Crashin' Down

White Noise or Avalanche?

Read much of my work (here, for example) and you will know I am not a doomer. Our office, other offices in our firm, and maybe yours if you are a wealth advisor or banker, is having conversations with some clients, not all, but enough, for us to spend a few minutes discussing the current environment.

“Elon and his mega-wealthy crew are crashing the economy so that they can buy all the major companies and thereafter control our society. What can we do about this?”

“The markets are going to crash. I want to buy gold/cash/silver/real estate.”

“How do I move my money out of the US, and if I do that, to what country?”

There are loads of charts regarding market and economic history. Relax, I’m not going there. If you want to see that, go here or here or here. By the way, $100, invested in 1928, in the S & P 500 (including dividends) would have been worth over $980,000 today. If you’d invested that $100 in the bottom decile of US small cap stocks, that $100 would be… about $4.7 million¹.

How We Got Here

The history of the earth is nothing but an ongoing disaster that for some reason fails to annihilate us all. Well, that sort of works as factual, unless you were (thank you, Chat GPT for this data):

1. Dinosaur - wiped out approximately 66 million years ago at the end of the Cretaceous period, marking the Cretaceous-Paleogene (K-Pg) extinction event.

2. Sumerian (c. 4500–1900 BCE) – One of the earliest civilizations, absorbed by the Babylonians.

3. Indus Valley Civilization (c. 3300–1300 BCE) – Declined due to climate change, trade disruptions, or invasion.

4. Minoan Civilization (c. 2700–1100 BCE) – Likely destroyed by volcanic eruptions and Mycenaean conquest.

5. Mycenaeans (c. 1600–1100 BCE) – Collapsed during the Bronze Age collapse.

6. Hittite Empire (c. 1600–1178 BCE) – Fell due to a mix of invasions and internal decline.

6. Carthage (c. 814–146 BCE) – Completely destroyed by Rome in the Third Punic War.

7. Nabatean Kingdom (c. 4th century BCE–106 CE) – Absorbed by the Roman Empire.

8. Etruscans (c. 900–27 BCE) – Assimilated by Rome.

9. Palmyrene Empire (c. 260–273 CE) – Crushed by Rome.

10. Maya Cities (c. 250–900 CE) – Classic Maya civilization collapsed due to environmental and social factors, though the Maya people survived.

11. Khazar Khaganate (c. 650–1048 CE) – Destroyed by Kievan Rus and other powers.

12. Baghdad (1258 CE) – Mongols destroyed the Abbasid Caliphate’s capital, massacring much of its population.

13. Great Zimbabwe (c. 1100–1450 CE) – Mysterious decline, possibly due to overuse of resources.

14. Vinland (c. 1000 CE) – Norse settlement in North America, abandoned due to conflict and isolation.

15. Aztec Empire (c. 1428–1521 CE) – Conquered by Spain (Hernán Cortés) and devastated by disease.

16. Inca Empire (c. 1438–1533 CE) – Conquered by the Spanish (Francisco Pizarro).

17. Roanoke Colony (1585–1590 CE) – English colony that mysteriously vanished.

18. Tasmanian Aboriginal Societies (19th Century CE) – Wiped out due to European colonization, disease, and genocide.

19. Easter Island (Rapa Nui, c. 1400–1800 CE) – Civilization collapsed due to ecological overuse and European diseases.

20. Kingdom of Hawaii (1795–1898 CE) – Annexed by the U.S., native culture and population severely diminished.

And there were a few other events, most of which felt like the end of the world at the time.

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19th Century (1800–1899)

Early 1800s:

• 1803 – Louisiana Purchase: The U.S. buys land from France, doubling its size.

• 1804–1815 – Napoleonic Wars: Europe sees major conflicts led by Napoleon Bonaparte.

• 1812 – War of 1812: U.S. vs. Britain; ends in 1815 with no clear victor.

• 1821 – Mexican Independence: Mexico gains independence from Spain.

• 1830 – July Revolution in France: Overthrows Charles X, establishing constitutional monarchy.

• 1839–1842 – First Opium War: Britain defeats China, forcing trade concessions.

Mid-1800s:

• 1848 – European Revolutions: Political upheaval across Europe; many monarchies threatened.

• 1853–1856 – Crimean War: Russia vs. Ottoman Empire, Britain, and France.

• 1861–1865 – American Civil War: Ends slavery in the U.S. with Union victory.

• 1867 – Canada becomes a self-governing Dominion of the British Empire.

• 1870–1871 – Franco-Prussian War: France loses, leading to German unification.

Late 1800s:

• 1885 – Berlin Conference: European powers divide Africa (Scramble for Africa).

• 1898 – Spanish-American War: Spain loses Cuba, Puerto Rico, the Philippines, and Guam to the U.S.

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20th Century (1900–1999)

Early 1900s:

• 1914–1918 – World War I: Global war with millions of casualties; Treaty of Versailles reshapes Europe.

• 1917 – Russian Revolution: Bolsheviks overthrow the Tsar, leading to Soviet Union.

• 1929 – Wall Street Crash: Causes the Great Depression.

Mid-1900s:

• 1939–1945 – World War II: Ends with Axis defeat; U.S. and USSR emerge as superpowers.

• 1945 – United Nations founded.

• 1947 – India and Pakistan gain independence from Britain.

• 1949 – NATO formed; Communist China established.

• 1950–1953 – Korean War.

• 1962 – Cuban Missile Crisis: U.S. and USSR come close to nuclear war.

• 1969 – Moon Landing: Apollo 11 lands on the moon.

Late 1900s:

• 1979 – Iranian Revolution; Soviet invasion of Afghanistan.

• 1986 – Chernobyl nuclear disaster.

• 1989 – Fall of the Berlin Wall.

• 1991 – Soviet Union collapses.

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21st Century (2000–Present)

• 2001 – 9/11 attacks; U.S. invades Afghanistan.

• 2003 – U.S. invades Iraq.

• 2008 – Global financial crisis.

• 2011 – Arab Spring uprisings; Osama bin Laden killed.

• 2014 – Russia annexes Crimea.

• 2019 – COVID-19 pandemic begins.

• 2022 – Russia invades Ukraine.

A good portion of the US population believes it is living in an unprecedented period in terms of what the President is doing and more importantly, in my opinion, the way this is being done. Another good portion believes that it has been living (since, say, Woodrow Wilson) in a dangerous and unprecedented period of Socialism and wasting of our precious dollars/what we have built by ourselves, with no help (I’ll argue we’ve had a lot of luck, and much help - by, say, the French during the war of independence). But what about the past? If we could resurrect a 40-year old from 1860, what would they say, and how would they compare 1860 to today? What would someone from 1917 say? How about 1775?

Look, I cannot predict an outcome. No one can. The Forecasters’ Hall of Fame, at least as far as investment markets and economies are concerned, has zero members. The only thing we can predict is unpredictability. We have tariffs. We don’t have tariffs. We are deporting people. We aren’t deporting people. We are massively reducing Government employment, or maybe not. Futures are up or they are down. We have DOGE violating the Constitution and our rule of law, or maybe we don’t. Find me the equation for predicting any of this.

All I can say is that we have survived all of the above or evolved our way through it. Might we become an extinct form of government, society, and/or culture? We might. Might we become the new Axis, aligned with the Russians, with the rest of the world aligned against us? We might, however awful that sounds to me. Might we go bankrupt, the US Dollar no longer the reserve currency, looking like any number of countries far poorer than we, at the moment, are? Sure, that’s a probability, and even quite small probabilities occur. That is why they are probabilities. Might we be on exactly the path we need to be on? We might. May Bitcoin become the world’s reserve currency? It might. Just because I can’t see that happening, and I think it will disappear in the “ether” does not make me correct. The phrase we most hate? I don’t know. Our brain wants to fill that “don’t know” gap in every single time it appears. And it is true: I don’t know. Most likely, you don’t, either. The applicable aphorism? Time will tell.

But we anchor. We extrapolate. We rely on recent events. We like to think each event is unique and never before experienced. Our instinctual behavior takes over and we fight or flight. Which one is the right response? I don’t know.

I do believe that the US economy, at roughly $30 trillion, is capable of surviving substantially more shock than it has currently seen. Another belief I hold is that our rule of law is far more important to our economy than any other thing. If we cannot be trusted to honor a contract or to protect those who are legally here from persecution and prosecution, if our Constitution can be bypassed because our President says so, with no consequences, if any behavior from any elected official is “legal” simply because they have immunity as an elected official, well, then I have a concern. I might even agree with the action proposed and still it would be cause for concern. Because it’s our rule of law that makes us great. Not one person, not our army, not our arsenal - our commitment to rule of law. The long-standing statement and belief (being blown up, potentially, at the moment - this is what terrifies many) that no one, no one, not Elon, not the President, not me, not you, is above the law. The JP Morgan note below feels right. For now. Might this change? It might. The Forecaster’s Hall of Fame has zero members.

Uncomfortable? Sure. Remember that all motion requires friction. Friction creates heat. Discomfort. I believe strongly that we need to change. I also don’t think this is a good way to make change. I don’t believe that current actions are aligned with what our Constitution was intended to mean (there will more on this later - from my personal Substack). I believe that more executive orders (the worst way to govern, in my opinion, and virtually every President in recent memory has relied on them), continuing to add to regulations, laws, and the deficit are problematic. It’s fair to opine that these are not being reduced by the current US administration. The debt is increasing, regardless of the mostly unproven and hotly disputed “savings” of DOGE (look here). Large numbers of executive orders are, guess what? Expansion of government control/regulation, as are all the bills currently proposed. I think we have a fair amount of data and history that demonstrate large institutions, and our Federal government is the largest of the large, become more and more dysfunctional over time.

I’m not at the disaster stage. I hope we are a long way from there. Maybe this is just the momentum-creating movement needed.

Now What

Avalanche? White noise? I don’t know.

Prior to the election, there were also strong sentiments and arguments for disaster, on both sides. I wrote about that here (Content warning: this one has charts and data). Historically, it has made no difference which party held the Presidency and/or Congress (well, the Democrats have a slight edge in market performance and all recent Republican Presidents have presided over a recession - but we cannot predict either). Historically, it has been white noise. But I don’t know. Time will tell.

My two cents regarding what actions to take follow (Before you take any action, please consult your advisory team (or call us and we will build a specific plan):

1. Make sure your income reserve/cash reserve/emergency fund is topped up. Something between 6 months and 5 years of the income you’d need if you had no other income source is usually enough. Most people no longer working are statistically and emotionally comfortable in the 2 to 3 year range.

2. Stick to your strategy. History says that when you are most concerned, and are compelled to make a big change, that’s exactly the wrong time to do so. Might this time be different? Of course. I don’t know. History tells me it is improbable.

3. Turn off the noise, especially television (at least in the US). The “news” is designed to sell advertising, not tell you the facts and let you sort it out yourself. Don’t read your statements. Read books. I think everyone should read a LOT of history (my most recent read is Churchill’s Citadel).

4. Think critically. Who benefits from this action/statement/position? How would it affect you? What principles and values are driving this action? Are those principles and values aligned with yours? What are the secondary and longer-term effects? What are the potential, unintended consequences? Forget how you feel - what does this do?

5. Pay attention to your emotions/instincts/how you feel. They might be right. And they might be very wrong. Your feelings are not your reality. Well, they are YOUR reality but at the same time may significantly distort the facts and drive poor decisions. The key is to acknowledge, investigate, and test your responses. Then return to 1 through 4.

1. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html