Financial acronyms emerged in the early 20th century for efficiency as markets grew, with terms like IPO and P/E ratio becoming standard. The rise of electronic trading in the late 20th century accelerated this trend, introducing acronyms like ETF and HFT. YOLO ("You Only Live Once") began as slang but became a finance term during the 2020 meme stock frenzy, popularized by Reddit’s Wall Street Bets. It epitomized high-risk, high reward investing, often involving leveraged bets on volatile assets. While some profited, many-faced heavy losses, underscoring the risks of FOMO-driven investing over fundamentals. Since last November’s election of the "Disruptor in Chief," the acronym "DOGE" has taken on new meanings. Originally an internet meme featuring a Shiba Inu, it later became the name of Dogecoin, a cryptocurrency. More recently, "DOGE" has been repurposed as the Department of Government Efficiency, a U.S. initiative to cut waste and improve efficiency. As the first quarter of the Jubilee year closes, savvy investors tracking the business cycle know the real "DOGE" that matters: Debt, Oil, Gold, and Equity.
Starting with Debt, while the Department of Government Efficiency boasts about cutting millions in wasteful spending, the reality is stark. In February, the U.S. government spent $603 billion, up 6% from $567 billion a year ago, while collecting just $296 billion in tax revenue. This led to a $307 billion deficit for February, meaning tax revenues couldn’t even cover the shortfall. Put simply, the U.S. spent more than twice what it collected, pushing the 2025 deficit to $1.147 trillion, already covering 38% of fiscal year spending.
This is a problem because not only is the cumulative budget deficit for the first five months of fiscal 2025 the highest on record, surpassing even the fiscal shock of the post-COVID response, but the U.S. government also has an additional $8.70 trillion in debt to refinance beyond this $1+ trillion deficit. In a nutshell, almost $10 trillion of US government debt will need to be issued in the last 9 months of the Jubilee Year, that s more than a trillion a month.
Taking another perspective: In just the first five months of the fiscal year, the U.S. has spent $480 billion on interest alone, a record high and more than three times what the Department of Government Efficiency claims to have saved since January 20, 2025.
Debt, particularly government debt, plays a crucial role in how investors evaluate the business cycle. Savvy investors know they should own gold only when the quality of the best credit (i.e., government bonds) is in question. This refers to Alexander Hamilton’s famous quote that ‘A national debt, if it is not excessive, will be to us a national blessing’.
Indeed, investors turn to gold when counterparty risk emerges in the credit side of the economy, corresponding to the right quadrants of the four-quadrant grid, where bonds fail as a reliable store of value. This typically signals an inflationary environment, as has been the case for most economies since the start of the decade.
After World War II, with the U.S. imposing the USD as the global reference currency for countries wishing to trade with the world's largest consumption economy, U.S. Treasuries gained their status as a "risk-free" asset. While there were times when Treasuries underperformed gold, savvy investors had no doubt that the U.S. government would ensure Treasuries outperformed gold over the long term, as any country that wanted to be a trading partner of the U.S. would have to recycle its trade surplus into U.S. government debt. In simple terms, the market believed there would never be counterparty risk with Treasuries. However, when Ben Bernanke took over as FED chair in 2006 and implemented the "Great Moderation," which led to the 2008 financial crisis and later Quantitative Easing, investors began to doubt the effectiveness of U.S. Treasuries as a store of value. Building on Draghi's infamous "Whatever It Takes" quote, investors realized that credit risk would emerge on U.S. Treasuries. This trend was further amplified by the weaponization of USD assets in 2022, meaning that the U.S. fixed-income market would likely underperform gold in the future, as holding Treasuries was no longer safe for anyone contesting U.S. imperialism.
Gold to US Treasury Bond Index Ratio (blue line); 84-Month Moving Average of the Gold to US Treasury Bond Index Ratio (red line).
Interest rates exist to compensate lenders for future uncertainty. Negative real rates imply the future is more certain than the present, which is nonsensical, and signal governments’ intent to undermine the rentier class by ultimately not repaying debts. Owning bonds in such an environment is equally foolish.
Foreign holdings of U.S. Treasury debt, which steadily rose from 1970 to 2008, have been declining since the GFC, reflecting growing reluctance among international investors. This challenges the belief that U.S. debt will always be absorbed globally. Furthermore, the economic return on public debt has halved in the past decade, with every new dollar of debt generating less than 50 cents of GDP. Meanwhile, rising interest expenses now represent the second-largest budget item, highlighting fiscal limits and the inefficiency of higher taxes in addressing the deficit.
Put simply, in a world of negative or barely positive real yields, discounted cash flow analysis has become meaningless. It took some time to understand, but eventually it became clear that the "prices" on the left side of the Permanent Browne portfolio (i.e., contracts) could no longer be used to measure the "value" created by the right side (i.e., properties).
In this environment, savvy investors understand that the only assets worth owning are those with inherent value, regardless of market price. This means portfolios should focus on properties (equities and gold), as contracts (cash and bonds) are no longer effective for preserving wealth. In other words, avoid "contract" assets and focus on "ownership" assets, with gold as the ultimate store of value, something experienced investors in emerging markets know well in times of permanent monetary illusion. In this context, instead of valuing equities through discounted cash flow based on a risk-free asset, investors should use gold to measure the relative attractiveness of "efficiency value" (e.g., the S&P 500) versus "scarcity value" (gold). If the S&P 500 to gold ratio is above its 7-year moving average, U.S. equities are in a structural bull market. If it's below, as it has been since the "Disruptor in Chief" took office, U.S. equities are in a structural bear market.
Upper Panel: S&P 500 Index to Gold Ratio (blue line); 84-Month Moving Average of the S&P 500 Index to Gold Ratio (red line); Lower Panel: 12-Month Rate of Return of S&P 500 Index (yellow histogram).
As the S&P 500 to gold ratio has fallen below its 7-year moving average, investors should brace for a potential stormy time in equity markets However, before rushing to their underground bunkers with gold bars; guns and canned food, they should note that while gold is outperforming the S&P 500, oil is not yet. The reality is that energy prices in the U.S. are still too low to expect a major bear market ‘Ursus Magnus’ anytime soon.
Upper Panel: S&P 500 Index to Oil Ratio (blue line); 84-Month Moving Average of the S&P 500 Index to Oil Ratio (red line); Lower Panel: 12-Month Rate of Return of S&P 500 Index (yellow histogram).
Indeed, savvy investors know that "big bad" bear markets have historically occurred when the return on invested capital fell sharply relative to the cost of energy. In fact, all the major U.S. bear markets in the last 65 years have occurred when the ratio between the S&P 500 and the oil price dropped below its 7-year moving average. These busts typically happened when both the S&P 500 to oil ratio and the S&P 500 to gold ratio were breaking down, signalling that the American economy was no longer transforming energy profitably. In other words, the marginal return on invested capital (ROIC) was falling relative to the rising costs of inputs, something anyone with common sense understands, as a modern economy should simply be viewed as energy transformed.
Upper Panel: S&P 500 Index to Gold Ratio (blue line); 84-Month Moving Average of the S&P 500 Index to Gold Ratio (red line); Middle Panel: S&P 500 Index to Oil Ratio (green line); 84-Month Moving Average of the S&P 500 Index to Oil Ratio (red line); Lower Panel: 12-Month Rate of Return of S&P 500 Index (yellow histogram).
With the S&P to oil ratio still more than 30% above its 7-year moving average, the U.S. equity market is still far from facing a "grizzly bear market." The difference this time is that the price of gold and oil have diverged more than ever, except for the flash crash during the COVID lockdown in March 2020.
Gold to Oil Ratio.
The question is why this discrepancy has opened up between the price trends of oil and gold, i.e. between the price of the current energy (oil) with that of stored energy (i.e. gold). The discrepancy between oil and gold price trends stems from the shift in how gold is viewed as a store of value. From the early 1980s to 2015, one ounce of gold bought 9 to 20 barrels of oil. Since 2015, that same ounce has bought 20 to 40 barrels. Before 2015, with the German bond market as a trusted store of value, gold was used to hedge property-related risks. However, since 2015, a new risk has emerged: the potential collapse of the Euro or USD, like the Zimbabwean Dollar. Gold still hedges against property valuation risks but now also offers protection against fiat currencies losing value or being confiscated, as the West increasingly weaponizes assets to enforce its policies globally.
In the past, major problems in industrial economies stemmed from the private sector, with factors like wars, revolutions, tax hikes, or price controls causing a plunge in ROIC. However, since the start of this decade, the issues lie with public institutions, as confidence from citizens and investors wanes. Since the start of the decade, governments have engaged in reckless spending on wars, DEI initiatives, and fiscal stimulus that don’t improve citizens' lives but serve to maintain a plutocracy in power. This is unsustainable and suggests that, in the coming months and years, major credit markets, especially in so-called ‘developed’ markets, could see prices fall to zero, either due to currencies becoming worthless or a sovereign debt crisis forcing governments to default.
In a nutshell, gold is now hedging not only a possible collapse in profitability but also a threat to the very existence of most fiat currencies. This shift in the role of gold, which occurred after Draghi's "Whatever it takes" promise and the FED’s Quantitative Easing to save Wall Street, is obvious to anyone who can read a chart.
Upper Panel: Gold to US Treasury Index Ratio (blue line); 84-Month Moving Average of the Gold to US Treasury Index Ratio (red line); Lower Panel: US 10-Year Yield (green line).
It should be clear to everyone that OECD bond markets have ceased to act as "reserves of value" since they are denominated in fiat currencies, whose values could theoretically go to zero. To halt the relentless price increases in all major currencies, a new store of value among contracts will need to emerge and that’s one of the reasons why gold price has consistently made new highs in all currencies including the Chinese Yuan and the Swiss Franc.
Gold price in USD (blue line); EUR (red line); JPY (green line) CHF (purple line); CNY (yellow line) since December 31st 2014.
As of today, China and its central bank PBOC is the only entity that could potentially replace the role of the FED and the Bundesbank. Contrary to the conventional wisdom in the western world, from 2014 until early the start of this decade, Chinese bonds in CNY were a proper store of value, only losing this status with the emergence of the Covid crisis in the Middle Kingdom
Gold to Chinese Government Bond Index Ratio (blue line); 84-Month Moving Average of the Gold to Chinese Government Bond Index Ratio (red line).
Today, with low long rates in China and high gold prices relative to energy, Chinese government bonds and gold remain the most antifragile assets of a global portfolio. However, with Trump, rather than Harris, becoming the 47th US president and ushering in "chainsaw" Austrian-inspired economic policies via the Department of Government Efficiency (DOGE), the risk is that US productivity could be boosted after an inevitable economic bust. If DOGE proves successful, this may lead to a potential correction in gold prices, bringing them back to historical norms in oil terms. Given that the success of DOGE remains uncertain and unlikely, gold continues to be an antifragile asset in the face of ongoing geopolitical tensions and "forever bankers wars," offering strong potential in the coming months and years..
Return of $100 invested in a portfolio invested in 50% in US government bonds and 50% in physical gold (blue line); 50% in Chinese government bonds and 50% in physical gold (red line); since December 31st, 2014.
In a nutshell, 'DOGE' isn't just a cryptocurrency or a fancy acronym used for propagandistic purposes; it also stands for Debt, Oil, Gold, and Equities, the four pillars that drive the business cycle, which cannot be changed by any policies, despite the mesmerizing propaganda spread by Malthusian Keynesians and their plutocratic cronies. Savvy investors understand that to preserve and grow their wealth, they must adapt to the business cycle rather than trying to change it. In this context, investors must focus on safeguarding their wealth by owning real assets like physical gold and silver, the only antifragile assets with no counterparty risk. Investors should also focus on Return OF Capital rather than Return On Capital, holding other commodities to weather the storm unleashed by the ‘Commodity Leviathan.’ Additionally, they will actively manage their cash allocation using a portfolio of short-dated, investment-grade (IG) USD bonds with maturities under 12 months and Treasury bills (T-bills) with maturities not exceeding 3 months. These income-generating assets will provide stability. Among equities, investors should continue favoring low-leverage companies with strong EPS and FCF growth, prioritizing energy and commodity producers over consumers. By doing so, investors will ensure both peace of mind and wealth preservation.
Read more and discover how to trade it here: https://themacrobutler.substack.com/p/the-real-doge-debt-oil-gold-and-e…
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