How Bad Could the Crash Be? Questions & Answers About the Economy, Finance, Politics, and the Future

Let me take a moment to answer some questions for you, since a lot of what I’ve been talking about has been abstract.

Is the stock market going to crash?

It’s not looking good. It isn’t just me warning you about it (anymore.) By now, every good economist and serious institution on earth has joined the chorus. The International Monetary Fund just warned of a bubble, which is probably the most sober authority left on the planet, and it almost never does that.

Are you sure?

Nobody’s sure. The issue here is risk. And what you should understand is that risk is increasing by the day. Not just of a stock market bubble, but in general. We are in real trouble as a world, with democracy in sharp decline, soaring inequality, stagflation, climate change, and much more (and it’s the measure of how poor thinking is these days that people seem to think AI is going to be a magic bullet for societies and economies in this context.) The escalating risk of a crash is very real.

What do you mean by that?

A lot of people aren’t thinking clearly about investing, and haven’t really been taught how to. The point isn’t just “making money,” it’s managing risk well. When risk is managed wisely, then long-term returns follow. In climates like this, of mania, of “FOMO,” risk is being mismanaged. In short, people are taking too much of it.

What do you mean by that?

Let’s think about FOMO for a minute. The fear of missing out. That’s one way to describe this bubble, though in truth it applies to every bubble. Never mind. When we “fear missing out,” what don’t we fear? Getting burned. “Missing out,” in volatile markets, almost surely includes being part of the crash, too. This is in fact how crashes happen, because the tide shifts, and just as fast as people couldn’t buy enough, now they can’t sell enough.

So I need to think about…risk?

Yes, my friends, yes. You need to think about risk in every aspect of your life now, though I’m digressing a little bit. For example, everyone who can should have an exit plan from a collapsing America, and I know that many typical men at the moment don’t think that’s true, but the rest of you should ask why not. And that’s just one form of risk. Risk of this magnitude is not a joke. As a civilization, we haven’t faced risks like this since the 1930s, and in a very real sense, many of the risks we face now are of an even larger magnitude.

Stop lecturing me, idiot. What kind of a crash are we talking about?

Alright, let’s be boring and focus on money. When we talk a stock market bubble, the risk that’s at issue right now is probably to begin with on the order of 20–30%. That’s just a regular crash. The kind that happens once a decade or so.

But this probably isn’t going to be a regular crash.

Because we’re not just talking about an everyday investment bubble anymore. We’re also talking about a deranged President, who’s declared economic war on the rest of the world, chosen a suicidal economic agenda for America, and is even putting an end to capitalism (which is ironic for those who didn’t even like capitalism to begin with, because, of course, authoritarianism and fascism are, LOL, even worse.)

So this set of risks is bigger. If your everyday stock market crash is on the order of 20–30%, here, we may be in store for something larger. Not just in percentage terms, but in more sophisticated terms, which is about how long the aftermath of crashes lasts, and the altered growth trajectory which results.

During the dot com bubble, the S&P and Nasdaq etc fell by 50%+. Imagine people’s wealth being halved, and you begin to understand what’s at risk here.

Can you tell me what you think already? I’m exasperated! Jesus, I hate finance! How bad is it going to be?

I do too, man, I just like art, fashion, and disco. The first sign you’re dealing with someone who’s not very good with economics and finance is that they only care about money, by the way. It’s like if a musician only cared about how a score or a song looks on paper. Gross. Reductive. That’s why we should never just talk about money, it’s secondary.

Alright, here’s what I think.

It’s looking like there’s going to be a crash, and it’s also looking like it’ll be bigger than a regular crash.

Remember: the dot com crash wasn’t 20 or 30% but 50%+. This is probably bigger than that, already, but we’re also dealing with way, way more risk than back then, because back then, America wasn’t in the grip of a fascist collapse, didn’t have a dictator, and the average person wasn’t in distress and at the brink of disaster already.

Now, bear in mind, Trump and all of America’s political class are going to do everything they can to stop it, including bailing out the AI industry, so maybe they’ll succeed…but only at the cost of exploding America’s debt, causing the dollar to plunge, and other assorted disastrous results. You can’t really escape the consequences of malinvestment, which is what bubbles really are.

When is it going to happen?

That’s a…tough question. Not because I can’t tell you, but because nobody can. Remember, crashes happen when people flip from greed to fear: from not being able to buy fast enough to not being able to sell fast enough.

They’re about manias, in other words. The psychology of manias applies, and that’s like an avalanche. We can estimate, but prediction? There’s usually a breaking point, a last straw, and just as often as not, it’s something trivial. Think of a bad marriage. What provokes the final meltdown into divorce? Often, it’s not much at all. And it’s hard to say when or why. The tension and pressure have been building, and eventually, they boil over.

Now. We have some information about when crashes happen. Usually, in September or October, or then in February or March. That has to do with the way that capitalism’s structured, it’s “earnings season” for companies. You’ll notice it’s already November, though. So am I saying…the crash didn’t happen…or it’ll happen in February or March?

I think that the old rules of crashes aren’t going to apply in this case. Just as the rules about the magnitude of crashes may not apply, so too the rules about the timing of crashes probably won’t, either.

I already said that I think this crash might, could, will be bigger than a regular one, because we’re not really just dealing with a typical bubble, but something more like America Going Fascist at the hands of a Lunatic Fuhrer and his creepily obsessed masses. Sorry if you’re MAGA (you’re going to be poor soon, oh wait, look at your new health insurance premiums.)

Rather than worrying about precisely when it’ll happen, again, let’s go back to the fundamental idea of risk and ask…

What could trigger the crash?

What’s different about now is that it could be anything, and that’s a very bad thing. Let me explain what I mean by that.

Usually, crashes have a narrow range of triggers. They usually have to do with money or profits, how fast they’re being accumulated, the boring and sort of gross typical stuff of capitalism.

But now? Those old rules don’t apply anymore, either.

For example: there’s little reason to think that it has to be some poor company’s bad earnings report that triggers metldown. That’s the old world, which had some semblance of normality and rules, even if capitalism was to sophisticated political economies what a zombie is to human beings. We don’t live in that world anymore. In this case, it could be…

Anything.

It could be Trump, I don’t know, declaring that every company on the stock market now owes him 5% of its profits. It could be Trump decreeing that Americans can’t move their money overseas (that’s coming, by the way.) It could be one of Trump’s minions deciding that suddenly, America’s debt to the rest of the world isn’t going to be repaid (that’s in the Mar-a-Lago Plan, by the way, which is Project 2025 but for the economy.) It could be something like: Trump decides that he’s going to drop bombs on this or that country, just because, or that he’s going to bail out this or that country, just because their aspiring autocrat is his new best friend.

Any of those things, or a million others, could trigger this crash. And they could happen at any instant.

And that’s what’s really different about this moment in history. If you ask me, it’s probably more likely that the crash is triggered by Trump than it is by a typical scenario of some company Not Making Enough Even More Money. Because, of course, Trump is doing far, far more damage to American and to the world than some poor company not making a buck fast enough for capitalism ever could. At some point, that’s going to have to be reflected in wealth. The musical chairs can’t go on forever, and the music is getting more frenetic and dissonant by the day.

Now you’re scaring me!

You should be scared. I don’t know why nobody is discussing this with you seriously, oh wait, I do. Everyone’s financial advisors and whatnot are terrified of these discussions, because if you have them, and understand what they mean, suddenly, America looks pretty shaky, and that entire capitalism-industrial-complex begins to make a lot less money.

Even my (very) wealthy friends aren’t getting good advice from their financial teams, and they don’t just have an advisor, they have like entire wings of banks and funds servicing their “ultra high net worth” needs. And guess what? They’re getting the same bad advice as everyone else, maybe even worse, because now instead of one dork, you’re dealing with like twelve of them, all trying to shout you down, and telling you…everything’s fine…look away from the fascism!!…you’re going to get richer and richer…not…

Investing in this mess is a bad idea? Maybe a terrible idea? Because it’s not a great idea to put your life savings in the same place that’s currently having a fascist meltdown?

Exactly.

So what should I be doing?

You guys always ask me that, and I’m not allowed to give you precise instructions. Not because I don’t want to, or I’m being difficult, or I don’t know how to, but because it’s against the rules of capitalism, as in literally you can get in trouble with regulators and authorities for doing that, which should tell you all you need to know: we can’t even discuss this out loud. Capitalism doesn’t like that, because it wants all your money to itself…and for you to be clueless about the risk you’re taking…just as it wants you to have a “job” in order to have some semblance of healthcare.

Capitalism in this way’s become a prison for Americans. Maybe that’s OK when it throws you a bone (no, it’s not OK, even then), but when the prison’s on fire?

You should consider all that seriously, by the way. This is a system that’s designed to keep you captive. So far, it’s been OK, maybe, sort of, because your wealth has been “growing,” even though nobody tells you that it could’ve grown much better and more solidly in other ways than just keeping it imprisoned inside these obsolete, dying structure of predatory capitalism. (That’s really true, by the way, even though it blows most Americans’ minds—have you not noticed much of the world growing wealthier, while America grew poorer in real terms?)

I’m going to launch Havens soon, and that will give you a very good idea of what to do. It’s meant to give you the kind of insight that a sovereign wealth or hedge fund would have, what the world’s most sophisticated investors not just would do, but are doing, and will continue to do, as America melts down, and the globe transforms. And I don’t mean the kind that’s just “dad gave me some money to play with instead of buying me a mega-yacht.” I mean precisely the kind of knowledge that American capitalism is determined and designed not to let you have, as it tries to keep you trapped on a sinking ship.

Lots of love,

Umair (and Snowy!)