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.
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.
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.
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.
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.
The post This Logic Trap Destroys Countries and Harms Investors appeared first on Stock Investor.recession pandemic nasdaq stocks fed federal reserve
Lilly’s diabetes and obesity leader to retire in broader leadership shuffle
As Eli Lilly anticipates an FDA weight-loss approval for its in-demand diabetes drug Mounjaro by year’s end, the drugmaker’s leader of those two areas…
As Eli Lilly anticipates an FDA weight-loss approval for its in-demand diabetes drug Mounjaro by year’s end, the drugmaker’s leader of those two areas will retire and be replaced by its immunology head.
Mike Mason, president of Lilly Diabetes and Obesity, will depart at the end of December after a 34-year career at the Indianapolis-based Big Pharma, per a Wednesday morning announcement. Lilly USA president and immunology president Patrik Jonsson, another three-decade veteran of the company, will take Mason’s place on Jan. 1.
Meanwhile, one of the drugmaker’s key decision makers is being handed additional duties. Science chief Daniel Skovronsky, who joined in 2010 via Lilly’s acquisition of his company Avid Radiopharmaceuticals, will take over Jonsson’s immunology role, which entails overseeing commercial and Phase III medicines in dermatology, gastroenterology and rheumatology. The company has received two complete response letters from the FDA in this area in 2023: the eczema drug lebrikizumab and ulcerative colitis drug mirikizumab. Both cited manufacturing issues as the reason.
And the C-suite will gain a chief medical officer as David Hyman expands his remit from a focus on oncology by way of Lilly’s $8 billion acquisition of Loxo Oncology in 2019. Chief consumer experience officer Jennifer Oleksiw will become global chief customer officer. The company also recruited Mark Genovese from an SVP role at Gilead Sciences to become its SVP of immunology development. Lilly’s EVP of corporate affairs and communications, Leigh Ann Pusey, is departing at the end of 2023.
“As we embark on this exciting new chapter of growth for our company, I’ve never been more confident about our ability to deliver life-changing medicines to the patients who need them,” Lilly CEO David Ricks said in a statement.fda
EU to assess export controls on AI tech and semiconductor chips
The European Commission outlined four critical technology areas including AI technology and semiconductor chips which on it plans to run assessments to…
The European Commission outlined four critical technology areas including AI technology and semiconductor chips which on it plans to run assessments to consider export controls.
The European Commission is conducting risk assessments and considering export controls on “critical technology areas” including artificial intelligence (AI) and semiconductor technologies, according to an update from the Commission.
On Oct. 3, EU officials said they identified four areas that need assessment regarding technology risk and risk of technology leakage. The four categories include AI, advanced semiconductors technologies, quantum technologies and biotechnologies.
According to the announcement, these technologies were chosen based on their transformative nature, the risk of civil or military fusion and the risk that the technology could be used to violate human rights.
Thierry Breton, the commissioner for the internal market at the EU Commission, called the move an important step for EU “resilience.”
“We need to continuously monitor our critical technologies, assess our risk exposure and – as and when necessary – take measures to preserve our strategic interests and our security.”
He continued to say, “Europe is adapting to the new geopolitical realities, putting an end to the era of naivety and acting as a real geopolitical power.”
The risk assessments will be carried out by the end of the year. Any results or initiatives based on the risk assessments will be presented by spring 2024.
The Commission says the next steps include engaging with its 27 Member States to begin collective assessments of the above-mentioned areas.
This development follows a move on June 20, when the EU Commission enacted the Joint Communication on European Economic Security Strategy, which was a multi-pillared initiative that included “protection against risks” and promoting European competitiveness in specific markets.
The United States has also been focusing efforts on assessing export risks of its own technology in similar sectors. Particularly, it has banned the export of high-level AI semiconductor chips to China.
Many lawmakers in the U.S. have also supported legislation that would mandate companies to report investments in Chinese technologies.
The decisions on this matter stemming from the U.S. have sparked countries overseas to consider their own course of action in regard to AI technologies.blockchain
Recession Warning! Four Key Triggers Are All In-Play Right Now
Recession Warning! Four Key Triggers Are All In-Play Right Now
Authored by Michael Maharrey via SchiffGold.com,
We keep hearing about a “soft…
We keep hearing about a “soft landing.” According to government officials, central bankers, and mainstream financial media pundits, the US economy has dodged a recession.
So why are recession warning signs still flashing?
Most major financial institutions and high-profile economists have abandoned or significantly downgraded their recession projections. Those that still still forecast an economic downturn predict it will be short and shallow.
For instance, during the last FOMC meeting, the Federal Reserve upped its economic forecast, characterizing economic activity as “expanding at a solid pace.” It increased its GDP projection for 2023 to 2.1%, more than double its 1% projection in June. Fed economists do expect growth to slow to 1.5% next year, but any talk of a recession is completely out of the discussion.
But one major financial institution still sees a recession in America’s future - Deutsche Bank.
The German bank was the first major financial institution to project a recession in the US, and it’s sticking to its guns.
Deutsche Bank isn’t just making a calculated guess. It has solid data to back up its projection. The bank’s head of global economics and thematic research Jim Reid and a team of economists recently analyzed 34 US economic downturns dating back to 1854 and identified four macroeconomic “triggers” common to past recessions.
Bad news — all four are flashing red.
In its analysis, the Deutsche Bank team calculated the percentage of times these four events led to a recession. They call this the “hit ratio.” Based on their analysis, they determined that no single trigger can predict a recession. Nevertheless, all four of the triggers most commonly associated with US recessions are in play now.
Reid cautioned that it’s impossible to accurately predict every recession using macro triggers.
But it’s fair to say that the most significant ones [triggers] have been breached this cycle and that the US tends to be more sensitive to these historically.”
The Four Triggers
Following are the four triggers identified by the Deutsche Bank team and their hit rates.
An Inflation Spike (77%) — There’s no question that this trigger is in play. Price inflation soared to a four-decade high in the summer of 2022. While it has cooled in recent months, the CPI began creeping up again in July and continued to rise in August.
Reid said the US economy “seems to have the most sensitivity to inflationary spikes.” Since 1854, a 3% rise in price inflation over a 24-month period caused a recession within three years 77% of the time.
Note that there can be a significant lag in time between the initial inflation shock and the recession.
And while price inflation might be down, it isn’t out. During a recent podcast, Peter Schiff said, “It’s obvious to anybody who opens their eyes that inflation is not topped out and coming down. It’s bottom out and going up. And the people who are blind to this, who are asleep, they are in for a rude awakening.”
An Inverted Yield Curve (74%) —Typically, longer-term bonds offer higher yields than short-term bonds. A 10-year Treasury generally features a lower yield than a 30-year. This is because investors typically factor in more risk on a longer-term loan. When this flips and short-term bonds start yielding more than long-term bonds, it’s called a yield curve inversion.
The US Treasury yield curve has been inverted since July 2022.
Yield curve inversions have preceded a recession 74% of the time since 1854. If you consider a more modern period since 1953, the hit rate increases to 79.9%.
A Rapid Rise in Interest Rates (69%) — To fight price inflation, the Federal Reserve has hiked rates by more than 5% in just 18 months.
Since 1854, a 2.5% increase in short-term interest rates over a 24-month period led to a recession 69% of the time. As Reid put it, interest rate hikes haven’t ended well for the economy. He said, “The US seems to have the most sensitivity to interest rates. The US cycle has historically been more boom and bust than others in the G7.”
That’s likely because the US economy runs on borrowing and spending. It can’t function for very long in a high interest rate environment. Schiff summed it up in another podcast.
The economy is built on a foundation of cheap money. It’s not just the economy; it’s every facet of it. The government, the deficits, the government budget is built on cheap money. And it’s not just the federal government that’s been gorging on this cheap money. A lot of the state governments, municipalities — they’ve all issued a tremendous amount of debt over the last 15 years.”
The last time rates were at this level was in 2006. We know how that ended. But there’s a big difference between then and now. There is even more debt in the economy. Consider that in 2006, the national debt pushed above $10 trillion for the first time. Today, it is more than three times that level.
Oil Price Shock (45%) — The price of Brent crude has spiked by about 33% since June. This has thrown cold water on the “disinflation” narrative.
When oil prices have spiked 25% over a 12-month period, the US economy has gone into a recession 45.9% of the time.
As you can see, all four of these triggers are in play today. This is yet another reason to question the mainstream’s sanguine view of the economy.
As Schiff explained, most people in the mainstream don’t seem to grasp the gravity of the situation. They don’t realize that we are at the beginning of the end of this whole phony economy. He said Fed chair Jerome Powell could put off the implosion in the short run by doing something drastic to change the narrative. That would entail at least hinting at interest rate cuts.
Otherwise, this is going to happen. Whether it’s tomorrow, the next day, or the next week is hard to tell. But what seems apparent to me is that we’re about to go over a cliff. I just don’t know how much more distance there is between where we are now and the edge of that cliff. But we’re going there.”
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