Why America Isn't Ready For Its Own Bukele

El Salvador's Bukele Continues To Impress

El Salvador President Nayib Bukele has become one of the world's most impressive national leaders with his common sense approach to government. Want to lower your crime rate by >90%? Lock up practically your entire criminal class. He has now applied similar common sense to immigration. Instead of doing what the United States does (giving free plane tickets and debit cards to anyone who walks across our southern border), Bukele is going to offer passports to highly skilled immigrants who can contribute to his country.

That has led a lot of us to hope for our own Bukele. Unfortunately, the biotech entrepreneur and former Coinbase CTO Balaji Srinivasan argued on X yesterday that America doesn't have the "antibodies" necessary yet to get its own Bukele. Basically, not enough Americans understand how bad things are yet. Below we've shared Srinivasan's post, and following that, we'll look at a way to invest while hedging the risk of America's decline becoming more precipitous. 

REALITY PRECEDES PROSPERITY

I think we agree on one point and disagree on two points.

THE BUKELE ANTIBODIES

1) First, yes, force alone is not the recipe for an ailing country. Ultimately you need community. Latin America suffered from generations of drug dealing and money printing. So now they have developed antibodies in the form of crime prevention and Bitcoin adoption. And Bukele is the incarnation of those antibodies. But society basically has to be ready to turn around before a Bukele can appear. He can wield force against the 1.6% of criminals because he has much of the 98.4% of non-criminals on his side.

I saw this in India as well, after generations of socialism. And in Vietnam, after generations of communism. Those societies finally had the antibodies to fight off the mind viruses that had brought them low. Of course, many societies just succumb. Is Cambodia mounting a comeback anytime soon? Or North Korea, or Cuba? Not really.

This is also the problem in the US. Many in the US have yet to even acknowledge it's declining. Many Democrats are Stalinist Bidenists, whose monthly checks are dependent on mouthing the party line. And many Republicans have replaced G-o-d with G-o-v. They see the US military as a god replacement, in its stern father form, and can't bring themselves to admit the country ain't what it was. They're Soviet conservatives, patriotic to a fault, saluting the worst because they've captured the flag.

I don't think this is true for everyone — people like [Chris Rufo and Dave Reaboi] know what time it is — but it's true for too many. If you still think, like Biden recently said, that his empire is still "the most powerful country in the history of the world" and that it just isn't trying or is like one election away from being fixed — you are wrong in a deep way.

The values that underpin the valuations have been broken. The current society is coasting on fumes. Fixing this is at least a generational rebuild. It's not something one vote will solve.

IT'S NOT RICH

2) We also disagree that the US is a rich country. It has a fake economy, built on debt, with exponentially increasing interest payments, that doesn't have much runway left, and doesn't have factories to fall back on when the money printing stops.

For example:

^ Why are interest payments suddenly spiking? Because the bill for QE is coming due. Either die by high inflation or high rates. Or both.

^ Why is the country issuing debt at emergency levels, without acknowledging it's an emergency? Because that's the only thing that can keep this fake economy afloat through the 2024 election.

^ Why is China the world's #1 trade partner on just about every physical good? Because the US only exports (a) printed money and (b) technology. Anyway, I could keep going, with literally dozens of graphs like this. But X only allows four per post.

IT'S NOT STABLE

3) On the topic of whether it's a country with a "turbulent history of...violence", the level of drug addiction, violent crime, homeless encampments, squatters, road blockages, and massive BLM/Hamas mobs swarming the streets has obviously spiked in recent years.

2020 didn't represent a one-off, it's a preview of what is to come, particularly in Blue America. Crime statistics are systematically faked — in San Francisco, you can actually see some dashboards where things like car ticketing have gone to zero — so we don't have an accurate picture.

Until you see undeniable things like stores closing and people moving out of blue states. And then blue politicians yell at those companies, and try to stop them from moving out. This is systematic: blues always disable the warning lights that tell you we're crashing into the ground, just like the mortgages labeled AAA in 2008, just as a mosquito anesthetizes you before drinking your blood, just as a snake evolves to employ camouflage before it strikes. Alongside lawfare, faking the stats is a core competency of both communist reds and woke blues.

TLDR: I think we just have very different mental models of the prosperity and stability of today's United States. Wokeness is hegemonic and the damage is deep. I wish it weren't so — but agreeing on reality precedes prosperity.

Cutting Through America's Fake Stats

In subsequent posts, Srinivasan showed how America's recent crime stats are essentially fake, because crimes simply aren't being prosecutoed or reported. 

This is a BLM/Hamas mob.
And this is a scene from World War Z.
Complete with the fast zombies.
That guy in the car did nothing wrong.
Other than being in the wrong place at the wrong time.
Namely, Blue America.
This doesn't happen in a stable country.https://t.co/S7KqD4MJgi

— Balaji (@balajis) April 8, 2024

What Happens If More Americans Notice The Decline? 

One outcome seems obvious: stock prices would decline. If enough Americans see America as being in decline, how could they be optimistic about companies based in America? That said, it looks like the Biden Administration and its allies at The Federal Reserve are going to do what they can to keep the bubble from bursting before the election. Let's look at way we can make money if the bubble doesn't burst, and limit our downside risk if it does. 

Heads We Win, Tails We Don't Lose Too Much 

That's the basic approach of our hedged portfolio method. The Portfolio Armor web app presents us with a portfolio constructed out of its current top names, with optimal hedges on each holding to limit our downside risk if the crap hits the fan. 

A Real World Example

Here's a real world example from six months ago. This was the hedged portfolio our site presented to an investor on October 5th of last year who was unwilling to risk a decline of more than 20% over the next six months. 

Screen captures via Portfolio Armor on 10/5/2023.

And here's how that portfolio did over the next six months, net of hedging and trading costs. This portfolio was up 50.65% over the next six months, versus up 22.62% for SPY. 

You can find an interactive version of that chart here. 

If you want to stay in touch.

You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).