This Logic Trap Destroys Countries and Harms Investors

There’s a dangerous theory floating around Washington…

A theory Joe Biden implied in his State of the Union…

A theory that can have direct implications on your savings and investment portfolio.

The good news is we’ve studied the enemy.

We’re going to keep you ahead of the game and avoid its devastating consequences by showing you how to recognize and avoid the thought trap that’s ruined investors and destroyed nations.

Modern Monetary Theory (MMT) would be more appropriately named “How to Destroy National Wealth in 30 days.”

We won’t bore you with the details of MMT because it requires Olympic-level mental gymnastics and a suspension of basic morality in order to prevent your head from exploding.

Besides being a prolific investor, Professor Mark Skousen is an accredited and acclaimed economics academic.

So, it shouldn’t surprise anyone that he’s been keenly observing the rise and advocacy of this ‘New Age’ thinking.

We call it ‘New Age’ ironically since nothing about it is new nor revolutionary.

Back in October 2019, Mark wrote the following article analyzing how MMT is taught as well as the theory itself.

Unfortunately, a growing number of left-leaning politicians, and even some on the right, have begun to embrace tenants of the theory.

They advocate for uncontrolled spending and believe we have no real nor moral obligation to manage our debt load, pointing to the $4 trillion 2020 bailout as their crowning achievement.

They point to statistics like the halving of the childhood poverty rate as proof of their claims.

While it’s not quite gaslighting, as these economic halfwits actually believe in MMT, it’s a logical fallacy that politicians fall into over and over…outcome validates decisions.

It’s similar to the old, flawed argument that correlation equals causation. But this one is harder to unseat.

And it’s particularly disastrous for investors, because we are susceptible to recursive learning, also known as feedback learning.

It’s a thought trap that’s destroyed nations and investors.

The good news is no one needs to fall prey to this mental magic.

All you have to do is learn to recognize it.

The 2020 Stock Market Disaster

2020 provides the perfect backdrop to study the problems wrought by this flawed logic.

Forced to shelter via a draconian global shutdown, a multi-trillion-dollar windfall left consumers with excess cash, a shortage of booze and, consequently, a lot of boredom.

At the same time, the Federal Reserve, led by Chairman Jerome Powell, with incredible hubris, and armed with powers abdicated by feckless politicians, declared that he would backstop the economy, free markets be damned.

Or put in terms of a gif…

It culminated in a market bottom in which retail investors actively participated for the first time in modern history.

With rent paid by your tax dollars, unemployed workers plowed money into risky assets, facilitated by charlatans like Robinhood, driving unprecedented runs in anything from meme stocks like “Bed Bath & Bankrupt” to “cryptocorruption”.

Average investors with little to no knowledge took leveraged options bets on the margin, hoping to score big.

While it worked well initially, signs quickly emerged that things wouldn’t end well.

The most troubling case came when a 20-year-old committed suicide after losing hundreds of thousands of dollars in the early days of the Fed-induced launchpad.

Yet, society buried its head, choosing to plow forward in one of the sharpest market bubbles in history.

The Bubble Bursts

Since making an all-time high in 2021, markets have pulled back by roughly 15%.

Options and futures contracts cleared by The Options Clearing Corporation (OCC), the world’s largest equity derivatives clearing organization, hit their highest levels in 2022.

Source: The Options Clearing Corp.

However, the rate of growth fell hard.

What explains this massive slowdown?

Retail traders and investors put their money in riskier assets, hoping for massive returns.

So, when favored stocks like Carvana (NYSE: CVNA) plunged by more than 90%, or stalwarts like Amazon (NASDAQ: AMZN), Meta (NASDAQ:FB) and Tesla (NASDAQ: TSLA) plunged around 50% from their highs, all the gains earned over the last two years evaporated.

Investors fell prey to poor decision-making.

They saw large-cap technology stocks run unabated for the first time since The Great Recession, becoming the first to recover from the pandemic bottom.

Few had enough experience or knowledge to see how much control and influence the Federal Reserve was able to exert over markets at home and abroad.

Some would argue that it holds more power than the president.

Avoiding Pitfalls

We encourage you to watch the following video from Mark Skousen outlining his Biden Disaster Plan.

Mark is no stranger to market volatility and, with his decades of experience, isn’t susceptible to populist fads or political machinations.

He sees the world and the markets as they are.

We want you to see how Mark carefully and thoughtfully lays out his thesis by explaining how and why he came to his conclusions.

Besides offering some stellar stock ideas, Mark demonstrates how to work through an investment problem thoughtfully and analytically.

This is the key to avoiding the recursive learning problem.

We’re all susceptible to emotions and bias.

That’s why it’s critical to step back, look at the picture objectively and then make decisions.

Because there is one truth in the market: We cannot control the outcomes, only the decisions we make.

To your wealth,

The Wealth Whisperer Team

IN CASE YOU MISSED IT

In this interview, Mark reveals everything he’s uncovered about the Biden administration — including what could turn out to be the biggest scandal of the President’s career.  Click here for the Biden Disaster Plan — and which three stocks could 10X as this disaster gets bigger and bigger.

 

 

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