Macrovolatility, or What American Collapse Looks Like in the Real World

Hi! How’s everyone? Welcome back old friends, welcome new ones, and here’s little Snowy giving you a tiny puppy hug.

Today we’re going to discuss a collapsing America, finance, economics, why your money guys don’t understand what’s happening, where that leaves you, and what to do about it all. That’s a lot! Take it slow with me, OK? 

Apologies for not writing enough lately. I’ve been doing sessions around the clock, and it’s been truly amazing and humbling to meet so many of you. And we’re going to launch the model portfolio shortly this week, so I’ve been putting finishing touches on that. By the way double apologies and don’t kill me just yet, I’m super backed up on emails for the same reason, but replies will follow this week.

Let’s get into it.

That Bad Feeling in the Pit of Your Stomach

These days, most of you probably have a Very Bad Feeling right down in the pit of your stomach when it comes to money. Finances. The economy. And what’s more, your money guys aren’t helping you much. Far from allaying that bad feeling, they’re giving you different flavors of “it’s gonna be fine!!,” which only sets your intuition more on edge.

Because…fine? Marines on the streets of LA. Military “parades.” Gestapos. “Raids.” These are the institutional breakdowns of overt authoritarianism. And that’s not even getting into the trade wars, tariffs, Mar a Lago Plan, and so on. None of this is fine.

And pretending like it somehow doesn’t have any consequences, which is what most of your money managers are doing, is foolish. It’s going to be devastating to most people’s portfolios, which are already creaking, straining, and breaking. 

So what are the consequences going to be? Wrong question. It’s: what are they already?

Nothing is Safe, or, the Consequences of American Collapse

The consequences of all this ugliness are already plain to see.

America is now being treated like the world economy like an emerging market. That’s shorthand for: a much poorer, destabilized country. In which capital isn’t safe.

You see, all the institutional breakdowns above matter. Not just in abstract moral terms, but also in financial ones. When people aren’t safe, neither is capital. Both are protected by sets of rights, which are guaranteed by the rule of law. But if instead of all that there’s just authoritarianism, in the service of a fascist mission, guess what?

Nothing is safe.

And that is why the consequence of American collapse is that the world is already beginning to head for the exits. It’s largest and smartest pools of capital, and plenty of them are based in America, aren’t able to bear this level of Macro Risk.

Let me say it again, for clarity’s sake, just what “this level of Macro Risk” is: nothing is safe. Not people, not towns, not streets. But also not any of the following. Corporations, money, bonds, stocks, dollars, assets.

We’re used to thinking of social collapse as some kind of sci-fi scenario. Everything goes to hell. And we’re unsafe in personal ways. That’s true, but it’s also true, yet often goes unremarked upon, that assets become unsafe too. Because just like an authoritarian can sic a Gestapo on the subhumans, so too can assets be expropriated.

Expropriation is a fancy word for the endgame of all this. In an authoritarian society, you don’t really own anything. Nobody does. Everything is had at the whim or mercy of the authoritarian. There are no guarantees anymore, because of course rights don’t function, and the rule of law barely holds on. All of this is risk. Which any sane investor or person must factor in and discount for.

So as societies collapse, they get poorer. Precisely because assets are worth less, since they are unsafe.

And that is what’s beginning to happen in America.

Correlation, or What Collapse Looks Like For Your Life

In America, we’re now seeing something genuinely remarkable happen. It’s the financial equivalent of multiple organ failure. 

Every economy has a handful of major financial markets. There are stocks, bonds, and currency. Then there’s the property market, and then the labor market. This is what an economy is, in the crudest terms.

(A more sophisticated way to think about is as the sum total of human well-being, but that’s a topic for another time.)

Now. In America, we’re beginning to see asset prices across all these markets fall in tandem. We’ve talked about this a little bit before, but now the trend is hardening and accelerating. It’s getting more real every day. And it’s going deeper and deeper.

On the one hand, the price of American bonds and the dollar is falling in tandem. There’s the stock market, barely holding on, fueled by the little guy propping it up, but he doesn’t have deep enough pockets to really keep powering it higher much now.

Yet something even more alarming lurks beneath this surface. Property markets are “frozen” or falling. And in the job market, young people can barely get a foothold, while seasoned executives and leaders are more and more unable to continue their careers.

So what we’re seeing is the advancement of a Macro Trend. America’s financial markets are all beginning to fall in tandem, right down to the property and the job markets. Meanwhile, the dollar’s plummeting, the T-bill’s bleeding out, and the stock market’s due for a severe correction.

Now. All the world’s good economists and financial thinkers have noticed this. And are talking about it. This behavior, like I said, resembles emerging markets. It’s something more akin to what we’d see in troubled, unstable countries, precisely because capital isn’t safe.

This is called correlation. Everything moving together. And it’s what collapse looks like in the real world, when it comes to capital.

Please take a second to reread and understand that, because it is really important for your future.

This is what collapse is when it comes to capital, aka, your finances and their relationship with the economy.

And yet your money guys aren’t talking to you about this. I know that, because many of you send me their updates, and those updates are usually…pretty lackluster. Banal would be kind. Oblivious would be more accurate, if a little harsh. They are not getting it.

So why don’t they get it?

Macrovolatility, or the Edge of Collapse’s Knife

I’m going to introduce you to a concept that you are going to need to know for the rest of your life (yes, really.) I call it Macrovolatility.

What does that mean?

The way your average money manager thinks about the world goes like this. It’s about homeostasis among three or four variables. Stocks go down, bonds go up. Bonds go down, stocks go up. Stocks go down, dollar goes up.

In other words, your average money manager—and this isn’t really about them, it could apply to any facet of our mental models, really—sees the world in linear terms where things self-balance. This is called “equilibrium” in economics, and the idea is that there will be a “resting” point, since assets going in one direction are counterbalanced by another form going in the opposite direction.

But now the world is very different.

Like I’ve explained to you, all of America’s asset values are now beginning to fall in tandem. And that is why many of your portfolios are getting shredded.

The correct answer to this problem emphatically isn’t: “everything’s going to be fine!” Gestapos on the streets, remember? People aren’t safe, and neither is capital when fascism arrives.

The correct answer is to understand the reality of the situation. And it goes like this.

Your average money manager thinks in terms of “volatility.” You’ve heard that term often. It just means that stocks bounce up and down more than bonds, and bonds more than dollars, etcetera. Just think of it as the spikiness of various forms of assets. 

But the world now isn’t about volatility in this old way. It makes zero difference today how “volatile” stocks are, or how bonds, or dollars. Since all of America’s assets are falling at the same time,

This is Macrovolatility. And Macrovolatility means that America’s financial markets as a whole are now experiencing roughly similar things, similar levels of volatility. They’ve decoupled from the old forms of risk that made stocks bounce up when bonds bounced down, etcetera, and instead, Macro Risk now dominates: the Macro Risk of America becoming an unstable authoritarian country, which makes all the assets in it unsafe.

So now asset values are correlated. Everything heads in the same direction at once. Stocks, bonds, dollars, property, incomes. That is because Macro Risk is now the dominating factor. Not Micro Risk. Micro Risk is Nike making a cute pair of shoes or what have you. Today, it doesn’t matter much. What does is whether or not America’s companies, institutions, markets, even currency, are going to survive authoritarianism and lunacy. In some kind of relatively intact form.

And because that is the question, all of America’s assets are now losing value at once. The correlation now dominates. Because the Macro Risk of meltdown is the most crucial factor of all. Now, we can’t value stocks or bonds or dollars or property without factoring in Macro Risk, and because the Macro Risk is so high, since capital is unsafe, asset values are not and cannot be what they were before. Their values must be lower.

Make sense? 

Collapse and Macrovolatility, or, Understanding How Much Risk (Your) Wealth is Really At

Now. Let me put that in plainer English. Macrovolatility is what your average money guys don’t understand. The world’s good economists and serious financial thinkers are beginning to understand it and think about it. By the time it trickles down to the level of the average money manager, it’s going to be far too late.

Because by then, people are going to have already lost a very great deal. 

And many don’t understand that they already have. You see, the losses to many Americans remain hidden, in a strange way, because the authoritarian information Iron Curtain is already falling. So your money guys aren’t telling you that the dollar depreciating by 10% has already cost you at least that much, and meanwhile, the risk in being in American assets, especially stocks and bonds, is incredibly high. A rising market, or even a flat one, is besides the point, when the question is: how much could you lose tomorrow?

Macrovolatility is going to wreck Americans’ life savings.

Please stay with me for a moment here, because you really need to grasp this, since your money guys don’t. What do we know so far? Here’s what I’v tried to teach you.

—American financial assets now move in lockstep, all falling at once.
—That’s deeply unusual, and is a sign of organ failure in an economy.
—In other words, correlation now dominates among asset classes, because Macro Risk is becoming real: capital is more and more unsafe by the day.

What does this imply?

Everything is moving in the same direction. Together. At once. Right now, it’s sort of a slow trickle. A bleed. And I’ve taught many of you in sessions how to stop the bleeding, but understanding Macro Risk here is really the point. 

If everything is moving together at once, and right now, it’s a slow bleed, what happens when it’s not?

What happens when it’s a severe correction? A crash? A crisis?

Then everything moving in the same way, because assets are all correlated now, means that the average portfolio will get destroyed. The stuff in it will be hit multiple times over, and it doesn’t matter what it is, really, stocks, bonds, dollars, property, and so on. Because it’s all correlated now, crashes in one market could well cause—and are likely to, since we know that correlation is a real, technical problem at this point—crashes in the next. And the next, and the next.

And that is how you get to a place of serious and lasting damage to wealth. That is the risk here. That because of correlation, crashes and crises, which are all but certainly on the way, cause wealth to just be eviscerated, in portfolios that aren’t designed to protect anyone against Macro Risk. And in plain English that means: just holding stocks and T-bills, if they’re going the same way, isn’t going to protect you from anything, it’s just going to cause you to get twice as hard, and all over again.

And that’s just the tip of the iceberg. Now imagine the Macrovolatility of climate change, and what that’s going to do to economies and finances.

Don’t Ignore Your Gut, Listen to It, or, Correlation, Macro Risk, and Macrovolatility

I’m not saying all that will happen tomorrow. That’s not what risk is. Risk is probability, and what we know at this point is seriously alarming, when you think about it that way. We know that crashes and crises are on the way, because capital isn’t safe anymore, and we also know that asset values are now correlated, and one doesn’t offer safety against the other, like in traditional portfolios, but only makes you less safe now.

In formal terms, Macro Risk causing correlations in asset values across all America’s financial markets means that traditional portfolios are at severe risk of wealth destruction. That’s Macrovolatility—volatility becoming monolithic across an economy’s financial markets. It means that in the meltdowns to come, as the slow bleed turns into something much darker and more arterial, traditional portfolios will be hit like a jugular vein being sliced open.

Your average money managers don’t get this. And you know they don’t get it, because this is what the Very Bad Feeling in the Pit of Your Stomach is really about. When you talk to them, and they tell you everything will be fine, only you know it’s not fine, and won’t be fine. Only you don’t know what to do about it, since you’re not a finance whiz, and it’s their job to help you, only they’re not doing it.

The point is that many of you are going to have to restructure your relationship with money, finances, and the economy. That means money guys, portfolios, careers, property, income, all of it. Because now the economy is changing, incredibly fast, and in desperate and brutal ways. It has to, as authoritarianism takes hold, because nothing is safe. Not people, not corporations, not trade, not capital.

And capital isn’t something abstract, which only belongs to billionaires, it belongs to you too. 

This is a big part of the reason I created the model portfolio, but the point is larger. You’re going to have to know how to use it, and that doesn’t mean hitting buttons, it means your relationship with the economy, it means understanding the concepts behind it, and it means seeing into the future, which is my job, but has to be yours too now.

Macrovolatility is a good place to start doing that. It doesn’t just apply to what’s happening to America, by the way. It’s a way to think about what climate change will do to the world, to economies, to societies. It’s a way to think about how democracy’s come undone around the world. It’s even a way to understand why so many of our relationships and careers are failing and burning out, too. 

So sit with it. Chew it over. These days, like we often talk about, the choice between panic and numbness leads nowhere. The point is to forge a new relationship with the world, and be the Adult in the Room, where our institutions have so signally failed at it. Unless, of course, you want to end up Sinking With the Ship, and I think that might have once been abstract. But is it anymore? Isn’t it very, very real now? Isn’t your gut already telling you?

As always, if you need help, just reach out.

Lots of love,

Umair (and Snowy!)

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