What is Gold?

Baby don't hurt me... don't hurt me... oh no

Summary

• POSIWID & Naming: Words matter profoundly. Emanuel Derman’s new book reminds us that naming things truthfully—be it one’s heritage ("African") or labeling government actions clearly ("tyranny")—is critical. When governments attempt to deny redress for acknowledged wrongs (Trump administration’s deportation stance), calling it what it is becomes a powerful, seditious act.

• Bitcoin vs. Gold: Deep recursive analyses (powered by AI and agent-based modeling) suggest Bitcoin’s structure inherently concentrates wealth, limiting societal benefit and implying a true valuation far below current prices ($4k-$6k). In contrast, gold, despite being a "barbarous relic," remains an unmatched store-of-value and pricing metric. Bitcoin has arguably suppressed gold’s fair market price by as much as 30-50%.

• Macro Crossroads: Unlike the 1970s, today’s inflationary pressures are not driven by demographics but rather by policy mismanagement and high public debt levels. This paradoxically makes high interest rates stimulative for wealthier cohorts via increased government interest spending, sustaining commodity demand and inflation pressures in a less explosive but persistently problematic echo of the 1970s—leaving traditional long-term bond strategies vulnerable despite short-term opportunities.

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Since we skipped last week, this one’s a doozy. Settle in YIGAFers. We’re talking Trump, POSIWID, Bitcoin, and Gold.

I had the remarkable privilege of spending time with legendary derivatives quant Emanuel Derman before a lecture at Columbia University. He shared with me his new, very personal book, “Brief Hours and Weeks: My Life as a Capitonian.” Emanuel’s original title did not label him a Capitonian. He called himself an African. A fact that can be proven, but not said in today’s world:

The power of naming things has been rightly recognized since the beginning:

“And the man gave names to all the livestock, and to the birds of the air, and to every animal of the field” — Genesis 2:20

Naming and the inability to name have been explored deeply by other authors. For example:

“My name isn’t Offred, I have another name... I tell myself it doesn’t matter, your name is like your telephone number, useful only to others; but what I tell myself is wrong, it does matter.” — Margaret Atwood, The Handmaid’s Tale

“Words can be like X-rays if you use them properly—they’ll go through anything.” — Ray Bradbury, Fahrenheit 451

“The ideal subject of totalitarian rule is not the convinced Nazi or the convinced Communist, but people for whom the distinction between fact and fiction...no longer exist.” — Hannah Arendt, The Origins of Totalitarianism

“Don’t you see that the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thoughtcrime literally impossible because there will be no words in which to express it.” — George Orwell, 1984

A remarkable document has dropped. Judges Wilkinson, Thacker and King wrote an decision regarding the Trump administration’s efforts to ignore the Supreme Court's 9-0 finding that it had wrongfully deported Abrego Garcia to Bitcoin Kingdom:

“It is difficult in some cases to get to the very heart of the matter. But in this case, it is not hard at all. The government is asserting a right to stash away residents of this country in foreign prisons without the semblance of due process that is the foundation of our constitutional order. Further, it claims that, in essence, because it has rid itself of custody, nothing can be done. This should be shocking not only to judges, but to the intuitive sense of liberty that Americans far removed from courthouses still hold dear.”

This is the breaking point for my limited endorsement of the Trump administration. I can no longer believe in an administration that views actions like these as lawful. Lest you remain confused:

“the government has conceded that Abrego Garcia was wrongly or ‘mistakenly’ deported.” — Wilkinson, Thatcher, King

The argument is no longer whether the action was wrong. It has been acknowledged as such. The argument is whether “redress” is available to those wronged by the government. Perhaps Thomas Jefferson and the Founding Fathers might have an opinion:

“In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.”

"Redress" means to address, correct, or remedy a grievance or injustice. Specifically, when the American colonists complained about a "lack of redress," they were referring to the British government's refusal—particularly King George III's refusal—to respond meaningfully to their petitions, complaints, and requests for relief from unfair policies or oppressive laws.

“Men who look upon themselves born to reign, and others to obey, soon grow insolent... petitioning is useless... we have been reduced to the necessity of taking up arms.” — Thomas Paine, Common Sense

While I am certainly not at the stage of taking up arms, being both old and relatively unfit to do so, I am privileged to avail myself of something far greater than the sword. The digital pen. This does not mean that you, dear reader, will be subject to further political tirades. No, I plan on being far more seditious. I will call things by their name. Emanuel is an African. And the actions of the Trump administration are tyranny.

I have written a form letter for YIGAF readers to use if they desire to do so. You can access it here. I have sent it to my elected representatives and encourage you to make your voice heard as well. If you disagree, I’m open to defending myself (again). If you agree, or are even mildly sympathetic, I provide the following links to emails and phone numbers for those who can do more:

Senate: https://www.senate.gov/senators/senators-contact.htm

House: https://www.house.gov/representatives/find-your-representative

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One of my readers apparently attended a speech I recently gave at the CFA Society of Boston (no replay is available to my knowledge, but if it becomes available, I will share). In this speech, I highlighted the use of the POSIWID framework — “the purpose of a system is what it does” in evaluating the US stock market in a period of passive dominance:

“It is a system of extraction and wealth concentration under the guise of participation.”

The reader asked, “What did you mean by the POSIWID reference?” and shared a recent post from Scott Siskind (nom de guerre, “Scott Alexander”) that suggests POSIWID is about to enter its “Why are ewe reading this now?” phase:

Come On, Obviously The Purpose Of A System Is Not What It Does

This is among the most disingenuous pieces I have ever read from Scott. He offers strawman after strawman with none of his usual steelmanning:

Consider the following claims

• The purpose of a cancer hospital is to cure two-thirds of cancer patients.

• The purpose of the Ukrainian military is to get stuck in a years-long stalemate with Russia.

• The purpose of the British government is to propose a controversial new sentencing policy, stand firm in the face of protests for a while, then cave in after slightly larger protests and agree not to pass the policy after all.

• The purpose of the New York bus system is to emit four billion pounds of carbon dioxide.

These are obviously false.

No, the framing is obviously false. Let’s just do one. You can try the rest out at home:

Why are you reading this poorly argued piece from Scott? Well, let’s ask ChatGPT 4.0 to apply the POSIWID framework:

Noble indeed. But…

This is correct. Look at his response:

“The purpose of a cancer hospital is to cure as many patients as possible, but curing cancer is hard, so they only manage about two-thirds.”

A giant “but… so” — deflecting, disarming, legitimizing adverse outcomes. “Hey America, what did you expect? Good healthcare is HARD. You’re lucky you’re getting any healthcare at all…”

The system is working.

Nowhere will you find better evidence of Scott’s intent than through his writings on IQ. Many of you probably harbor illusions of the validity of IQ in analyzing social ills. And there are indeed “facts” that support that view. But underpinning those “facts” (intentional quote) and belief is a MISUNDERSTANDING of statistics. If you think IQ drives outcomes, I would encourage you to read the masterful takedown by none other than Nassim Taleb.

Don’t stop there. Challenge your AIs!

I can work with that. Let’s ask Grok to diagnose itself:

This tracks. What does ChatGPT think of Grok?

Oh yeah? Well take that you cultural milquetoast rival. Grok fires back:

Umm, Grok? That’s exactly what ChatGPT said. When fed ChatGPT’s analysis, an interesting statement emerges:

Grok fares less well:

So once again, calling things by their name offers you power.

The tools are there. For now, they are “honest” even if their ultimate objectives appear occasionally inconsistent with their stated goals. I encourage you to use them to refine your thinking. Request a diagnosis of systems within a POSIWID framework. Do not bend the knee to pseudo-intellectual influence. And turn the light on yourself:

The less charitable (and perhaps cynical) Grok:

While I don’t share this interpretation, it is far from unreasonable. I am the Chief Strategist at Simplify. I represent Simplify in public. I am remarkably proud of the success of our firm and our stable of funds. With less than 10% of all funds receiving five-star ratings from Morningstar, and funds requiring a three-year track record before being rated, it is an incredible feat that fully 69% of eligible (three-year history) funds at Simplify, issued after my joining in February 2021, have achieved a Morningstar 5-star rating.

With that said, like many firms, we faced challenges in Q1 2025 that provided opportunities for learning and improvement, both in execution and communication. Which makes ChatGPT’s more charitable conclusion seem fitting:

And with that, let’s make more enemies…

I’ve offended the Bitcoiners over the years. I remain unfazed in my analysis. It is remarkable to me that a supposedly numerate group of “what’s next” financial-wanna-bes do not understand that the Satoshi white paper establishes a testable programmed system. ChatGPT offers: