)
I was reminded of this quote as I pondered a largely accurate tweet from Bloomberg’s Eric Balchunas:
Keep reading with a 7-day free trial
Subscribe to Yes, I give a fig... thoughts on markets from Michael Green to keep reading this post and get 7 days of free access to the full post archives.