Friend of Fringe Finance Lawrence Lepard released his most recent investor letter this weekend. He gets little coverage in the mainstream media, which, in my opinion, makes him someone worth listening to twice as closely.

Larry was kind enough to allow me to share his thoughts heading into Q3 2025. The letter has been edited ever-so-slightly for formatting, grammar and visuals.

Larry offers up what I believe to be an extremely clear, concise and accurate analysis of the situation the U.S. finds itself in heading into the summer.

If you’ve been reading me for a while, you know I don’t hand out praise easily. But when it comes to Larry Lepard, I make an exception. Larry has one of the sharpest macro minds in the game — not just because he sees what’s happening, but because he says it plainly, without the usual Wall Street sugarcoating.

He’s been consistently ahead of the curve on inflation, monetary policy, gold, Bitcoin, and the dangerous illusions at the heart of our current financial system. He’s not afraid to connect the dots between politics, markets, and policy dysfunction — and he does it with clarity, rigor, and just the right amount of well-earned cynicism.

This latest quarterly letter is Larry at his best. I agree with nearly every word — from the absurdity of the so-called “Department of Government Efficiency” to the market’s delusional ability to shrug off war, tariffs, and fiscal lunacy. Larry’s diagnosis of the “Crack-Up Boom” is not just timely — it’s inevitable, unless the laws of economics have been permanently repealed.

Note: What you’re about to read is Part 1 of Larry Lepard’s Q2 letter. It covers the political and market chaos of the past quarter — tariffs, airstrikes, the TACO doctrine, DOGE, Powell vs. Trump, and the fiscal insanity unfolding in real time. It’s a wild ride, and a brutally honest look at where we are.

Part 2 will be out this week, and it dives deeper into the core of Larry’s macro thesis: what all of this means for Bitcoin, gold, silver, monetary debasement, and how he’s trying to position accordingly. Subscribe today and get 60% off:

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Quarterly Overview

The second quarter ending June 30 was another headline-driven, news-filled extravaganza. It began with President Trump appearing on national TV on April 2nd (after markets closed) and announcing extremely aggressive tariffs on imported goods from a wide array of countries. The move, quickly dubbed “Liberation Day,” was not well received by the markets. The S&P 500 dropped 15% over the next three trading days. More concerning, the yield on the US 10-Year Bond jumped from 4.12% to 4.4% in just a week.

The market response sent a clear message to the White House: a full-blown trade war would not be good for stocks or bonds. Likely at the urging of Treasury Secretary Scott Bessent, Trump walked back the policy almost immediately. On April 8th, he announced a 90-day pause on the tariff implementation to allow for negotiations. That reversal triggered a massive 9.5% gain in the S&P 500—the third-largest single-session increase in history.

This abrupt about-face gave rise to a new acronym: TACO, short for “Trump Always Chickens Out.” Some called the sequence of events a clever Art of the Deal maneuver, intended to keep other countries off balance. There may be some truth to that, but the net result was a period of dramatic market volatility. We addressed much of that in our last letter. Here, we’ll focus on the macro implications. Still, from a quarterly standpoint, a few other developments deserve mention.

First, the market fully recovered from its April swoon. In fact, the S&P 500 reached a new all-time high of 6,204 on June 30. That outcome surprised us, and we will unpack our thoughts on why later in this letter. Second, on June 22, the Trump administration executed an airstrike against Iranian nuclear development facilities using B-2 Stealth bombers. Many feared this was the beginning of World War III, but for now, things have settled. Notably, Israel’s war on Palestine continues without respite, and the Russia–Ukraine conflict is intensifying once again.

The quarter also saw a resurgence in IPO activity, with 100 companies raising over $15.6 billion. Two offerings in particular—CoreWeave (focused on AI) and Circle (a stablecoin firm)—stood out, debuting strongly and rapidly multiplying in value. Perhaps even more surprising was the shift in economic sentiment. While first-quarter GDP contracted by 0.5%, the Atlanta Fed now predicts 2.6% growth for Q2. Despite tariffs and geopolitical conflict, the market’s resilience has been extraordinary. This is what we now call a Teflon market. War, inflation, tariffs—it doesn’t matter. Investors continue to buy the dip. That mentality has worked since 2008, and we admit we’re stunned by how far and how long this bubble might run. We’ve updated our thinking accordingly and will expand on this in the “Crack-Up Boom” section.

As the quarter ended, the Trump administration shifted its tone and policy direction in a notable way. During the first half of the year, the focus had been on government reform, specifically via the Department of Government Efficiency (DOGE), which aimed to rein in the federal deficit. Although some progress was made, the overall effort failed to gain enough traction. The negative market reaction to the tariff episode, ongoing geopolitical instability, and the sheer cost of addressing these issues contributed to a strategic pivot. The administration now appears fully committed to an aggressive fiscal expansion, formalized in a new initiative dubbed the Big Beautiful Bill.

Using his characteristic approach and aided by a compliant Congress, Trump managed to push through a record increase in federal spending—outside of COVID stimulus—and a $5 trillion increase in the debt ceiling. This virtually ensures that U.S. fiscal challenges will persist well into the future. As the BBB passed, we saw a clear market reaction: gold, silver, and Bitcoin all surged. This aligns with Treasury Secretary Bessent’s recent remarks, in which he stated that the administration’s new priority would be economic growth first, under the assumption that faster GDP growth will ultimately shrink the deficit. We don’t necessarily disagree with the goal, but such growth will require substantial inflation—and for that, the Federal Reserve must cooperate. So far, it hasn’t.

U.S. Fiscal Watch

The primary driver of long-term monetary debasement continues to be the federal government’s inability to control spending.

COVID shifted the baseline for federal outlays upward, and even though deficits have come down from their pandemic peak, they have not returned to pre-COVID norms. The chart below we reference in our report shows that while the deficit fell sharply after emergency COVID spending ended in 2022, it has since resumed an upward trajectory. Through May 2025, deficit levels have tracked equal to or above the prior three years.

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