The Sicilian Expedition
“Come back with your shield - or on it” - Plutarch
Looking at the continuation of the blockade of the Strait of Hormuz and the second order effects as oil stocks are slowly running out while SPR reserves are as well released, given the recent reference made by Chinese president Xi relating to the Thucydides trap, when it came to selecting our title analogy, we reminded ourselves of the “Sicilian Expedition”. The Sicilian Expedition was an Athenian military expedition to Sicily which took place from 415 to 413 BC during the Peloponnesian War between Athens, Sparta, Syracuse and Corinth on the other side. The dire consequences of the failed expedition led to a defeat of Athens and had severe consequences. An appreciable portion of Athens total manpower were lost in a single stroke. The Athenian defeat is considered by some historians to have been a turning point in the Peloponnesian War. Some historians considered the Sicilian Expedition to have been fatally flawed from the outset and the Athenian attempt to conquer Sicily was an example of mad arrogance. In 411 BC, the Athenian democracy was overthrown in favour of an oligarchy and Persia joined the war on the Spartan side.
As we pointed out in our April conversation “Crossing the Rubicon”, we made another “Roman Empire” analogy as an addition to our November conversation entitled “Kaì sú, téknon”. In this previous post, we made a visual parallel between the Roman eagle (symbol of imperial Rome) and the American eagle (symbol of the United States) as it was striking and intentional.
We reminded our readers that regular circulating United States quarters contained 90% silver through 1964. Starting in 1965, all regular circulating quarters switched to the copper-nickel clad composition that continues today but pennies stopped in early 2026.
We read recently that the Trump administration officials have pressed the Bureau of Engraving and Printing to design a $250 bill featuring the president’s portrait, in what would be the first appearance of a living person on U.S. currency in more than 150 years as indicated by the Washington Post:
- Source Washington Post
Yet another sign we think of the US Republic moving towards a Roman Empire scenario.
We would add to this that our Sicilian Expedition analogy could potentially lead to a similar outcome with the ongoing operation against Iran. The Sicilian Expedition marked in effect the beginning of the end of Athens as a “democracy” but we ramble again…
On the subject of currencies and “tokens”, related to AI we read with interest on our X feed the following comment made by Yoshik:
“The AI numbers are starting to look very ugly.
Even under “best case” assumptions, FT’s own data shows Microsoft AI ROI at -9%, Google at -15%, Meta at -28%, Oracle at -35%. Only Amazon barely comes out positive.
This is exactly why I keep comparing this to the dot-com era. Incredible technology does not automatically mean sustainable economics. The internet survived. Most internet companies didn’t.
Right now hyperscalers are spending trillions hoping future demand catches up to present capex. That’s not certainty. That’s a leveraged bet.” – Yoshik – Grah source Financial Times – X/Twitter
As well as the US dollar seems to be following the Silver Denarus trajectory in conjunction to the political system during the Roman period following the Crossing of the Rubicon. One might argue as well that “tokens” value will need to “depreciate” significantly given that Uber’s COO said recently that heavy AI spending is getting harder to justify, as token usage fails to show a clear payoff in consumer features. The interesting part is not that Uber overspent but, it is that even a company which is obsessed with efficiency cannot clearly tie the spend to a useful feature yet. On top of that, we read recently that Microsoft canceled its internal Claude code licenses after the “token-based” billing made the cost “unsustainable”, even for a company such as Microsoft with infinite cloud resources.
On that point we read with interest “Hedgie” ‘s take on the subject, as well on our X/Twitter feed:
“🦔Microsoft canceled its internal Claude Code licenses this week after token-based billing made the cost untenable, even for a company with effectively infinite cloud resources. Uber’s CTO sent an internal memo warning the company burned through its entire 2026 AI budget in just four months. American AI software prices have jumped 20% to 37%, and GitHub (owned by Microsoft) is dropping flat-rate plans for usage-based billing across its products.
My Take
The AI subsidy era is ending in real time. The same company that put $13 billion into OpenAI and built the Azure infrastructure powering most of Anthropic’s compute just looked at the bill from a competitor’s coding tool and decided it was not worth paying. That is not a productivity failure on Anthropic’s end. Token-based pricing is forcing every enterprise customer to confront the actual cost of running these models at scale, and the number turns out to be far higher than the flat-rate experiments suggested.
This ties directly to my Gemini Flash post yesterday. Anthropic, OpenAI, and Google all raised effective prices in the last six months. Enterprises that built workflows assuming AI costs would keep falling are now watching annual budgets evaporate in months. Two outcomes look likely from here. Either enterprises scale back AI usage to fit budgets, which slows the revenue ramp the labs need to justify their valuations ahead of IPOs, or the labs cut prices and absorb the losses, which makes the unit economics worse at exactly the wrong moment. Both paths land in the same place, the numbers stop working, and somebody has to take the writedown.
Hedgie” – Source Hedgie – X/Twitter
It is not only the falling value of the US Dollar as measured by the rising price of Gold that needs to be taken into account but current dizzying valuations in the AI space, do make us feel that “token” value will have to drastically come back down and valuations in the space as well. One thing for sure, the fight is intensifying and will go more “vertical” given we have read recently that French Mistral AI wants to build its own chips to “outpace” Wall Street. Sovereignty matters more and more, as such you can expect various regions and countries to follow not only energy/food independence and rare earths sourcing but, as well “independent AI”. This we think is why “scarcity” matters and supply management has been the dominating feature of the success of the Chinese economy in recent years.
For those of you interested on our take to the United Kingdom strong exposure to Inflation-linked bonds, here is the link to an article we just published on LinkedIn relating to United Kingdom “convexity risk”.
For those of you interested in “ongoing” Blowbacks and “sovereign credit exposure”, here is the link to an article we just published on LinkedIn relating to Bahrain’s fiscal situation being in the “crosshair”.
In a Pareto efficient economic allocation, “no one can be made better off without at least one individual worse off”.
In this conversation we would like to look at the recent rally in perspective and the rising disconnect with some credit signs under the hood, leading us to reassess some of our exposures and look more towards “Frontier Markets” from a “Macro” perspective and allocation.
On a side note, we collaborate with friend Geoffrey Fouvry from GraphFinancials as you probably know from reading our Substack Macronomics. As such should you want to subscribe to Geoffrey’s top investing analysis (Geoffrey manages his own portfolio and his performance long/short, no options was around > 150% in 2025) enclosed is a discount link to subscribe to GraphFinancials services of trade recommendations. Geoffrey, like us is old school value but opportunistic as well:
https://buy.stripe.com/4gM6oI2oP7hCfkEbdZ4ZG0m
Also : You can view our most recent YouTube conversation with Chris J. Snook on our Tube channel:
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