The title of the episode, "The Bull Market That Loses You Money," is not a riddle. It is a warning. On a recent episode of The Meb Faber Show1, macro strategist Luke Gromen, founder of Forest for the Trees (FFTT), delivers a systematic and unsettling argument: U.S. equities are likely to soar in dollar terms over the next five to ten years, and still lose money in real terms. For advisors and investors still anchored to the 60/40 playbook of the last four decades, the implications are profound.
The End of Neoliberalism
Gromen opens with a phrase that is equal parts policy diagnosis and cultural obituary: the "stupid Washington consensus." It is not his term. It belongs to Vice President J.D. Vance, who used it in a Munich speech to describe four decades of deindustrialization, offshoring, and the financializing of the American economy. For Gromen, this is not political commentary. It is the clearest signal yet that a structural regime change is already underway.
"In a nutshell," Gromen explains, "Hamiltonian economics are high tariffs, protection of domestic industry, and a neutral reserve asset. Hamiltonian economics are the exact opposite of what the United States has been doing for the last 35, if not 40 years."
The reference is to Alexander Hamilton's 1791 Report on Manufactures, which set the intellectual foundation for American industrial greatness through the late 19th century. Gromen argues that across two administrations with radically different political identities, the same Hamiltonian policy logic has persisted. "When you go from someone like Trump to someone like Biden and the policy doesn't change, and then you go back to Trump again and the policy doesn't change, that's just your figurehead king. Washington has changed its view of neoliberalism. It's dead."
The implications for capital markets are not peripheral. Anti-Hamiltonian policy created a very specific set of winners: Wall Street, Washington, and China. Reversing that policy, Gromen argues, creates a very specific set of new winners: the U.S. industrial base, gold, inflation, and nominal wages. The losers, in plain terms, are long-duration bonds.
Stocks in Dollar Terms, Disaster in Gold Terms
Faber frames the problem precisely: "I think we've all done a disservice for the past number of decades only talking in nominal returns." The real returns, returns you can actually eat, tell a different story. Since the Federal Reserve began hiking rates in 2022, the S&P 500 is up roughly 60-70% in dollar terms. In gold terms, it is down 25%.
Gromen's framework is built on this distinction. Real rates, he argues, must keep falling secularly because the U.S. government cannot service its debt at yields above approximately 4.7% on the 10-year Treasury. At 120% debt to GDP, with entitlements, interest, and veterans benefits consuming effectively all federal tax receipts, the math is brutal. "The math doesn't care about any of that. The math is going to math."
The historical precedent is instructive. After World War II, the last time U.S. debt-to-GDP exceeded 110%, the government engineered a 50-point reduction in five years. The mechanism: capital controls, significant inflation, and real rates that bottomed at negative 13%. Treasury bondholders bore the cost.
Gold as Duration Replacement
Gromen's prescription for this environment is unconventional but direct: replace long-duration bonds with physical gold. The traditional justification for long bonds, steady real returns as a portfolio anchor, breaks down entirely in a fiscal dominance regime. Gromen cites the 80-year stretch from 1901 to 1981, during which long-term sovereign bonds returned negative 1% per year on average in real terms. The 1982-to-2020 era of falling rates that made bonds great is the anomaly, not the norm.
Gold, by contrast, has returned roughly 1 to 2% above actual inflation over long periods, and in a multipolar world where central banks with competing interests are actively buying it, its price-discovery mechanism is more trustworthy than CPI. "When I look at whatever they tell me CPI is," Gromen says, "just show me gold."
His suggested allocation: at minimum 5 to 10% in physical gold, with personal conviction at more than 25%. The framework he references is the Jacob Fugger portfolio, 25% each in gold, cash, real estate, and blue-chip equities, designed to survive both hyperinflation and deep deflation without catastrophic loss.
The AI Snake Eating Its Own Tail
The conversation's most provocative turn concerns artificial intelligence. Gromen does not dispute AI's transformative power. He disputes its fiscal sustainability. AI companies are borrowing enormous sums, competing directly with the Treasury for capital, driving up interest costs at precisely the moment the government cannot afford them. "AI is borrowing money, competing with Bessent to undermine the tax base of Scott Bessent. Half of American tax receipts come from jobs. A lot of that is from higher-paying white-collar jobs."
His analogy is the 1990s telecom boom. The fiber laid from 1996 to 2002 still carries the internet. Most of the companies that laid it went to zero. "Some of them aren't going to be here to enjoy the fruits of their labor. Somebody else is going to buy their stuff out of bankruptcy."
Faber adds the competitive dimension: Chinese AI is rapidly closing the performance gap at dramatically lower cost. Gromen's Rust Belt upbringing makes the pattern recognizable. "I heard it 20 years ago. Oh, it's not as good. Oh, it's close to as good. And then: oh God, it's cheaper and it's better. And if you get to that last one, it's already over."
Where to Allocate
For equity positioning, Gromen favors electrical infrastructure above all: GRID and PAVE ETFs, along with industrials like Eaton, Parker-Hannifin, and Illinois Tool Works. U.S. electricity generation in 2023 was identical to 2004 levels, a 20-year plateau that he calls a direct signature of financialization. The reversal is inevitable. He also favors international diversification, specifically Japan and selected European industrial economies, arguing that excess returns require owning something different from the consensus. Cash, approximately 20% of liquid net worth in T-bills, provides optionality to act when dislocations appear. Long-duration U.S. Treasuries, in Gromen's view, remain certificates of confiscation.
The Secular Shift
Gromen closes with a quote from former Merrill Lynch strategist Bob Farrell: "In times of secular change, the markets will be playing by a new set of rules while most market participants are still investing by the old rules that had existed in the prior secular condition."
That mismatch, between the old rules and the new reality, is the opportunity and the risk simultaneously. The bull market that loses money is already running. The question is whether portfolios are positioned to recognize it.
5 Key Takeaways for Advisors and Investors
1. The regime has changed, and it is durable. Hamiltonian economics, characterized by tariffs, reshoring, and industrial policy, has been pursued across two ideologically opposite administrations. This is not a political cycle. It is a structural shift with 5-to-10-year investment implications, including persistent reflation and dollar weakness.
2. Long bonds are the wrong risk asset for this environment. With U.S. debt at 120% of GDP, the government's fiscal arithmetic requires negative real rates, not rising ones. Long-duration Treasuries held through this period are likely to deliver negative real returns, repeating the experience of 1901 to 1981. Advisors should revisit duration allocations with urgency.
3. Replace duration with physical gold, not just gold equities. A 5-to-10% allocation to physical gold is the minimum threshold Gromen recommends, with the rationale that gold functions as a real-return anchor in a fiscal dominance regime. In a multipolar world with competing central bank buyers, gold provides price discovery that CPI cannot.
4. Equities will likely soar in nominal terms and lose ground in real terms. Advisors who report only nominal returns are doing clients a disservice. Since 2022, the S&P 500 is down approximately 25% in gold terms even as it has risen sharply in dollar terms. The metric matters. Portfolios should be stress-tested against real return benchmarks, not just nominal ones.
5. AI is infrastructure, not a standalone investment thesis at current valuations. The telecom parallel is instructive: transformative technology, massive capital destruction at the company level, eventual public benefit captured by those who buy the assets at distressed prices. Position through electrical infrastructure exposure rather than richly valued AI platforms, and avoid assuming that frontier U.S. model leadership is permanent at current price-to-sales multiples.
Footnote:
1 "Luke Gromen: The Bull Market That Loses You Money - The Meb Faber Show." Meb Faber Show, 19 Aug. 2026, www.themebfabershow.com/episodes/HsfGpSrsSWe.
