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Everyone Look What's Going Down - Part II


ASK BART: Are You The One To Blame?

- By The Notorious CFP®


Answer: Yes, but let me explain.

TABLE OF CONTENTS

  • Where we are
  • How we got here
  • What happens next
  • What to do now


How We Got Here

In Part I of this series, I laid out a fairly rambling comprehensive treatise on the current state of our culture, economic and financial affairs. I explored a lot of seemingly unrelated threads before tying them back into a cohesive narrative that could help the modern investor understand why their wealth has temporarily disappeared, either through decreasing asset values or debased savings (reflected primarily through reduced buying power), or both.

I anticipate that some readers will still struggle with reality. They may refuse to accept the myriad cruxes of my argument, and that's understandable. If your mind is impervious to the true machinations of global economics at this point in your life, I don't maintain any illusions that I will be the Oracle. For everyone else, I suspect I'm just reinforcing what you already know to be true because well, for one it's right there in front of your very eyes every day. None of my incoherent musings are particularly revolutionary, they've simply been subverted or worm-holed by our betters in the media and the large tech firms from the greater populace. I just have the energy, commitment and bravado to document them. Translation: if any of this offends you, a.) you're welcome and b.) it's likely because you're likely ensconced in a ideological bubble of your parents own making, and will have to work harder to escape the Matrix. You've become too comfortable, like with debt and waistlines.

Some people feel the same about debt as a baby does about a dirty diaper: Sure, it stinks – but its warm, and its mine.” - Dave Ramsey

My overriding objective in this series is not to provoke, but simply to dispel some misconceptions and confusion surrounding many of the sensitive topics swirling around in the culture that I am hearing in my daily conversations with clients and others. I also aspire to slay some of the misinformation and other falsehoods being promulgated from the media, our political and corporate leaders... and your crazy brother-in-law who reads a national newspaper every day (or God forbid, government-curated Google or Apple News on his iPad...); yet still can't explain to you who the IMF and WEF are, what they do and why it matters; has only minor qualms with our national governance but will still tell you how the world economy works and what's gonna happens next. (If so, please forward them, I've woefully bereft of LOLs in my life!)

These folks are often materially and spiritually harmed because they rarely engage with alternative views and opinions - what I often term 'reality.' As a result; when they speak, think, act (and vote), they foment great disharmony in the country. In certain subsectors of a culture that believe laws of nature are irrelevant, perhaps it's time for some gravity to be applied to the situation (good and hard.)

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." - H. L. Mencken

The Origin Story

If you've made it this far, a.) congratulations and I'm sorry and b.) it's beneficial to begin by taking a walk down memory lane to understand 'the origin story' of the environment we currently inhabit. A proper prelude to this conversation can be found in a recent post I published titled, A Century of Sloth and Incompetence, regarding the damage that has already been inflicted by a central government and financial class that vacillates between stupidity and self-destruction in its quest for absolute power, thus preparing a fertile garden for a generation of crisis, chaos and misery. With a title like that, you'll be shocked to learn that the article is a micro-aggression ATM...

A Century of Sloth and Incompetence

- By The Notorious CFP®

Only I would ease people into a topic of such great sensitivity of who to hang blame for our current financial predicament with a post about sloth and incompetence. What can I say, it's my gift.

The COVID Paradox

Of course, we now know in painful retrospect we made some pretty significant errors during the pandemic, both those in charge and those who chose to listen to them. We also collectively realize that the correct course of action with the Wuhan should have been to leverage both science and evidence intelligently. First, we should have  (temporarily) quarantined the highly vulnerable demographics, namely those over age 65 and/or unhealthy (namely overweight) until we had evidence to suggest that other ages faced similar risk. I'm of course distinguishing my definition of science learned during 150 hours of electrical engineering school ("a systematic endeavor that builds and organizes knowledge in the form of testable explanations and predictions about the universe.") vs. the modern definition that Doctor Anthony Fauci promoted - i.e. "I represent science." Which is a nonsensical statement, of course, but he's the highest paid employee in government so who am I to judge.

I recognize that mine will no doubt be highly controversial opinions, especially among non-STEM graduates. And that's great because I'm old enough to remember when the First Amendment existed, and like to believe all of this is  my way of reminding people about American history. But the facts are that science is a process, not an absolute nor a person- certainly not an unelected 80-year-old bureaucrat making $480,000/year who profited during the pandemic - and the scientific PROCESS constantly evolves as new testing and results are discovered. In my experience, many people have a distorted view of what science really is, because they were educated in government-run facilities. So let's review..

Relying on facts and data instead of human interpretations, emotions, biases and political calculations- which are often flawed- would seemingly have been the more effective and humane course of action, versus quarantining people that were never at serious risk, namely the young and healthy. For example, even in the first months of he pandemic, it was well-known by health authorities that the average age of COVID death nationally was around 81 (our modern  life expectancy is 77.) And even that elevated average age is probably inaccurate due to fraudulent claims filed by hospitals who were gaming the system

Today, we look at those facts and struggle to understand how nationwide lockdowns were truly warranted past the first few weeks.  Without a functioning economy, the financial lives of every American (i.e. the ability to feed, shelter and clothe oneself long-term) were a far greater risk than the virus. No one alive today will outlive the adverse consequences of these misguided calculations of risk- it's important to accept that our human failure to properly gauge risk will reverberate for a generation. We all remember the emotion and hysteria being pumped into the cultural bloodstream in early 2020 (and sustained in the enlightened coastal enclaves well into 2022) about what is now understood as a terrible cold that was mostly fatal for the elderly and/or those in below-average health. 

In fact, the average number of comorbidities - i.e. other pre-existing negative health factors- in COVID decedents was FOUR). Yes, those who died with the virus detected in their bodies at death AVERAGED four other ailments that could have been deadly on their own, and would likely contribute to premature death eventually. This means that if you were fortunate to enjoy good health, strong genetics or had made especially smart health decisions earlier in life, you carried fairly minimal risk of death. Regardless, we chose to shut down the country for the better part of a year, outlaw all but the largest, most politically-connected businesses from remaining open and eliminate jobs- either through mandates, onerous (and frankly, ridiculous) regulations or firing the unvaccinated.

New York City, what a place...  Remember 'bubble dining?'

One might argue that this was fundamentally the result of a society now controlled primarily by emotion- specifically fear. Others have mentioned that it didn't help that the country is still largely controlled by the Baby Boom generation - most of whom are retired, wealthy and very politically active. Personally, I find that a bit heavy-handed but they are a demographic you definitely don't want to (screw around) with. The left initially blamed the Boomers for not taking the Coronavirus seriously, in retrospect that looks hilarious... and a great reason to stop reading articles from sycophant elitist, coastal activist/journalists at such esteemed purveyors of nonsensical propaganda like Vogue and The New Yorker. As time moved on, however, the right and libertarians began blaming them for being so gullible during a period of mass-hysteria. Poor Boomers can't catch a break!

Of course, I am famously in love with Baby Boomers. They are the reason I get out of bed each morning, they are the best part of my job and serving them is my life's mission. I secretly wish I was one and absolutely convinced that I was born 20 years too late. When Boomers (born between 1946 and 1964) are gone, I'm definitely not sticking around to work with these GenX crazies. I anticipate most Millennials will disregard traditional investments for magic tokens like crypto, NFT and meme stocks, so I probably wont have much use by then. Fortunately, I could retire today but frankly, that would decrease my waking hours working with Boomers and so why would I not continue serving them?

Regardless, the truth is that the Baby Boomers rule the world. Gen X is too small to matter and many Gen Y (Millennials) and Gen Z (Zoomers) still struggle with reality and facts. As a result, when Boomers a.) vote in the highest proportions, b.) control all levels of power- government and big corporations, c.) logically have the greatest fear of death, d.) would continue to get paid their salaries, social security and pension payments during a lockdown or e.) worked for big companies likely to increase market share over the closed small businesses, it seems at least possible that these incentives might assure that they would get their way (as they famously have since their conception in 1946). 

I'm not judging or condemning. I'm just pointing out that the age demographic with the most power and least to lose in a global shutdown of the economy would be more predisposed to turning off the economy until they could ascertain that they were safe. Unless you want to make the argument that these 'terrified' Zoomers would have enacted similar anti-economy policies (once they sobered up)...

From the mouths of babes...

If you're offended that I'm spotlighting Boomers, a.) I spotlight everyone (but myself) and b.) please recognize that I'm only generalizing. In any of my generalizations, especially "generational generalization," I'm usually only referring to somewhere between "some" and "many" of the included demographic. That includes literally tens of millions that I am exempting from whatever nonsense I am hammering on that particular day. It's behaviors, attitudes and ideology that I am usually criticizing- and those cross all age, race, sex and ethical demographics.

Translation: Don't allow yourself to be triggered (especially by loquacious blowhards), and your life will be exponentially better. And if you're up for a debate- and believe the young are actually the age demographic to blame for the lockdowns (including those collecting unemployment checks to riot in the streets through 2020 until it got cold), then I would love it! Just send your argument to bart@stevens-wealth.com and I will publish it! 

In hindsight, it's worth pointing out once again - for anyone that may have missed it the first three times I mentioned it - that shutting down the entire economy in 2020 was a mistake, perhaps the greatest domestic blunder of our generation. Bigger than our government's failure to prevent 9/11. Bigger than government's failed military adventures in Iraq and Afghanistan. Bigger than government's failure to regulate Enron, WorldCom, Madoff or the dotcom / housing bubble they inflated. Bigger than government's failure to hold anyone accountable for the GFC. You get the idea... COVID response was the biggest of all their annual inflictions of personal pain and suffering in the 21st century.

Suffice to say that if COVID was indeed the world's greatest social experiment, we definitely failed. It's also a near certainty that we would not be suffering financially at our current levels and the financial markets would not be down today if we hadn't collapsed the economy and then compounded our folly by giving out free money in a fruitless attempt to avoid the consequences of our error. (Followed by raising interest rates, crippling the supply chain, neutering the energy industry, dividing society along racial and sex lines, vilifying our most productive demographics and then branding them 'domestic terrorists,' etc...)

In fact, had we operated from a place of greater logic and reason, by now it's likely America would once again be "the shining city upon a hill." Today, as we look at our diminished investment accounts, exploding costs of living, slowing economy and missing or displaced workforce, declining quality of life, rampant drug abuse and inconceivable criminality in urban cores; we now understand that there is always a price to pay for bad  decisions, in our own lives as well as the country itself. Today's challenges are not bad luck but  self-inflicted, and they've been fueled largely by emotions, disinformation and even lies.

I confess that I spent most of the spring of 2020 hiding under my desk in the fetal position (metaphorically.) Everyday, in fact since I never missed a single day of work in the office that entire year. (I didn't even own a mask until 2021.) 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 was reckless, poorly administered and criminal. I was certain it would adversely impact us all, but 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. It will expand the government like all of their crisis. (Have you ever seen one that did not? Have you ever wondered why?) It's enough to make one wonder about the role - and perpetrators - of crisis in Western society.

I believed then that stimmy recipients - and indeed, all Americans- would end up paying many multiples of the amount of their combined government check(s) just in grocery bills the next year. Because as someone managing more money than anyone I've ever met for over 20 years, I know that unearned money is almost always cursed money.

And so it was...

LOL. These journalists are so stupid it went from being funny to scary then back to funny again. And yet I still know people reading WaPo and NYT. I bet you do, too.

I'm not bragging, and I'm certainly no genius. Hell, I'm literally writing my own termination letter in this blog post. I just know that most of the time when the government creates a program or enter an industry (health care, finance, higher education, residential homes, automotive, etc.), they overwhelmingly and invariably end up distorting the economics and hurting the people they profess to help. It's not that the private sector is so great, it's just that the alternative is so bad. The bar is very, very low.

Invariably, when the government intervenes in a capitalistic economy, they will create new programs to attempt to fix the problems created by their original efforts. The only problem they usually solve is producing more unproductive jobs for the Americans that they displaced initially, and are now unemployable in the private sector. This is not dissimilar to feeding a wild animal. It's like they thought the classic book, Atlas Shrugged, was an instruction manual on how to run an economy.

I wrote about this in a recent post titled, The Climate vs. Inflation.

The Climate vs. Inflation

- By The Notorious CFP®


Introduction


So what does that have to do with your investments? Well, all of the above context helps explain why 2022 has been a train wreck for the economy, the markets and your investment portfolio.

A Free Lunch

Much like they are trying to do with global climate, the government honestly believed that they solve our economic problems by generating 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. It offered the promise of no longer having to raise money through taxes (and therefore W.O.R.K). Who wouldn't love money for nothing, and what could go wrong?  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 on said productivity, 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. A financial sabbatical, 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 even 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's brilliance was roundly rejected by the Greatest Generation in the 90's, only to be resurrected, repackaged, manipulated and codified into law for their children to approve twenty years later as ObamaCare- yet another of many wealth distribution schemes for the 21st century that were laughed out of the previous century. 

It's also 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...

And yet in recent years, some in government aspired to duplicate their efforts. In this case, such MMT quackery could have only been hatched in one corner of the economy- academia, of course. 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 from the hypnotized young minds they meld but who lack 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 or 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 during the Bernie Sanders 2016 campaign (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.

When AOC and MSNBC collide, it's LOL and SMH at its finest. This woman truly is the poster child of the Millennial generation... With her iWatch and iPhone.

Needless to say, MMT in reality hasn't worked out 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 may be 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 are. The early line was - 23 vulnerable seats in the house, and it's gotten worse since then. Much, much worse.

Actually, I'm being a bit disingenuous... Commissar Bernie did crawl out of one of his mansions this past week to chime in on the inflation problem...


Yes, seriously. The guy who is as responsible as anyone in America for the intellectual underpinnings of our current inflation by promoting MMT... is tweeting from his iPhone about the fascist enrichment of corporations that he has cultivated with his diseased crank theories. Some people really drove to a polling station and voted for this guy. He actually was elected to the Senate. And fell one Clinton criminal election fraud short of becoming our President. 

Secondly, the idea of replacing labor with money printing was mercifully squashed before we got to the mass genocidal killing chapter that epitomized the 20th century regimes of Lenin, Stalin, Mao Zedong and Pol Pot. It's also why just a few months later, even famous liberals were suddenly 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 is better equipped to determine what specific work is worth than government bureaucrats who haven't worked in the private sector in their entire lives, 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 runaway 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 rationale for these absurd plans is that the authors 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 numbers.) If 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 sign off as the mule to Boomer's Cadillac benefit plans in this social contract for much past next week, you are dreaming...) We all know that giving people something for nothing is easy, fun and popular. That's literally the script 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. I call it the Land Rover effect, because you spend money differently when you didn't earn it yourself because you only see them financed driven by people that were given the money (or are deeply lonely inside.) 
  • A national shopping spree quickly ensued, 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 was used to cover life necessities, you would be wrong. I sincerely hope that the legions of 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 (or what I term, "Robbin'-you") to buy all manner of speculative products- including options, cryptocurrency, Non-fungible tokens (NFTs) and meme stocks that were designed to impoverish the bored, young and gullible. That plan 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.."

* In 21 years in this business, I don't think I've ever had a single client (under 40) who inherited an account and DID NOT completely bleed it dry within a few years. And that includes some accounts as large as seven figures. We all like to believe that we would be more responsible with unearned windfalls, but the reality - and my experience - suggests that is almost impossible. With more than a hundred such examples in my career, I would estimate that only about 20% of clients (and 0% under 40) - invariably the more mature, very successful and/or self-disciplined - resist the temptation to spend most of the money that someone else earned and gave to them. It's too bad we live in such a morally- and intellectually-"challenged" culture that we don't zero in on that phenomenon and internalize it into personal and public policy (the story of my life and mental illness). It would transform this country, but in my experience nobody very, very few people want to be told the truth anymore, much less live in the reality that truth facilitates. Hence, our politicians... who step into the breech to serve as the conduit and enforcers of (forced) wealth distribution. That's why we need term limits at a minimum and incarceration at a maximum (if I was a theocratic dictator). The paradox, of course, is that the nature of the modern politician's role makes anyone who voluntarily pursues that life wholly unsuitable for the job.

But I digress.

As a result of the money printing through PPP and stimulus checks, 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- became 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 couple of years. 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 financial experiment that upended more than 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, especially using the government as the conduit. 

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 financial problems are fundamentally the result of excess debt and insufficient savings. But in a capitalistic, free-market economy like ours - especially those relying on a fractional reserve currency- if everyone lived within their means and remained flush with savings, the economy would collapse overnight. The actual amount of currency is circulation would simply be 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, slaves with 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 industry (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. Up until the late 70's- as America was itself abandoning sound money and embracing consumer debt- borrowing was safe, legal and rare (like abortion.) And then suddenly, for the first time in human history, beginning roughly in the early 80's, as Boomers were becoming the primary demographic in the American workplace. At that point, debt could be utilized beyond just the purchase of land and very large purchases but instead on more of life's luxuries. 

I personally believe that the vast majority of American economics revolves around the Baby Boomer generation and their relationship with debt. I have observed that few people appreciate  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 today for people to conceive of an era when a house was not always an investment, and was barely an asset for hundreds of years prior, until Boomers flooded into the market in the 90's. If you had asked, many of the Greatest Generation would have considered a house a liability. 

The Boomer's infamous "conspicuous consumption" is not necessary a bad thing from a personal perspective and certainly not a knock on them. Without Boomers, I'd probably be unemployed right now. However, 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 some uncomfortable abnormalities. Like the housing market, for instance..

Client: "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." Bart: Oh, okay.

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. The Paradox of Thrift dictates 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 sudden loss in appetite for  consumer financing represented not only a painful shift for potential home owners, but an existential threat to the country's economic solvency. The nation's combined mortgage liabilities couldn't just dry up, the debt had to go somewhere. 

You see, debt is to our economy what motor oil is to an engine. Without it, a capitalistic economy will seize up and die. Due to stifling government regulations, improved 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 (along with immigration). In short, we have to live beyond our means. Said differently, we have to spend more than we are capable of producing. This is an uncomfortable fact of our free-market capitalistic economy. Today, we have more people but we're producing less. And that's not good.

Entering 2022, there was a general sense of ease emanating from investors, politicians and even everyday Americans that we had "gotten away with it," by dodging the inflationary bullet. It was therefore hypothesized by a lot of liberal arts majors and others who know nothing about finances that MMT could perhaps solve this problem. They surmised that it might serve as the bedrock of a brilliant new economic system aided by the next great 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 and exciting method of 'funding' our exploding national budget has successfully supported a few  (fifteen, to be exact) rather expensive agencies like the Departments of Energy, Education, Justice and Health & Human Services without all the annoying work and sacrifice (or taxes on the work and sacrifice of others.) Without money printing, taxes could not support this level of government largesse. It's estimated that government welfare employment would have to shrink by as much as 75%. That's a lot of people unemployed with no tangible value in the private sector (translation: unable to support themselves or their families).

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 first 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 (money printing) problem, 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 this issue, 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 that they were inflicting on the American economy.

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. In a bureaucracy, there is always someone else to blame. That's not a glitch, it's the overriding theme. The problem (among many) that quickly develops 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 such a 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 on the back of their earlier boondoggles to both cover up previous mistakes and allow for the expansion of size and scope. It's like putting wallpaper up in home previously used as a meth lab.

For example, the student loan epidemic is not - 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 as it stands in this country now, 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
  • Steal Secure the natural resources
  • Introduce processed Western food and culture
  • Increase military budget to boost MIC stock price
  • Abandon allies (Iraq, Syria, Libya, etc.)
  • Funnel refugees to Europe
  • Rescue US citizens and equipment (optional)
  • Disburse those men accountable to military contractors and Big Tech

Sadly, it appears that has all ended with Afghanistan, and now we can unequivocally agree that the state can no longer build nor 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.)

In all fairness, the military itself has 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 a prison cell. 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% of them are retired or heading out. 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 

Unfortunately, politicians aren't generally (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. Some don't even have to have functioning brains to be put in charge of millions of people and billions of dollars of resources. Some - definitely not me- might argue that intelligence could actually be a hinderance in public service.

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 fulfills them in the end. This applies to teachers, parents and managers, but also to greater society as a whole.

Conversely, if you operate 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 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 prolonged than it would have been if left to the free market, the financial markets and intelligent people. While this scenario could be beneficial for the bold investor willing to take advantage of the less intelligent investors selling into the current decline, one has to ask about the morality of it all.

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 banshees 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. 

Our politicians and local political activists know that if they have to choose between ruling over 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. This is 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 headquartered 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.

A Scam of Affluence

"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

As we continue to delve into all of the catalysts of 2022's market meltdown, we would be remiss to bypass the fact that the vast majority of cryptocurrency is a scam, as well as ESG (Environmental & Social Governance) investing, another contrivance cooked up by investment bankers to extract more wealth from credulous retail investors. If you're unfamiliar with the sudden rise and imminent fall of this pseudo-asset class, I recently penned an article expounding on the ESG racket in all it's glory...






Hopefully, I've dismantled the ESG agenda thoroughly and also dispelled any delusion notion that oil and gas production or use - which correlates 1-to-1 with human wealth and prosperity- will ever decrease in our lifetimes. I wish it would, but I personally prefer being able to pay my bills, avoiding suffering and not being ruled by other countries. By now, we should recognize that the best we can hope for is for fossil fuels to experience a steadily diminishing market share as we continue using the same or more of the energy under our feet to help gradually transition into a future of more sustainable energy (Which apparently now equates to nuclear power and coal stored in batteries. Composed of lithium. Which is composed of cobalt. Both of which we mine. From the earth's crust overseas. Using foreign child labor...)

OK, got it. Sounds very green to me..

Furthermore, we would be remiss the next time someone claims that oil companies and their greedy executives are to blame for higher gas prices, that we didn't.. a.) partially agree with them, because it's true.  Just drive around the Woodlands, Texas and tell me how their executives are struggling to put food on the table), but also b.) ask why the Executive Branch would purposely block hundreds of billions of dollars in capital investment over the past decade, weaken the domestic energy industry, make us poorer and make us more vulnerable to foreign adversaries. Surely, they would know that being dependent on reliable energy sources (i.e. wealth) from our enemies in the East, Middle East and Venezuela would require us to become entangled in future wars, like Ukraine and (someday) Latin America and Africa.

I have written extensively about our government's struggle this year trying to balance their climate change agenda with remaining a solvent country. To me, it seems like an easy decision between the two, but I'm clearly far too dumb to compete with the intellectual heavyweights deftly leading our country, to the laugh track of a thousand nations, including our enemies. I've done my best to incapsulate my thoughts in a recent piece titled, Our Energy Policy Is A Kamikaze Mission to Poverty.


Our Energy Policy Is A Kamikaze Mission to Poverty

Energy & The Wealth Of Nations 

- By The Notorious CFP®


Learning the Hard Way

I know that my thoughts and strategies will offend some people. No one likes to admit the people we vote for are hurting us. It's uncomfortable to consider taking advantage of feckless leadership, as well as the unskilled and inexperienced investors they create.  But personally, when someone decides to invest in the stock market, I kinda' feel like 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 undersized, unprepared and/or unqualified; and your team were to find itself 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. Like with your parents.

It's not the Aggies' job to go easy on Sam Houston State or Prairie View A&M, run out the clock or bring in their backups. On the contrary, the most caring act of love is for them to keep their foot on the (proverbial) throat of their opponent until the final whistle. That's how humans learn, grow and improve (metaphorically.)

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 patsy first-week team is the problem, not the Aggies. They're paid very well to be humiliated, like men in the Kardashian universe. 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 the opposing coach? 

Similarly, it would have been better for new and unskilled investors to understand the markets before losing all their money this year in meme stocks, crypto and options. They could have instead learned first-hand 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. No one is coming to save you. 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 not only been 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 I can't have/do/say something???

But that, ladies and gentlemen, is the state of America- where few are ever told "no," many lack an understanding of true market risk, their distorted view of reality or their infinite, unquenchable capacity for BS. 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. They need to fail, and that is what is happening today, in real-time.

Enabling the "helicopter parent" approach towards investing since the Great Financial Crisis 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, AMC and GameStop. These are all "investment categories" that should not and would not have existed if not for a fragile, gullible generation (or three) that frankly wasn't spanked enough. 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, then 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 accept the 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 presently untapped because we already think we're good enough. 

When you look around at all that society has accomplished in this modern era, 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 at the bottom of their annoying Tom Brady commercials where he recharges himself like an EV: 

Tell me again how we're not just slightly evolved chimpanzees with pants?

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  to create the next generation of great investors, those that value earnings and dividends over hope and faith. (This post was originally over 200 pages in MS Word, so perhaps you can believe in my commitment to this cause.) 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 (an old dude from the 50-60's.) 

Wow, I really was born in the wrong century.

The truth is that we have a fundamental breakdown in economic intelligence in this country that has been festering and compounding for more than one 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 offends some people. As you can tell, 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 a certain degree of stupid, though 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 the expanding capacity for nonsense, but it turns out America life expectancy has exceeded even their their wildest expectations.


I doubt the Founding Fathers could have ever foreseen an entire population kept so comfortably numb and willfully ignorant by technology. One might even wonder if we're being kept ignorant about finance at the personal, community and national level on purpose. We're lied to so often and so blatantly that I feel it doesn't seem to even register anymore. It's 2022, and half the country is still thinking about Russian collusion and unarmed buffoons in Viking helmets stealing Nancy Pelosi's lectern. (Thankfully, she was at the doctor's office for a medical checkup that day, where he found traces of blood in her alcohol.)


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, we only move forward through individual 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. They represent the old order, and they need to be replace, if not outright removed.

The good news is that 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 the logic and reason necessary to win at finance, investing and life.

For instance, the government allows for the existence of most crypto-currency for many reasons, but one of the most useful- for them- is that it permitted the 2020-2021 stimulus money to quickly flood into the crypto universe (i.e. via early adopters, or HODLers). I suspect 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, so as to avoid even more massive inflation than already exists. Now that we're in hyper-inflationary 2022, the door is now open 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. It was pre-ordained.

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.



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 continuing a sustained move downward. It's impossible to know the short-term outlook for certain because the market is at it's foundational 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

The Media

While we are on the topic of toxic influences on the financial markets, it would be irresponsible for me to leave out my favorite target, the media= also known as the Legacy Media or the Mainstream Media (MSM). I've written extensively about how their product is primarily propaganda at this point, and not only provides little in the way of accurate (much less useful) information that investors can profit from, but actually works to undermine your intelligence and mislead you into making bad decisions. To really twist the knife and articulate my true feeling, I recently published a post titled, The Media Hates Your Guts.


The Media Hates Your Guts

- By The Notorious CFP®


Kamik-easy

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 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 3% 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 full 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 - and go around - their elected (and unelected) leaders and their propaganda arms in media to find truth and solve problems.

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. This all contributes to an inability to discern truth and an ease of gullibility.

A nation of fatherless (or father-challenged) homes, and a lack of real leaders and heroes who will tell us what we do not 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.”

Question: 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 the Constitution. On a similar note, is it weird that our Presidents only want to liberate weak countries with easily-accessible fossil fuels (Iraq, Libya, Syria)? Yet leave the most oppressive countries in world history (for instance, our 'ally' 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 THIS PAST SUMMER...


We're being ruled by fairly clever smart people who have maintained 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 pays his mortgage or taxes, or drives 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 rampant in the streets and getting worse, gas over $4 and rising, and stores shelves randomly 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 , 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 a 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 10 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 temporarily 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,  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 in 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 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 we 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.

BACKGROUND

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 2022 would likely be the first time that 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 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 by 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 to unravel the fabric of the country, our leaders 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 summer, my cryotherapy salon (of course I use one..) 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 below and ask yourself, "Should the user really be fully in control?" and "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) when he forgot to protect his feet in a cryo session and lost an entire season. The one before last seasons when he got kicked out permanently.

Leadership

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?

These are not great scores. How do your opinions fall against the consensus? Are you still mad I insulted your favorite politician?

Capitalism

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 performers 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 on government credit (via the bank origination) 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 younger Americans,  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 a.) the growth in the population as well as b.) 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.) However, the  problems with this predilection for debt and spending 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 health-case 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, 21st century businesses have been equally poor at capital allocation. 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 for shareholders nor  improve society. In their defense, they are just responding to the questionable and damaging government strategy of financial repression perpetuated by the Federal Reserve, who is Public Enemy #1 no matter how you measure it.

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 - even more.. 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 the IRS brings in through taxes; our city, state and federal governments ALWAYS consume more. That's neither new nor necessarily nefarious, it's literally baked into the system. 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... but no one  considers the DMV, TSA, DOT or NPR as harboring our best and brightest. 

The simple fact is that you can't rehabilitate a cokehead child by continuing to give him ever-increasing allowances, arranging million-dollar jobs that he doesn't even show up to in industries that he has less than no experience and personally approving him to receive millions of dollars in gifts from America's mortal enemies who want to see us dead. Only a gd idiot or someone who's political ideology is so far up their (ear) that they get offended by this sentence and can't even face reality would think otherwise. But with each successive year's tax revenue's growing exponentially larger, it's naive to expect the bureaucracy to stop or even slow.

All of those departments would certainly be better run if they were automated (or at least outsourced to the private sector.) Unfortunately, the sad truth is that government agencies are primarily jobs programs masquerading as civil service. They're used to mop up the 20% of the population that they could not  sustain themselves financially on their own current (lack of) skills and resources in the private sector. Translation: they cost more than they produce, but when you make your living off other people's taxes, this is not a problem. If they were forced to earn what they are actually worth professionally, they could not survive, much less spend. And as we discussed, over 70% of the country's Gross Domestic Product (GDP) is spending. That's literally our top export: consumption. 

I'm not being a jerk, that's literally why these jobs are 'kept in-house' where they can be shielded by unions from economic and professional reality. As we've all discovered, more than half the country lives outside the bounds of reality, and vote accordingly. Which only serves to perpetuate the never-ending bloat of the civil service and a hollowing out of the productive class. For instance, if the DMV was privatized, their labor force would be shrunk by over 90%. If schools vouchers were a viable national option, the public school system would lose half of their students the first semester. And toll roads aren't getting built by the DOT for a reason.

As a result, 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 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). This hallows out the middle class and pushes us closer and closer to a Latin-American style economy.

And all that's also by design, either by politicians and greedy corporate fascists that continue to push us further and further towards a Latin-American style economy. Both parties work 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 perspective that definitely won't endear me to many clients, so I'll abstain from further commentary. Regardless of the causes of our current dilemma, 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 government survey below demonstrates 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 is proving to be a risky gamble for the current administration

While this trend appears to only be beginning, the greater existential threat is deteriorating conditions in household budgets will likely inspire them to demand (and receive) additional government assistance, which will only spur additional economic hardship in a self-perpetuating cycle where our elected leaders offering solutions today for problems they created yesterday... solutions which will then invariable create 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 some 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 the pyramid 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 surrender our prudence, common sense and long-term perspective precisely at the moment that our (perceived) personal health and livelihood appears at greatest risk. That's because the "we" is nothing more than a collection of humans, and humans are often the 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 do. They have not, will not and 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 initially raised to trust the authorities. Right up until  the 60s and 70s, when many in that generation 'forgot' or rebelled against those customs during the counterculture social revolution), what Fourth Turning terms The Awakening

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 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 fatherless homes that require government support to survive 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 icons like Elon Musk, Jeff Bezos and Joe Rogan; 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 a preference for community and conformity as well as highly engaged in "rising civic engagement, improving behavior, and collective confidence." Our youngest Americans have ushered 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 politicians (i.e. our majority and minority speakers are a good example) are the least qualified to speak, much less act- yet still hold the most power. 

I suspect that's a core reason why politicians historically have been removed (either by compulsion or fate) from the private sector and enter public service to "serve the public's interest." Many times, they're simply lazy or stupid. Look at them, few of them are known for taking care of their physical or mental health and they are generally not highly intellectual people. Do you consider your federal representatives as especially cerebral? I doubt it.

You don't ask your pet or housekeeper (or your refrigerator) 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 about anything? They should be lucky to have jobs.. Which is why they (should be) working for us and not the other way around. 

Yet in modern life where we have elevated our politicians to stations significantly above the servants that they are, these 'leaders' are no longer scared for their livelihoods and have been led to believe that they are allowed to tell us what to do. 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 police reform, student loans, stimulus checks and the COVID response.

It's been said that history always looks different through the rearview mirror, and one would hope the spectacular and myriad miscalculations in past eras might have facilitated renewed and improved reflection and humility during recent times. 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. 

We stockpiled food and water in 1999... traded 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 walked away from their homes through foreclosure and short sales in 2009... we hoarded toilet paper in 2020... hoarded fuel in plastic bags in 2021... all actions that seemed rational to so many otherwise-intelligent people at the time but now look downright ridiculous. 

So, too have the actions taken on our behalf over the past few 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 their 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 they believe  periods of temporary economic challenge 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 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 fiat 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 gain of function (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 economy [i.e. approaching mid-term elections.] And also 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. And yet, the little ones will still cry that their (massively-debased) loans are unfair "because (blank)."
  • 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, for all but the most politically enslaved. Errors in judgment in Washington D.C. 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 probably 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 "intellectually and professionally retarded" 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 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 of abject corruption and malfeasance that defy comprehension.
  2. Most of our crisis are man-made, which means that so it shall be with the  solutions be. 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 water comes out when you turn the faucet, the gas pump 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 (future tax-payer) money they needed to prop up their failed policies and programs until the next election, states who made rash and misguided decisions would be insolvent. 

Hundreds of thousands of transplanted residents who took their companies, jobs and taxes south or east 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 to produce the recession that they desperately want.

Jerome Powell & Co. are attempting to channel their inner-Paul Volcker and rediscovering monetary religion in order 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.) Not only is it reckless, but it forces the country into more dangerous instability that is sure to produce unpredictable (and almost certainly undesirable) results. Dual fears of inflation and rising interest rates are starting to cause genuine concern in and 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. We now reserve to those as "Strategic Midterm Reserves."

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. They simply cannot accept it, especially those who don't run businesses and cannot understand how real-world economics work.

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 next summer, 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 tenth month of deteriorating economic conditions, souring investor sentiment and the resulting slow and painful declines in almost all financial markets. This is an economic and market environment currently unlike anything we've experienced  seen since the Great Financial Correction (GFC). That three-year 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 declines in the S&P 500 so far this year feel 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) remains confounded by the contradiction wrapped inside paradox encased in confusion. Stocks are down, bonds are down and  international stocks are down. Cash is losing massive purchasing power every month due to inflation, which is being under-reported by the people paid to do under-report it and denied by those paid to deny it. Instruments meant to hedge market losses- like precious metals (gold and silver) and crypto-currency - have fallen even further. Commercial property looks extremely  risky given the amount of workers who will never return to an office again. Amazon can take over only so many shopping malls and convert them into warehouses.

Residential real estate is down or cooling in most  markets, mostly southern states and rural communities and suburbs. Most experts are confident that anything financed with debt (real estate and vehicles) are heading towards their 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. Cut expenses
  3. Build savings
  4. Pay off debt, especially floating and revolving
  5. Be grateful
  6. Keep perspective
  7. 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 invested in the market in the last correction  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 and if not, let's find it.
  • This is different. We have even bigger morons in charge this time That's definitely true, the folks running our country are certified 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 aspects of our economic system for almost 300 years. 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. This years cascading drops have been gut-wrenching experiences for everyone except for oil wildcatters and home construction contractors, and that's even about to change for them. Fast. I can’t help but wonder if billions of investors have been opening their October 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 many of them 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?" Clients 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 ten months like your IRA.) 


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!" 

Yes, exactly. That's what happens at market tops, when money is free and 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 alone 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. Guess when to re-enter - You can't BS a BSer. If you're basing your decision on present conditions, it's largely a guess.

2. Recognize the guaranteed indicators of a market bottom - 9/11, Lehman Bros, Enron, COVID- and agreeing to put all your chips in bad stuff happens. Of course, the problem arises when  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 18%. Both times they went on to set new highs and then some.

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.) Abandon 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 few years 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 problems with jumping out of the market are obvious and well-known to most readers. You are probably familiar with many of those as well, and they probably play on a running loop in your head most ays. 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, a lot 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 or poor savings habits in the past. 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. 

"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 market reprieves in the midst 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 find themselves at risk of becoming too complacent towards the inherent risks in the market. Time and time again, they operate their lives and finances  'priced to perfection,' a term I plagiarized from market analysts describing stock prices of companies that enjoy high valuations based on the presumption that nothing will ever go wrong. 

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... just as long as nothing ever goes wrong. You think I'm joking, but I'm not. This is how too many people structure their lives, with minimal consideration of what could wrong, how often and how to respond. As a result, just like companies and governments, when misfortune does eventually arise they're stuck "winging it." These folks are the first to curse their luck, blame anyone but themselves and make quick, impulsive decisions that rarely age well. 

More mature savers and investors are usually familiar with the possibly of financial challenges and calibrate their probabilities better. They prepare for the worst and pray for the best, and when they go through the valleys of life, they tend to 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 made by 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 even 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 that happens, the problem is often solved with suboptimal behavior - 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...

  1. Withdrawals or debt can involve interest, fees, penalties or taxes. Dave Ramsey calls that "stupid tax," most of us have done it and the banks love you for it.
  2. Liquidations almost always impede or delay 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 $2,100 mortgage payment, but the kid's college isn't getting funded. They have a $700 car payment, but don't fund their Roth IRA. They order food delivered, but lack an emergency fund. They fail to contribute to a Health Savings Account (HSA), but have a pet. Then, as hardship invariably arrives when the universe deals them that inevitable "surprise" financial blow with multiple $0s on the end, they blame it on bad luck. In reality, these things happen to all of us with unfortunate and frequent regularity, and it's rarely all bad luck. It's Murphy's Law.

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 - like most things in life- can often prevent turning money 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 far into the future are almost always a mistake, and there is almost always a better option. But the best option is to prepare for them, and my recommendation is to prepare for it to be five figures and happen once a decade. This prevents you from selling an investment after it's already down. You justify the sale because you think it's going lower. But if you liked the company or fund at a certain price in the past, then 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 fuel. They just avoided a 30% 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 some 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.) Sometimes, they will grasp on to something in hindsight to rationalize what was originally and fundamentally an emotional decision.

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. 

It's 2022, people. There are no more secrets anymore- everything finds the light, and fairly quickly. (Except for former President Trump's criminality. That's been promised by CNN and the DNC for six years, and last I check he's somehow still the front-runner as our next President. Which is bananas. 

If anything, we're living in the era of anti-secrets. Our problems aren't primarily what we don't know, it's what we're told that just ain't so.

Adam McKay’s Oscar-winning film The Big Short opens with the above epigraph.

This year's "Navy Seal" type rumor is that Biden is a stooge puppet of the WEF and actively planted to destroy the country and move us toward a one-world order and currency. It's the only explanation. No cabinet is this stupid..." I get plenty of those emails with friendly demands to respond and defend the accusation. 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 an email forward, please let me know and we'll bet against it and make millions. I promise if you know about it and most others don't, then it's certified misinformation and please don't take offense. I got the same email to sign up for the newsletter as you.

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 a dangerous illusion based on a misconception, wrapped inside a faulty premise. Does intuition exist? Absolutely. After six million years of evolution, I believe we behave in fairly reasonable ways based in innate and genetic predispositions. I believe there is an unseen energy force that flows through all humans. For imminent 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 act against your intuition. 

It's what everyone else is doing (i.e. 'FOMO'). As I'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. Quite a few are broke, or heading in that direction. They're the friends jumping off a bridge that your parents always warned you about.

It's therefore incumbent on each of us to ask ourselves, "Do I know anyone (besides Warren Buffett) 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 only 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 aren't just often wrong, they are virtually always wrong. (I say 'virtually" simply to avoid being sued.)

This is because the crowd lives 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 is underwater on their vehicles and flip 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 fiduciary of their payroll "contributions."
  • The crowd can't cover a $1K emergency and is one paycheck away from bankruptcy.
  • The crowd pays taxes.
  • The crowd only puts 10-20% down on real estate purchases, and their payments represent more than 1/4 of their take-home pay
  • The crowd makes horrific mating decisions throughout their twenties and marries too early and too often.
  • The crowd rarely volunteers for the community, unless it involves for other family members.
  • The crowd doesn't have a passport and rarely travels international, unless it's to 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 could not defend themselves from an intruder tonight.
  • 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, and pays for it.
  • The crowd supports their adult-children (also know as "kidults") after the historical cut-off of age 21.
  • The crowd does not attend church (or worse, attends ultra-progressive churches of very dubious theology. i.e. "prosperity gospel")
  • The crowd invests large sums (or borrows) for non-STEM degrees instead of hard work, mentorship, trade school and/or apprenticeships that are far more beneficial for society a liberal arts degree.
  • The crowd mutilates their body with tattoo ink and piercings, and wears skinny jeans, tops that show their stomachs and other ill-fitting, trashy clothing that signal their lack of sef-respect.
  • 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 / melanin 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 unqualified sociopaths lacking in moral compass (often well-financed attorneys from big firms) to positions of leadership instead of successful, ethical people or those who have run actual businesses.
  • The crowd has no- or deeply flawed- spiritual foundations. As a result, they have no- or deeply flawed- value systems that prevent them from reaching a fraction of their true potential.

I could go on, and I could provide links (Lord knows I can provide links...) 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. (I would use far different words in private conversations.) In almost every situation, we would all be much better off doing the exact opposite of what everyone else is doing. Like, quite literally. And yet you're going to care about and react to their collective decisions of these people 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 use and can actually 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 to them while there's more demand than supply (a novel concept apparently.)

If you think the leaders of our country are imbeciles (and evidence is mounting that you are correct), be excited that you're not alone and it's going to impact Mr. Market. Perhaps these leaders will drive the country into a ditch for their 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 invariably fall into success.


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 feel powerless to the market's daily vicissitudes. It hurts more to be confused and scared about what's actually going on in the markets and economy. It feels good to be updated on what's driving the markets. 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. 

Like the question above I posited about caring how other market participants think and behave, 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 and endanger 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 so that you can later save up and pay cash for something nicer. It's hard to find the money to save for retirement. It's  easy to find it for vacations; kids sports leagues and class pictures; streaming television services, unlimited data plans 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 breakup 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 sometimes easier to lie than tell the truth. It's easy to stay at home and play video games or consume social media than exercising. 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 recognize that's not exactly a ringing endorsement..

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, so many have been coddled and misled their entire life about how the world works. We've all had it pretty easy compared to the rest of the world for about a century, and we're now enjoying the fruits of previous generation's labor and sacrifice. 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. No, you're not depressed, you just have bad mental health habits.

As Tom Hanks' 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 it can't be that..

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 without transaction costs. 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. For free.

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 not being discussed  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 as I've mentioned a few million times, it's free, since online transactions fees no longer exist for most custodians. Also a first in the history of financial markets. Thanks, Robinhood. Consider for a moment  these two 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, cat videos, 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, Instagram, Snap Chat, Tik Tok 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 potential - 20% drop today? If the American (and indeed, world..) populace have become so bipolar and polarized... 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.

https://equiuspartners.com/worried-about-stocks-why-long-term-investing-is-crucial/

https://klementoninvesting.substack.com/p/dont-bother-forecasting-the-next?s=r

https://www.sofi.com/learn/content/history-of-the-stock-market/

https://www.collaborativefund.com/blog/obvious-things-that-easily-escape-attention/

https://www.servowealth.com/blog/beware-of-bear-markets

https://behaviouralinvestment.com/2022/05/24/what-we-should-remember-about-bear-markets/


It's Raining Securities (Hallelujah)

Most investors are keenly aware - through intelligence and/or experience- that it's been proven statistically impossible for anyone to know when to time markets consistently. 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 the exit and entrance into the markets more than perhaps once in their life. 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. Anthony “Attacks on me are attacks on science" Fauci and The View all day. I believe the Russia hoax narrative was still in the headlines back. Like the vaccine's efficacy, it took years for that to be disproved as well. 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, we're not special,  all this has been done before, and that we're going to get through this?

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 ten 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 a tragedy, I get it. But it's  not a hardship) and/or you do not anticipate needing to draw down all of 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 outside and live your life. In essence, do the opposite of what many panicked sellers are doing or contemplating doing right now. 

Warren Buffett 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, information or the 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. Your 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, partner,  employee and citizen. And your parents 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 subconscious 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 keep or even 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 couple 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 political career in 2024. Forgiving student loans will also free up trillions in annual payments that will likely be spent on a lifetime of Door Dash, Uber and Candy Crush coins, which will then be recycled back into the economy to fund 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.

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.”

Bart

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.

https://twitter.com/i/status/1537214216989552641

https://www.thenewsminute.com/article/aave-liquidity-protocol-160427#:~:text=Aave%3A%20Introduction-,Aave%20is%20an%20open%2Dsource%20and%20non%2Dcustodial%20DeFi%20protocol,earn%20interest%20on%20the%20same.