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Everybody Look What's Going Down

ASK BART: Shouldn't you be doing something?

- By The Notorious CFP®

The following is a new series dedicated to answering real client questions. The questions themselves, along with names and details, have been altered to protect the innocent.
READING TIME: Weeks. (You think I'm joking..) 


  • Introduction
  • Where We Are
  • How We Got Here
  • Where We (Grow) From Here


The title above isn't just rhetorical clickbait but an actual question that I receive explicitly a couple of times a week now, many more times implicitly (and both increasingly as the stock market continues to vacillate). I never begrudge the inquirer for a very reasonable question and logical reaction to the carnage many investors have experienced in the stock market so far in 2022, especially in recent months. This is a topic I presume is occupying most investor's thoughts these days, as account balances whipsaw from day to day, and primarily downward. If I was my own client, I would be seriously questioning my own intelligence and activity (or lack thereof), so no I don't take it personally.

The volatility across all financial markets is such that even some of my toughest, most tenured and battle-hardened clients are struggling to keep the faith, and a few have even contemplated turning their paper losses into permanent ones (translation: sell and/or go to cash.) And it's not hard to understand why. At the highest level, it's crucial for investors to know and understand that the foundational cause of the turmoil roiling the financial markets today is human psychology. Everything else permeates from a form of collective madness that has gripped our society. Warning: I go into great depths on this topic below and I do so specifically to upset as many people as I can. I liken upsetting to a close cousin of 'disrupting preconceived, often irrational notions.' If you prefer to be told what you want to hear, pick up a newspaper or call your favorite Senator. And then get back to me how your life turned out in a couple decades.

NOTE: I use the euphemisms  'our', us and me a lot these days, because I believe an intelligent person looks out at the behavior of our culture and should be at least contemplating the possibility that they have gone insane as well. But don't worry- off the record, when I use those terms, I'm still mostly referring to all the crazy people that don't act the way you and I think they should.

I sincerely wish I had better news for you. None of what you're about to read is going to be easy for you to hear, but I am convinced that there is not only a light at the end of this tunnel but also incredible financial  opportunity. The simple truth- and this blog post in less than 1000 words - is that a general unease has permeated the populace during the past few years, and people of all stripes are struggling to identify and process exactly what has changed in their lives (and those of their fellow citizens), and what it means for the fate of our country and economy- both where they are now and where they may be headed. 

We're going to deconstruct that as we meander (painfully) towards a unifying thesis (not Joe Biden's version of "unifying" resembling Grampa Simpson. Like legit enlightenment...) about the current market and what to do about it. If you think it's sliding off the rails, then you're probably right. But I promise you that at least it's gonna be entertaining. If you can stay engaged, and not give up on me, I think you will find it time well-spent .. at least compared to how you usually waste your disposable time. Best case, you'll be smarter. Worse-case, you'll know it's time to find a new financial planner.

At the highest level, it's crucial for investors to know and understand that the foundational reason that the financial markets are in turmoil is human psychology. Everything else permeates from a form of collective madness. 

When diagnosing our current predicament, it's always helpful to establish some baselines. First, the President of the United States is not the source of your problems. Nor was the last guy. (They're honestly just symptoms of a greater cancer. They're props in a greater production. Used to distracted the stupid.) The climate and it's changing nature are also not the source of your primordial anxiety, nor are the border crisis, the Supreme Court, social injustice, declining morals, the destruction of democracy or your mother-in-law. In the vast majority of the cases, if you're unable to cope with something, it's likely because you are deficient in some capacity or are lacking a particular skillset that would allow you to adapt. Or at least cope with it. Don't shoot the messenger, blame your parents (Cuz I do.) Most older and more mature adults already understand this implicitly, but it always bears repeating. Since I've deduced that the vast majority of Americans today are really just children trapped in adult bodies.

Once we as humans identify the true source of our primary quandaries, it becomes incumbent upon us to solve those problems ourselves. Not the government, not the company that trade us money for time, not our family, and not people on the Internet. If CNN or Fox News is the outrage drug you feel the need to consume in the morning to be whole the rest of the day, then how you feel about the source of your hostility is your problem, likely a projection of your own insecurities and will continue to exacerbate your own failures in life. Or at least that's what my fortune cookie told me last night. But in all seriousness, if you fell for the Trump Russian Collusion hoax or believe President Joe Biden is the actual person destroying our country, then you're being played. And that's not me saying that, it's the universe, channeling me through this blog. I'm just the conduit with nothing to lose.

My point is that the general anxiety we are all experiencing a.) is real and b.) represents the apogee of a much larger existential arc that's been cresting for many years, even prior to the COVID pandemic. Many attribute our current economic malaise to the inevitable - albeit delayed - consequences of government shutdowns and the dislocations in a country left festering from several very ill-fated decisions. Others prefer to assign primary culpability to the acceleration of technology and social media. I observe far too many Americans choosing to blame the "other" half of the country that disagrees with them one one issue or another. You see it at the store. You see it on television. You see it at the polls. We are a country deeply divided. Diversity is not a strength when you can't even agree on the nature of reality. And everyone knows exactly whom I'm referring to, both those nodding right now as well as those fuming.

I can make a pretty compelling argument that the Western developed world was suffering from a certified mental health epidemic well in advance of the arrival of the COVID virus and vaccine on our shores, but we as a culture chose to ignore this fact, because we lack either the collective intelligence or ethics (or both) to properly recognize it, identify the cause and work toward a solution. Perhaps a country of psychologically distressed citizens too focused on their own self-interests or deficient in both wisdom and character conveys benefits too attractive to ignore for powerful political, ideological or corporate interests that would rather our country and it's people be engaged in a weakened, confused and dependent state. That being said, it would be hard to deny that our current condition has not exacerbated exponentially in the wake of the COVID's impact: hundreds of thousands of Americans dead, businesses and livelihoods destroyed or on life-support, and a  feeling of helpless and fear of what might come next. 

In summary: yes, the world is going insane. Obviously. But what kind of insanity is this? And how does this relate to how much money we've all 'lost' in the market in the past year? We'll get to that in a couple hours. For now, let's really twist the knife (my greatest life skill). I introduced my thesis previously in a short, popular, random (and quite controversial) post recently titled Requiem for a Correction and I think it would be beneficial to detour there before continuing further on this topic.

Requiem For A Correction

An Introduction to Mass Formation Psychosis 

- By The Notorious CFP®


Across the many dozens of intimate personal interactions I engage in daily, I have yet to encounter even one client in the past year who is even remotely comfortable with the current direction of the country, the leadership, the economy and the markets. At all times- depending on one's exposure to the news- it can feel like our society is spinning out of control, the pace is accelerating and the entire experience has become massively disorienting, if not overwhelming. To compound matters, many have been led to believe that our mental health problems are the result of one man, one political party or some other singular entity. I recognize that this is the easier intellectual route to travel, so it's not surprisingly the one most popular today with the average American who has been educated in a government facility and raised by soundbites, tweets and inane online commentary.

It's not unusual nor unprecedented for humans to fall for or engage in this type of delusion. All societies require a worthy villain, enemy or opponent - USSR, Ho Chi Minh, Castro, Darth Vader, Andre the Giant, the Dallas Cowboys... And if an enemy is not easily found, then one will ALWAYS be provided for us. Usually by the media, who traffic in emotion and subterfuge as their primary business model. However, targeting of a single person, entity or idea that we don't like often only satisfies a compulsion to avoid self-accountability or identification of our own problems or agitators within our own walls. It can strip us of our agency because if our personal problems are the result of something or someone else, then we're absolved from having to solve them. Hence the past sixty years of race and gender relations. Anger helps dehumanize and resentment usually injures the aggrieved most. Which is the state most desirable to the elite, and increasingly prevalent in households with a single parent or two working parents.

As I wrote and predicted in early 2020 (and conceived in the aftermath of the 2016 election) - and Doris has had to suffer through most mornings for the past two years... and which many Americans are only now starting to discover - for most Americans, their real mental struggle isn't actually with someone or something external, but with something inside themselves. They've been tricked. And that's a painful pill for anyone to swallow, especially those who have been yoked to comforting lies or ideology by their parents, the school system and/ or the government. Many will never understand or see this, and will continue to hold on to distorted, counter-factual and counter-productive beliefs until well past the point they no longer serve them. 

Many Americans are only now starting to discover that their real mental struggle isn't actually with someone or something external, but with something inside themselves.

I'll give an example to bring the point home. Few people I ask are too familiar with Venezuela's descent from wealthiest country in South America at the dawn of the 21st century to third-world status today.  I traveled extensively in Latin America during that period and I mostly remember the arrogance of the Venezuelans. The price of petroleum was high back then and the country derived incredible financial and national benefit from it's production. That is until they didn't. The introduction of a socialist economy, and the expulsion of the evil gringo and his evil corporations, were but two of the early missteps by their leadership and  a population who thought they could redefine economic reality on their own terms. That didn't end well, it never does. Today, Venezuela is an actual hellscape where middle-class people like you and me dumpster-dive for scraps of food and plot their escape to neighboring countries or- increasingly, the United States. Milton Friedman rolls over in his grave and I think college econ professors should be forced to teach their classes remotely from Caracas.

When I reflect back on my travels through that beautiful continent, I also remember the massive social delusion I witnessed as their society began to slowly implode- even as the cost of fuel rose, small businesses were destroyed, stores shelves emptied, prices skyrocketed, and police reform led to mass criminality (Yes, sounds vaguely familiar but I'm still talking about early 2000s Venezuela!) Assets like housing and stocks were going up or staying UP, but the value of their currency was going DOWN faster, it couldn't keep up. Like our real estate market, residential home values weren't so much increasing as much as the things used to buy them (bolíva) were decreasing, a key distinction that most Americans who only took high school economics miss today.

This weird era and phenomenon is referred to as 'a crack up boom' by Ludwig Van Mises, a character certainly familiar to anyone who has ever opined about capitalism or socialism online or to other people out loud (LOL, I wish!) The crack up boom is a fascinating framework from which to contemplate our current state of affairs in the United States, for anyone who has ever wanted to sound smart but lacked the confidence to do so. Or anyone who thinks there home is more valuable than it was in 2020 just because it takes more US dollars to buy. We think we're getting rich because our houses cost than we paid for them, but that's because we're stupid. If dollars are losing 15% YOY, you're not even breaking even.

I know this will sound completely foreign to us (cough*cough), but up until the end of the party, Socialist Venezuelan continued to blame who the state media told them to blame (mostly big business and the evil United States) and they believed in the power of their own government apparatus (welfare) to save them. Following historical precedent, they then transitioned towards the predictable blaming of individuals ("they just didn't implement it right"), when it was really their own retarded narrative and misunderstanding of people and economics that was the true culprit. Yeah, it's gonna be that kind of blog post- snowflakes and the easily triggered should bail out now. 

I introduce Venezuela's decline early because it imparts a very powerful analog to our current financial market condition, and provides an anti-roadmap on how to break free of our current struggles, and ultimately benefit financially (Hint: I have found that one should behave financially in the opposite way to anything that a.) has been tried before but b.) has always failed 100% of the time in the past- socialism, communism, fascism, etc.) Capitalism eventually fails as well, but the timeline is exponentially greater and usually dos so primarily because it devolves into one of the former systems.

The Dark Triad

The consistent commentary I have been hearing this year from clients pervades across both sexes, political leanings and all socioeconomic strata, and it clearly weighs heavily on all but the most obtuse or proactively disconnected. Angst appears to be the dominant "je ne sais quoi" throughout most of the Western World (and beyond) and the foundation of the cultural malaise currently infecting virtually every aspect of society and household finances. In my estimation, it all ultimately comes down to control (which is closely connected to choice), specifically the belief that we can maintain control in all aspects of our daily existence. If psychology is the concrete foundation of our predicament, and Mass Formation Psychosis the rebar, then control is the edifice from which we began to build the structure of our life's narrative.

It's human nature to believe that we are in control of our lives, our situation and our future. Most of the time, that's an easy social construct to adopt because we live in the developed world, with unprecedented levels of  obscene (and awesome!) convenience and luxury. In my observation, many people today think they are their own God. They would never articulate it as such and lack that level of consciousness even if they could. But that's the result of a culture with collective tendencies trending towards the Dark Triad of narcissism, Machiavellianism, and psychopathy. We see it everywhere today- on television, social media, driving in Dallas and in some of the seemingly hollow, transactional and meaningless interactions with others. 

But it's mostly self-absorption, and in my experience it manifests in what I perceive as a lack of societal altruism. I suspect you see it, too. As a result, revelations of how little we actually do control in our own lives can often feel like a violation of the natural order and our profound sense of self. That's our experience when stock markets go down and people see their wealth evaporate. It's a violation of (their) laws of finance, or how they think it should behave. Especially for a younger generation who has been told their whole life  how special they are while being simultaneously and perpetually bailed out and protected from life's ugly dark side. In this alternate reality, hard-earned savings disappearing is like gravity failing. And they struggle to understand, cope and move forward. That's what's going on right now in all financial markets- from stocks to crypto to (soon to be) real estate.

The truth is that control is largely an illusion we desperately cling to, has been gradually and carefully cultivated through many years of conditioning and aided by our advanced technological and affluent society. We are intoxicated by the belief that many of our perceptions are reality when in fact most are actually false representations. My observation- both personal and professional but definitely not educated - is that the total autonomy and agency bestowed by a sense of control may actually produce a chemical-like effect of well-being and ease that is now being harnessed and manipulated by those entities that would benefit most - namely the most powerful pillars of modern life such as our government, corporations, churches and community organizations.

Control is largely an illusion we desperately cling to, has been gradually and carefully cultivated through many years of conditioning and aided by our advanced technological and affluent society. We are intoxicated by the belief that many of our perceptions are reality when in fact most are actually false representations.

For instance, when cosmetic and healthcare companies want us to feel insecure about our bodies, they introduce a 'solution' within our control (and budget) like hair color, eye liner, facial creams, fillers, Botox, gastric bypass surgery, breast augmentation and other panaceas that lead us to believe we can control aging. On the other hand, whom among us would be willing to fully recognize and tackle the toxicity in our own diets, drinking water, physical activities and sleep- all far more effective solutions- because frankly, where's the money in that? 

Mega-corporations motivate us to buy by presenting images in commercials, ads and social media posts that offer up that one product or service we're missing to achieve that elusive happiness that we all seek. When governments want to consolidate more power, acquire more control and neuter personal liberties, they escalate or even manufacture fear - usually through contrived  "wars" on communism, drugs, poverty, disease, terror, climate change, health care costs, Russia, etc. At this point, it's becoming comical; Poor Karine Jean-Pierre has assumed the role of America's favorite comedian; silly rabbit initially thought she was being promoted. As she gradually begins to discover the truth, be certain that she is already writing the book that stabs her boss in the back. Trust me, It's coming.

Governments throughout history always coordinate with their propaganda arms in the legacy media to saturate the market with buzzwords, bogeymen and dire media coverage that drive and influence all of the most malleable minds that were educated in government facilities under their curriculum. They sometimes even subjugate entire racial/gender demographics into the benevolent arms of group think, which does far more to enslave than liberate. But as we've seen and I will discuss in depth below, those aren't arms, baby. 

"Choice is an illusion created between those with power and those without" – Merovingian (The Matrix Reloaded)

Cognitive Dissonance in Modern Finance 

- By The Notorious CFP®

Unfortunately, another problem arises when we're misled by disinformation to believe obvious untruths. One example of this is the stock market, which has averaged about 8-10% long-term (without much manual intervention by the investor themselves except for continued funding) and has been thus far the greatest wealth-generating device in the history of the world, but is risky in the short-term (< 5-10 years). Like really risky. Investors in many financial instruments need to have long-term time horizons (think 3-5 years minimum), understanding of financial concepts, historical context of markets, suitable risk tolerance and sufficient outside capital to avoid tapping investments if and when they gyrate unpredictably every 5-10 years. And thank God markets are risky, because can you imagine if the stock market only went up and never went down? Then everyone - even the young, entitled, reckless and the stupid - would have as much success as their more prudent doppelgängers. (Do you get the impression my posts fell like I'm playing a galactic Scrabble match against myself?)  

What would happen if (hypothetically, of course..) the investing population was misled to believe in a perpetually rising stock market with no risk? There would also be no fear, of course, which would lead to increasingly larger and wilder speculation. I know, impossible to comprehend. 

On one hand, we'd all work like a boss to accumulate enough scratch as possible and put it into the market to grow nonstop. Many Americans would avoid overspending and financing everything they make (and then some) for obscene consumer purchases that they don't really need - like granite countertops and self-driving cars- in order to impress people they don't even know or like. Everyone would be successful, and we would all come together every tax season to celebrate our shared bounty with the beloved IRS, give thanks to our politicians for their generosity in prudently spending our money, hold hands and sing kumbaya. Local DC resident Chief Senator Elizabeth Warren could read us recipes from her Pow Wow Chow Cookbook and lead us in Cherokee songs. It would be a gay old time, indeed.

Admit it. Right now, your brain is saying, "I don't have time to read this tripe," but your body says, "Oh wow, he's about to go off the rails. He thinks he can just say whatever he wants... like it's 2015... Dude's committing professional suicide... It's screenshot time."

Compounding the inherent risk in the fluctuating price of stock certificates, in 2022 all investors (and advisors) are rediscovering that the investing community is prone to temporary and unpredictable bouts of irrational and illogical behavior, and the market is not as easy to tame as we've been led to believe. Before the modern Fed adopted their current mandate and became much more "active" (around the turn of the 21st century) the stock market would go down in value (or flat) fairly frequently... like approximately every 7-8 years (1981, 87, 1990-91, 94, 2000-02, 08, 11, 15... you get the idea...) The new Fed has recently and successfully forestalled much in the way of major pain in the stock market since 2009, so we've really been "in extra innings" the last few years of gradually rising markets and thus  due for a pull back. Trees don't grow to the sky, ya' know... 

But man, does this market below really seem that risky to you? Are bell curves really something to be feared? Or expected?

I recognize that history and facts don't matter to a lot of people these days. Some even feel threatened by facts.... But I go on record as admitting that I LOVE facts, and I want you to love them, too!

Make no mistake, the federal government, the Federal Reserve (head of the banking cartel) and Wall Street are very invested in convincing Americans that investing is easy to understand, fun to participate in, predictable all the time and very lucrative for all involved. It's incumbent on their survival for investors to believe that all other participants are just like you and me- logical, rational, patient, funny, and devilishly good-looking. It's also helpful if you believe the other players to be cold, calculating and robotic in their behavior, know the exact price of all assets correctly and never misbehave or overreact.

Sadly, that's not how it works about 10-20% of the time. That's not how any of this works. We may want to believe politicians can control Earth's weather, consumer preferences, health and beauty ideals and equality of outcome- indeed many people raised in dysfunctional homes grow up living in that exact fantasy- but our leaders increasingly do a crummy job of letting the free market operate. People making their own decisions about their own lives is anathema to them and terrifies them. So they intervene. And this has led to a level of a level of investor complacency over the past 13 years (since the Great Financial Crisis 2008-2009) that has lulled more than a few investors into believing that the stock market is universally fair, can only go up, dips in value just for their benefit and only exists to cherish and support them. Like a Snuggie for your money

The truth is that - like the real world- markets can be merciless. The vast majority of the time, they are calm and predictable. And they usually do go up. But every few years, they deviate from what's expected and go down or sideways. Believe you-me, It's a real scandal. Depending on the length of time since the last market disruption, the volatility can unsettle even experienced and resilient investors if they perceive it to be outside the norm or subsist for longer than they are comfortable with. Normally this happens every 7-8 years, but on occasion the Fed can engineer an 'economic summer' for 13 years in a row. Like the Green New Deal, it  sounds great in theory. But in reality, it's actually bad. And the reasons should be obvious to anyone living in Texas.

Newer investors are often famous for losing faith early on when markets drop and investors approaching retirement are also prone to panic-selling because they think they need it all safe and protected on the exact day they retire. If the decrease in value persists long enough- especially if there is a compelling narrative about why the market is down and might stay down forever- say, for instance, if one were to believe that our leaders are the complete morons that we were always warned they would be - then our old friend, cognitive dissonance, can rear it's ugly head and sabotage even the smartest investors.

“Let me tell you something you already know. The world ain't all sunshine and rainbows. It's a very mean and nasty place, and I don't care how tough you are, it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't about how hard you hit. It's about how hard you can get hit and keep moving forward; how much you can take and keep moving forward. That's how winning is done! Now, if you know what you're worth, then go out and get what you're worth. But you gotta' be willing to take the hits, and not point fingers saying you ain't where you wanna be because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that!.”
Sylvester Stallone, Rocky Balboa

Habits of Success

Client frustration resonates with me because the truth is that doing something - anything - to protect assets is one thought that rarely leaves my mind. I'm superhuman of course, Type-A and fairly proactive, but even I'm susceptible to the same temptations with my personal investments as my clients. When I watch years of my own savings evaporate in mere months, I feel the same pain, experience all the regrets and lament all the "woulda/ shoulda/ coulda's" with the money that is (technically and temporarily) gone. It always feels like a grave injustice has been committed because I did the 'right thing' by saving my disposable income instead of spending it (like most of the populace), only to find myself worse off than if I hadn't delayed gratification at all and simply blown it on something pleasurable. Like Nutella. At least I'd have the memories. And only weirdos look back fondly on the actual act of saving money. 

Perhaps you can relate to those thoughts as well. Perhaps you're also feeling a little foolish about investing following this recent market sell-off. Fortunately, those feelings are always fleeting to me. Brief, unconscious regressions back to a time when I was a less experienced investor, when I simply lacked enough repetitions (i.e. mistakes, failures and losses) necessary to achieve mastery in the investing game. I will let you in on a little secret: I rarely look at my own investment account statements anymore (quarterly at most, semi-annually on average..) because a.) I kinda' don't care, and b.) I understand my own investor temperament and the need to avoid putting myself in compromising situations that might sabotage my long-term financial success.

This is similar to my strategy with many temptations- like Las Vegas, cigarettes, Dunkin' Donuts and wild women. I know if I can get home from the grocery store without the cookies and chocolate in the grocery bag (the reusable cloth ones, of course. Because I'm a citizen of the world..), then I know I've won 90% of the battle. And thus it is with my investments. 'Cuz I know who I am.

When I work late to finish a new financial plan, or go to the gym instead of socializing with friends, I don't experience this same kind of regret as investment losses because I know there will be a guaranteed payoff at the end... and usually soon- gaining a new client, losing a pound, etc. The positive result I receive is always a consequence of the effort, it's a universal constant. But when I observe account balances drop on paper, even though I know it's inherently built into the process  - markets can't always go up, they have to go down occasionally- the losses somehow trigger a more painful neurological experience. 

I never know for sure how deep or how long or low that down markets will go. I think human brains process this kind of sacrifice with investing uniquely because- although we intellectually know and accept that our portfolios will eventually recover and go on to new highs, as they always have - emotional demons still whisper into our minds, "What if it doesn't this time?" "What if this is the big one?" "What if this jackass, [insert boogeyman] is the guy that finally drives America over the proverbial financial cliff?"

In addition to avoiding account statements like chocolate cake, I've also spent most of the 21st century carefully "training my brain" to consider most of my long-term assets as not real money nor something I will ever access, so it doesn't hurt as much when it loses value. Today, anything I don't hold in bank accounts might as well be Monopoly Money or some uncertain future payout (like the corrupt Illinois lottery) to me. I recognize that for some that mentality may seem odd, irrational or simply a privilege of my young(er) age. However, a.) that doesn't preclude it from being an effective approach and b.) I have identified these as two proactive mental exercises that I can control that have always produced  successful outcomes. They may not in the future, but so far, the markets - and my accounts - have reliably risen over any sufficient length of time. (I suspect this is where I'm required to disclose that "Past Performance Is No Guarantee of Future Results.")

I know if I don't look at my accounts and don't feel the money, I'm less tempted to do dumb things with (and to) it. An investor gains a competitive advantage if they can internalize (or even pretend) that "it's only money" while also recognizing that if the US stock market were to never recover from a major correction, then that likely means that all of America's largest companies went belly-up simultaneously. Which would mean Americans stopped buying homes, vehicles, smartphones, computers, MSM lies, etc.. That would seem to me to be a very precarious situation preceded by far greater calamities, like a nuclear holocaust, zombie apocalypse, alien invasion (followed by the inevitable enslavement and uncomfortable probes), you get the idea...  

In those types of highly-improbable scenarios, where even just a few companies dissolved suddenly, and Americans lacked goods and services to consume, then there would likely be no more economy, the US dollar would no longer have value backed by a military and taxing authority, and retirement accounts might be the last thing on most Americans minds. Most of us probably wouldn't be alive. Especially me, 'cuz I ain't going up into no alien spaceship. I know what happens up there.

So there's that.

It's dark but it's true. If it all goes to (pot), then what does it matter? But if it doesn't, what do you have to lose by waiting 12-24 months for a recovery? I've waited two years (and counting) for a freakin' new car... you don't see me selling my truck and yelling at the dealership. I just go on with my kickass life and control the things I can control.

I acknowledge all that can seem a wee bit morbid and nihilistic but a.) have you met me before??? and b.) sometimes it's my job to wake some people the heck up so we can really work through their deepest (sometimes irrational) fears. For instance, I actually get a, "What if it all fails?" type-question at least once a week. Usually from very smart people. I typically respond by carefully navigating the client through a poor man's version of the Socratic method - i.e. questions and answers about their unease in regards to worst-case scenarios - before transitioning into important topics like goals and objectives.

Inevitably, many come to realize some of the inherent and impractical conflicts in their worst-case narrative. Like how worried were residents of New Orleans about their Roth IRAs during Hurricane Katrina? I mostly remember people floating down city streets in small boats looking for water and bullets. The groceries stores were empty, even the vegetables were already stolen by then (which is rare in New Orleans). The entire city was underwater. Refugees were using the Superdome as a giant toilet. Kanye West proclaimed to America that George Bush Jr. hated black people. A significant portion of those Cajuns fled to Texas, were shocked that people there didn't live like animals and never returned. And our schools have never been the same.

My point is that worrying about a collapse of the financial system is kinda' ridiculous, right? 

Hardly manipulative, I instead perceive my Socratic script (of love, just for the record) as a reliable method for exploring where the true sources of underlying anxiety really arise from in order to determine if our perceptions, expectations and concerns are truly warranted. Many times they're not. Often we collectively agree that worrying about these scenarios is a waste time, a resource that could be used doing something more productive, like giving me more money to invest. Or buying me gifts. Or voting for me as Top Financial Advisor in Kerr County again. The point is that I would never manipulate people.

If I had to resurrect a unifying theme from this whole diatribe from several chapters (and hours of your life) ago is that protecting client wealth is always on my mind, it really is my life mission. So adjusting portfolio asset allocations in response to market dynamics seems on the surface to be a logical manifestation of that covenant. However, I'm aware from history - and my own professional experience - that the compulsion to act can be dangerously quixotic. This mentality is only a slightly unorthodox combination of a unique financial background mixed in with some above-average self-discipline and mental conditioning (with some delusion thrown in) that prevents me from acting on almost many of my market impulses. For me or my clients.

The truth is that the time to act is almost always before the stimulus to act appears. That is, when it makes the least sense to do so because typically the market is up and/or rising. That runs contrary to the majority of our hardwiring and the human experience, which is one reason I suspect that humans struggle so much with financial markets, especially during its infrequent drops. Our ancient and magnificent hind-brains are not designed for a stock market that's only a few hundred years old. We have little to no historical or biological framework from which to approach it effectively.

Once the stimulus appears (for instance, a substantial market adjustment or a shock), it's usually too late and ill-advised to do much of anything- assuming your portfolio strategy checks all the traditional boxes of successful investing, namely: buy quality, diversify and hold on (or even increase) your positions when markets go "on sale." Once a market enters a true market drop like currently exists- especially if it's steep and/or without an obvious catalyst- then the most productive action is often to decide when and how much more to buy of your existing positions (not sell). In fact, one of my most important roles is to discourage clients when I feel that they may be acting on their own emotional impulses during those (typically and relatively) brief windows of time when market go down or sideways. 

The time to act is almost always before the stimulus to act appears. That is, when it makes the least sense to do so because typically the market is up and/or rising. That runs contrary to the majority of our hardwiring and the human experience, which is one reason I suspect that humans struggle so much with financial markets, especially during its infrequent drops.

If all that fancy talk comes off as somewhat trite and glib, a.) that's pretty much my schtick and b.) I wrote a recent post called Some Historical Perspective with some other (colorful!) reasons why doing something is rarely the best reaction to market volatility...

Some Historical Perspective 

- By The Notorious CFP®


In the absence of scant positive news anywhere at the moment, investors are understandably on edge. We are becoming increasingly rattled by the ineptitude of our leaders- and our society as a whole- to lean in to our challenges and make the difficult, courageous decisions that have historically moved the country forward in past crises. I recognize that it seems inconceivable to most of us that any of our 21st century US Presidential candidates - on either side of the aisle - were our very best Americans for the job. I wouldn't let any President after Reagan in my house, and for all but the most ideologically damaged, I think they would agree. Many are left wondering, "Where have all the real men gone?" 

I think we all know the answer to that deep down, if we apply even a modicum of effort. It's not an accident that the elected leaders of virtually every country in the Western developed world today are less intelligent, masculine, innovative or courageous than their immediate predecessors. In our country, it's important to recognize that each successive President for the past 40 years has been largely inferior to- and certainly less effective than - the man he replaced. And that's presumably also not an accident nor coincidental. Of course, this is true for our 'leaders' in the other two branches of the federal government as well. All three branches are in tangible decline, because as Joseph de Maistre opined, we always "get the leaders we deserve."

“The government you elect is the government you deserve.”

― Thomas Jefferson

In addition to failures at the highest levels of politics, COVID similarly uncovered tremendous rot and ineptitude within our largest public institutions (from federal law enforcement and local government to education and health care) that had been previously swept under the rug or ignored, as the burdens and vulnerabilities of a large, undisciplined and unconstrained empire have grown exponentially. A fiat currency will tend to produce those outcomes.

These specific conditions have certainly sustained and even accelerated since the Great Financial Crisis of 2008-2009 (i.e. the Fourth Turning). While I have no doubt that we can (and will) rise to the occasion when the time calls for it - and sooner than many people think- the truth is that Americans, as well as our economy and markets, are at a historic inflection point. We face  myriad obstacles that will only respond to resolutions that conform to the founding principles of the country while still being able to accommodate new paradigms and a majority of the dwindling sane people left in our society. It's also clear that group does not include President's Biden's ruling cabinet of puppeteers (Susan Rice, former President Obama, et al) nor former President Trump and his rotating staff of lackeys.

Like humans, generational societal "pivots" rarely manifest during good times (when so many are 'fat and happy' and willing to overlook and ignore important systemic problems). Change usually requires extraordinary conflict and challenges that require us to fundamentally rethink how we operate our daily affairs- politically, socially, professionally and financially. And most important, personally. America has undergone three major "turnings" that upended and reset society: The American Revolution, The Civil War, The Great Depression / WWI-II. Each was roughly 80 years apart because that's generally how long it takes for the lessons learned by one generation to be fully lost. Of course, American's next Fourth Turning was scheduled to occur on or around 2008, but we somehow dodged that opportunity, for better or for worse.

Or did we?

I am genuinely optimistic for the future, but I also recognize that the bridge from where we are now to where we want to be will not be without great sacrifice and loss. Letting go of the things we cling to in order to embrace a new and better future will be paramount, and that begins within our own minds and our current perceptions of our world. The George Floyd / BLM riots, the collapse of the Texas Energy Grid for a long weekend and natural disasters foretell that  most Americans are ill-prepared for even a minor deviation from the norm. 90% of the people I know would not last a week without Wi-Fi, much less electricity. As a result, to rise and move forward, we must first awaken from our current cultural stupor (Tik-Tok comes to mind), while simultaneously rooting out and improving upon those destructive elements of our society that we've allowed to fester far too long.

I know I'm coming out the gate hot with a lot of fancy five-dollar words, high-fluting ideas and charged rhetoric, but don't despair. This post will (eventually) layout a definitive, somewhat offensive (to some), obscenely long (to all) and comprehensive framework for investors to understand where we are, how we got here and where we're headed. We will identify the opportunities that abound and discuss how, when and where to take advantage of our current dislocation in modern financial markets.

You thought this article was going to be about which stocks to buy. I understand. And I'm sorry. This isn't the hard-hitting, deep-dive financial analysis of USA Today.

Some Background

I won't lie. Even my own resolve can become tested in markets like those we've experience in 2022, as our current market decline admittedly feels distinct from any of those from my previous twenty years in financial services. You see, I gave up more than two decades of my prime years (personal, physical, professional and definitely social) to move from the "fun" mecca of Texas (Austin) to the two wealthiest counties in the state (per capita). I did so specifically to work long days, nights and weekends serving as steward of the savings of as many households as possible (mostly successful and conservative Baby Boomers).

I constructed defensive, ultra-conservative portfolios with a focus on principle protection. I changed firms four times in two decades to arrive at the perfect business structure for modern investors, far superior to my competition at the wirehouses ( =  basically any investment firm with TV commercials, sports stadiums or online marketing.) 

Throughout that journey from W-2 employee advisor to small business owner to Certified Financial Planner and finally to Registered Investment Advisor (RIA), I've faced professional obstacles, deeply personal betrayals and industry upheavals that one can't even imagine, experiences that I'm not even comfortable sharing (which is rare for me!) The journey began by knocking on 125 doors a day in the 100 degree Texas summer heat for four years, just to keep my job at Edward Jones... and then it got harder.

I was on probation my entire tenure and colleagues actively worked to overtly sabotage my career (a consistent theme during my time at Jones), my bosses actively threatened to fire me on multiple occasions, and I had to attend remedial sales classes run by peers who had been given large existing offices and assets that would take me a decade to achieve. I look back like an abusive spouse and wondered why I stayed so long in such a terrible relationship, just to help investors.

After breaking free to become an independent advisor unbeholden to Wall Street, my M.O. has generally coalesced around conspiring to 'hit singles and doubles' as my clients approached and entered their retirement years, playing it prudent with the understanding that we would likely surrender the tops of many market peaks to ensure that we would enjoy greater protection on the downside when markets inevitably corrected. Unfortunately, in the first half of 2022, that strategy did not work out as expected for us nor for almost anyone else in the world. I know, I know... you have a friend or brother-in-law who piled into energy in 2021 and has made a killing. (After a decade in which oil and gas enjoyed -50% losses.)

Ask around. There are very few sectors that are not hemorrhaging in 2022. As in the early stages of most emotion-based market sell-offs like ours, everything is for sale and steep discounts abound. The laws of economics seem to no longer apply and everything falls in value at roughly the same terminal velocity, because indiscriminate selling by novice or uneducated investors (who may or may not distinguish between the merits of their existing holdings), begets more selling and causes a lot of  babies to be "thrown out with the bathwater." 

It's only when we look back months or even years down the road that we can truly observe periods like today with proper perspective. As Warren Buffett once opined, "In the short run, the market is a voting machine but in the long run it is a weighing machine." If you understand this simple truism, you'll better recognize how market prices can fluctuate so wildly during times of confusion, stress and anxiety. In reality, markets tend to be fairly stable the vast majority of the time, but can be prone to bouts of temporary madness. Kinda' like some of my family members. 

Behind the scenes, I've been waiting a very long time - since roughly 2009 - for the opportunity to benefit from a defensive strategy that could transition into "offense" during market drops- i.e. replacing some of our conservative positions for cheaper shares of some of the world's best companies, including many that had been trading at rich valuations for years. Stimulated by a lot of "funny business" (free money, low rates, quantitative easing, etc.) that would have been considered inconceivable to previous generations of investors, 2021 stock performance left us with arguably the highest premium valuations in modern market history. I felt confident that we were moving toward that elusive and lucrative market correction. So we engaged in some defensive maneuvers late last year, but even those have thus far been relatively ineffective against the combined headwinds of inflation, interest rates, oil/war and the supply chain (what I call "the four horsemen of 2022.")

While I continue to harbor a strong conviction that a window of opportunity may be approaching (or may have even started), I also recognize that the prices we're seeing today are already deeply depressed and may be trading at once-in-a-decade levels. But even I failed to anticipate the full extent of our current (and in my opinion, ridiculous) sell-off in in financial assets. As such, I am uncertain of whether we've seen the lowest prices of 2022 yet, and frequently doubt that we have. I suspect some of my readers feel the same.

More and more panic-stricken investors, speculators and DIY investors (who thought they had mastered capital markets and that stock trading was an easy game over the past decade) are 'throwing in the towel' and "heading for the exits" as they slowly start to realize that fundamentals still matter, Reddit may not be the most reliable source of investment advice and stock trading apps might actually be to wealth creation what social media is to mental health.

Once enough investors begin to 'capitulate' in unison, we'll then know a new market bottom is being established and the next bull rally may already be in motion. If you are unfamiliar, capitulation is a term that roughly equates to an environment where nobody wants to own, buy or even talk about any stock at any price. I know this environment very well. It is here that those refusing to sell generally dig in, become numb and literally stop paying attention. Others, however, instead choose to sell out before they 'lose it all.' We haven't seen that mood shift on a broad scale yet in this cycle, but I suspect we could soon.

Stock trading apps might actually be to wealth creation what social media is to mental health.

A New Generation 

I am confident that a big part of the extreme volatility we're witnessing today is related to is a new generation of "market participants." I stop short of calling many of them investors. Quite a few are simply gambling addicts... I find that many of my clients still perplexed by meme stocks and cryptocurrency may have never considered how much the 2020-2021 explosion in price (which I - and Warren Buffett - like to distinguish from value) was simply the result of a perfect cosmic collision of free government money, strict lockdowns and frankly, a lack of professional sports to wager on. As it was, people decided to participate in the stock market. But 2020-21 could have just as easily seen the rise in cockfighting, midget wrestling (do people still call it that?) or the WNBA.

“There are only three sports: bullfighting, motor racing, and mountaineering; all the rest are merely games.”

― Ernest Hemingway

We all assume that financial markets have risen dramatically post-COVID because a lot of new, sophisticated (and trending young) investors with their superior intellect have entered the market and uncovered new value in the form of great, undervalued companies. They have not. Many of these participants were simply tossing free stimulus money that they didn't earn into a casino called day trading in order to have some fun, stave off boredom during lockdown and try their hand at the investing game. It was the 2020 response to cancelled professional sports. 

Like a casino, the Federal Reserve's capital has slowly been taken back from these new investors over the past year, either through their initial investment of capital (checks from the Treasury that eventually transferred into the coffers of large US companies) and/or through the eventual sell out (of their shares) to the investment brokerage houses and exchanges themselves. This is a big reason why the market is down, the game is no longer fun when you're not winning while still believing that you possess some unique and special stock-picking skill ("Ooh, I'll buy Apple in 2020 because they're making Wi-Fi satellites and electric cars and I can see the future." So contrarian!) That is, unless you can specifically point to some entity like Enron, Lehman Bros or the World Trade Center that has collapsed and directly caused the 2022 sell-off? You probably can't because there hasn't been one.

In the last 9 months, we've seen a mass sell off of virtually all equity (stock) shares. Next quarter, the most hated asset could very well be all the new cars that were bought in 2020-21 with their stimmy money. Next year it should be some other massively overvalued asset like homes or personal property. That's literally what many people believe that recessions and corrections are designed to do: they allow the free markets to redistribute the wealth that the government took from large assets owners and high income earners and redistribute it back to them. Like printing money, the President, the Congress and the Fed are quite familiar with the wealth cycle - in anti-Robinhood approach- and their role in it.

My point is that rarely do people - especially decent people who live outside major urban cores and avoid most MSM and cultural drama - appreciate how much of crypto's modern interest and sudden rally aligns with Western society's mass embrace of speculation. Said more bluntly (my specialty), we simply can't appreciate how dumb the average American is. 

For instance, below is the 2022 performance of Bitcoin (in blue) and one of the largest index funds tracking legal gambling companies (in yellow), Roundhill Sports Betting & iGaming ETF (BETZ):

If you don't see the correlation between the two industries most designed to extract wealth from their customers, look closer....

Do you see any pattern between legal gambling and crypto-speculation?

Lest you think I'm exaggerating or being too mean...

"Ramiro Flores set the same ground rules when he bought Bitcoin for the first time in 2018. 'I like gambling. I go to Vegas quite a lot,' he says. 'So, I was like, 'Hey, you know what? Like, this is just like a little trip to the casino.' Flores, who used to be a firefighter in Edinburg, Texas, remembers talking about cryptocurrency in the firehouse. After he did some research, he bought $2,000 worth of Bitcoin." - NPR

"For Milkowski, the ups and downs — well, especially the downs — got to be too much, and she decided to get off. "There's definitely peace that comes with just selling off such a volatile asset," she says. "I don't have to worry, 'Am I losing $500, $1,000 today?'" In May, Milkowski cashed out completely. She decided to cut her losses, which ended up being around $8,000." - NPR

It is true that a few of these financial whippersnappers got rich (and then poor) trading crypto-currency (i.e. Bitcoin). Other's initial market experience may have been Robinhood-gamified trading on their smartphones against large hedge fund short positions inspired by Reddit's Wall St Bets activism, or something in that spirit. They aspire to get rich quick, have very short-term time attention spans and horizons (less than 5-10 years), no defined goals aside from ambiguous vigilantism and little-to-no appreciation nor concerns for a company's true economic fundamentals. 

Crypto enthusiasts come in all shapes and sizes (literally), from the very highly intelligent to the dangerously naïve. One the easiest marks of the latter (including the infamous 'crypto bros,') is that they're skeptical and sometimes even offended with the idea that wealth should generally be derived from work. Achieving success from extraordinary effort is a foreign concept to many in a generation of Americans who have received trophies, accolades and support for coming in ninth place their whole life. I don't think we appreciate how that collides and impacts the modern investing landscape They worship at the altar of social media influencers who have very little talent or are simply famous for being famous, like Dan Bilzerian, Kim Kardashian or Paris Hilton. 

A disproportionate number of crypto fans fail to appreciate (or conveniently ignore) any contradiction with the reality that the value of a specific crypto token only rises based on increased adoption (for instance, how many future participants Bitcoin owners can find to come in after them) and not human labor nor intelligence. Which all starts to feel a lot the exact characteristics of like a pyramid scheme to me, but what do I know... Maybe you can 10X your money in a single year based on your superior intellect. Granted, my strategy has been to work 60-hour weeks for 25+ years, so maybe I'm not the best person to opine on this topic.

The Real Racists

Another community that eagerly embraced cryptocurrency is self-perceived victims - sometimes represented in minority populations- who feel left behind by the current financial system and have been led to believe that capitalism is a corrupt game rigged specifically against them (and people that look like them, which seems like an odd perspective..) because of their genitals or skin pigment or what-not. As a result, they perceive actual US dollars - with these crusty evil old white men who created them and are not forcing anyone to use them across the front - as systematically oppressive. Personally, I feel like being born in this country of any race, creed or sex is pretty much like winning a lottery that you didn't even buy a ticket for, but then again, I've traveled overseas before so that's my privilege, I guess. I do recognize that's also easy for me to say- I have great parents and work 15-hour days, which is really the secret to success (or failure) in life. Nothing against whining, complaining, and blaming others - those are popular options as well...   

Capitalism being systematically [pick your self-identity obsession]-ist is admittedly an intoxicating thought for those not winning in it. But I didn't attend public school in the 21st century so it's hard for me to put myself in their shoes. Many have identified this exciting new get-rich-quick scheme of crypto as their ticket out of disadvantaged situations and poverty, instead of an immoral fraud that has actually been perpetuated on them by well-intentioned but IQ-challenged friends, compromised industry acolytes and minority celebrities looking to make a (US) dollar. 

In many ways, this is the next progression of pop culture (following in the footsteps of hip hop and rap music industries) which have - and continue to - exploit, manipulate and weaken the black American population for their own material gain. In fact, many of the most well-known rap artists transitioned into the music industry following years of selling narcotics to their own communities; now cryptocurrency seems to have replicated this script in the finance industry.

"Blacks are more likely to see the stock market as risky and unfair... The high interest in crypto among blacks springs from the influence of social media and the general popularity of risky investments among black people... Black consumers in particular see crypto as an opportunity to build wealth outside of a traditional system that has not served them well historically... 'the black community sees crypto as a way to even the playing field and get in the game before the gatekeepers prevent others from participating.'” - ZeroHedge, Hispanics, Blacks Disproportionately Dinged By Crypto Crash

Say what you want, most disciples of cryptocurrency are true believers, convinced that they see what others can't  (which roughly translates to watching YouTube videos, which is not exactly contrarian behavior). To them, their favorite digital asset is the exception to the rule and will eventually make them rich because they figured out the secret to wealth (which apparently appears to those sleeping in until mid-morning on a workday) before everyone else. And they will never shy away from telling you about it. As well as why you should also see the light as well and adopt it as your new store of labor. This blind adherence to the cause is something I recently touched on in my equally-snarky post, Should I Borrow Against Crypto?

ASK BART: Should I Borrow Against Crypto?

What could go wrong?

- By The Notorious CFP®

Productivity = wealth

While recognizing and acting on opportunity can certainly represent a key component of financial success and long-term wealth accumulation, in my entire career I have yet to uncover a wealth-generating strategy that does not carry with it some degree of an work component. Without one or the other, I don't believe anyone can achieve true and lasting wealth. It's not enough to simply watch a video and take a course- that's not work. And opening an account with Binance or Coinbase to buy crypto is not work, either.

"The reason a lot of people do not recognize opportunity is because it usually goes around wearing overalls looking like hard work." — Thomas A. Edison

Here's some more blasphemy that no one in the MSM will be talking about for another six months.. 

The financial markets are NOT the best tool for achieving financial success (at least not on their own). The markets exist largely for growing wealth, usually after you've first earned it. Usually through labor. Income is your greatest wealth building tool (after my musings, of course.) Your success in life will be heavily-influenced by your financial situation, which in turn is heavily-influenced by your income. That is heavily-influenced by your score on Bart's Four Components of Professional Badassery (patent pending):

  • Is my skillset rare, valuable or in demand?
  • Am I good at it?
  • Will people pay for it?
  • Do I enjoy applying it?

I just saved you $100K in wasted college tuition and six years, you're welcome.

In my experience, the vast majority of wealth is initially accumulated from income or benefits from a J-O-B, either one that is given to you by a company or created by you. Financial markets almost never make people wealthy on their own... Warren Buffett and Charlie Munger representing by far the rarest of exceptions. Some people become financially successful in real estate, but again the real estate equity that they own almost always comes from income or assets from some another productive venture or source. 

I doubt I've had a single client in two decades who could attribute their attainment of financial independence initially, primarily or solely through investing in the stock market. They almost always earn their wealth initially through WORK and then use the financial markets to grow, protect and diversify this wealth. I say this to: a.) humble myself and b.) implant in brains a warning that if any influence- human, digital or financial- offers you the chance to achieve financial independence without tangible physical work and risk and a reasonably long timeline, then you should think of me and immediately put your guard up (not because you're thinking of me... you know what I mean..) That's why lottery winners almost always end up broke and destitute and real estate reality show couples are almost always victims

Moreover, another one of the major disrupters in this market today is that many of our newest market participants tend to operate primarily off emotion and hunches (similar to their political and personal lives). I witness this in my office quite frequently. They will claim their behaviors are purely instinctive and innate, one even claimed they were simply "fulfilling their lived truth," but those are all myths and a lie, respectively. Like men who claim they can multitask. When I interact with some of this cohort and I we discuss the topics of income statements, balance sheets and cash flow, they have no idea what I am talking about. The idea that a company derives some measure of value from it's internal economics is lost, and it sometimes feels like I'm talking to a wall. Their eyes glaze over and they instead want to tell me about 'new paradigm' I missed, the growth opportunity of cannabis or batteries, or some video that they saw on YouTube.

Here's a hint: if you are searching for (or finding) investment strategies or advice on specific companies or sectors through online videos, you've already lost. You just don't know it yet. You will not find true enlightenment in video form. It's like getting reliable information from teachers or cable news networks. Or dating advice on Tik Tok. Or life coaching tips from people born in the 21st century. Or economics from politicians. Or parenting from me. 

A New Demographic Enters the Market

Our current economic and market downturns are both "firsts" for our two youngest generations, the much-maligned Millennial and Zoomers, now officially the largest age demographics in the country and Western (i.e. Developed) World. Their heft carries tremendous importance and influence in our society, but few areas have been more impacted than finance. One of the biggest 'challenges' for these spry digital nomads, and more than a few in the older generations as well whom  are equally gullible, is that they believe that screens are accurate windows into reality, when it's actually just the opposite. Few of them would articulate it as such, of course. But that's one reason a large proportion appear so misguided, misled and generally inept. That's not a knock on them, just a generational curse that many were handed- like student debt, three recessions and an impossible housing market. Technically, their biggest curse is simply bad parenting (for everyone but your kids, of course), but all other curses are simply symptoms of this. And the subject for another day.

Fortunately, real estate never goes down. So lever up!

Don't get me wrong- some of the smartest, hardest working and successful people I know were born after Reagan was elected. They are out there, they are scary smart and I have plenty of them as clients. But those are few and far between and in general both generations struggle mightily with both intelligence and work ethic. Many of them can barley hold down a conversation nor a job for more than 15 minutes because most of them suffer from the Lake Wobegon Effect (i.e., the belief that they are above average in any meaningful attribute). Perhaps you've noticed. 

If there was a less offensive way to state the obvious, believe me I would. I could remain silent about this phenomenon and troubling trend, but pandering and placating them is precisely how they are - and have become - such a challenge in the first place. Those I know and are honest will be the first to agree with this assessment of the culture, which is precisely how I eventually arrived at this realization. Their condition seems primarily the inevitable result of being raised in an era of mass affluence and "Dr. Spock" parents wanting to be their children's cool best friend "that they can confide in," all over the past forty-year period of the greatest period of prosperity in human history. So the resulting degradation in character and virtue is not a bug, it's a feature. That's harsh, but that's reality.

"Gen Z has received the most structure and attention throughout their upbringing, in comparison to previous generations, and the pre-organized playdates, ongoing extracurriculars, and soft-handed critiques have inhibited their ability to develop grit and gumption." - Jonathan Haidt, The Coddling of the American Mind

As the first generation raised on screens and modern communication technology from a very early age- often as a replacement for dual incomes, empty homes and quality parenting- only a small percentage of Millennials and then Zoomers seem to know how to navigate the world effectively, interact with others, or understand the world or truth. They believe truth is a subjective concept, and that their perspective is their lived truth. It's shockingly narcissistic at it's foundation. But then again, so are we. Most of this cohort would reference Sandy Cortez (AOC) as their most articulate leader...

Years of entitlement have been so deeply embedded into the psyche of a great many young people as they were funneled through government education facilities on an assembly-line conveyer belt structure not dissimilar  to the process employed a hundred years ago to produce workers for the industrial revolution (minus the classes on religion, civics or virtue). Today's society has evolved but our academic institutions are operating as if they are still operating in the previous century and economy. This is largely enable through the collusion of the unions and a federal bureaucracy that wants it that way. Unfortunately, this churns out a lot of low-skill, low-wage workers that employers prize because they are generally docile, agreeable and easily enticed by a JOB ("just over broke.") 


Since the dawn of the century, enormous campuses increasingly staffed and managed by many well-meaning but ultimately unimpressive and overwhelmed glorified babysitters who spend 7-8 hours each day integrating STAAR Test / Common Core curriculum intermixed with flawed life concepts and nonsensical ideology during their formative years. You would think our  kids could observed these messengers and properly determined for themselves whether these individuals  should be opining on anything outside of a textbook, but that has not been the case. An education industrial complex that should be striving to create a final product of better humans are  instead producing plenty of unqualified, underdeveloped adult-children ("kidults") who are now often confused, vulnerable and sanctimonious -  never a good combination. 

Before the founding of the Department of Education in 1979, the US was ranked #1 in the world for education. Now, with the abject graft, corruption and malinvestment of resources that is inherent in all bureaucracy, the United States has fallen to 27th place  for education. That's a decline few want to acknowledge, much less diagnose, because it would lead some very uncomfortable truths about who is and who is not truly capable of higher learning, who should be diverted out of the university system into separate tracks and professions and who is ultimately to blame. The evidence clearly demonstrates that central control of  education- while effective managing and pacifying a base of academia that reliably votes one way and is also unemployable in the private sector- is about as effective as letting Washington DC control families through social policies. Some people will blame the dramatic decline on knowledge and wisdom on insufficient spending, but that's ideological claptrap easily dispelled by critical thinkers but  plays well with people who still consume their news through social media and their phones. It's a theory with no basis in reality

I've learned more in a couple years of videos and podcasts than I did in all of my years in college. And I earned arguably the hardest undergraduate degree in America (a computer engineering degree from an enormous state school that didn't care about me at all and actively tried to weed me out of the department) while simultaneously playing a sanctioned collegiate sport (as starter, captain and president) and working part-time. And if you know me, you know I ain't that smart. The sad truth is that you can enlighten your kids more from a month's worth of ZeroHedge commentary than ten years (the current average) of high school and college combined. Everything you've suffered through in this blog post is proof of that. But most parent won't, because they're too plugged into the matrix, too invested, intoxicated and indoctrinated by the cultural myth of sheepskin, being able to look in the mirror and tell themselves they successfully educated their children via the last remnants of a bygone era (20th century) of higher education. Today, one can come to the conclusion that sending children into the public school system and/or a liberal arts school is madness in the purest sense.

Let's examine whether it really is money that the federal government needs to make their education system successful?...

That is a lot of money to be spending per student. The majority is divided between pensions for former educators long-sense retired and salaries of administrators that cost more than they produce.

The short answer is of course,  no. The quality of one's education is rarely about the money. It's always and forever about communities and families. Namely two engaged parents, one of whom is in the home during the day. And it doesn't matter which one, though thousands of years of humanity - up until about 60 years ago- suggests women are the best teachers and influencers of the(ir) young. I understand that hurts a lot of feelings. But I think we can all agree that hurting feelings- and making it sting- is something we need to amp up, not down. This living in fantasy land isn't working. The federal system is in terminal decline, and it's my assertion that we simply cannot afford to destroy a fifth consecutive generation of Americans with more comfortable lies.

"Per pupil spending for elementary and secondary public education (pre-K through 12th grade) for all 50 states and the District of Columbia increased by 5.0% to $13,187 per pupil during the 2019 fiscal year, compared to $12,559 per pupil in 2018. This is the largest increase in more than a decade. Data for this report covers the fiscal year before the COVID-19 pandemic. The spending increase was due in part to an overall increase in revenue. In 2019, public elementary and secondary schools received $751.7 billion from all revenue sources, up 4.5% from $719.0 billion in 2018." - Annual Survey of School System Finances 2021

Translation: Virtually all public education is a scam. If defined by an enlightened, virtuous citizenry prepared for the jobs of tomorrow, I could create twice the value for half that cost just by myself, by simply making it about the kids again (and not the adults). And I'm borderline illiterate. 

In summary, if money solved all our problems, we wouldn't be experiencing societal knowledge (once upon a time the byproduct of formal education) in such disorder. We keep spending more and more money and - like "health" care (below) - it just keeps getting worse...

If it was about the money, our life expectancies would be going up with (inflation-adjusted) expenses. The money is needed for control. If our leaders wanted us healthy, they could do it this afternoon. Take, for instance, mask mandates

One glaring problem is that when adults with the kind of upbringing our youngest generations have enjoyed are confronted with a real world that operates contrary to their distorted, solipsistic self-image and belief system, they often lack the proper discernment and critical thinking skills of previous (analog) generations. They are instead left to construct their own narrative of the world, one which typically lacks the intellectual underpinnings and experience that might hinder existing delusions and frequently results in a life largely divorced from reality. Their perception of truth is more influenced by social media and screens than parents who often only interact with them for a couple hours a night at most. Many parents I work with and know seem to be serving more as unpaid chauffeurs for the myriad sports teams and other extra-curriculars that they foist their children into year-round.  Our youngest generations are then attracted to and reinforced by online communities like Reddit and 4Chan that condone what can be most closely described as mental illness. How else to explain Furries

When so much untruth is held as fact for so long (i.e. CRT, multiple genders, men can be women and get pregnant, multiple new 21st century sexual identities and preferences, preferred pronouns, replacing history with fiction, and of course politics), an adult is certain to run into some trouble and experience mental health trauma when their narrative collapses immediately upon first contact with the reality of their daily existence. Repeated exposure to this merciless dichotomy inevitably leads to anger, frustration, unhappiness, and sometimes even a desire to tear down the existing structures of society simply to avoid having to reconcile one's own cognitive dissonance. 

Discovering that most of their life up until that point has been a lie at worst, and a success limiter at best, is painful. One can deny reality only so long before being forced to confront and accept the consequences of their family/school indoctrination and the ensuing and very-related failed value system (for instance, high gas prices, empty store shelves, weaponized justice system, rising crime, hyper-inflation, declining marriage and family, record depression, drug use and suicide, etc.) As the brain attempts to spin a scenario where it can both retain previous flawed beliefs, avoid admitting error and still navigate the world effectively, the mental illness that invariably ensues is liable to consume the host and produce  even more unpredictable, counter-productive and sometimes dangerous outcomes. Taken to its extreme, this condition can and often does lay the foundation for tragedies like mass shootings, drug overdoses and other forms of self-harm.

The reason I emphasize this phenomenon here is not to play Debbie Downer or pick on the young. It's to demonstrate how the symptoms and outcomes of our current youth upbringing protocol could be greatly impacting investing and financial markets as well. You see, we older generations began to observe and identify this retarded (the clinical definition) maturity (i.e. arrested development) in our youngest Americans as early as the 80s and 90s. We all pondered (and feared) what would happen when these young folks entered an adulthood composed of immutable and universal laws that perpetuate and sustain modern life but also threaten to shatter their flawed notions and behaviors. We anticipated that the "real world" would wake them up and correct their course.

What we failed to properly account for years ago was the possibility that the newest generations would seek and succeed in imposing their delusional narratives on our reality instead of the other way around. Because of their immense size, influence and lack of proper parenting, 20th century youth became 21st century adults who in effect flipped the script, as well as reality on it's head. Because I prefer not to be cancelled- at least this early in a blog post- I will abstain from expounding about the absurd falsehoods we're all now forced to swallow about biology, nature, science, human relations, gender roles and other "social constructs." Suffice to say that the reason many young people feel so disoriented in modern life, gaslighted about what were obvious universal truths up until 15 minutes ago and noticing that so many areas of society (social, political, professional, media, entertainment, sports, etc.) are spinning out of control, is because they are. 

Truth has been hijacked by "the lived truth" (i.e. subjective) of severely damaged people who have lost their bearings on reality and are bound and determined (unconsciously, but sometimes even consciously) to bring the rest of society along with them on Mr. Toad's Wild Ride, whether we like it or not. As a result, their views about the world of finance - for instance, what is fair, what assets have value and how much, and how markets should perform for them - are impractical and distorted. In effect, their mommies are no longer their to call the principals, the coaches or the HR departments. The market simply doesn't care.

Up until 2022, their fictional perceptions of markets tended to roughly align with the market itself. It was 'all-good.' Like so much of their life to date, there had been no opposition. They bought an investment, it invariably went up, and that was what they were conditioned to believe would always happen. I get it.

Now that markets aren't working out exactly the way they had originally expected, instead of the critical self-evaluation that tends to unlock true enlightenment, many investors just pout and quit. They melt like snowflakes. They jump out of an investment or market when it goes down, and back in when it goes up. That's why you see such dramatic swings, it's called momentum trading. There's no investment analysis.

And when enough people quit a specific market, it drops in value. This will someday be true of higher education as it heads toward it's inevitable collapse and we're already seeing it within legacy industries like media and entertainment that won't exist in their present form in another five years. The reaper of reality and the laws of the universe are also almost certain to impose themselves next on industries like housing and transportation, both currently being propped up by the Fed while simultaneously being upended by the changing tastes of the new generation (who value mobility, "experiences" and personal autonomy at the expense of accumulating assets).    

To reiterate, this is nothing inherently unique to Americans born after 1980 versus those born before. They're simply overrepresented in this flawed line of thinking. In fact, I suspect we all know older friends, family and coworkers from earlier generations who still can't see the world for how it really is. They have ridiculous opinions and views on certain aspects of life, but not enough to destroy them. What you don't see is that they maintain similar distortive distortive ideas in many other areas of their life that would be visible if you could ever delve beneath the service, or beyond their online persona. I see it in my practice everyday. More often than I can count, I discover that their politics isn't the specific cause of their dysfunction, it's simply a symptom and the evidence is manifest in many other aspects of their life- the size and quality of their social networks, their relationships with the spouse and children, their professional success, their spirituality, their physicality, their happiness and especially their life purpose. 

Unfortunately, some people never evolve to even the stage of recognition of how much of their life has been premised on a lie. This only opens the door for accelerated mental degeneracy disguised as ideology, specifically political. For so many, politics has replaced and become their religion, with celebrities and "experts" their deities. Their programming has been so comprehensive and effective, and administered so consistently at such an impressionable age, that most are unable to ever revisit and fully reprogram their flawed beliefs. They are incapable of breaking free from the matrix. They are in some respects disciples that instead must continue down the same counter-productive path yielding them little traction in their life objectives as their predecessors. They would rather coddle a lie than honestly evaluate their beliefs and hold them up to scrutiny. As aspects of their 'lived truth' begin to inevitably unravel, many even double-down on their fantasies- continuing to think, act, behave (and vote!) in ways contrary to their best interests, as well as their fellow man and country. 

And that's how you end up with a generation buried in crushing debt they don't think they should have to pay back, in support of socialism and other genocidal systems, facing a financial system and unattainable housing market they believe is rigged (unaware of the concept of a 'starter home'), suffering from unprecedented and debilitating addictions from permissive childhoods and fleeting opportunities to participate in The American Dream, and convinced that their life is special and their tribulations are unique. That's also how you arrive at explosions of non-binary sexual preferences, preferred pronouns and a spectrum of genders. It's all narcissism at it's core. Mom and dad said I was special, then they said I must have a learning disability. Then they held me back a year because I was born in the wrong month. Then they said I must have an emotional/chemical imbalance. Then they said I am disadvantaged because of my skin pigment or reproductive organs. 

No, you're just like everyone else, honey. I'm sorry to break it to you. Your parents were unconsciously addicted to proving your uniqueness because in many ways you represented them. You were their shiny toy. And your lack of exceptionality and/or success - even at an age where you're not even expected to have any- reflected poorly on them. They were damaged, so now you are. Don't pin accountability for your problems on that ol' mean and evil President so-and-so (pick one), this is on mom and dad. It's also how so many of our youth are drawn into- and intoxicated by- instruments of financial destruction like crypto-currency, Non-Fungible Tokens (NFTs) and meme stocks.

They are what Goldman Sachs refers to as Muppets, and as you can imagine that's not a compliment. Their insistence that they are special and unique- as are their unfair burdens and their superior intellect- is leading them right over a cliff of their own making. It's the new Adderall, and Wall Street- like Pfizer- has plenty of supply of these magic investments to sell you. Because the previous generations are just too old and dumb to see their value. Not like you, you've done your research (on YouTube) and see the future.

Muppets on Parade

So what does this have to do with our current market??? 

A lot, actually. 

Behold the "trophy generation" who was told they were special and could never fail. They were watched over, protected and bailed out. But now they are confronted with market losses for the first time in their adult lives, it all seems cosmically unfair (like elections, house prices, student loans, the Constitution, etc.) and they don't know how to process the experience, their emotions and their response appropriately. For many, their "lived experience" of market losses simply reinforces the perception they were programmed with in their homes and government-daycares that they are victims, which robs them of the critical agency to learn, grow and recover from failure. I suspect that a collective lack of wisdom, experience, perspective and self-discipline from this demographic may now be contributing at least some amount to this most recent market dip, and pulling the rest of us all down with them. 

I understand the intoxication of playing the victim, as it allows the following:

  • It provides a permanent alibi for personal failures
  • It attracts attention
  • It generates sympathy
  • It acts as a 'social currency' with likeminded people
  • It disguises negative traits & actions as virtues

The problem is that victimization is the mindset of losers. Literally by definition. Think of your top five heroes. How many of them were victims of circumstance? How many of them became successful largely because of initially challenging circumstances? 

It's critical to point out that anyone who was not an active investor with substantial assets 13-14 years ago during the Great Financial Crisis (GFC) - which is almost everyone under age 40- is experiencing the first full stock market downturn of their adult lives. Every time the market has dropped since 2008, we have seen a relatively quick and dramatic bounce back towards new highs. Lacking any formal, legitimate, real-world investing acumen- but with an inflated self-perception of mastery that completely belies this fact- many of our newest investors are doing exactly what you might expect them to do, which often involves engaging in the absolute worst decision-making possible: selling into a dropping market (or more accurately, rebalancing into cash). 

Such investment strategies succeed in stopping the emotional pain as well as the cognitive dissonance between their own self-image of perfection and the reality that they have made bad decisions, thus resulting in unexpected and unwelcome outcomes (which we used to call 'life.') In their failure, TikTok stock market gurus, Reddit boards of complete strangers and day trading apps like Robinhood all step into the (lucrative) breach to exploit and compound their ineptitude. And when their magic pills don't work out the way they want them to, the spiral continues downward. Since this the first stock market correction to integrate this new generation, the final chapter has yet to be written. We have yet to see real capitulation, real carnage, real blood in the streets. And we may not. But for those who sold their investments and turned their paper losses into reality over the past several months, this was a major opportunity to build resilience that they've lost and therefore will never properly learn from.  

To date, stimmy-check meme-darling, AMC is down 80% from it's 2021 peak, and GameStop is down 63%. Apparently, r/WallStreetBets got bored with torturing hedge fund managers in 2021 or simply got distracted. Indeed, one of the weirdest aspects of modern culture is that the typical news cycle of even major stories lasts about two weeks and most people- especially younger- have the attention spans of goldfish. That's why the terms Occupy Wall Street, MeToo and Black Lives Matter have sadly become punchlines. 

It's not that the original premise of these movements was flawed (although all were, of course.... deeply) as much as the unfortunately reality that you just can't achieve social justice leveraging a demographic that still lives with their parents, hates at least one of their borderline personalities, sleeps in, traffics in outrage and trolling, and exists only to cancel other people and destroy existing institutions without providing any alternatives. The ranks of these so-called "protest movements" are basically adult temper-tantrums masquerading as social revolution and are filled with many who lack the intellectual software to focus on anything long enough to affect true, lasting (and in my opinion, necessary) social change. They think they are soldiers but they're really just slaves to their dopamine receptors and those who know how to manipulate them in Big Tech, MSM and the Open Society Foundation. Wen the 'happy chemicals' and their Adderall wear off, they're on to something else. If there is nothing to protest, they will find something to complain about, or it will be provided to them through mass manipulation.

Perhaps you have a young person in your life that behaves like this, completely aimless and a slave to their emotions. Maybe they go to rallies, or protest marches wearing colorful hats. They make signs. They change the social media avatars to support the cause du jour. Now  imagine them setting up an online trading account and investing in this stock market, and you're on your way to understanding the first two quarters of Q1-Q2 of 2022. You might dismiss this anecdote as too simple, or this demographic as too young and too small to matter to a global market. But recognize that their oldest members were born in the early 80s, are now in the early forties, and are  not an insignificant influence on our society nor the markets. They play a leading role in the chaos we're all witnessing in both areas in 2022. And it's liable to get worse. 

Recognize that these people vote and procreate

Of course, I can't pin all of this on young day-traders investing their 3-4 rounds of stimulus checks and childcare credits - as much as I'd love to. That's admittedly an overly-simplistic and inaccurate generalization and there is always enough blame to go around all age demographics in every economic and market swoon. As I've mentioned repeatedly, some of my smartest and most resilient clients are under age 40. But my offices are in Kerrville and Fredericksburg and my younger clients are certainly NOT representative of the greater population nor that generation. That urban demographic was was raised in an urban environment or the safe suburbs and doesn't need no advisor because they know it all and trade accordingly. They think I'm a dinosaur, which I admit is kinda cool. When I used to knock on doors, people used to tell me to come back when I could drink alcohol and looked like the guys in the wire house brokerage commercials, with white hair and smart haircuts.

As a result of their fragile investment strategies, each month during Q1-2 this year- and right on schedule- Wall Street has stood by, ready and more than willing to accept those unwanted, dropping and discarded stock shares in exchange for some of that free fiat currency of rapidly decreasing value from the Federal Reserve. Our newest market participants are prodded by investment banks analysis reports, planted stories in the media and internet investment fear-mongering that the sky is falling and it's going to get worse. When I see this content, I always ask myself, "If you were an investment bank with compromised ethics and an enormous (think billions) incentive to buy stock anonymously for much less than today's prices, would you push your analysts to publish market analysis that the economy, market and/or a company stock is going up or down

If it was me, I would claim it's all going down. Way down. And never coming back. And that crypto is the new paradigm and the better bet for the new markets. My report might be titled something ambiguous like... I don't know... Recession Risk is Very Very High.

Here's another little secret: when the big banks are providing free market analysis to the public, they're not looking for accolades. They're planting snares and looking for marks. When financial websites do it, they're not looking for validation, they're looking for (greed/fear) clicks. Like social media, never forget the maxim that when the service is free, you're the product. 

The World's Most Efficient (Legal) Market

In most of my conversations, I find that few investors - of any age or demographic - ever stop to truly appreciate the magical ease with which we transact in securities whenever and wherever we want, or contemplate why someone else would be willing to buy them at the price we are selling. Anyone who has ever bought or sold a security on an exchange (NYSE, NASDAQ, OTC, etc.) likely considers the contra-party (if they consider it at all) as just some nebulous 'blob' existing in the investing ether, a faceless and benevolent deity that will gladly take your shares or sell them back to you at (roughly) the same price at any hour of any day.. like a Red Box Video kiosk for your wealth. We rarely, if ever, reflect- even for a moment- on whether there is an actual person on the other side of the trade and if they could have more information about our investment than we do. Is it...

  • An unemployed day-trader sitting at home in his underwear trading options, trying like hell to avoid getting a real job? 
  • A mom buying shares for her kid's college account on her smartphone? 
  • A large brokerage house or fund company accumulating shares to fulfill client orders for the day? 
  • An investment bank who has determined that anyone dumb enough to exchange their shares at that price deserves to be fleeced?

When you think about it, it's humorous that any one person thinks that they have more knowledge or perspective on the markets, the economy and the future of both than virtually everyone else in the world, since financial instruments are by default priced at the perfect combined average global opinion of its underlying value. It's as absurd a proposition as say, thinking a President, Congressman or government bureaucrat is more qualified to regulate or control (insert any sector of our economy) than hundreds of millions of actual participants in that sector, each with the free will to vote with their pocketbooks and feet on what is the best path for their lives. (Sadly, for some Americans having their lives controlled by a master who makes their decisions for them feels safer and preferable than actually living free but having to carry the burden of responsibility of one's own life. That is literally the theme of The Matrix and many American's lives today- an existential dichotomy that fundamentally divides the Divided States of Retardia politically as well.)

"The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it."

- Adam Smith, The Wealth Of Nations

So when investors feel compelled to trade their stock shares out of fear or greed or based on market timing (versus a more traditional recurring or one-time lump sum purchase or sale), they are in effect communicating their belief that they are right and everyone else is wrong. Unfortunately, most lack that level of self-awareness and humility, and thus march themselves and their financial future right into the slaughterhouse of an engineered market correction. They play right into the hands of their opponents on Wall St.

In that moment of selling, the predominant thought seems to be, "Thank God I have someone to buy these shares off of me" and that should instead be a red flag and opportunity for serious self-reflection. Which is rare when your trading platform is a gamified app on your smart phone. It reminds me of the people who walked away from their (temporarily) upside down homes in 2009, happy to turn them over to Blackrock. Anyone who looks back on that time period realizes how naïve and disastrous that decision would have been. Today we judge those people harshly, but if you've ever sold shares out of fear that they might lose more value, then that's you.

I wonder if a retail investor community who typically transacts in investment shares directly with a machine in their hand or desktop- devoid of intermediaries - has in effect removed the humanity from the experience (a blessing for market efficiency) but also prevented itself from failing to fully consider whether they have all the information needed (or at least more than the other party), whether the trade is either prudent or necessary, and whether they should instead sleep on the decision first. 

Can you imagine walking onto a car lot or auction house and just immediately paying the price on the window sticker? (I'm referring to pre-COVID, of course. After the government shut down car companies and their suppliers - and then when they reopened, pressured those same companies to fire their unvaccinated employees, thus creating some 'unforeseen' - for some people- supply chain problems. Who could have predicted that... Now vehicles now go for well over MSRP by default to a lot of imbeciles. Which is why voluntarily buying a new or used car in 2022 should be considered an act of financial insanity.) Of course me and my clients would never do that, because we all know that the car lots and auction houses  are rigged against the public and the first price offered is always the worst price offered. Yet this is exactly how far too many investors now approach modern markets, which sets many up for slaughter failure... 

This is an important point because a.) I said it and b.) because it has resulted in what I perceive to be a period of massive indiscriminate selling. At times this year, it seemed like all assets were in a state of freefall. Even bonds- a reliable harbor of safety in past corrections- were down almost as much as stocks, and still have lost more in 2022 than in the past 45 years. Almost all international markets are down several multiples of that, partially due an ever-rising dollar (did you know that China's markets have been down for the past four years?) US Dollars are being metaphorically lit on fire daily by the multiple rounds of Trump/Biden stimulus and President Biden's "incredible transition" inflation. Now sitting in cash is the only guaranteed loser of 2022. Moreover, even so-called uncorrelated assets (translation: those expected to move independent of - or even contrary to - the stock market) like commodities, crypto-currency and even real estate funds, are all declining at an even faster pace. 

Below is a mutual fund outflow report from the Investment Company Institute (ICI). It shows investors fleeing literally every single category of the stock and bond markets. It almost always acts as a contrarian indicator (which often suggests that when more Americans are flooding into funds, it's time to get out. And vice-versa.) Right now, massive amounts of money are being withdrawn. While no one knows the timing, or whether it's smart to be buying right now, this certainly argues to not be selling when everyone else is selling. Indeed, "That's not how this works. That's not how any of this works..."   

Not surprisingly, stock valuations are adjusting downward to reflect dimming economic prospects for the remainder of 2022, in what sometimes feels like a self-perpetuating spiral. Very few experts have a credible explanation for exactly what tangible factors are actually causing this preponderance of fear. It's still heavily debated, but I provide some possible causes below. The resulting drop seems to be manifesting an enormous and unexplainable disconnect between the markets and the actual economy that they're meant to index. Interest rates are rising but still historically low. Supply chains are compromised but improving quickly. Inflation is at a 40-year high but expected to moderate this year, with a government unable to print any more checks (with the notable exception of student loan forgiveness, which is Build Back Better via Executive Order and guaranteed to exacerbate inflation further). 

War looms large in Europe but the most likely scenario is still a peaceful resolution before year-end. No critical sectors, companies or governments have failed, the labor market is incredibly strong (if still dysfunctional) and people are spending their debased money like it's 1999. Maybe you noticed the uptick in paper license plates these days. Full price for a depreciating asset and financed?... Ouch! When I was a kid, paper license plates and fancy cars meant you were somebody or had accomplished something. Now it usually just represents the culmination of a series of bad life decisions (like tattoos).

So why is virtually every financial markets acting as if we've experienced a sudden shock to the system?

ASK BART: Is Now The Time To Get Into Real Estate?

 - By The Notorious CFP®

Similar to real estate, we are beginning to see reliable red flags going up that were visible in previous stock market corrections as well, and this dynamic is further  exacerbated by declining investor sentiment and emotional selling. My guess is that most of the sellers are doing so not because of P/E ratios, book valuations, cost of goods sold, EBITDA and 200-day moving averages, but because "my account is down a lot. And it's very stressful. I can't afford to lose this money." Which I always find to be an interesting response to falling prices. Like, have you ever known someone who sold an asset - home, vehicles or possessions- specifically because it had recently dropped in value?" 

Probably not, because that reaction is loco and only happens in the stock market, where many people often and voluntarily buy high and sell low. They claim they want to do the opposite, but when prices inevitably fall, instead of moving money into the market they experience a toxic combination of amnesia and trauma (which sounds like my response to my Engineering Calculus exams in college). Instead, they often choose to wait until everything returns to normal (= full price) before feeling comfortable enough to buy back in. In almost any other market, people usually prefer for prices of their assets to go up before selling. In mine, people prefer to pay full price and hate when things go on sale. 

The Media

To be honest, I've been expecting more hysteria to be stoked by the media- they're usually the first in line to exploit suffering and manipulate public emotion during periods of volatility, but usually nary a mention on the front pages of any news site these days (check for yourself) or anywhere except buried deep in the business sections of most of the dying legacy outlets. They're too busy running a minute-by-minute chronicle of the Johnny Depp / Amber Heard trial or debating "what the victory of a Trump-endorsed GOP candidate in Pennsylvania could mean for the end of the republic." 

As we've discussed, if you consume news from a source with a city/state/country is in the title, you can guarantee it's on billionaire financial life-support and won't be around for much longer. Kinda' like cable television or professional sports, which are almost headed for almost certain default. If anyone is still consuming either post-COVID, I honestly just feel bad for them. Like how bad and how numerous do the lies have to get before you break up with someone?

Regardless, it seems pretty clear why the MSM is choosing to ignore this market decline, and the fact I don't need to tell you explicitly why is all the evidence you really need to know that at this point, any news with three letters is basically state-sponsored Pravda. They seemed quite diligent in their reporting during the last two corrections of 2008 and 2020, so their refusal to acknowledge not only reality, but also the most important news in the country (deteriorating financials and the stock market) seems ponderous, indeed.

Or maybe they're just that stupid.

Play Stupid Games, Win Stupid Prizes

If you're unfamiliar with Paul Krugman, you're really missing out on a great story (pun intended). Wikipedia calls him a public intellectual, which is the first (of many) red flags. He won a Noble Prize back in 2008 for economics. Yes, that was a year before President Obama won it for peace. (And yes, in the 21st century the jokes really do write themselves, I'm just plagiarizing them at this point.) In the late 90s, he seriously predicted that the Internet was a fad akin to the fax machine. He coined the 'broken windows theory,' which essentially argues that natural and economic disasters can be good because they lead to increased economic activity. It's absurd nonsense that he keeps doubling down on because he lives in an echo chamber where he is never called out.

The internet is this thing you are on right now. Without it, I'd be writing this on the walls of the Kerr County jail. Regardless, Krugman produces, traffics and supports the most fantastical economic gibberish from his ivory tower in NYC and has been a professor at virtually every school in the Ivy League. He is perhaps America's greatest manifestation of the elite intellectual literati infected national discourse. It's a tight race between him and Larry Summers.

In my opinion, Paul Krugman represents everything that could go wrong when political hacks collide with journalism (present company excluded) but yet is somehow still the guy many politicians on the left reach out to in order to understand economics and markets. Which I guess is kinda' like consulting inmates about crime. This is because politicians are also isolated from reality, so it is perhaps logical for them to seek financial guidance from other patients of the institution, like Tom Cruise consulting the Church of Scientology. It's worth noting that Krugman is paid obscene amounts of money to sell financial fiction to the masses who were taught math at public schools and liberal arts colleges. Despite being mostly discredited about most of his financial philosophies for most of the 21st century, plenty of people still view him as an economic savant. Like Fauci for finance.

I get paid nothing but criticism for my incoherent and inconceivably long musings, and I'll be lucky if this post doesn't get me cancelled. And I'm more right than Krugman.

I bring this up because it made me laugh last week when I counted nine (9) references to former President Trump on the front page of the Washington Post website. Not total, but on the same day. Yes, this was July. Of 2022. (Yes, I admit that I couldn't help myself and even did a Control+F search on their website for the words "George Bush" and "WMD" before moving on to a more legitimate news source.) And yet I still know people who still pay to have newspapers delivered to their home or Inbox.  I've offered to happily deliver something of similar value and at least as grotesque on their porch for half that price. But still no takers. Caveat emptor.

My point is that while modern society seems to have an endless appetite for human waste masquerading as journalism and seems staunchly reticent to hold any 'expert' accountable when they are obviously wrong, this kind of misinformation has real consequences for society (as we are witnessing with the imploding of our economy based fully on human errors in the last 1000 days.) The internet was supposed to make us smarter, but Krugman is the perfect example of how it actually makes us dumber. You almost wonder at what point Krugman moves his young adult fiction schtick to TikTok. Or possible OnlyFans.

Compounding this is an ever-growing media drumbeat for war in Ukraine, a country that no one I know has ever visited nor could not identify on a map before this year and a government that the media hated up until last year, due to neo-Nazi nationalistic tendencies, world-leading corruption and multiple controversies surrounding the Biden family. Suddenly it seems that the matters of foreign countries have suddenly become more aligned with the preferred narrative than highlighting and investigating the true source of our own country's true (including economic) troubles. With the media, it's rarely what they report but more often what they do not report on that exposes their true agenda. 

Why is that? 

  • If even a borderline illiterate hick from Central Texas can see that Russia is purposely slow-rolling (i.e. sand-bagging) this conflict to inflict maximum suffering on not only Ukrainian but also the rest of Europe in the fall and winter (when temps drop below zero and they will have drastically reduced energy and heat supply), thus breaking the EU's snowflake-resolve and destroy the remnants of NATO and US influence in the region... then surely the MSM on the ground understands this, too? 
  • Why would they aide and abet Russia's evil campaign by lying about Ukraine's chances of success to the American people? Cui bono?
  • Why would President Biden purposely maintain painfully high WTC oil prices, which  funds the Russian military, knowing full well that < $50 oil brings this war to a close by the start of the NFL season and saves the mid-terms from the jaws of humiliating and historic defeat?

“I would tell [investors], don’t watch the market closely.. Investors who buy good companies over time will see results 10, 20 and 30 years down the road. If they’re trying to buy and sell stocks, they’re not going to have very good results. The money is made in investing by owning good companies for long periods of time. That’s what people should do with stocks.”

- Warren Buffett

A Decline in Confidence

Suddenly, almost every corner of the economy seems to be facing new and significant headwinds, and many investors appear to believe that things could get worse before they get better. The primary drivers are mounting (and shocking) worries about our political leadership (both aisles), the health of the overall economy, shrinking corporate profits, and the prospect of war in Eastern Europe. But make no mistake that the problem is primarily leadership.

And yet each year, each administration and each "crisis," Americans voluntarily and enthusiastically relinquish more and more control to a government that can't even manage it's own affairs well. At this point, the federal government has become a glorified a jobs program, a place to hide non-productive labor and kept solvent by the country's dwindling supply of producers. At this point, government leadership is just about the only place old people past the age of retirement can work (and Walmart.) This is all an interesting paradox... unless you are a mentally disabled. As a result, new opinion polls from the government's own compromised surveyors at Galliup hint of the ominous conditions ahead...

How many of these worries do you believe are directly attributable to our political leaders? And how many were created by capitalism and free markets? Should holding a real job now be a prerequisite for elected office?

So if you are wondering why the stock market is down this year, it's crucial to understand the the foundation of our dilemma is massive collective angst about our current personal and financial (household) situations... in the context of greater frustration with our national (federal government and regulators) situation... as a result of actions performed by  leaders that we elected. All other factors, symptoms and side-effects- including the current decline in "our perceived value of shares of ownership in America's largest corporations" (i.e. stock shares) - spring forth from what is essentially our emotion and perception. And that's a problem.

For instance, people were led to believe for many years that President Trump was the source of their problems. This is at the root of the mass formation psychosis that we referred to in the introduction. While many simply lack the intellectual capacity to see beyond that narrative and/or continue to view their political ideology as their primary "religion," a few others are starting to realize they were gravely misled. (And this from someone that did not vote for Trump.) This is not dissimilar to our experience during the Obama administration, when so much personal anger about the decline on the country was laid at his feet, when it was really Congress that did the vast majority of the damage. 

Today, many have turned their focus - and ire- on President Biden, a candidate that - as has become apparent to virtually all by now- was tragically (s)elected specifically to be thrown under the bus, a fact that crystalizes more and more each day, creating greater and greater cognitive dissonance, political tension and social unrest from his base. They must be asking themselves, "Were we misled?.. Did we mislead ourselves?.. Do we even care? Has our life improved and is this really better than the alternative?.. Could there have been anyone else outside of his DNC primary competition that is viable (but whom we recognized were unelectable just two years ago)? Has our collective folly cost us another era of power and more liberal Supreme Court replacements? Are we in greater freefall than the GOP?

All represent important questions that must be asked by the Democrats before they can hope to repair the damage that has already been done so quickly and forestall the nightmare scenario hurdling toward them, both in November and in the aftermath of the mid-terms, which could and may divide and destroy their party, and will almost certainly start the clock on President Biden's eventual resignation. What we are doing to him is inhumane and dangerous.

How We Got Here

To best understand the environment we're in, let's take a walk down memory lane, shall we...


Most of the investors that I work for have experienced plenty of longer and/or deeper market declines than this in the past. For instance, in February 2020, the market dropped over 35% in less than two months in response to the outbreak of the COVID pandemic. (As of this writing, the market is not even down half of that.) That may surprise some readers, due in large part to the rapid response of the Trump administration and the Federal Reserve ('Project Warp Speed') to quickly approve sending large checks to virtually every American and small businesses in April of that year. 

I spent most of that month hiding under my desk in the fetal position. But when I emerged, the first thing I told Doris (and those clients unfortunate enough to come near my office) was that, "This free-money program is criminal, and will hurt the poor the most. Because it's run by the government, fraud won't be a glitch in the system, it will be a feature. Like handicap placards or Disabled Veteran license plates, it could the next leg down for doctors, or at least their reputation." And it was. To me, the policy decisions of 2020-2021 felt like the half-century disastrous legacy of LBJ's Great Society all rolled into one month. I knew then that stimmy recipients would end up paying many multiples of the amount of their combined government check(s) in grocery bills next year.

And so it was...

I'm not bragging, and I'm certainly no genius. I just know that most of the time when the government creates a program, they overwhelmingly and invariably end up hurting the people they profess to help. Years later, they will create new programs to attempt to fix the problems created by the original program. The only problem they usually solve is creating more unproductive jobs for Americans that are unemployable in the private sector. Take for instance, the police force at the U.S. Capitol on January 6, 2021. They had one job to do, and only had to do it right one day in their entire career. And it's safe to say they could not, and it did not go well (unless opening doors, standing aside and ushering in rioters is standard protocol for government building trespassing.)  If they were protecting the offices of Stevens Wealth Management, I would be paying their unemployment insurance by the end of the week. But when you protect and serve the most powerful politicians in the world, I guess everyone keeps their job, gets a pension and a lifetime of trauma

During the stimulus period, even Hunter's Biden's favorite prostitute got $20K for her "female owned sole proprietorship,"

As we reflect on the impact and success of programs launched by the federal government, I think we can all agree that they always end in utter and abject failure. For example, the government's respective wars on drugs, crime, terror and poverty have not only worsened each predicament but disproportionately hurt those most afflicted as well. Despite this, our federal legislators now think they can win a war against Earth's changing weather (by moving fossil fuel pollution to Venezuela and Iran?). How obtuse, incompetent and arrogant would you have to be to believe that U.S. Congress has the power and intelligence to change the Earth's weather? And what historical precedent would you use to support this view? Have you heard Chuck Schumer, Nancy Pelosi or Mazie Hirono speak out loud? Does Mitch McConnell strike you as a particularly moral and effective statesman?

Now, our House and Senate are fighting on two other fronts- inflation and Russia. Through government intervention. Because that always works out so well exactly 0% of the time. Let's see how those wars turn out. I have a pretty good idea. And I'm setting up a line of credit for anyone who wants in on this action.

I mention all this not to embarrass the federal government (they're frankly doing a better job of that than I could ever conceive of) because for the first time in the history of mankind, our leaders in 2020 attempted to sever the historical connection between the labor (productivity) that they had outlawed and the value (money) that derives from the labor. In essence, the government honestly believed that they could generate wealth without work. So they decided to experiment with Modern Monetary Theory (MMT), which theorizes (and I use the term loosely) that 21st century governments could simply print money out of thin air without any consequences. Arguably one of the silver-est linings of the tragic pandemic is the death of the MMT fiscal model. RIP MMT...

To be fair, MMT is a very intoxicating concept for the very lazy and uneducated. No longer would we need to increase productivity or increase tax revenue to enjoy greater prosperity. Under MMT, when we need money we can just wire it into people's bank accounts and take the rest of the month off. Kinda' like when Transportation Secretary Pete Buttigieg went on dual-maternity leave with his husband for almost three months in the beginning middle of a national supply chain crisis and no one noticed. Or Hunter Biden's entire life.

I secretly suspect that's one reason why the Greatest Generation had to pass away for MMT to see the light of day... Like HillaryCare when it was rejected by the Greatest Generation in the 90s, only to be resurrected, repackaged, manipulated and codified into law for their children twenty years later as ObamaCare, another of many wealth distribution schemes for the 21st century that were laughed out of the previous century. And it's interesting to note that we're not the only country that engaged in MMT folly. Like most things financial and terrible, Japan did it first and with similar results. So much so that even our debased US dollar is still trouncing the yen by 30% in the last two years...

In this case, such MMT quackery could only have been hatched in one corner of the economy- academia, a fantasy land where unicorns poop gumdrops on streets of gold and where kooky theories are espoused by lifetime tenured professors who tweet their fiction and thrive, free of any opposition in the minds of hypnotized young minds lacking enough real world or work experience to cry, "Horse Hockey!" (I would use different words). 

For a political class made up mostly of folks who've never held real jobs in the private sector (much less run a business nor created a single job in their entire life), MMT in 2020 was an idea who's time had presumably come, and had been gaining steam ever since it was unleashed onto the unwashed masses on the Bernie Sanders campaign trail (not a coincidence) and thereafter promoted by intellectual heavyweights like The Squad, led by Alexandria Ocasio Cortez (AOC), her Boston College Economics degree and extensive post-collegiate work history as a bartender. Which, all jokes aside, is still a far more prestigious resume than lifetime-grifter Bernie Sanders, a man so lazy that he was actually expelled from a hippie commune. And yet still would have likely beat Trump in both 2016 and 2020 if he hadn't been railroaded by the DNC. America, what a place.

Needless to say, MMT in reality hasn't worked nearly the way that professors envisioned, and the whole world is shocked. Maybe Zimbabwe and Venezuela weren't outliers after all, and governments can't produce wealth (only confiscate it.) This is a big reason why we don't hear much from Bernie Sanders or AOC anymore. For one,  the DNC doesn't want to lose any more counties this coming November than they already have. The early line is - 23 vulnerable seats in the house.

Secondly,  the idea of replacing labor with money printing was mercifully squashed before we got to the mass genocidal killing stage that symbolized the 20th century regimes under Lenin, Stalin, Mao Zedong and Pol Pot. It's also why just a few months later, even famous liberals are praising former-DNC pariah, WV Senator Joe Manchin, for his heroic stand against President Biden's potentially catastrophic Build Back Better, a plan that would have made our current inflation nightmare look tame in comparison.

Instead, we've learned a lot (the hard way) in the last two years. The most important economic lessons were: 

  • Countries, companies and individuals should still provide value in exchange for money. Crazy, I know! Highly-educated Millennial and Zoomer brains are exploding all across the galaxy right now, they've been duped by their Econ professors. But wait... It gets worse, kids.... 
  • This money earned from work should also be commiserate with the value provided and- I hope you are sitting down- a free market composed of billions of free participants should determine what specific work is worth, not government bureaucrats who haven't worked in the private sector in my lifetime, vote for their own income and benefits and make their living off of other people's labor. The US economy itself produces almost $25 Trillion (with a T) of activity consisting of millions of workers and businesses. That's a lot of moving pieces that make it difficult to get an honest grasp on what’s going on in real-time. Talk to your doctor today about whether being a productive member of society is right for you.
  • When you sever or pervert the relationship between work and compensation for said work - for instance, creating money out of thin air- then be prepared for bad things to happen. Like hyper-inflation. Or unsustainable interest rates. Or supply chain breakdowns. Or President Biden's Build Back Better (Green New Deal by executive order) with a original tab of $3.5 Trillion (mercilessly reduced by Senators Manchin and Sinema) and his American Rescue Plan, both of which are primarily schemes to keep the most urban cities on each coast financial solvent until 2024, which is obvious because neither have created useful jobs and the alternative purpose is that they just aren't that smart. Or [insert any number of government boondoggles].
  • ... Or student loans forgiveness- which would be wildly inflationary and I anticipate would raise our future and permanent costs of living (or what I call 'cost of lockdowns') another 2-3%, on top of the current 12-15% (you can always add 25% to BLS's published and fraudulent inflationary numbersIf you think 20% inflation represents economic success, my advice is to run that by someone who was alive in 1980, like I have 10x a day for the last two decades.
  • ... Or (some) pensions, which are important, necessary and earned by most recipients but still represent payments to one group of people based on the labor of another. (And if you honestly think Millennials and Zoomers are going to be okay with serving as the mule to Boomers in this social contract much past next week, let's talk...) We all know that giving people something for nothing is easy, fun and popular. That's literally the game plan of modern politics. But sometimes leaders- like parents- must instead stand up to do the unpopular thing for the ones they love, and all those that will follow. 
  • Despite the sharp decline in math and financial aptitude in this country over the past 60 years, the laws of economics still apply in certain areas of the economy, which has left us with some uncomfortable truths and consequences from our brief and catastrophic foray into MMT. This problem is compounded when we elevate and delegate decision-making to an elite class of political leaders lacking a shred of real-world business intelligence (which admittedly goes back multiple generations, due to the fact that successful business people generally lack the desire to rule over and bully others, as well as other sociopathic characteristics). 
  • Even after finally electing the first President in a century with an actual business background, the outcomes weren't much better. Apparently starting life on third base, becoming a television celebrity and running multiple companies into the ground exploiting the bankruptcy system weren't quite at the level of a Lee Iacocca or Peter Drucker, nor did they prevent former President Trump from increasing the money supply by 40% in a year. Of course, when your Treasury Secretary looks like a James Bond villain (along with matching wife), you can't act too surprised.

We'll never forget you, Steven Mnuchin. And your wife, Pussy Galore. And your creepy henchman. These people are beyond parody at this point.
  • As sometimes happens when money is received that is neither earned nor needed, lots of people went out and passed along their money to big corporations so fast you would have thought it was on fire. A national shopping spree by design. This spending orgy helped cushion the financial blow (for about a dozen companies) from government's attempt to turn off the entire economy for a couple of years. If you thought the free money were used to cover life necessities, you would be dead wrong. I sincerely hope that all the STEM majors in the US Congress (I think there are two of them) have more success repairing the ozone layer. 
  • Some people used their new and unlimited free time during the lockdowns to consume sketchy content from YouTube market gurus, develop overnight expertise in global finance (despite dubious academic credentials) and applied their free money to Robinhood accounts (what I call "Robinyou") to buy all manner of speculative products- including options, cryptocurrency, Non-fungible tokens (NFTs) and meme stocks that are meant to impoverish, bored the young and gullible. That also hasn't worked out so well- for them, the market or greater society. We'll come back to that later, under the section titled, "What Could Go Wrong.."

As a result, by the time people received their quarterly brokerage statements in the fall of 2020, a sizable portion of pandemic market losses had already been recovered, thanks to massive consumption unleashed from the caffeine-like high from the stimulus. By the end of 2020, those who had stayed the course and avoided jumping off the market rollercoaster were back to even again and then some. It was a remarkable, unprecedented market recovery. As usual and quite understandably, many investors - both new and old- may have become conditioned to believe that such immediate bounce-back behavior was  "the new normal," instead of an anomaly. And like in real life, the money handed out to almost everyone ended up in the pockets of the top 10% within a year. Gee, isn't that an interesting phenomenon. I feel like Adam Smith might have mentioned something about this topic in the past.

"The natural effort of every individual to better his own condition...is so powerful, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations."

- Adam Smith, The Wealth Of Nations

In eras with a more enlightened populace, one might argue the pandemic was a perfect short-term experiment that upended over sixty years of flawed monetary theory about the allocation of wealth without commiserate labor in less than two years: less people working and more wealth inequality. Neither problem can be solved by transferring the stored labor of one person to someone else. While the adverse consequences can be masked or even ignored temporarily, doing so robs the producer of his full potential to improve society while also robbing the recipient of their dignity, and therefore their full potential to change society as well. In the end, everyone loses except for those who control the medium and terms of labor exchange - i.e. the distribution of wealth (politicians). In short, Rome. It may sound pedantic, but it's one of the most basic laws of human nature.

To everyone's shock, the short-term panacea benevolently bestowed by government bureaucrats came with a steep cost, one we would dodge temporarily but someday have to face at great expense (pun intended). That day is today. And that cost is sloth.

This should be on the memo line of the COVID stimulus checks

The Paradox of Thrift

The Saver's Paradox (or the Paradox of Thrift) dictates that "what's good for the country is often bad for the individual" and vice-versa. For instance, what's best for the individual is generally to avoid all consumer debt and maintain a healthy emergency fund, as virtually all personal and national problems are fundamentally the result of excess debt and insufficient savings. But in a capitalistic, free-market economy like ours - especially those using a fractional reserve currency- if everyone lived within their means and flush with savings, the economy would collapse overnight. The actual amount of currency is circulation would be simply insufficient to maintain our current system.

As such, the future prosperity of America is incumbent on a substantial portion of the populace living beyond their means, poorly capitalized and highly-leveraged. In other words, elevated debt and negative net worth. That's one reason why real estate is such a privileged sector of the economy, full of a lot of unique goodies bestowed by the government yet unavailable to virtually any other industries (like 1031 exchanges, deductions, depreciation, etc.) It's also a big reason why land and property valuations have continued to grow exponentially over the last forty years, roughly in line with the explosion in overall debt in the last 40 years. Property is indeed the perfect asset to lever up many multiples of what one's income (i.e. their labor) can rationally justify because it serves as excellent collateral, aids social stability, is tangible and is relatively illiquid (i.e. it's much easier to find and repossess). However, like all government largesse, it has its dark side.

This is relevant to the topic at hand because the Baby Boomer generation was the first generation in American history to fully embrace debt as a necessary component of life. For the first time in our history, it could be utilized beyond the purchase of land. I personally believe that the vast majority of American economics revolves around the Baby Boomer generation. I tend to notice that most people are less aware and appreciative of how influential this group is to American life. As those born between 1946-1964 began to hit their peak earning years and accumulate wealth/debt between 1980-2000 (below)  you can clearly observe their fondness for bigger and more expensive housing (i.e. McMansions) growing exponentially compared to earlier generations (below). It's hard for people to accept that a house was not always an investment, and was barely an asset for hundreds of years until Boomers flooded into the market in the late 90's. Their conspicuous consumption is not necessary a bad thing from a personal perspective and certainly not a knock on them. Without Boomers, I'm probably unemployed right now. Deriving directly from the immense wealth of this demographic (on the backs of their own above-average work ethic and their parent's immense sacrifices) and along with their accompanying debt load has come uncomfortable abnormalities. Like the housing market, for instance..

"I'd like to move $100,000 from my retirement account into an illiquid residential housing project because the stock market is overvalued and risky." 

A Generational Curse

It's my conviction - and hardly hyperbole - to point out that our government has tremendous incentive to maintain a sufficiently large collection of debt-serfs in order to survive and grow. Suffice to say that if everyone lived within their means and did not spend more than they make (i.e. no debt except for paid-off income-generating real estate), then our current quality of life would not only be reduced, but impossible. So when the housing market collapsed in 2008-2009, along with all the mortgage/HELOC debt along with it, the disappearance of financing represented  not only a painful shift for potential home owners, but an existential threat to the country's very existence. The nation's combined mortgage liabilities couldn't just dry up, it had to go somewhere.

You see, debt is to our economy what motor oil is to an engine. Without it, both will seize up and die. Due to stifling government regulations, increased female reproductive rights (and now the massive collapse in small businesses and labor participation due to government lockdowns), America simply cannot produce enough goods and services- nor children- to support our current standard of living. We have to fill that gap with increasing household, corporate and government borrowing.

Entering 2022, there was a general sense of ease from investors, politicians and even everyday Americans that we had "gotten away with it," dodged the inflationary bullet and MMT could perhaps serve as the bedrock of a brilliant new economic system aided by the next big government innovation (following in the esteemed footsteps of public schools,  USPS delivery vehicles, mail-in voting and the new 988 mental health hotline rollout). This new way of funding the expanding budget offered a new ability to continue funding useful agencies like the Departments of Energy and Education without all the annoying work and sacrifice (or taxes on the work and sacrifice of others.) 

The only problem was that the market drop of 2020 wasn't a true recession nor a correction in the literal nor figurative sense. It was primarily a health crisis that governments around the world introduced in their biolabs and then transformed into an economic crisis (for right or wrong.) By turning off the economy for more than a year to attempt to control the outbreak of their virus, our leaders compounded their folly by generating both a labor (lockdowns) and a debt problem (money printing), a strategy successfully lifted straight out of the playbook of many past Presidential administrations, most notably President Obama's controlled transition of national mortgage debt into higher education in 2008. I wrote an entire article about it for those who still believe student loans were meant to help students and the country, and should be forgiven for the good of both... 

ASK BART: Should I Finance College?

Student Loans are America's Biggest Racket

- By The Notorious CFP®

As with mortgage and student loans, there exists a possibility - albeit remote - that there were some within government whom may have originally had the best of intentions with their brief and tragic dalliance with Modern Monetary Theory (MMT), but simply lacked the intellectual capacity, courage and/or  real-world experience to foresee the full ramifications of their folly, respond appropriately when the program was deemed irreparable or begin working on suitable alternatives to the quandary that both the Executive branch and the CDC found themselves in once they realized the permanent destruction they were inflicting on the American people.

But our government doesn't work that way. A bureaucracy is literally defined by it's specialization of functions, adherence to fixed rules, and a hierarchy of authority- all characteristics which prevent anyone involved from ever being held accountable for their actions, no matter how egregious. The problem (among many) in this situation is that after a certain point (usually early-on), there comes a point of inflection where any remaining supporters of even base-level intelligence should be able to identify the dubious foundation of the program, the disastrous execution and/or the inevitable crippling effect on the U.S. economy. 

When this occurs in the private sector, there's usually a process of reflection, regroup and replanning followed by a defined pivot towards a viable alternative solution. Or the business fails (as 20% of all small businesses fail within the first year, over half within five years and two-thirds by year ten. Unfortunately, the government lacks the capability or resources (people, money, time) to do any of these things. So they tend to devise and enact new, larger and more expensive programs instead that both cover up previous mistakes and allow for the expansion of size and scope. 

The student loan epidemic is and has never been beneficial for the country, outside of one fairly unproductive sector- academia. The money could have been better squandered almost anywhere else in the economy (oh, like I don't know...  infrastructure?) the truth is that we will never see serious money applied to infrastructure. Never. Because that involves people doing real labor. And in that country, that ship has sailed. Unless you think California's bullet train to nowhere is a paragon of government wisdom and efficiency.

Union Pacific experienced a 160% increase in criminal rail theft in Los Angeles County in 2021. And yet I bet you know people that still live there.

This is largely because our government can apparently no longer do anything well. At one time, you could argue they are best at destroying things, which is primarily why the military was largely considered the last and final department that could do anything successfully with their classic formula:

  • Launch fighters
  • Flatten the country into a parking lot
  • Invade
  • Install compliant dictator
  • StealSecure the natural resources
  • Introduce processed Western food
  • Increase military budget to boost MIC stock price
  • Leave (Iraq, Syria, Libya, etc.)
  • Direct refugees to Europe
  • Rescue US citizens and equipment (optional)
  • Disburse those men accountable to military contractors and Big Tech

But that has all ended with Afghanistan, and now we can unequivocally agree that the state can no longer build or create, they can only take. Which is their primary role today, and they would agree (though they might use disparate and softer-sounding euphemisms like wealth distribution, reparations and tax reform.)

Fortunately, the military itself have perfected Critical Race Theory, preferred pronouns and reduced physical standards. This helps mitigate their struggles with basic competence

All I know is if I lost $67M in a single day, I would be a.) out of a job, b.) beaten and c.) probably posting these articles from prison. But with egregious and mind-numbing stupidity in the public sector, no one is held accountable and no one loses their job. The problem, of course, is a.) a dumbed-down federally-educated populace and b.) a national rat-in-a-maze societal incentive structure.

 * NOTE: This is no way is meant to disparage individuals in the military. The smartest people I know have military backgrounds, although by now, almost 100% retired. My issue is with the system, the leadership and the public's inability to hold the MIC accountable for any of their galactic fraud and graft.

Show Me The Incentives

“Show me the incentives and I will show you the outcome.” - Charlie Munger 

For a . Unfortunately, politicians aren't (s)elected to perform that function anymore, they are oftentimes chosen based more on their soothing words and charisma and what they promise to do right now that will make people happy today, or strong tomorrow.

The problem is that in life often what feels good in the short-term (cupcakes, in my case) is usually not the best long-term strategy- and vice-versa. Giving someone what they tell you they want (as opposed to what they actually need) rarely truly fulfills them. This applies to teachers, parents and managers, but also to greater society as a whole. Ultimately, if you can work from a (jaded) perspective that we have largely become a nation of children, so much of the chaos that envelopes us all today - including and specifically, in the financial markets- makes a heck of a lot of sense. The decisions being made are so short-sided and poor that if the markets were suddenly turned over to your local middle-school students to run for the summer, I suspect they might look a lot like the one we have now and you might not even notice the difference. 

Protecting American from their lockdowns by printing and distributing free money was more like mom and dad bailing young Hunter Johnny out of jail the day after they've been arrested-  a scary experience, no doubt, but not especially impactful to his overall, long-term investor psyche. Once again, government's compulsion to think (and be screamed at by their unhinged constituents) that they must act - when the best course is often to do nothing at all- has almost guaranteed that the natural recovery portion of this particular market cycle will be much more pronounced, chaotic and delayed than it would have been if left to the free market and the financial markets. Our advantages over politicians is that a.) we still have our souls (presumably) and b.) we don't have to act when a pack of screeching hyenas hyperventilate about climate change, social injustice, various "isms," wage gaps and other Nazi threats to our first-world lives. My unsolicited advice is to permanently discard the victim card and narrative so that you're not a guaranteed lifetime loser, since the two concepts are mutually-exclusive. Or you can just travel to any other continent in the world to figure this truth out for yourself- you will never complain of social justice another day in your life. 

Your politicians and local political activists know that if they have to choose between the powerful victors and docile victims, they'll choose the latter every day. Without losers, both are out of business. All parasites need willing hosts that do as their told, collect a paycheck, enslave themselves in consumption and debt and don't ask too many questions. That's why large global conglomerates LOVE Ivy League graduates and spend so much time and effort interviewing on their campuses. It's why PACs are always headquarters in the core of large urban centers. My advice is to put both schools and activist organizations out of business. Don't surrender your God-given agency just so that some organization of losers can accumulate members, donations and tax dollars. And don't let your children finance college. Set them up for success, not failure.

The Ideas In Our Heads

"No one in this world... has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby. The mistake that is made always runs the other way. Because the plain people are able to speak and understand, and even, in many cases, to read and write, it is assumed that they have ideas in their heads, and an appetite for more. This assumption is a folly." - H. L. Mencken

Here's another (related but open) secret: The vast majority of cryptocurrency is a scam, on par with ESG (Environmental & Social Governance) investing, another contrivance cooked up by investment bankers to extract more wealth from crudulous retail investors. If you're unfamiliar with the sudden rise and imminent fall of this pseudo-asset class, it's worth a read.... I wrote an article expounding on the ESG racket recently to ... 

ASK BART: Is ESG A Good Investment Strategy?

America's Newest Scam 

- By The Notorious CFP®

If you are unfamiliar with ESG, a.) congratulations,  and b.) in my estimation, ESG is arguably one of the biggest and most recent scams in finance, and it's been perpetuated by at most about a dozen investment bankers that may control significant swaths of the stock market. As heads of some of the largest mutual funds (think Fidelity, Blackrock, Vanguard), these extraordinarily wealthy individuals control the fund companies that manage the mutual funds and Exchange Traded Funds (ETFs) that largely control the most important decisions at the majority of the largest companies in the world. Which means they control the economy and the world, so this is not an insignificant situation. When contributing to a mutual fund, most investors (happily and usually unknowingly) transfer their proxy voting privileges to them as well. And in my experience, exactly zero percent of my clients care even three squirts of a cow's utter about losing this privilege. Even explaining to them what they're losing is usually wasted breath, like accepting the Apple user agreement. But they should care. 

You see, when buying a share of stock in a company, you are now an owner. And that ownership entitles you to a single vote at their annual shareholder meeting. When you own a mutual fund that owns a share, depending on the size of your investment in the fund, you own a fraction of a share of ownership in the companies it invests its assets into. So by default, mutual fund investors are (very) small owners in the companies that the funds select. However, the nature of mutual funds means that your use of the mutual fund transfers your ownership in the component stocks to the fund company. Each individual investor ownership is relatively small, but when combined with all the money contributed into the fund by all other investors (i.e. why they are called 'mutual funds') gives them control of a significant amount of proxy votes. And that in turn gives them significant control of the individual companies themselves. 

As investors have piled into these funds over the past 13 years during an unprecedented, easy-money, buy-the-dip stock market bull rally, the ownership of companies have transitioned from individual investors to the fund companies themselves, or said more accurately the managers of these fund companies. And by controlling the largest mutual fund companies in the world, that control the largest funds in the world, which control the largest companies in the world, the managers of these companies are in effect now some of the most powerful investors in the world. This makes them some of the most powerful people in the world, because even though managers have boards of directors and shareholders of their own, most managers - especially of well-run and very profitable firms, operate somewhat autonomously and with few limitation (think Elon Musk and Tim Cook.) In a world where justice is disappearing (or at least rigged for the benefit of the chosen few elite - think Jussie Smollett, Michael Sussman and Paul Pelosi), these people do what they want. The regulators aren't smart nor courageous enough to go after them, and with the economy moving more towards a version of fascism than a free market, those elite of a certain political persuasion are in effect above the law because they are largely protected by the federal intelligence community (DOJ, FBI, CIA) and the legacy media. That's a harsh indictment but easy to prove. That admittedly sounds morbid and depressing, but that a.) that's the way the game is played and b.) it won't last forever.

The important point to understand is that the power held by the largest mutual fund companies is immense, so much so that even legendary investor, John Bogle- who founded Vanguard, launched the lost-cost investing revolution that we all take for granted and changed the world of investing more than any human in the past century- publicly expressed alarm at what amounted to a consolidation of power into the top bosses of these firms is both impressive, staggering and could be dangerous to the free market and capitalism themselves. If they were to get together and decide that they would only allow investments in companies that (hypothetically) have rainbows in their logos during Gay Pride month, have commercials with biracial couples, or contribute to a certain political party, that would in effect be a "sanction" of sorts (similar to the US response to Russian aggression in Ukraine), which would block capital investment into these companies, isolate and ostracize them. 

I may have failed to mention before, but it's really hard to run a company of any size in 21st century. Think of the average job. Then imagine it was 20x more difficult and stressful and add 3-4 hours of work each day in the office. That's what just it's like on federal holidays like Juneteenth. If that's a bad example, you can pick another day- federal employees get 44 paid days off per year, in addition to the 100 days off for weekends. That's roughly 150 days off out of 365. Annnnyways, my point is that being a business owner is really hard. It's much harder to manage a larger firm with people, and every business is a challenge to manage in the last few years when the government made it illegal to work for all but the most politically well-connected, like Amazon, Target and Best Buy. And even they had their problems with customers breaking in to them and stealing all of their merchandise (Use code "FLOYD" for free shipping and 100% discount up to $950. Double coupons on Juneteenth, limit ten purchases per day- or whatever you can carry..), which far exceeded the benefit of being a beneficiary of the federal government's attempt to make them monopolies in 2020-21. 

personally direct the vast majority of investor money nationwide through their mutual funds into the companies that they believe they can control. So when they decided ESG should be a new moneymaker (like crypto), they dictated that all companies that wished to receive their money must adhere to their personal opinions and whims on climate change. As a result, this created a massive investment distortion in capital markets that starved a lot of good, viable companies out of significant investment. If companies didn't achieve sufficiently high ESG scores (which are decided upon by whomever makes that decision, kinda like the credit agencies and the China social credit systems), then they would not be eligible for any investment whatsoever from the world's largest mutual funds. Which would be like denying you water and air. As you can imagine, this racket was directed at and certainly included energy companies like Exxon and Shell that make modern life livable (since only 44% of oil is used in vehicle/ transportation and the remainder used for other forms of fuel and as well as components of devices like the one you are reading this article on and almost every other physical entity in the room you are sitting in now. 

Going for the Jugular

So the next time someone tells you that oil companies and their greedy executives are to blame for higher gas prices, a.) agree with them (that's not entirely untrue. Drive around the Woodlands and tell me how their execs are struggling to put food on the table), and b.) ask what effect the Executive Branch blocking hundreds of billions of dollars in capital investment over the past decade might have had on the industry they personally work(ed) in. If that someone says anything along the lines of, "a lot," "mass layoffs" or "certain insolvency," then congratulate them on their honesty- perhaps they can begin to understand why our entire oil and gas infrastructure (and more importantly, the rest of the Western world, specifically Europe) was unprepared for the US government's efforts to remove Russian energy from the world market, why energy investors and industry CEOs are a wee bit hesitant to simply start committing billions of dollars of cash and loans into capex now, and why President Biden is begging other countries to give us more oil, presumably because their pollution isn't as bad for the planet as our pollution? (The most powerful country in human history is also begging them for baby formula but that's another story - or is the same story? Talk amongst yourselves..)

How many people don't even have six figures in cash in the bank, and are complaining about Exxon's reticence to commit billions of dollars to an industry the government is actively trying to destroy, just not for another 6-12 months? 

These people really have never worked a day in their lives. Even their own media is calling them out.

Prostituting himself out to a country that President Biden labeled "a pariah" earlier this year is truly remarkable, and hardly a great look for our President or the country. Either the House of Saud is a strategic ally or the worst human rights violator of the century, I feel like you have to pick a side. Groveling for oil that I have under my house makes America look weak, and serves as yet another humiliation for an embattled administration that cannot get out of its own way and seems intent on self-destruction. DC Mayor Bowser is gonna need to hire President's Biden's fence contractor to protect DC before this is all over with. (The abject hypocrisy of our political class writes it's own jokes these days, you truly can't make this stuff up anymore.)

The incoming leadership famously knew from CIA "intelligence" that Russian aggression into Ukraine was imminent and certainly understood the massive disruption that their own Russian sanctions would cause in the global energy markets. At the same time the administration was scheming to dismantle US oil and gas production (and our energy and military independence in the process), it surely also knew that a coordinated and purposeful crippling of the average American household budget would unleash unpredictable an unnecessary human suffering and be catastrophic for the country, the mid-terms and their legitimacy to rule. It simply makes no sense.

This leaves only two possible conclusions: a.) Susan Rice and her team truly doesn't care or b.) she really is that incompetent. Like most Americans, I go back and forth. Bill Clinton's brilliant strategist, James Carville said it best exactly twenty years ago, "It's the economy, stupid." Even if Rice & Co. do eventually throw Biden under the bus (my prediction, probably after the midterms and certainly no later than 2023), the damage to the country and the Democratic party will already be done. It's not like these people are new to politics- Biden has been around long enough to have witnessed the Lincoln assassination (he was a truck driver back then) and you don't represent 'the banker's state' without learning how the game is played. 

By now, it's fairly well understood that the Biden cabinet is in charge and most likely taking orders from someone outside the administration. Many speculate it's President Obama or her husband, former President, Barak. If you're in your third Presidential term, you've clearly become quite deft in the political arena. The District of Columbia is full of political animals, power is the coin of the realm, and most of it's residents are literally unemployable anywhere in America outside of large coastal cities. Yet, regardless of your ideology or what's perception vs. reality, no one can deny they are heading into certain political disaster, and continue to do so even today. The question is whether they will beat the Republicans in fracturing or even dissolving first, but my money is on a tie. Two drunk brawlers in the ring, leaning up against each other for support, sharing nothing more than a random jab or hook when the other provides an opening.  

To be honest, I feel most sorry for them. When this is all over, these folks won't even be able to find work on K Street. I come from a very long and proud line of Blue Dogs Democrats, but Kennedy would take a flame-thrower to this party (not that he nor MLK would still be allowed in today's Democrat party.) It's unfortunate, because America needs strong parties, both willing to cut off the cancerous 15% of fringe degenerates. The left would return to its pre-Southern Strategy roots of tolerance and compassion. Explicitly and brazenly cramming inflation, interest rates, a dysfunctional education system, $5 fuel and a broken supply chain up the (ear) of the middle and lower class is not compassion. 

This grotesque facsimile of Camelot more closely resembles Alice in Wonderland, a true Mad Tea Party. At this pace, I sincerely doubt either party survives in their current incarnation much past 2024. I think we can all agree that Biden vs. Trump Part II would usher in the end of the republic. Could Joe Biden really survive the after-effects of the same level of uppers he consumed to get elected in 2020? We all lived through the 1980s, would the consequences of this kind of drug use be even worse than those he is suffering from today? 

No matter how many apparatchiks we pump out of the university system or how many unskilled migrants we dump into the heartland(I've got clients living across the street from a prominent INS bus stop in South Texas, and unless you've seen that bus unload in front of your home with your own eyes, you know nothing about what's going on with the immigration, and should comment on the topic accordingly)... neither demographic will be enough to overcome the economic masochism currently being unleashed on our country. Applying more stupid to a problem has never been a viable solution anywhere but Jonestown. 

If you consider yourself "green," then where was the benevolent and skilled invisible hand of government intervention between 2004 and President Biden's 2021 inauguration when the XOM stock price (i.e. greedy shareholder profits) went exactly nowhere FOR SEVENTEEN YEARS? (While the stock market rose 5X)?... I'm old enough to remember when XOM stock lost more than two-thirds of it's value in just five years leading up to COVID? And now they're executives are being painted as greedy, as Washington has doubled their stock price in 12 months? If that's a green new deal, no thank you.

When Exxon lost $20 Billion (with a B) in 2020 (under a Republican administration), I do not remember many howls about price gouging and demands for price caps...

President Biden, the most powerful man in the free world just got humiliated by the House of Saud AND taken to the woodshed publicly by one of America's top CEOs all in the same week. This was in response to his surreal letter (clearly written by someone who has never prepared a P&L statement in their life) that singled the company out for price gouging, when any rational person knows this is his mistake alone. It's my conviction that the time has come for us as a country to a.) step back and re-evaluate whether our leadership would be better situated in a nursing home or halfway house (can I still use that term in 2022?) and b.) for smart investors to rewire our brains to begin looking for investment opportunities to specifically exploit stupid. In other words, it's time to start looking at our elected leaders (and their constituents) like the credit card companies, banks and Wall Street view us. And go for the (investment) jugular by gladly taking advantage of their missteps and investor's responses (selling off), so as to bring the price of WTI back down to it's rightful 2020 range of $40-60/barrel and make some profit in the process.

I know that strategy will offend some people. It's uncomfortable to consider taking advantage of feckless leadership and unskilled and inexperienced investors.  But personally, when someone decides to invest in the stock market, they've signed the liability form. It's hard to argue they are still an innocent party or a victim. For example, If you were to show up at Kyle Field in College Station on a Saturday afternoon in the fall unprepared and/or unqualified, and your team is losing by three touchdowns to the Texas A&M Aggies, if you're embarrassed and upset that they keep their well-paid semipro varsity squad on the field for more name/image/likeness (NIL) royalties, then that's on you. No one marched you into the slaughterhouse. If you thought it was going to more akin to a pillow fight, then perhaps the real error occurred further up-stream. 

It's not the Aggies' job to go easy on Sam Houston State, run out the clock or bring in their backups. On the contrary, the most caring act of love is to continue to keep their foot on the (proverbial) throat of their opponent until the final whistle. That's how humans learn, grow and improve. If your outmatched team is getting paid millions of dollars to be eaten by the lion, then it's your job to play better, or die (metaphorically) trying. The Bearkats are the problem, not the Aggies. And if you weren't prepared for the reality of the situation, then maybe you should have stayed home. Maybe you should have studied/practiced more and harder. Maybe someone should have exposed you to risk and loss earlier in the process. When the student is ready to learn, the teacher will appear.

If a generation of investors is suddenly realizing they don't know what they're doing, investing is harder than they thought and this game is not for them, better for them to learn that in little league then once they're lined up against a 340 lb defensive lineman named Shemar. Who's more to blame... Aggie head coach, Jimbo Fisher? Or their coach? 

Similarly, it would have been better for new and unskilled investors to understand the markets before losing all their money than afterwards. They can instead learn from the experiences of others (which is the second-best method and way easier) and not be led to temptation to trade based on free money, gamified apps, free trading and an inflated sense of self-worth. 

Investing in the market is still very much a game (as all modern warfare is), but the specific components involved are anything but trivial. This is your (financial) life and it's no one's responsibility but your own to play the game well. Many have been (mis)led to believe they can constantly monitor and outsmart the financial markets (composed of thousands of institutions with huge research teams, very tall buildings, front-running algorithms and Jerome Powell on speed dial), without any formal education, lengthy experience - especially in declining markets- and an honest and objective understanding of their own investor profile. It therefore does little good to tell new or unskilled investors that they're special, can do anything they want, or enable further delusion

Telling me in high school that I could have a future as an offensive tackle in the SEC (at 5'10" and 170 lbs.) would have been not only absurd, but dangerous. Carried to it's extremes, I could have lost a limb. But when it comes to mental and intellectual prowess, promising someone that they can't beat Vanguard and Blackrock- much less the market- is still considered offensive by many people. What do you mean someone can't have/do/say something? But that, ladies and gentlemen, is America- where few are ever told "no," many lack an understanding of (or much recent history) true market risk, their distorted view of reality or their infinite, unquenchable capacity for "b.s." I would love to tell them otherwise, but I care about them too much and I want to see them succeed. A nation of enlightened, experienced and resilient investors that have been put through multiple (economic) recessions and (market) corrections is a stronger nation.  

Enabling the approach towards investing that we've adopted since the Great Financial Crisis in regards to investing disposition and behavior is literally why we're in this mess in the first place- in some ways we've become a nation of children that have been coddled our entire lives, resulting in mass speculation in gimmicks like Non-Fungible Tokens (NFTs), most forms of cryptocurrency and meme stocks. These are all "investment categories" that should not and would not have existed if not for a fragile, gullible culture that frankly wasn't spanked. Now we have a not-insignificant percentage of participants cashing in their chips at the slightest hint of economic turbulence and going to cash.

For a market to operate efficiently, someone has to be on the other side of that trade to buy or sell your shares. No one is holding a gun to investor heads as far as I can tell. So if another investor wants to buy high and sell low, who are we to stop them? Our responsibility is to win the game (retirement, college, estate, insurance, etc.) and that requires buying low and selling high. All of which involves being on the "field" of Wall Street and mimicking the big money by thinking long-term, being patient, having cash (and some stones) and being ready and available to exchange stock shares from those that sleep better at night holding fiat currency losing 15% per year indefinitely. Or at least until the varsity team shows up to lead this country.   

That sounds harsh, I understand. It feels like I'm punching down. But no one got rich playing down to the lowest common denominator (except the Texas Longhorns). I think we need more harsh in our world. We need to be reminded that we have vast reserves of potential that are untapped because we think we're good enough. When you look around at all that society has accomplished in this modern world, it can be easy to forget that we still live in a world largely awash in stupid. You know how I know this? Because even in 2022, Hertz has to put this disclaimer in their annoying Tom Brady commercials where he recharges himself like an EV: 

Tell me again how we're not just slightly evolved chimpanzees in fancy clothes?

The fact is that apples never fall far from the tree. I take it as my own personal mission in life to to instill intelligence, resilience and fortitude into our national financial markets if we hope to create the next generation of great investors, those that value earnings and dividends over hope and faith. This post was originally over 150 pages in MS Word, so perhaps you can believe me. But we all have a collective responsibility to gird ourselves to be smarter, more rational and more antifragile investors.

“You can’t let a youngun’ decide for himself.  He’ll grab at the first flashy-with-shiny-ribbons-on-it-thing he sees.  It’s difficult for him to tell the difference between right and wrong.  When he finds out there’s a hook in it, it’s too late.  The wrong kinds of things come packaged in so much glitter, it’s hard to convince him that the other thing might be better in the long run.  All a parent can do is say, “Wait…trust me”…and try to keep temptation away.” - Andy Griffith (some old dude from the 50-60's.) 

We have a fundamental breakdown in economic intelligence in this country that has been festering and compounding for a generation. And we've made some very poor judgments about the people we allow to run our country. We compounded this by becoming complacent about surrendering the culture to the mentally ill and those with a desire to dismantle the greatest society in human history. I recognize that fact also probably offends some people. I'm deeply concerned about that and when someone provides another culture that has accomplished more, I'll gladly surrender my position. The truth is that the United States was specifically designed to be run on stupid, but not inept and immoral. With one person = one vote, the system is designed to protect against that and has been successful over time. I once thought the Founders had a blind spot for that eventuality, but it turns out America life expectancy has exceeded all of their wildest expectations.

I also doubt they ever could have foreseen an entire population kept so comfortably numb and willfully ignorant by technology. One might even begin to suspect we're being kept ignorant about finance at the personal, community and national level on purpose. We're being lied to so often, so blatantly and so often that it doesn't seem to even register anymore. It's 2022, and half the country is still thinking about Russian collusion and unarmed imbeciles in Viking helmets stealing Nancy Pelosi's lectern. 

The bad news is that anyone anticipating a top-down solution to our most pressing problems is going to be sorely disappointed. This isn't a case of time or resources, its re-enlightenment. The good news is that it's 2022, more information exists in our smartphone than all the mental capacity of the entire world a couple hundred years prior. As such, it is now incumbent on each and every American to accept that our current leaders aren't getting any smarter from here on out. They're too old, too ideological and too corrupt. No one is coming to save you, which feels scary but is actually quite a liberating mindset for you (and your trusted financial counsel) to build and protect wealth together by understanding how the game is now played, eschewing all external noise to focus on reliable and time-tested principals of money management, and positioning wealth in strategic and prudent ways to (legally) take advantage of the dysfunction in the financial markets and financial illiteracy of the majority of the populace who struggles with logic and reason to win at finance, investing and life.

The government allows for the existence of most crypto-currency for many reasons, but one of the most valuable ones is it permitted the 2020-2021 stimulus money to quickly flood into the crypto universe (i.e. early adopters, or HODLers). I wonder if the Fed's hope was that what hasn't already evaporated into the ether this year (i.e. to the early investors at the top of the crypto Ponzi pyramid) will eventually and slowly drip back into the economy on a more controlled and gradual pace, as to avoid even more massive inflation than already exists. Now that we're in hyper-inflationary 2022, perhaps it's become necessary for the Fed and it's primer dealers to pull some of that stimulus money back out of the economy... hence the current collapse in virtually all crypto digital assets. 

To many that's not conspiracy theory, that's by design. Otherwise, why would an asset and currency that is supposed to be non-correlated to the US dollar and stock market fall by over 70% in value in a single year, during hyper-inflation and an economic contraction? If crypto was performing as promised, it should be actually rising in the face of a currency debasement and market correction, not falling off a cliff at 3x the speed.

Protecting American from their lockdowns by printing and distributing free money was more like mom and dad bailing young Hunter Johnny out of jail the day after they've been arrested-  a scary experience, no doubt, but not especially impactful to his overall, long-term investor psyche. Once again, government's compulsion to think (and be screamed at by their worst constituents) that they must act - when the best course is often to do nothing at all- has guaranteed that the natural recovery portion of this particular market cycle will be much more pronounced, perverted and delayed. Our advantages over politicians is that a.) we have souls and b.) we don't have to act when a pack of screeching hyenas hyperventilate about social injustice, isms, wage gaps and other Nazi threats to our first-world lives. My unsolicited advice is discard the victim card and narrative so that you're not a guaranteed lifetime loser, since the two concepts are mutually-exclusive. Your politicians and activists know this. Without losers, both are out of business. (Hint: don't give up your God-given agency so that some organization of losers can collect donations and tax dollars.)

The Great Financial Crisis

The slow and steady unraveling of the US housing market culminating in the Great Financial Crisis (GFC) started in 2005, was already weighing heavily on the economy and began pushing the stock market down as early as 2007Stock prices continued falling through 2008 and market fever ran it's course through March 2009, at which point the market and most investors were down much more (over - 50%) and for much longer (17 months from the all-time highs of October 2007) than we are in this current economic situation - and for an actual legitimate reason (as opposed to today's general angst about current conditions and future outcomes).

By late 2008, most investors were sobering up to residential real estate's myriad and rampant excesses (as made famous in the remarkable book that was later immortalized in an even better movie, The Big Short). The financial sector that had fueled the home-as-an-investment orgy was also at genuine risk of collapsing in on itself, banks large and small were staring down insolvency and investment firms were closing up shop left and right. for weeks, the nightly news recycled a continual slideshow of well-dressed white-collar professionals standing on the sidewalks in Manhattan with their careers in a cardboard box, crying and talking into their cell phones.  

The red-hot residential real estate growth today is at least partially attributable to the aftermath of the previous crisis, as home builders and developers were decimated in those ensuing years, an environment of prolonged under-development that continued for almost a decade. Inventory shrank to such minimal levels that to date there is still insufficient supply - even amidst absurd valuations, obscene materials costs and the specter of crippling property taxes for new homeowners or those upsizing in the past few years. Even at the scorching current pace, it may take many years to catch back up, and rapidly rising interest rates could extend that timeline even further. This is but one reason that building is likely to continue well past the point of prudency over the next few years. Real estate is somewhat unique as the only alternative to building for some professionals (in a market where few can afford to move into a new and higher mortgage rate) is often laying off and closing the business, so the incentives of the former create distortions that often cause boom-and-bust cycles very similar to the energy industry. 

When the Great Housing Crisis began to unravel in late 2007, people were still carrying Nokia's, the iPhone was barely a thing and you couldn't trade stocks on it. Is it possible that is influencing today's manic market?  

The Dot Com Bust

Last but certainly not least, we would be remiss to ignore the the first recession of the new century, a period in which the market seem to bounce aimlessly from crisis to crisis between 2000 and 2002. The collapse of mega-hedge fund, Long Term Capital in 1998 was soon followed by the Y2K hysteria of 1999, the dotcom bust of 2000 (with the tech-heavy NASDAQ exchange losing over 80%!)... followed by 9/11, the ensuring "War on Terror" and finally the collapse of Enron and WorldCom in 2002. This cascade of economic uncertainty stretched well over three full years, butchered an entire generation of investors and still seems worse (to me) than our current environment (for reasons that I cannot completely explain - publicly anyways- although I have my theories.) I suspect that we've simply different people now, and I can guarantee from experience that we're different investors. 

So why are investors that have been through much larger and much more serious corrections in 2000-2002, 2008-2009 and 2020 so much more spooked by this market environment? Have markets changed that much? Or have we? It seems trite and superficial to argue that "we're older and inherently 'closer to our financial goal timeline?'" Or is there more at play? 

Even my clients in their 60s and 70s (who can look forward to decades more of reasonably comfortable living) still openly confess to me that they "don't have the time to recover from another correction." That's a refrain I hear literally every day and I do understand it, at least the premise (if not the reality). Others- even those who were investors during the Jimmy Carter administration- still fear we'll never recover from this presidency either. I'm told, "this time it's different" with increased frequency, a phrase that is the well-known most dangerous words in the stock market.  Somehow this most recent downturn feels worse to many of our clients, and that's why I believe the subject is worth exploring in greater depth, and why this recent stock market "yard sale" - my words- (where investors are communicating through their actions that, 'everything much go at any price!") has been so much more stressful than in the past. 

Where We Are Today

Maybe it's true that this time is different, or maybe it isn't. Of course, history never repeats itself but we all recognize that it does indeed rhyme. Perhaps we're at the bottom of this cycle, or maybe starting a sustained move downward. It's impossible to know the short-term outlook for certain because the market is at it's most-fundamental core represented by the combined "intellect" (and neurosis) of several billion self-interested parties of varying skills and intelligence, all trying to make the best decisions for themselves and their future, while also attempting to balance and control the only market emotions: fear and greed

"The man of system…is apt to be very wise in his own conceit; and is often so enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it… He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it." - Adam Smith, The Theory Of Moral Sentiments

I don't claim to know the future, anymore than I can the outcome of wars. I don't sit in the boardrooms of America's most successful corporations (well, except my own.) I certainly can't predict the decisions of our leaders nor the future outcomes of our elections (though I do have a hunch how this November mid-terms will go). What I do have is some perspective based on history and the evidence that suggests that:

  • CNN (and other mainstream news outlets) are virtually ALWAYS wrong about most things, but nothing more than investing and the financial markets (uh oh, here we go again...) It's not that they're stupid, at least that's not the full explanation. It's because they're biased humans with an agenda. And like politicians, they rarely go much deeper than the surface for facts because the modern news cycle is so brutal and rushed. They have to get the story out quickly to get the views and clicks, and that prevents them from fully utilizing logic, reason and accountability. Which is convenient because most of them are journalism majors. Even if they were accurate in their conveyance of fact, they would be hampered by their lack of intelligence and an impossible dictate for them to act and report prudently and patiently. That's why their influence on the culture has been so devastating the last few years and they're going out of business so fast. Their self-destruction is a self-perpetuating cycle, one they happily (and desperately) extend to their audience. But it doesn't have to be your cycle nor destiny. You can not only ignore them, you can live life and trade investments against them

  • Retail investor and CNN consumer sentiment is actually one of the most reliable contrarian indicators in existence. For any Texas Aggies (whoop!), that means what NOT to do. This is because - like many news sources today- what they call a journalist in modern parlance is really code for an activist (the same phenomenon also exists at MSNBC and Fox). I obviously don't read MSNBC because I'm literate and prefer to live in reality, but I stumbled upon an article last week (on Trump, shocking. His name was ) and had no idea how bad it has gotten. Putting aside the overt (and frankly embarrassing) political slant, the grammar was atrocious and the general premise was surreal, like some screed off Reddit. I wondered, "Does this really pass as journalism today? Do people really read this garbage?" If so, it explains so much. If you know an MSNBC reader, my advice is run. These were their top stories of the day, like porn for the deranged. If these headlines don't make you laugh and/or roll your eyes, they've captured you too...  

  • Most of us know that already, and few are deluded enough to think that Sean Hannity or Joy Reid are any more credible sources of objective journalism than say the cast of The View. If you're unfamiliar, The View is like The Jerry Springer Show for the 21st century, primarily programmed by men towards unemployed women, and hand-downs the dumbest show on television. But every once in a while, the software in the heavier hosts short-circuits from a toxic combination of cat litter and boxed wine and they threaten to go on sex strike if no one listens to them. Which seems like an odd strategy, but hey work it if you got it.

As a result, these talking heads read off a teleprompter an agenda that is linked at the hip with a delusional narrative of how they think the world works from their million-dollar condos on the UWS. Most of my clients are aware of my love for journalists on par with politicians, as I consider the majority of modern news content akin to consuming young adult fiction while chugging Mountain Dew- yes, you're literate but are you something that should be voting? At this point, online outlets like the Atlantic, HuffPo and Slate are primarily just journalism majors passing off fiction as fact to justify as a result of terrible parenting and a lifetime of poor choices. These are just the ones I've read this year...

It always seems odd to me that you never see black people at most racial justice protests. How do you think these folks would react to a stock market drop that hurts minority investors? Why is no one talking about this? 

To top it off, at the intersection of universities and social justice, I'm just learning that not just bikes but my entire "swim-bike-run" triathlon lifestyle has been perpetuating bigotry. Up until now, I just thought I had insufficient access to girls and unresolved issues with my father. All of which is understandable since I live in Kerrville and there's like five black people living in our entire county. We have almost less diversity than Africa, Asia and at least four other continents. This makes it hard to swim on Friday nights from 7 - 8 PM, when the empty pool now only serves to reinforce the social construct that perpetuates all this privilege and requires me to re-examine how I will protect minority swimmers under the age of 29 this summer 2022...

c.) When they are promoting either fear or greed, investors would literally become better assuming that truth is the opposite of whatever it is they're saying. I'm convinced the media hates investors. 

For instance, what do you make of CNN's current agenda below and at this link? What would be an contrarian response to this 'information?' 

Who do you trust more for your financial news, Warren Buffett or Brian Stelter? Who would you invest your money with? For that matter, who would you let into your house?

I doubt five people on the planet know what's going to happen in Ukraine next week. Putin could fall victim to blood cancer, or he could launch a nuke (or both.) Sustained conflict could cripple the world food and energy supply, or a sudden ceasefire in Ukraine could bring the price of oil crashing down overnight. Europe could run out of oil and natural gas before this winter and end up going medieval by 2023. 

China could decide that now is the time to claim Taiwan, or it could continue to keep their own economy shut down- unleashing untold suffering on their people - just to watch Americans melt down over the loss of two-day shipping. (That's my response, anyways). The Biden administration could impose price controls and ration fuel. Our domestic and economic challenges include so many variables that a comprehensive and palatable solution to today's problems makes my college Differential Equations curriculum look easy.

That's partially why we will have to go through painful contractions as we give birth to the next evolution of this country, politically and financially. Rise and falls are literally built into the system. It's not a glitch, it's a feature. That's also why the founding fathers of the republic were and always will be i(n my humble opinion) the smartest Americans that ever lived. They designed the system to work with and for an intelligence-challenged population. (How's that for political correctness?)

Perhaps that's why their likenesses and legacies must be removed from public view, because if you can't get rid of the memory of a better time, you can't understand the problems with today and you therefore can't hit rock bottom. In America if you don't do that, then complete reversal of this status quo dumpster fire of impotence and hubris can't commence. 

So where am I going with this? 

I suspect all of this is closely related to why the market is down right now- which is for no good reason. Stupid is built into the equation. And it took me a long time (roughly twenty years, in fact) to realize this. See, I used to be a libertarian and I basically still am at heart. Hell, I was the chairman of the party for Kerr County from 2008-2010. (This fact does not score me as many dates as you think it would.) I learned pretty quickly that such an impractical ideology would only work if everyone in society acted perfectly, like me. But none of us are perfect people- present company excluded, of course- and we're not a perfect society. 

Our founders knew this. So the system - both political and financial- was set up so that every so often, we: a.) would have to be reminded of that (enough that it really leaves a scar impression), and b.) would have to understand and accept that excessive swings in all aspects of our society- politics, spirituality, entertainment, and finances- are a healthy and unavoidable sub routine coded into the software of democracy and a republic.

In my estimation, a Fed Funds rates still below 1% was insufficient reason for a market sell-off. An uncomfortably rising cost of living (or what I call 'cost of lockdowns') in 2022 equal to and even exceeding the dollar value of multiple stimulus checks we enjoyed in 2021 also does not justify nor fully explain it. A crippled supply chain that is struggling to match supply and demand (both with materials and labor force) doesn't tell the story either. 

War in Europe and the likely impact on energy and food are very serious matters, but they are solvable. Lastly, a dysfunctional political class being chauffeured around in a clown car of corruption isn't new and also not enough to bring us down. Those with enough age and wisdom under their belt recognize that these crisis too will pass given with enough time. 

It should be clear to most that our current leadership across both aisles doesn't know what they're doing, and doesn't really care to know- which feels eerily similar to the previous administration (and all the ones that came before it.) I often wonder if the primary difference today is that we're just a more skeptical and cynical audience than our ancestors. Or maybe that's just me. 

I suspect we've seen too much in the last six years, we've been lied to so many times that it's hard to not feel like gaslighting has become the national pastime. The Russia hoax that is unraveling in front of our eyes in the Michael Sussman trial and the Hunter Biden laptop scandal are both communicating to Americans that they are going to have to dig deeper than their elected (and unelected) leaders to find truth.

Our politicians and leaders now deceive with such skill and sincerity that it's easy to think you're seeing things. Biden just claimed publicly that vaccines weren't available before he came into office already vaccinated. Donald Trump and Stacy Abrams are still trying to claim victory in their last elections. We're being told that men can get pregnant, and that words are now violence (but silence is also violence, proving that you really are "damned if you do and damned if you don't.") The same people that wanted to imprison antivaxxers in internment camps just last year are now protesting for full body autonomy outside the houses of Supreme Court judges, including ones that support their cause. And now, Machine Gun Kelly and Megan Fox have professed that theirs is a true love.

Aversion to truth has become one of the biggest problems in our society right now. As we've systematically (and some believe, purposefully) dismantled the nuclear family, it's not a coincidence that we've also supplanted logic and reason with emotions and feelings. We've replaced parents - specifically fathers- with government-subsidized single-parent households and anti-American groups with mission statements proclaiming as much.

A nation of fatherless (or father-challenged) homes, and a lack of real leaders and heroes who will tell us what we don't want to hear even when it's good for us, has become anathema. We've attacked and all but eradicated healthy masculinity (and it's feminine equivalent) and with it the courage and resilience to endure hard times, or even times that are simply "not awesome." We've become the opposite of Taleb's anti-fragile.  

As a result, a profound sense of disquiet has enveloped the republic and many citizens are feeling tremendous unease at the realization that they can longer trust what they see (deep fakes) or hear (soundbites out of context). Many seem convinced that the media is no longer a purveyor of objective information. This is leaving Americans confused, suspicious and rattled by even the slightest agitation. As George Bush, Jr famously quipped, "“There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — uh, um, uh.... you can't get fooled again.”

By the Way: Am I the only one old enough to remember when George Bush Jr. flattened the entire country of Iraq into a giant parking lot in order to 'free' it, and his only punishment was someone throwing a shoe at him? Now Senate Majority Leader Chuck Schumer publicly and in scripted and rehearsed remarks is threatening the lives of Constitutional experts on the Supreme Court for their interpretation of (wait for it...) the Constitution. On a similar note, is it weird that our Presidents only want to liberate countries with fossil fuels (Iraq, Libya, Syria)? Yet leave the most oppressive countries in world history (for instance, Saudi Arabia) alone? Is that related? Should I stick to economics?

I definitely have gotten that question this year! So I shall digress...

Sometimes, I wonder if we're all experiencing some form of collective cultural amnesia, like casually forgetting how incompetent George Bush Jr. truly was, arguably as much as Joe Biden and at a much younger age. I recognize that statement annoys and hurts a lot of feelings. No one appreciates discovering that they voted for a moron in the last seven presidential election cycles ("s/he was the lesser of two evils.") The cognitive dissonance is just too tangible, I get it. But my advice is to never let feelings interfere with the truth, and that's something we've definitely lost as a country. It seems a lot of people actually want to be lied to. Otherwise, how else can you explain the continued existence of cable news and newspapers? My friends, family and clients who do not watch it are significantly more enlightened (not to mention far happier) than those who do, and yet half of society has failed to catch on to why.  

And if you needed any sort of reminder or validation of what feckless leadership looks like, yes the following video is real and yes it happened JUST LAST WEEK...

We're being ruled by fairly clever smart people with very distorted view of the real world for a very long time. For instance, do you realize that Bill and Hillary Clinton haven't driven a car since 1996? President Biden entered Congress before the combustible engine was invented, yet claims to have been a commercial truck driver.. And do you think President Trump is rolling around in a Rav4? Do you think that any of these people make their own food or dress themselves? Are they are being told by their trusted advisors how the cow ate the cabbage? I think not.

If you think the Kardashian clan has lost touch with reality, consider they weren't even famous before Kim's sex tape... THAT WAS RELEASED IN 2007... And look how mentally damaged that family is. So just imagine if you were so famous that it extended into a previous century, or so famous that you've never had to deal with people like me on the road. Or go to the DMV. Or negotiate a legal settlement. Or lose power in your home. Or even stand in line? Do you think that all that comes with fame and/or politics over multiple decades could distort your perception of the way the world really works? Then perhaps you can begin to understand how these people can make some terrible decisions and why it's going to take us some time to work through them.

“The investor’s chief problem, and even his worst enemy, is likely to be himself.” - Benjamin Graham (Father of value investing, Warren Buffett mentor and author of the The Intelligent Investor)

As a result, when a big and scary universe that falls outside the control of media or government suddenly exerts itself (global pandemics and stock market crises, for example), I believe a disproportionate number of Americans don't really know how to react anymore. We're become comfortable always being able to retreat to the comfortable confines of our own confirmation bias in our favorite local news sources and propaganda. 

But this time is different. With crime is rampant in the streets, gas over $4 and rising, and stores shelves empty, even the most indoctrinated and delusional zealots are beginning to struggle to make sense of it all, to reconcile their narrative with the reality on the ground. They're forced to ask, "How could this injustice be happening to me? In my safe and comfortable cocoon / narrative / ideology / psychosis, this current reality couldn't be possible. Could it?

So perhaps it's no surprise that we - and especially and specifically our youngest American - recoil from exposure to the truth so quickly and aggressively. Perhaps that's the primary reason when the world doesn't go the way we want... be it politics (Supreme Court judges or judgments), athletics (blaming refs, claiming the MLB or NFL is racist (which is HI-LARIOUS), female athletes subsided by the men's teams demanding more of their earnings, mobs destroying cities when their teams lose), entertainment (actors assaulting each other on television, disqualifying movies from recognition unless there is sufficient gender and racial quota, the marginally employed opining on Twitter and Facebook during business hours, despite having no credible knowledge of the topic), media (projecting the corruption of one US President onto another President), grade inflation in the schools and universities, or other entitlements we think we're owed (free money due from other's labor, refusal to pay back student loans, insistence on high-paying jobs, positions of authority, validation, signs of appreciation, bonuses and fulfillment at our first jobs out of college)... a certain segment of the population is struggling to comprehend, adjust and thrive.

It's enough to make anyone crazy, both those who know what's wrong and even more so those who don't. In fact, studies are now confirming that those who cannot or will not reconcile their flawed view of the world with the true reality are the ones struggling with their delusions the most, and it's getting worse. 

What's The Point?

I bring all of this up because I suspect at least a portion of our shock at the stock market's drop is due to modern conditioning. I'm suggesting that maybe when the stock market goes down for just five months following a 14-year (168-month) bull market, perhaps some investors might be overly vulnerable to premature selling for no good reason at all, simply to stop the pain or prevent them from facing the truth that sometimes markets don't do what they want, things don't always go their way and sometimes we buy things that  can termporarily go down in value. Maybe we don't control everything, and that's okay.

I further suspect that's what's going on right now in the financial markets- where virtually everything (except for notably, real estate and energy)- is falling suddenly, hard and dramatically. Personally, I want markets to go down so I can buy more shares of my favorite investments cheaper, because I thought they might have been a bit overpriced at times during the last few years. But I recognize and acknowledge that's easier said-than-done when you're supposed "conservative" portfolio is falling at the same terminal velocity as much more aggressive investments. For many, these kinds of drops shock our sense of justice and fairness. We played by the rules, we didn't engage in speculative or risky investments, and we were patient.... yet we are still losing so much money. When is it gonna stop?

The truth is this current market and this recent April-May selloff feels like a gut-punch to me as well. Below, I hope to convey the response I give to myself each morning when I ask myself,

  • "Should I be doing something in the face of this market sell-off?"
  • "Should we join the herd and move to cash, so we can ride this out?"
  • "Or should be double-down on the eventual recovery and go for broke?"

This is the response I typically reiterate to my clients. It's what I firmly believe.

You probably thought the above was the article, but it was just the prelude.


You've probably noticed that financial markets - and portfolios- are currently in the throes of a series of challenging headwinds in the economy both domestic and abroad. It certainly seems likely we may be headed for an official recession (two quarters of negative GDP growth) and a correction (-20% drop from highs) in the S&P 500. The economic slowdown and resulting impact on the stock market is largely due to forces that existed in 2021 as a result of government policy and actions initially launched in 2020, but have been culminating throughout the majority of 2022 and seem to have accelerated in the last 30 days. 

Suddenly the inflation, rising interest rates and compromised supply chain that we've all been aware of for some time are all colliding simultaneously with many American's pocketbooks, and people are reacting. Unsustainable real estate valuations went exponential starting in late 2020 and show no signs of abating. Ford trucks and SUVs are selling for $80K in the face of $4+ fuel, neither of which is a new development for most Americans.

The store shelves have been thinning for quite a while now, and it should have been obvious to most- at least our leaders- that the potential loss of access to Russian and Ukrainian energy and agriculture resources could have drastic impacts back home. So what's changed? And why is it affecting the stock market so much and so suddenly? 

Americans are starting to buckle, in both their spending and their investing habits. What is most disappointing is that both the recession and correction are effectively man-made crisis - yes, at least partially caused by foreign leaders- but also by leaders that many Americans still trust. 

Government first started curtailing oil and gas production, closing small businesses and factories, and sending out stimulus checks in early 2020. But it's only now that the effect seems to have finally hit the mainstream, or more specifically the consumer. And with our economy being the largest in the world, and consumer spending representing more than 70% of it, our personal spending habits are therefore one of the most important factors in the world's economy. Our reliable addiction to new cars, technology devices and elective health care help drive a powerful and dynamic economy that often pulls many other economies along with it, like moons around a planet. So pat yourself on the back the next time you buy a cheeseburger, smartphone or vacation because our profligate spending has literally pulled billions out of poverty over the last forty years.  

I predicted in a post written well over a year ago that Q1 2022 would likely be the moment when the average American truly felt the discomfort from  government decisions made in 2020-21. Few listened to me because a.) honestly, who cares what anyone thinks anymore?, and b.) people are generally averse to any random predictions spouted by some dude in the sticks about something so obscure and misunderstood as inflation. Besides, Kim Kardashian just recently left Kanye West and is now dating Pete Davidson, which is way more interesting than global economics.

In all fairness, government hasn't introduced this level of inflation since the 70s, so Americans could be forgiven for becoming somewhat complacent about the topics of monetary policy, the inflation it engenders and the side effects of both. 

“Inflation is always and everywhere a monetary phenomenon.”

― Milton Friedman
Translation: Inflation can only be created by the Federal Reserve in collusion with the Executive Branch. This is basic Economics 101 and not debated. The question is whether it's purposeful or by accident (i.e. mistake), why is it being done, is it effective (based on past evidence) and who stands to gain/lose? Which demographic is hurt most by rising prices- rich or poor?  

How Did We Get Here?

At this point, you're probably  wondering, "Didn't we go over all this in your March novel post?

The short answer is, "yes." But I get paid by the word, I have new jokes and still encourage you to keep reading. Don't give up on me now. Just like Marvel movies, the back story is critical if you are to understand the present and be prepared for the future.

It is imperative to understand at a deep and existential level that the reason the stock market is down right now is that people want to feel like they are in control, not only of their own lives and circumstances, but also their future path. Right now, more and more people are starting to wake up to the reality that they not only don't have as much control of the present and foresight into the future as they thought they did, but that they never did and never will. And that is a troubling concept to work through, one that most never will. 

Most of us are familiar with the expression, "ignorance is bliss" and I'll go out on a limb to suspect that in the past few years you've secretly entertained that idea more than once. For some this can be liberating but for most, this epiphany creates mental stress in the subconscious mind that can weigh heavily on their mental health. It did on mine for many years. This overarching paradigm can also apply to your money, and we'll come back to this idea later.

Suffice to say that the less attached you are to your money (which before the stimulus used to represent your labor), the more successful you will view and employ it. To maximize your profit, it will be beneficial to consider that investing is a game and the money is not real.

It's All In Your Head

I'm fully convicted that before 2020, Western society was already decades deep into a massive mental health epidemic brought on my the level and pace of change and stimulus, technology, social media, and the acceleration of forces that destabilized society- outsourcing of labor, environmental toxins and degradation of our food supply, sedentary lifestyle, mass adoption of pharmaceuticals, depravity pushed by the media and entertainment, bad parenting and coddling of 2 1/2 generations, feminism and changing gender roles, equality of outcome, diversity and most of all, the promotion of self over all else. 

Then the pandemic and lockdowns came, and whether it was misguided or part of a bigger plan of unravel the fabric of the country, they pushed a lot of people to the edge of their mental and emotional capabilities. Many people got pushed right over. And now it feels like we're all living in an insane asylum. One that's a.) extraordinarily expensive ("where is all this money coming from?) and b.) experiencing a labor shortage ("where did all the workers go?)

The question is why only if you political ideology has become your religion and has rotted your brain. Or you are a college professor and by definition should not be opining on real-world economics.

It's gotten so bad that this past week, my cryo salon told me they were so understaffed that I would now be expected to manage my own session. I'm 100% not making this up. Look at a normal cryo chamber and ask yourself, "what could go wrong here?"

While this is certainly a first-world problem, this is where we are.

All I can think about is the karma I'm inviting since making fun of Antonio Bryant, (formerly) the dumbest player in the NFL (which is saying something.)  


So that's the wide and shallow foundation of the pyramid. On top of that layer, people are losing faith in our leadership across the board. I'm not just talking about the political situation, which does feel like your local Chick-Fil-A has been taken over by McDonald's. For the past thirty years, each successive Presidential administration has been worse than the previous one, and that's not an accident. As President Obama said, “People have a tendency to blame politicians when things don’t work, but as I always tell people, you get the politicians you deserve." Which seems an odd comment from the sitting President, but who am I to object?


I'm also talking about losing faith in our capitalistic, free-market system. You know it's bad when Americans consider real estate a better investment than stocks for the long-term - despite requiring massive upkeep, crushing property taxes, and only growing 3.7% (compared to stock's average of  9.5%) between 1928 and 2013. For that paradox, we can thank the Boomers and their extraordinary "enthusiasm" for homes, land and debt starting in the 21st century.)

It's even worse that more than one in four Americans consider cash, bonds and gold - all deeply negative for the past decade- as the best investment for the long-term.

And people claim financial advisors are obsolete. LOL...

Even though a physical property was originally - and is still fundamentally- a depreciating asset akin to a liability (i.e. its materials decline in use and value over time) as well as most homes taking income instead of producing it, our oldest Americans have somehow convinced themselves and their children in this century that it's now an investment. Part of that is societal programming of course, but a much more important aspect is attributed to the self-perpetuating cycle of the Baby Boomer generation's propensity to acquire multiple homes to enjoy or rent out, which increases demand, limits supply and pushes the cost of home ownership beyond the capabilities of successive generations.

This vicious cycle perpetuates renting as the only option for GenX, Millennials and Zoomers, many burdened with student loan debts at least partially attributable to Baby Boomers and GenX's blind and misguided worship at the alter of expensive higher education with equally dubious ROI. As a result, the country is now digesting a generation of young Americans entering adulthood with crippling debt, poor credit scores and unaffordable housing. So they continue to rent, thus driving up rental income profits and home price appreciation, and so the cycle begins again. Which leads us to the third layer of the turd-sandwich that is our national finances...

We Huff and We Puff

A country's wealth is arguably defined by it's Gross Domestic Product (GDP) and in a perfect world this would be heavily influenced by the growth in the population and their productivity. I spent a lot time harping on that in my last series, Don't Fear The Bear. As we've discussed many times in the past, the largest component of GDP is consumption. This is a good thing. The good is that we as Americans are addicted to spending, it's our national pastime. It's also what has pulled us out of every recession ditch we've ever driven into, and it will do so again in this current cycle. We love to buy stuff, and we will do anything necessary to afford it (or at least finance it.) The problems should start to become clear. 

First, we spend more than we make, a lot more. To fill that gap, Americans maintain significant (and unsustainable) levels of debt at the household, corporate and government level. That has made us vulnerable.

In addition, we've transitioned from a manufacturing-based economy (making stuff) to a service-based economy (typing on keyboards and creating PowerPoint presentations). That has made us weak. 

We've also perverted a lot of the components of GDP. Government spending is the most egregious, directing tax dollars away from productive projects like roads and bridges and more towards outlays that provide no or low social utility and ROI- namely, interest on debt, welfare spending, government salaries, generous pensions and retiree benefits. We also send a lot of money to the military and other countries, but let's not go there today.

In addition to Government, business has been equally poor at capital allocations. Instead of investing profits in research, development and employee training, they've used a healthy portion of their profits in lavish C-Suite salaries and financial chicanery like stock buy-back programs. I think most will agree that those do little to create real value and improve society. In their defense, they are just responding to the questionable and damaging government strategy of financial repression. 

I mention all of this because while the United States is still the best and most powerful country on Earth, and likely to remain so for some time, we are nonetheless becoming poorer. And that's by design. Our leaders know we cannot continue to lead the world if we are less productive, and productive at all the wrong things (i.e. too many liberal arts major and not enough STEM graduates and blue-collar workers, too many working in fast food and food delivery as a career instead of entry-level employment.) Our labor costs are too high and uncompetitive because it is so expensive to live here. And that's because wages and per capita GDP (household income) cannot keep up with the government's spending and their inflation.

Like GDP, unemployment and many other metrics, the government lies about inflation, to the point of absurdity. They do this because if they acknowledge how much they are debasing the dollar, they would have to increase their entitlements like social security, Medicare and Veterans Benefits. By 'downplaying' the loss of purchasing power, they can slowly erode American's cost of living without major social unrest. If it becomes too great, people may stop blaming and attacking each other based on superficial differences and realize that the hand that feeds them is the hand that holds them down.

No matter how much revenue they bring in through taxes; our city, state and federal governments always consume more. It's not new and it's not necessarily nefarious, it's just built into the system of a republic. Especially one in which more and more Americans are no longer employable in the private sector. I'm not taking a shot at anyone in particular, I doubt anyone considers the DMV, TSA, DOT or NPR as harboring our best and brightest. All of those departments are certainly better automated (or at least outsourced to the private sector.) They're primarily jobs programs masquerading as civil service. Mostly because more Americans are no longer able to sustain themselves on their own current skills and resources, and so we must distribute labor (i.e. taxes) from a shrinking productive slice of the population (as well as the not-insignificant ill-gotten gains of modern day robber barons) to an expanding un/der-productive class that's been left behind by a plethora of poor jobs, a refusal by many Americans to reskill (i.e. "learn to code"), a crumbling educational system (where most of the money is siphoned to pensions) and deficient home environments that are the primary (and painful) arbitrators between success in life (and not the color of one's skin, despite a fiction that many have determined as fact with zero evidence). 

And all that's also by design, either by politicians and greedy corporate fascists that facilitate a Latin-American style economy or a combination of both working synergistically to aide and abet the destruction of the American economic system.

"In a free society, [we] enter adulthood with three major responsibilities: at least finish high school, get a full-time job and wait until age 21 to get married and have children... Our research shows that of American adults who followed these three simple rules, only about 2 percent are in poverty and nearly 75 percent have joined the middle class (defined as earning around $55,000 or more per year)." - Brooking Institute, 2013 

Can you spot the problem in our national finances?

This is a very complex and controversial that definitely won't endear me to many clients, so I'll abstain from further commentary. Regardless of the causes of the current situation, it's crucial to understand that this bedrock of financial 'imbalance' is indicating foreboding challenges ahead for many Americans who are beginning to struggle under the impacts of the government lockdowns and government money-printing. Tragically and as expected, the following government own surveys demonstrate rather conclusively that the government policies promoted as helping lower- and middle-income Americans are hurting precisely those demographics the most.

Pushing through the Green New Deal and Financial Repression through executive action proves to be a risky political gamble for the current administration

While this trend appears to only be beginning, the greater existential threat is deteriorating conditions in these families will likely inspire them to demand (and receive) additional government assistance, which will only spur additional economic hardship in a self-perpetuating cycle of our elected leaders offering solutions today to problems they created yesterday, which will then invariable become the problems of tomorrow. Each day, it seems Ayn Rand's classic tomb, Atlas Shrugged, has become the federal government's new playbook. It's going to take a major overhaul, and time, to return the country to solid economic footing.

If the primary priority for your administration is causing the primary problem for American families, it's time to repent and pivot. Hard and fast.

We Have Met the Enemy 

On top of the mental health epidemic, loss of faith in our government and economic system, and our own personal finance anxieties, we must  hoist  the final top layer of national stress: ourselves.

The reason we are in a economic quagmire right now is that from time to time, we as a country lose our minds and collective bearing. During times of crisis (Y2K, 9/11 and the GFC), we often put on hold prudence, common sense and long-term perspective precisely at the moment that our (perceived) personal health and livelihood to be at greatest risk. That's because the "we" is nothing more than a collection of humans, and humans often are most susceptible to these dynamics. Without any supporting evidence, we are quick to assume that our first and emotional perceptions are accurate, our actions are appropriate and that our leaders know better than we did. They did not before, and they do not now. That's not necessarily a dig on our leaders as much as it an indictment of our own permissiveness.  

All too often we are prone to trust politicians who tell us what we want to hear and distrust those who don't, which is more of a flaw of the human condition than a conscious choice made by fully rational beings. It's not fully nature, it's actually more nurture. Or said differently, it's conditioning. For instance, if you're a child of the Greatest or Silent Generations (pre-1946)- i.e. a Baby Boomer- then Fourth Turning theory argues fairly convincingly that you were likely raised to trust the authorities (well, except for the 60s and 70s, when many in your generation 'forgot' that during the counterculture social revolution), what Fourth Turning terms The Awakening. But as the Boomers became wealthier in the 80s-90s, many suddenly moved away from their hippie days and gravitated back towards their preference for conservatism and social conformity in addition to being ruled over and adhering to the authorities. That was certainly on display during COVID. 

If you were born after 1980 (Millennials and Zoomers), a similar generational framework predicts that you were inclined to adopt similar beliefs about politicians, at least the ones that you agree with. But that conditioning was largely hoisted upon you through parenting or educators of previous generations, and exacerbated by the advent of mass media's and it's enhanced reach and control. That's why the majority of them (though certainly not all and few out here in the sticks) seem to hate themselves, others, the country and reality.

In contrast, my generation's (GenX - 1964-1980) most formative early-childhood years were heavily influenced by the transgressions and failings (and eventual decline) of the four main pillars of modern life (termed the Unraveling, where society begins to pivot or deviate from past social or structural systems): 

  • Government - Murky JFK assassination fallout, LBJ's Vietnam and The Great Society, Watergate, Ford and Carter's economic missteps and stagflation
  • Corporations - Declining corporate loyalty and responsibility- including the death of unions and pensions- and the move toward outsourcing jobs to Asia (first to Japan in the 80's, followed by India in the 90's and China in the early 21st century.)
  • Spirituality - Vatican II, Catholic sex scandals, Time Magazine's "Is God Dead?" issue and a forty-year decline in religious participation. 
  • Family - Gender roles changing dramatically for the first time in modern civilization- feminism, birth control and contraception (the pill), abortion (Roe v. Wade) and no-fault divorce, all of which supported the decline of the two-parent household and nuclear families. Overwhelmed single-parent households and father-less homes that require government support and have since led to deficient and ill-informed progeny who are easily influenced by fraternal substitutes like entertainment, media and the state. 

As a result, GenX is often considered a generation defined by skepticism, cynicism and distrust of leaders. Epitomized by Elon Musk, Joe Rogan and (unfortunately) Alex Jones; and defined as "pragmatic, free-agent persona and Survivor-style self-testing " Those born after us (Millennials and Zoomers) are more likely to shed individualism for community and conformity. Highly engaged in "rising civic engagement, improving behavior, and collective confidence." and ushering in an era where, "civic authority revives, cultural expression finds a community purpose, and people begin to locate themselves as members of a larger group."

Naturally, our youth align with and gravitate towards political parties that mimic previous indoctrination (by design, like a catchy brand jingle) and begin to see their leaders and ideology as infallible, rigid and in possession of the singular truth. Indoctrination in the education system accelerates that trend and leads to a degree of their self-righteousness that I confidently qualify as undiagnosed sociopathy and fertile ground for the introduction of anti social media; intolerance; and misguided, incoherent and contradictory social justice.

The primary problem with our final stage of the Fourth Turning (i.e. the Crisis stage) is that in a free-market republic, by definition our elected representatives almost never know more than us nor the collective because they don't operate in reality. This is also why the oldest or longest serving representatives (majority and minority speakers are a good example) are the least qualified to speak, much less act- yet hold the most power.

I suspect that's a core reason why politicians historically have been removed (either by compulsion or chance) from the private sector and enter public service to... serve the public's interest. You don't ask your pet or housekeeper or your oven how to live a successful life, yet we tend to hold our elected representatives to a level of esteem which is typically unwarranted (like who really cares what AOC or Adam Kitzinger thinks) and highly dubious. Which is why they work for us and not the other way around.

Yet in modern life where we have elevated our politicians to stations significantly above servants, they are no longer scared for their livelihoods and think they are allowed to tell us. You can finish that train of thought because the problem is obvious. Somewhere along the way, we forgot who worked for whom. And we trusted experts who knew less than we did. And so it was with the COVID pandemic.

It's been said that history always looks different through the rearview mirror, and one would hope the spectacular and myriad miscalculations in our past might facilitate renewed and improved reflection and humility. Instead; it seems that our collective fears, arrogance and seemingly infinite gullibility continue to resurrect during each crisis to teach us the same lesson again and again. Stockpiling food and water in 1999... trading away civil liberties in exchange for a new federal bureaucracy of 17 over-funded and under-worked national intelligence agencies following the Patriot Act of 2002... unqualified homeowners walking away from their homes through foreclosure and short sales in 2009... hoarding toilet paper in 2020... hoarding fuel in plastic bags in 2021... all actions that seemed rational to so many otherwise-intelligent people back then but now look downright ridiculous. 

So, too have the actions taken on our behalf over the past couple of years already begun to take on a different sheen in the rearview mirror of history, and taken us down a different path than (I hope) was intended. 

Everyone knows how I enjoy picking on the government, it's practically a hobby. But that's only because it's so easy. (I prefer the term, "shining a spotlight," and believe our founding fathers and greatest Presidents would condone a healthy and cynical view of government.) When the Wuhan lab virus officially arrived on our shores in early 2020, Americans should have been more discerning and skeptical of government dictates offers to help fix the problem that they initially denied but now admit they created. Alas, our species seems perpetually destined to repeat past mistakes. 

In response to their error, another department in the executive branch, the Center for Disease Control (CDC) soon thereafter - and for reasons still unknown- assumed the authority to shut down my small businesses and others of similar size (but notably not Target nor Wal-Mart or Amazon). In response to those errors, the Federal Reserve quickly moved to cut interest rates to zero- making money effectively free (again) and thereby exacerbating the mal-investment and profligate spending that always occur when borrowing money carries effectively no risk. They did this because to them periods of temporary economic hardship are bad. (Unless of course you have strong spending, saving and investing habits- in which case it can be an exceptional opportunity.)

In response to most governments shutting down their economies, our Federal Reserve then coordinated with the Executive branch and the US Treasury to mail out checks to most businesses and individuals as compensation and as a bribe to obey- because trophies for everyone is good. (And because they also know that the new currency will  eventually end up in the pockets of America's largest lobbyists companies and the big banks.

We know this because if the government had instead simply offered the same amount in tax breaks, it would have had greater impact on people, and produced dramatically less fraud. It also would have prevented the levels and length of our current hyper-inflation. But no one ever mentions that idea because a.) everyone loves free money, b.) most of the country doesn't pay taxes and c.) and our national civics and economic intelligence has been neutered by the public school system.

A year later, the new Presidential administration approved several more rounds of money printing (including one that was mercilessly defeated), while also proactively shrinking domestic energy production, thus perpetuating or directly initiating "the four horseman of the post-pandemic apocalypse:"

  • Supply chain disruption - as a result of global government lockdowns instituted as a result of the pandemic as a result of quality control failures in joint government-funded GOF projects in Wuhan. In which not a single person nor government has yet to be  held accountable. 
  • Inflation rate increases - as a result of money printing in response to the government lockdowns. Perhaps I've mentioned that already.
  • Interest rate increases - as a result of inflation, as the Federal Reserve raises the Fed Funds rate to tame inflation, but also increase the cost of borrowing for all Americans (except for college loan borrowers, who have been deemed 'essential' to the approaching mid-term elections. And who's debt is being inflated away 1-2% every month without anyone even noticing. In four years, student loan debt will be debased over 60% through compounding inflation, and don't think that's by accident.
  • Oil price increases - as a result of executive actions by the President to move forward on Green New Deal policies that were defeated by elected officials in the Legislative Branch. With the goal of replacing fossil fuel production in the US with that of our geopolitical mortal enemy regimes in Venezuela, Iran and Russia. Presumably because international pollution is less dangerous to the environment- and global peace- than domestic pollution (which represents a 15% contribution to global pollution.) This is frustrating to many Americans, as most now understand that most Green New Deal initiatives like Electric Vehicles (EVs) actually are more damaging to the environment than internal combustion vehicles and therefore dismantling the fossil fuel industry is not only more damaging to the environment and the country, but also makes our country- and therefore the world- less safe

As a result of the above, American's mistrust of our leaders is at an all-time high. Errors in judgment in economics, health, science and geopolitics have left many Americans confused and anxious. If you haven't figured it out, the Executive Branch is where the government hides many of the people and departments- CDC, HHS, NIH, etc.- that are unqualified for employment anywhere else in the public sector. 

The vast majority of them are appointed by other bureaucrats and unelected, and that's not by accident. They are staffed by a lot of over-educated people with graduate level degrees in dubious, non-STEM fields that don't have a home in the overall economy. If you've ever worked for a company that hires family members to leadership positions, you have an idea of the quality we're paying for. Right now, our executive branch resembles a Chick-Fil-A that's suddenly been taken over by the local McDonald's. I bring this up only to reinforce three very important points:

  1. Disclosure: My retired civil servants will be the first to tell you how "challenged" their employers and some of their fellow employees are. In my experience, my clients are very bright people - some of the smartest that I know. They could have absolutely survived and thrived in the private sector. But they are unicorns and the exception. At some point, they weighed the benefits of the public service and weighed it against the stupid before determining it was worth it to stay. Over a soda, they regale me with stories and systems that defy comprehension.
  2. Most of our crisis are man-made, which means that so will our solutions be, as well. As quickly as they've caused these problems, we the people can fix them. They simply require realizing the errors of our ways and pivoting back to the policies and people that make this country great- employees and employers in the private sector who go to work everyday so that the electricity turns on when we flip the switch, the gas stations fill our tanks, and the food gets delivered to the store. 
  3. The American system and way of life are designed to absorb and fix mistakes and crises. That's how wealth gets passed through the generations, where 79% of the millionaires are first-generation. That's why the republic and the free-market have produced some remarkable progress for not just America, but the world. We make mistakes. From time to time, we (s)elect the wrong people to lead our families, companies and country. We are all taught flawed or incomplete narratives about how the world works and adopt the wrong ideologies, and it usually takes us 40-50 years to realize it. While few of us like to admit when we're wrong, we also tend to vote with our pocket books and feet. If we didn't operate in a Federalist system, we'd all still be wearing masks, socially distancing and listening to unelected (and elected) power-mad bureaucrats telling us who we can eat Thanksgiving dinner with.

I'm personally amazed at how often we forget- and the reality-challenged refuse to admit- that if it weren't for two heavily-armed, liberty-obsessed and mad-as-hell American states (Texas and that nasty old Florida), entire countries such as Australia would still operating quarantine camps. That's profound. If each of us was not free and able to pick up and move from tyrannical states ruled by the clinically insane, Texas wouldn't be thriving. My real estate holdings wouldn't have doubled in the last five years. Beto O'Rourke would be skateboarding into the Governor's Mansion in a sheep mask and onesie (to millions of fans) right now, with Wendy Davis (with her hilariously shady past) as his Attorney General. If we allowed the entire country's economy to be controlled by Washington DC and its financiers in Big Tech, then 2022 would be just the beginning of a long marched toward Chinese totalitarianism. I certainly couldn't make jokes about Governor O'Rourke. 

Today, those who misled us for two years are nowhere to be seen, seemingly erased from the media and public discourse. Leaders and politicians who are the most culpable for our current situation are facing a historic reckoning in November. Without the Build Back Better money they needed to prop up their failed policies and programs until the next election, states who made rash and misguided decisions have accelerated their own demise and moment of self-reflection and change for the good.

Hundreds of thousands of transplanted residents who took their companies, jobs and taxes and are never coming back are now supporting states that want them. Companies that were gutted by the government shutdown are bringing jobs and factories back to the United States, where they are going to find an energized workforce that has spent all of their sabbatical money and are ready to begin working at enhanced wages. And most importantly of all, Americans that were initially detached from economic reality are starting to reconsider that the changes necessary to get this country back on track will be coming from the bottom-up, not the top down. 

It all seems rather problematic in retrospect- as most emotional and rash decisions do. Historically, when Americans become stressed, we can become distracted, drop our guard and open our loving arms to the sweet warm embrace of Uncle Sugar. Sometimes we demand the hug and don't want to let go. Now, the money printing that ensued in 2020-21 has come home to roast in 2022, leading to the inevitable inflation that has spurred the Fed to begin raising interest rates. To fight the inflation that they caused.

Jerome Powell & Co. are attempting to channel their inner-Paul Volcker and rediscovering monetary religion to raise rates at the fastest pace since 1994. (For perspective, this is roughly akin to cutting off an alcoholic from booze in the middle of a bender.) Dual fears of inflation and rising interest rates are starting to cause genuine concern about industries and sectors historically dependent on borrowing, such as real estate and energy exploration. And that has markets a bit spooked.

In order to provide relief at the pump, President Biden just begun releasing more oil from the Strategic Petroleum Reserve (or SPR), created to protect our fuel supply during times of national emergencies and war (and usually not to protect political parties in approaching Congressional midterms.) His administration claims this is in direct response to Russia's invasion of Ukraine, but his releases started in November 2021, several months before the war began.

The administration knew that shutting down domestic oil production would increase fuel prices and boost electric vehicle (EV) sales - that was the whole point- and a direct nod to those Americans most concerned about the environment and global warming who helped elect him. The fact that these vehicles are vastly more expensive and environmentally damaging than internal combustion vehicles seems to be an inconvenient truth for many. 

Even today, President Biden's administration continues to close or block the expansion of large sources of oil supply, which appears to be creating some stress and confusion in regards to their overall strategy, as well as where prices will go from here and for how long. Clients often quiz me on why the President is now simultaneously releasing oil from the SPR to bring oil prices down if he originally wanted them up. I am the first to admit that it does seem hypocritical to both reduce the supply of current and future oil to drive prices up (to push EV's and other alternative energy sources) while simultaneously releasing oil into the market to drive them down. It's enough to wonder who is going crazy, our leaders or us. (For the record, the answer is yes.) 

The energy sector has been almost the only bright spot in the stock market in 2022, mostly because investors are communicating their conviction that the government will ultimately be unsuccessful bringing energy prices to bear. Even Warren Buffet, who tends to lean fairly progressive for a 95-year old man, appears to be doubling down on his energy holdings, presumably based on the belief that these high prices are here to stay. While I anticipate the price of oil should retreat a bit before year-end, the truth is that medium- to long-term commodity prices are almost impossible to predict reliably. 

One of these industries is not like the others in 2022 YTD. Can you tell which one?

Where Are We Now?

The vast majority of American corporations, money managers, financial advisors and their client-investors are now collectively suffering though the fifth month of deteriorating economic conditions, souring investor sentiment and the resulting slow and painful declines in in almost all financial markets. This is an environment currently unlike anything investors have seen since the Great Financial Correction (GFC). That market drop started in the summer of 2007 with the collapse of two Bear Sterns hedge funds and ended in March 2009 with the passing of the Emergency Economic Stabilization Act (EESA). 

What we've experienced so far is nothing like those brutal two years, but based on conversations that I am having with clients, one would think that our current 16% drop in the S&P 500 in the last five months feels at least as bad as that 18-month drop of over - 50%.

How quickly we forget.

So far in 2022, while retail investors run wild, the 'smart money' (institutions) remain confounded by the contradiction wrapped inside paradox encased in confusion. Stocks are down, bonds are down, international stocks are down and cash is losing massive purchasing power every month due to inflation, which is being under-reported by the people paid to do it and denied by those paid to deny it. Expected hedges like precious metals (gold and silver) and crypto-currency have fallen even further. Commercial property looks a bit risky given the lack of people who will ever return to an office again. Amazon can take over only so many shopping malls and convert them into warehouses. Real estate is down or cooling outside of residential housing in certain hot markets, mostly southern states and rural communities and suburbs. Most experts believe it's heading towards it's own day or reckoning, as mortgage rates are rising almost as fast as sale prices, which still seem untethered from reality for most Americans. It feels like a bit of a bloodbath out there right now.

What Should We Do?

  1. Don't panic
  2. Be grateful
  3. Keep perspective
  4. Play the game

Some other comments I've received from very smart clients in the past few weeks...

  • This is different. I didn't have as much money back then (in previous market corrections)? I know, it's grown exponentially since then, that's a good thing...
  • This is different. I'm retired/ing, I don't have time to recover from this correction? Are you planning to leave us in the next 3-5 years? How much of this money do you plan to withdrawal from your account in the next 12- 24 months? How much do you have in cash in the bank? I bet we have enough cash for a year or two between us.
  • This is different. We have even bigger morons in charge this time? That is true, the folks running our country are genuine goobers. But America, free market capitalism and a democracy were literally designed to be run by morons, like Tesla full self-driving cars. We should welcome recessions, because they are a crucial aspect of all three of the above systems. Trees don't grow to the sky (and a lot of other clichés, until clients make me stop..)

It’s understandable for those in or approaching their retirement years to be experiencing elevated anxiety right now as stock markets swoon and each account statement balance seems to drop lower than the previous one. April and May have been gut-wrenching experiences for everyone except for oil wildcatters and home construction contractors. It's the nature of their business. Most of my clients held up quite well up until early April, but losses seemed compounded for the next several weeks, even with historically safe investments. 

I can’t help but wonder if billions of investors were opening their April - and now July- statements (most only receive quarterly statements – Jan/Apr/July/Oct), panicking and then logging into Robinhood or Fidelity (or calling their broker) to move their accounts into cash or something- anything!- that is NOT losing money. Maybe that's why they call them brokers, that's what they make you. Which is why you should only work with Certified Financial Planners. I get at least one email every single day that asks, "Where can I put my money that is NOT losing money right now?" They never like the answer, it simply does not compute that there is virtually no alternative securities sector in some alternate universe that I can move them to that I just hadn't gotten around to telling them about. 

  • Sure, investors could move into energy stocks, but go back just a couple years and review the 10-year performance numbers. Exxon is up 53% in 2022. In the sixteen years prior to this year, it lost money. Repeat: It made NO MONEY over sixteen years... (Not six months like your IRA.)

Sure investors could move to some type of real estate partnership or crowd sourcing fund, but isn't the point of investing to 'buy low?' And does the real estate market feel low to you? "But Bart, you're just sour grapes. Land is doing a lot better than the stock market, and it's the only thing that's not falling!" Yeah, that's what happens at market tops, when money is free and  when everyone is piling into one investment. That's like everyone standing on one side of a ship at sea. That's the definition of a bubble. If people saw them coming, they would never pop. There has to be a narrative so compelling beyond a bubble for it to draw in really smart people, because dumb people don't have enough money to inflate it. (Except for GameStop. And Dogecoin. And RVs. But you get the idea.) 

How's this gonna work out?

I can’t predict when this current market decline will end, but I can safely predict that it will end someday. I recognize that is a bold prophesy. But hear me out.... 

I'm also predicting that few will know when to get back into the market or will be quite late doing so. People typically get out of the market when things look bad. But the paradox arises because the best time get in will be when it looks the worst. But it's literally impossible to know the worst in the future or present, only while looking back in the past from the future. So you're left with three options:

1. Guessing when to re-enter (don't bs a bs'er... if you're basing your decision on present conditions, it's largely a guess.)

2. Recognizing the guaranteed indicators of a market bottom- 9/11, Lehman Bros, Enron, COVID- and agreeing to put all your chips in when that happens. The problem being that markets don't always collapse, sometimes they just go down and then bounce back. Like 2008, when the market dropped almost 10%. Or 2019, when they dropped

You probably forgot about those corrections. Why is that? Because they were so short that you didn't have time to freak out before they started climbing. But if 2018 took two months to recover, and 2019 took three months to recover, and 2020 (COVID) took six months to recover, please explain to me why five, ten or twenty months is somehow more than you can handle? It's an interesting paradox, no?

3.) Abandoning any delusion of knowing and acting in perfect unison with the market bottom and just resign yourself to riding this out.

You know my preference, but ask yourself, "Are the other two ideas really smart?" If is possible that Wall St/ The Universe/ Joe Biden/ George Soros/ The Bilderberg's are playing a game where almost every year they fleece investors? And the only way to win the game is to not play?

War Games, 1983. A great movie and reason #209 that GenX had it the best

When this economic malaise that we're presently enduring does finally end- and it will end- there's an above-average chance that another new generation of investors could be experiencing a deep sense of regret that they made emotional reactions to short-term gyrations- namely selling out and going to cash in the last few months- with the expectation that they will know conclusively when to get back in. This despite the fact they didn't know when to get out. But I digress... 

I speak to quite a few clients these days who are seriously entertaining the idea of selling out and moving their accounts to cash. The problem with jumping out of the market are obvious and well-known to most readers. You are probably familiar with those as well, and they probably play on a running loop in your head these days. But because I get paid by the word, here are but a few more risks of selling into a falling market that you may not have thought of...

First, indiscriminate selling is a big part of why the market is going down in the first place. Perhaps the biggest. As more and more people log in to their accounts online or receive monthly statements, they are consciously or unconsciously making themselves vulnerable to committing the cardinal sin of investing: buy high / sell low. They run the risk of reacting emotionally to paper losses and selling for reasons entirely disconnected from the state of financial market, company fundamentals, or their future financial goals. In fact, almost without fail the most common reasons of clients who've liquidated holdings recently are as follows:

  • No/low emergency fund, resulting in increased anxiety about the ability to cover short-term bills if there is a disruption in their personal situation (which is unlikely)
  • Insufficient assets or savings (relative to their current or future financial needs) and feeling they "cannot afford to lose what little they have left" (their words, not mine). 
  • Too much or uncomfortable debt, and a fear they won't be able to pay it off before markets recover
  • Insufficient income through other means (work, investments, pensions, social security) to fund their current lifestyle in order to "ride out" a market correction without needing withdrawals.
  • Projects (usually discretionary home improvement or upgrades) that they were wanting to complete in the future that they now fear they may be unable to pay for. 

In summary, most of people are making investments decisions based on their personal finances. Which is rarely a good idea. In some ways, these investors are being penalized by the investing gods for deficient finances. Economic recessions and market corrections are perceived by many as constant reminders of the value of maintaining sufficient and strong balance sheets (assets and income) to navigate lean times. 

Without these critical aspects of a healthy economy- for instance, during a 12-year bull market engineered steered by the Federal Reserve's ultra-ultra-accommodative policy in the aftermath of the GFC - investors are at risk of becoming too complacent towards the inherent risks of investing. Instead, the risk operating their lives and finances  'priced to perfection,' a term I plagiarized from market analysts describing stock prices of companies that enjoy high valuations as long as nothing ever goes wrong. 

"The survey found that younger investors were more likely to panic-sell. Nearly 70% of Gen Z investors pulled money from the market along with 57% of millennials. At the same time, 49% of men sold stocks due to a negative event, compared to 24% of women." - Magnify Money 2022

Without a doubt, the #1 mistake I've observed in my career is how many people live their financial lives 'priced to perfection,' a state in which they maintain a budget and financial plan that are designed to work perfectly as long as nothing ever goes wrong. You think I'm joking, but I'm not. This is how most people structure their lives, with minimal consideration of what could wrong and how to respond. As a result, just like companies and governments, when misfortune does eventually arise they wing it. These folks are the first to curse their luck, blame anyone but themselves and make quick, impulsive decisions that rarely age well.

Grown-ups are familiar with the possibly of challenges and calibrate their probability better. They prepare for the worst and pray for the best, and when they go through the valleys of life, they come out in a better position- not only compared to peers but sometimes in a better position than their previous situation because they are able to take advantage of previously-unavailable opportunities, like distress decisions of those who did not prepare and as a result, act impetuously and often against their best interests. As a result, these people not only welcome events like recessions and corrections but thrive in them.

We've already shown that roughly 2/3 of the country could not cover a $1,000 emergency with cash. Unfortunately, in the real world, most people will experience some degree of misfortune every few years that carries with it an unexpected negative financial consequence- i.e. health, family, career, personal, car/home, etc. All too often, they fail to consider those situations and emergencies that they can't (or have never) seen.

When it happens, the problem is often solved via suboptimal means - like borrowing money or liquidating long-term assets. If you've ever met someone who has cashed out an IRA or 401k, you know what this looks like. Maybe that's you. Either way, it acts as a double-whammy because...

a.) Withdrawals or debt often involved interest, fees, penalties or taxes. Dave Ramsey calls that "stupid tax," most of us have done it and the banks love you for it.

b.) They almost always impedes or delays future financial success (just plug in an amount into this investment calculator for 40 years to really feel the sting of your last run-in with "stupid tax.")

We all know people who live their life priced to perfection. They have a $2,000 mortgage payment, but the kid's college isn't getting funded. They have a $600 car payment, but don't fund their Roth IRA. They order food delivered, but lack an emergency fund. They fail to contribute to an Health Savings Account, but have a pet. Then, as hardship invariably arrives when the universe deals them that surprise/inevitable financial blow with $0s on the end, they blame it on bad luck. In reality, these things tend to happen to all of us with unfortunate and frequent regularity, and it's rarely all bad luck. 

Have you ever known someone who bought more house or car than they could afford? Had to sell off assets to cover a short-term emergency?  Made an impulsive decision that cost them 'stupid tax' to unwind? Sold investments at or near the bottom of the market? Sure, most of us are at least somewhat familiar with this situation, either from our own past behavior or someone we know.

We recognize that in most scenarios, injecting even just a small amount of time and space into the equation can often prevent turning problems into major calamities. Indeed, that is essentially the benefit of meditation- separating out the response from the trigger. Indiscriminate selling of quality investments that are meant for long-term goals well into the future are almost a mistake. If you liked the company or fund at a certain price in the past, you should like it more if it's value drops, not less. What other people think of you or the investments are irrelevant.

If selling decisions are based on intuition, so will any future moves. Over the last several months, as in every market downturn, I've begun hearing story after story of someone's buddy or brother-in-law who "saw the collapse coming and jumped out" last year. For one, it's not a collapse if the banks are still open and the gas stations aren't rationing. They just avoided a 20% market correction, calm down. Second, in most instances, those involved can rarely point to specific fundamental market factors that inspired them to get out; it's usually just degree of speculation, guessing, intuition, a hunch or something anecdotal. They can't pinpoint the length or depth of the drop, nor buy or sell signals, only that they had "a feeling something bad is going to happen." Yeah, me too. It's called life. (Or more specifically, my dating life.)

Every day things happen to all of us. Some are good, some are bad. Last year, I had more than a half-dozen fairly smart clients call me separately to warn me that Trump was going to be installed as President by the military. They all said they knew someone that knew someone in special forces with special knowledge of the situation. They clearly have never spent time around members of the the special forces. They're amazing people, they're very skilled at killing and subterfuge but they're rarely brilliant, they aren't privy to much intel beyond their immediate missions and they sure as hell wouldn't be telling the public about whatever covert plot is being hatched by so-and-so.

This year's rumor is that Biden is a stooge puppet actively planted to destroy the country and move us toward a one-world order and currency. I get plenty of those emails with friendly demands to respond. Here's a hint, if you received a call to action involving the end of the country/the economy/the market either unsolicited or from a forward, please let me know and we'll bet against it and make millions.

For too many people, reading some 'free' doomsday e-newsletter from an unsolicited email that  required your email address and that you received with a link to a video that you could not fast-forward through, somehow constitutes secret stock market guidance. Very few of these market prognosticators are referencing price-earnings ratios, Sharpe ratios, 200-day moving averages, inverted yield curves or any other objective measurements that professional managers use to gauge market valuations. Often it's someone with a larger platform than you telling you what you already want to believe. Most of the time they reference someone who knows someone else that sold out of the market in October/ December/ March / Etc and "here's how to do it yourself to protect your life savings..."

Intuition is not a a strategy in the stock market anymore than it is in a casino. It's largely an illusion based on a misconception, wrapped inside a faulty premise. Does intuition exist? Absolutely. After 6 million years of evolution, I believe we behave in fairly reasonable ways based in innate and genetic predispositions. For danger, for deceit, for love. But for trading slips of paper that represent ownership in publicly-traded corporations? I think not.

Stock markets only go back to 17th-century Western Europe, not nearly enough time for the human mind to develop any type of affinity for opportunities and threats we envision based on our vast knowledge of thousands of companies worldwide. In fact, when it comes to the stock market, you'd usually be better off (especially if you have testosterone) to acting against your intuition. 

It's what everyone else is doing (i.e. 'FOMO'). As we've discussed ad nauseam, success in investing and the stock market is usually not the result of doing what everyone else is doing, but instead doing the exact opposite. If you want to get more than everyone else, you have to be willing to do something that no one else is doing. And I guarantee you that the vast majority of investors today are fearful, and many are selling

It's therefore incumbent on each of us to ask ourselves, "Do I know anyone (besides Warren Buffet) who is actively buying? Of those selling, do I value their financial and market acumen? Do I know someone with fundamental knowledge of financial markets or past experience with market timing? If someone is online and providing advice,  were they someone who was simply uncomfortable with something culturally (politics, war, more for-sale signs, etc.) in the past and drew a conclusion that the end is nigh, thereby successfully guessing right once? Have they consistently guessed right about the market in the past? Are they doing their selling from their own private island?"

If not, I'm not interested in their newsletter prognostication that they are sharing with me out of genuine concern for my well-being. The crowds isn't just often wrong, they are almost always wrong. Don't believe me? Consider the following...

  • The crowd texts when they drive.
  • The crowd finances vehicles, toys and appliances.
  • The crowd rolls over credit card balances each month.
  • The crowd flips old car payments into new car payments.
  • The crowd does not have a budget.
  • The crowd considers Social Security a key component of their retirement, and the US government a trust-worthy manager of their paycheck "contributions."
  • The crowd can't cover a $1K emergency and is one paycheck away from bankruptcy.
  • The crowd pays taxes.
  • The crowd is only putting 10-20% down on real estate purchases.
  • The crowd makes horrific mating decisions throughout their twenties and marries too early and too often.
  • The crowd rarely volunteers, except for other family members.
  • The crowd doesn't have a passport and rarely travels international, unless it's a beach or resort.
  • The crowd does not go to the gym nor have a consistent and effective fitness routine.
  • The crowd does not get enough sleep.
  • The crowd watches television, specifically cable television, and does so too late in the day.
  • The crowd eats in restaurants. Or worse, has food delivered to their house. (Yet claims to care about climate change.)
  • The crowd gives their children smartphones with data plans.
  • The crowd supports their adult-children after the historical cut-off of age 21 (also know as "kidults").
  • The crowd does not attend church (or worse, attends ultra-progressive churches of very dubious theology.
  • The crowd invests large sums (or borrows) for non-STEM degrees instead of hard work, mentorship or apprenticeship.
  • The crowd mutilates their body with ink and piercings, and wears skinny jeans, tops that show their stomachs and other ill-fitting, trashy clothing.
  • The crowd consumes terrible music, film and other entertainment. They ruin all the best shows and movies from the 1980-90's.
  • The crowd is obsessed with everyone's genitals and skin pigment instead of the content of their character.
  • The crowd believes they are victims of circumstance, the patriarchy and Nazi terrorists, despite being born in America.
  • The crowd elects politicians to positions of leadership instead of successful, ethical people who have run actual businesses.

I could go on, but you get the picture. And I've hopefully offended everyone at least once. If not, just stick around. In virtually every aspect of American life, the majority of people are struggling with their journey. (Is that politically correct enough?) In almost every situation, we would be better off doing the exact opposite of what everyone else is doing. And yet you're going to care about and react to their collective decisions in the stock market?

Here's a novel concept: wake up every day and try to go in the opposite direction of the crowd. If the market looks bleak and the headlines are universally negative, laugh and buy a share of stock from a company that a.) makes something you can touch and b.) makes a profit. That will eliminate about 20% of the S&P 500, but you get the idea. If everyone is getting rich buying stock, then consider selling some of yours back. If you think the leader of our country is a moron (and the evidence is mounting that you are correct), be excited that you're not the only one and it's going to impact Mr. Market. Perhaps said leader will drive the country into a ditch for his first and only term, providing you an opportunity to pick up more shares "on sale." If you behave in this way long enough, you will fall into success (or bankruptcy, so be sure to run your financial plans by your favorite Certified Financial Planner. Or at least your mom.)

Selling is the easy thing to do right now because it feels good. It hurts more to remain in the market and watch it drop. It feels good to sit in cash (losing 12% YOY to inflation) and feel protected. It hurts  to have no control over the market's daily vicissitudes. It hurts more to be confused and scared about what's actually going on in the markets and economy, but it does feel good to feel like you know what's going on. It's tortuous to endure the media's incessant doomsday narratives, but it feels good to feel like you have some secret and special knowledge about topics of interest. 

As with the above question, it can sometimes be beneficial to ask yourself how often in life the hard choice ultimately ends up being the better choice. For me, it's most of the time. It's easy to leverage your finances to go to college (especially if I'm paying for it), but harder to become an apprentice or enter the workforce before entering academia. It's easy to finance a car you can't afford, it's harder to drive something that is "beneath your self-perception" for a temporary period of time, save up and pay cash for something nicer. It's hard to find the money to save for retirement, but it's easy to find it for vacations, kids sports leagues, streaming television services and other forms of recreation.

It's also easy to walk out on a job, but harder to stick it out and stay employed until you find another one  (although ultimately far  easier to get a new job while still working at the old job). It's easy to quit on a relationship by ghosting someone without enduring the pain of a formal conversation. It's easy to send out a mean tweet or social message without sleeping on it first. It's easy to eat fast food then to prepare  your meals at home. It's occasionally easier to lie than tell the truth. It's easy to stay at home and play video games or consume social media. And let's be honest, going to the gym to pick up and set down heavy things is not a whole lot of fun for most people. I like it, but that's not exactly a ringing endorsement for anything..

The point is that doing what's hard vs. what's easy is almost always the superior option in life. That's part of the reason our oldest younger Americans are in such a mess, they've been coddled and misled their whole life about how the world works. We've all had it pretty easy compared to the rest of the world for about four decades , and we're now enjoying the results of three generational, financial and social welfare. No, you're not a unique and special snowflake. You're just soft. No, you're not repressed, you've just had bad parenting. No, you don't have a disability, you're parents just want social validation. No, you're not being denied opportunity, you're just lazy.

As Tom Hank's character, Jimmy Dugan, says in the classic A League of Their Own, "It's supposed to be hard. If it wasn't hard, everyone would do it. The hard is what makes it great."

Here's the honest truth: If financial markets only went up, then everyone would do it. (Well, that's not really true. The market actually goes up more than 95% of the time (see below), and yet only about 58% of Americans choose to participate in the greatest wealth generating system in human history. But you get the idea.) I'm sure your first thought when you saw the 58% stat was the same as mine: it must be racism, bigotry or the patriarchy (or some combination). But surprise, studies show minorities are more active in crypto than white Americans, despite it going down 95% of the time, so that can't be it.

In addition to one's financial situation and level of intelligence, I suggest the third determining factor in investing success is simply the self-discipline to risk one's own capital in the stock market in the first place. So when you arrive at one of the many forks in the road of investment strategies, and you must decide between the hard path and the easy path, my advice is to take the one less traveled every time. 

Trading is now free. This one is important, like really important and I suspect you haven't even thought about it before. The last recession was 2008-09. Perhaps I've mentioned that several times above, in every post for years and forever and ever, Amen. That's thirteen years, not a bad run...

It's worth acknowledging and appreciating that if we are indeed in or going into a recession and/or a correction in 2022 (or frankly, whenever it happens), this will be the first time in the history of financial markets that investors can literally make their own trading decisions in their own self-directed accounts on their own personal smartphones, tablets and other technology devices, without anyone's permission or counsel. Or said differently, this is the first time in human history that an investor can destroy their financial life from a device in their hands in seconds. 

Think about it: have you ever sent a text, posted on social media, or sent a tweet you later regretted? If not, have you ever known someone who did? I bet you have or do. Well now you can go on to your smartphone app and with the press of a few buttons, you can move the majority of your wealth to the sideline. Or into the market. Or into gold. Or crypto. Or Beanie Babies. Or Iraqi Denari. Or Trump's Truth Social stock. I've seen it all. Is it perhaps possible - dare I say, likely- that having immediate access to adjust a lifetime of life savings at Fidelity or Vanguard at your fingertips might be detrimental to your long-term success? Assuming the person reading this is not a cold, calculating robot who never makes mistakes, is it possible that such a capability on such an application on such a device could be the worse thing to happen to investors in the history of financial markets? (Much like guns to young men, antidepressants to young liberals or social media to women?)

These stats from Pew suggest this is a major issue currently underexplored and which may shed light on attitudinal differences towards various social policies. By bringing them to light, perhaps we can begin to unify the country.

I would suggest it's not only possible, but probable, that immediate access to one's investment portfolio is a new, unknown and underreported influence on today's chaotic markets.

And it's free, since online transactions fees no longer exist for most custodians. Also a first in the history of financial markets.

Think about these twin recent innovations in investing, their implications to you and the likely outcomes to the markets and society. Do you generally find online and immediate social media access and capabilities to be a generally positive or negative to human communications?

Putting aside all the amazing things that the internet and information revolution allow (online bill pay, ease of information, keeping in touch with friends and family, a plethora of entertainment options, etc.), do you believe that people are more or less likely to make better decisions with their lives, finances and their trading by controlling their own money... without any speed bumps, curbs, barricades or obstacles that could prevent them from reacting to something they've seen or thought?

Or is it possible that an entire planet of investors with the power to move their assets in and out of investments and the market freely and immediately might damage the overall and collective level of intelligence, discernment and/ or stability in the market?

You know the answer. Just look at social media and ask yourself if it's improved human relations. May I submit 5 minutes on Twitter as evidence that it most certainly has not. Nor has Facebook or (insert any technology app that serves to remove the obstacles between your a.) thoughts and b.) responses (words / actions). At this point, you probably know where I'm going with this...

Is it possible that at least a portion of the market's behavior this year is due at least in part to short-term, emotional and reckless decisions made on smart phones from trading apps designed to mimic slot machines (Facebook, Robinhood, Reddit, etc.)? 

If so, then would it not be potentially beneficial to accept this new reality of bipolar markets that turn what would have been a  -5% drop in the past instead into a - 20% drop today? If the American (and indeed, world..) populace have become so bipolar... and our politics, entertainment, sports, and (insert any aspect of American life) have all seemed to reach a level of maximum dysfunction, is it such a leap to assume that our financial markets will resemble it as well? 

If any of this resonates with you, then why would  the prudent, patient and intelligent investor choose to do anything but the exact opposite of what this new business model facilitates and incentives? Does it not present a reasonable  argument to do nothing at all?  

We have two generations of Americans "investors" that have never been through a correction or a recessions as an adult with money (and I use both terms generously.)

We've all been conditioned 

My two local communities are deep red, yet both are anchored by hospitals with more than 75% of their revenues coming from federal government entitlements (primarily Medicare and Medicaid).  

Don't Fight the Fed

People are doing this on their own now, - FinTech revolution. It could only end this way, with a nation of people who thought investing was easy for the past 14 years- EFTs, meme stocks, FAANGS, etc.









We're probably closer o 

What are you going to do with the cash?

CNN fear index

Real estate in trouble




Uncle Warren is buying...


We may have time


If the world ends - You might think this is an odd 

It's Raining Securities (Hallelujah)

Most investors are keenly aware - through intelligence and/or experience- that it's statistically proven to be virtually impossible to know when to time markets. That is, when to both jump in and jump out. And no one alive that I know has proven to have that ability to time both both exit and entrance into the markets more than maybe once in a lifetime. It’s also worth noting that the last market correction that began in February 2020- at the beginning of the shutdown of the economy - only lasted a few months, and was already recovering by the time clients got their July statements. By that August (less than 6 months from the March bottom), investors who held on were already back to even. Yes, that was largely thanks to the government throwing money at anything moving (and plenty that was not) to bribe them to stay home and watch Dr. Fauci and The View all day. I believe the Russia hoax narrative was still in the headlines back. Like the vaccine, it took years for that to be disproved. Unfortunately, in that time a few million Americans forgot to go back to work, but that’s a conversation for another email!

Recessions are historically shorter than you might expect. And they're getting shorter. How long can you hold out? As long as those tough as nails investors in 1873? Can you believe they had investors back then? Are you starting to consider the possibility that maybe this is nothing new, and has all been done before?

The valley below was only six months in length, and was already rising within one month of the February pre-COVID apogee. That’s far different than this last five months of torture that we’re currently enduring. To me, this market grind downward has been especially brutal, and even smart and experienced investors like you (and many others) expressing angst is completely understandable and predictable.


You put yourself in stupid places

Yes I think you know it's true

Situations where it's easy to look down on you

I think you like to be the victim

I think you like to be in pain

I think you make yourself a victim

Almost every single day

You say they taught you how to read and write

They taught you how to count

I say they taught you how to buy and sell

Your own body by the pound

I think you like to be their simple toy

I think you love to play the clown

I think you are blind to the fact

That the hand you hold

Is the hand that holds you down

- Everclear (Everything To Everyone) 

What should we do? 

Not surprisingly, my advice for most clients in most situations is to stay the course. If you are not experiencing true economic hardship (i.e. months on the Ford Bronco Raptor waiting list is tragic but is not a hardship) and/or you do not anticipate needing this money in the next 2-3 years, then most people are likely better off ignoring the media, ignoring what your last statement tells you the investment community values your investments at, be patient and go out and live your life. In essence, do the opposite of what many panicked sellers are doing or contemplating doing right now. Warren Buffet has said that "the market is a voting machine in the short term, but a weighing machine in the long-term." What he means, of course, is that daily and short-term fluctuations are worth what people think they are worth based on their...

... Circumstances, which are not yours.

... Perception of the global economy and stock markets, which are usually inaccurate. I work for a lot of clients, and none of them have done a stint at the IMF or IBS. I promise you that none of us has a complete perspective or intelligence to properly evaluate 500 or more US companies. (hint: if the Federal Reserve doesn't know what's going on, you don't either) 

... Biases, which usually have little basis in reality and are more emotion-driven or flat out dumb. Humans are biased based on evolutionary psychology, and I promise you that they have not evolved to thrive in picking which company's stock will outperform. Well, maybe women have. But you know what I mean. 

... Emotions. If you're like me, 100% of your decisions are rational, logical and well-thought out. You never make mistakes. You brain performs 24-7 like a robot, devoid of any emotion and that's why your life outcomes are always perfect. You are a perfect parent, a perfect employee and a perfect citizen. And your spouse and siblings all agree. But for the rest of the world, every decision they make is first filtered through a primarily irrational, impulsive and intuitive subsconscious mind. Only later (sometimes fractions of a millisecond) do we then develop largely automatic rationalized justification for those decisions.

It's very difficult to sell an investment that is up in value, and very hard to buy a stock that no one wants at almost any price, like when Ford (F) was selling under $2/share and Edward Jones blocked my clients from buying it in 2009 because it was too risky. Yeah, that really happened. On the day I wrote this screed, GameStop (GME) surged almost 30%. None of that is logical.

Most of my clients have extremely conservative portfolios, ones that would have been laughed at just a year ago. And yet they are down almost as much as some accounts twice their risk level. From my personal perspective, this singularity of outcomes just reinforces how ridiculous this market selloff is, where everything is falling at the same terminal velocity. To prove it, I’ve uploaded a list of the largest holdings of one of my most popular models. I encourage anyone to review it, ask themselves which of these companies are poorly run and probably won’t be here in 5-10 years. And then call me to tell me yourself, so I can make a mental note to follow up with you in a few years.

The truth is that if they exist then, they will be worth more. If for no other reason than inflation will make their shares more expensive. But I have other reasons, like the fact that the US population grows by roughly 0.6-0.8% each year. And that doesn't even include undocumented aliens, who add another 10%, I presume they are consuming a lot of milk and honey, and will probably be nationalized before the end of President Biden's tenure in 2024. Forgiving student loans will also free up trillions in annual payments that will likely be spent on a lifetime of Door Dash and Uber, which be recycled back into the economy to buy more Instagrammable trips to Bali and BLM donations

My personal belief is that a large and disproportionate portion of the market volatility that we're witnessing right now is panic selling by new, young and/or overly emotional investors (many on legal or illegal pharmaceuticals they swear don't impair their judgment..) who don’t know what to do, so they just sell. Some are selling to get ahead of potential Biden tax code changes, but that's not a given. Others realize they need that stimulus money for the rent. Some are trying to 'bury the bodies' of their misguided and beautiful youthful arrogance.

By the way: when stock loses value, we know where it went- beanbag chairs and massages at Facebook and Netflix headquarters, etc. Sometimes new hires and buildings, research and development, charitable donations, you get the idea... But when crypto value is destroyed, do you know where it went? Much sits in the (cash) wallets of early adopters selling their tokens. Gee, call me crazy, but that sounds a lot like a Ponzi scheme to me. Who would have ever expected JP Morgan to be facilitating the sales of the "picks and shovels" to these digital gold miners.

The government allows for the existence of most crypto-currency for many reasons, but one of the most valuable is it permitted the 2020-2021 stimulus money to quickly flood into the crypto universe (i.e. early adopters, or HODLers). I wonder if their hope was that what hasn't already evaporated into the ether (i.e. original investors at the top of the crypto Ponzi pyramid) will eventually and slowly drip back into the economy on a more controlled and gradual pace to avoid even more massive inflation than already exists. Now that we're in hyper-inflationary 2022, perhaps it's become necessary for the Fed and it's primary dealers to pull some of that stimulus money back out of the economy... hence the current collapse in virtually all crypto digital assets. To many industry observers, that's not a conspiracy theory, that's literally the original plan. Otherwise, why would a currency that is supposed to be non-correlated to the US dollar and stock market fall by over 70% in value in one year, during inflation and an economic contraction? If crypto was performing as promised, it should be actually rising in the face of a currency debasement and market correction, not falling. 

I personally refuse to mimic what those demographics do, because- like many of my clients- I don’t need this money any time soon. And (disclosure...) I’ve sold into so many down markets that I don’t even want to think about them. The following two charts haunt me, and I want them to haunt you:

Feel free to print these out and put them on your fridge. Or at least over my face on the dart board.

If you stay, it would also be beneficial to NOT look at your accounts for another month or six more if you can handle it. When markets sell off like this- indiscriminately and for no obvious reason (i.e. no Lehman Bros, Enron, dotcom meltdown, housing bust, etc.), it tells me this is an emotional-based reaction that is neither rational nor justified. As such, it pays to ignore it, have faith in the US economy and refuse to buy into the temptation to do something when we know from history that the right path is usually to do nothing. In short, do the hardest thing, because the easy path is what most people do and that’s rarely the most lucrative. 

There are only a few large economies in the world, there is a TON of money sitting on the sideline waiting to get back in. It ain’t going to South America and will NEVER go to Africa. Canada is America’s northern suburb and has a GDP smaller than Texas, so it is not going there. Europe is FUBAR. I know you don’t want to hear this, but they should have listened to the fat orange man back in 2018 when he told them to build up their defenses and disconnect from their Russian energy addiction. Now they’re one winter away from going medieval. Russia is and always has been a one-trick pony with terrible demographics. It’s also a dictatorship, which rarely incubates innovation and economic progress.

China is a serious threat, but their stock market is still trading at the same price it was in 2014 (imagine how hard it would be for me to have that conversation with clients!) With it's quarantines, police state and inability to defend itself (the people nor the country), Australia showed during COVID it’s basically still a backwater country, a future province of China and frankly, irrelevant. I know this because you can’t name one large company based there. (Hint: their largest company is called Wesfarmers, you’ve never heard of it, and it would be ranked 195th largest in the US. Economically, India has almost five times the amount of people as the US but their average per capita GDP (annual income per person) is almost 10% of ours. If you think your paycheck is small, imagine living on $8K/year and working 20 hours a day in squalor!

I know, I know... you're oppressed because the Supreme Court said something you disagree with and you're afraid they're going to show up at your house to take you away. You're just gonna have to endure your highest per capita income and highest standard of living in the history of the world like the rest of us victims. But I know you will do it with grace. (Is that your HVAC I hear in the background? Or your fridge? Oh, it's your flat screen television? Oh, OK. Got it.... Fight the power, Che Guevara.)

Aside from China, the only countries that have the strongest investing opportunities are - not surprisingly - the same ones that America saved in the 20th century, and that’s not an accident. So unless Earth starts creating new countries, or we start having to rebuild new countries through war, or Antarctica experiences a growth spurt, our economy and stock market should receive a fair share of those future investing dollars sitting on the sidelines right now. And when that happens, I suspect the companies in the attachment above (that we are invested in) are going to see a few of those of those dollars flow through them.

But know this: You will not win by sitting on the sidelines. Unless you are an NFL kicker. Or possibly Colin Kaepernick. Or Megan Rapinoe.

I suspect that if I had put out an ad in the local newspaper last Christmas offering the largest companies in the world at the discounted prices we're seeing today, there would have been a line down the block of investors wanting to buy them. Now, I can’t give them away. So what happened in less than a year???

I’m fielding a lot of unhappy calls these days, but not one person in a hundred is asking me, “Why is Amazon selling at 2/3 it’s price from last December?” of “Why is Ford down 1/3 if there are 125,000 people on the Bronco waiting list?” I’m only getting, “Is now the time to get out?” and “What do we do?”

My advice to you and most clients is to do the same thing we do when the newest Star Wars or iPhone is released: “Let these (damaged people) react emotionally, ridiculously and illogically, it’s all just a symptom of the times. Life is short and we’ve got more things to worry about.”


P.S. Here’s a comprehensive list of every industry in the US stock market, ranked in decreasing order of 2022 market performance (last column). As you can see, it’s a bloodbath out there and you have to look pretty close to find a sector that is not down. This is what a broad-based market sell-off looks like, no one is bifurcating the good from the bad. I often refer to it as a ‘yard sale’ because to many retail investors selling right now, “everything must go.” And unlike during our parents and grandparents generations, it’s so easy (and free) to go online and just press the SELL button on your trading app on your smartphone. Humanity has never had personal weapons of financial destruction in their fingertips before. So I’m not surprised that so many people are taking advantage of the powerful dopamine hit that they get from knowing they’re ‘out of the market.’ They genuinely plan to get back in when everything looks safer. Which is like buying real estate in 2021 -feels good, but likely to be horrible timing.

We're nearing capitulation, because there are some days I can't keep up with all the clients insisting that we bail out into cash. 

Since I’m not as skilled as some in Texas at finding the needle in the haystack, I’m just gonna “buy up everything in the front yard for $1” through a broad-based, high-quality and low-cost mutual fund.