This "Memo" of an AI-Created "Ghost Economy" Ignited a Savage Sell-Off

The Clint Eastwood flick Heartbreak Ridge is one of my favorites — a fun flick … with a powerful message.

Eastwood plays U.S. Marine Gunnery Sgt. Thomas “Gunny” Highway, a Medal of Honor winner stuck with a misfit platoon as he careens headlong toward retirement.

It’s a ragtag group:

• A grifting, wannabe rock-n-roller named “Stitch” Jones (played by Mario Van Peebles).

• A young father who’s working a (verboten) part-time job to support his new bride and newborn baby.

• A hulking giant named “Swede” who spends more time in the brig than his bunk.

• And his nominal superior officer 1^st Lt. Ring, a bespectacled, “revenge-of-the-nerds-type” who lacks coordination — both physically and as a leader.

Gunny Highway understands this is his “last dance.” He also knows that his unit’s commanding officer, a pompous major, sees him as an anachronism, and wants to drum him out of the service.

So Highway resorts to unorthodox methods — and even his fists — to build esprit de corps, to turn his motley crew into real U.S. Marines … and to keep them alive.

(In one total reg-breaking move, Gunny live-fires a Soviet AK-47 over and around his unit, intoning: “This is the AK-47 assault rifle, the preferred weapon of your enemy … and it makes a distinctive sound when fired at you … so remember it.”)

What Gunny’s really doing is teaching resolve. The image above comes from a scene where he first shares the key message: “You’re Marines now … you improvise … you adapt … you overcome. Surrender is not in our creed. Oorah.”

It’s great advice — advice that, it turns out, he needs to use himself.

Gunny won the Congressional Medal of Honor — America’s top award for duty and bravery — in a Korean War battle known as “Heartbreak Ridge.” The duty and codes he lived by are being forgotten. He fully understands that the end is coming (career-wise, that is). And he truly wants back with his ex-wife, a woman he realizes he still needs to have a life after “The Corps.”

In short, Sgt Gunny Highway (himself) needs to improvise … to adapt … to overcome.

And something I saw this week reinforces that Wealth Builder investors like you and me must keep that lesson in mind, as well.

I’m talking about a dystopian AI scenario released on Substack earlier this week by Citrini Research Founder James van Geelen and colleague Alap Shah of Lotus Technology Management.

If you didn’t read it, you need to.

Taken at face value, it was absolutely terrifying.

And investors definitely took it at face value: It triggered a global selloff in stocks … across an array of sectors. And, coming as it did after weeks of fretting about AI valuations, the potential for technology leapfrogging and the massive capital investments that seem to be rolling along, it’s causing aftershocks that are continuing to hit us.

Titled “The 2028 Global Intelligence Crisis,” the research paper was really a “what if?” (hypothetical) memo that imagines a world where AI worked “too well.”

It’s datelined June 30, 2028. The S&P 500 is down 38% from its October 2026 peak. U.S. unemployment has zoomed to 10% — after AI scythes through America’s white-collar “knowledge workers.” Folks don’t have money to spend, so consumer spending plunges — a frightful prospect in an economy that’s 70% consumer-driven.

And (as their narrative went) we face a ruinous kind of “creative destruction” — where some business models totally break down. Take intermediation, the companies that play the “middlemen” between buyers and sellers, and who collect fees for putting the two sides together.

I’m talking about:

• Payment Processors — like Visa V 0.00%↑ and Mastercard MA 0.00%↑, firms that collect interchange fees.

• Delivery Platforms — like DoorDash DASH 0.00%↑, which takes a cut from the restaurant/customer connection.

• Software Platforms — like ServiceNow NOW 0.00%↑ or software-as-a-service (SaaS) firms that have “per-seat” pricing arrangements for their wares.

• Or Banks — which take in your money as deposits and lend that money out at higher rates.

With AI, searching, matching, processing, routing, verifying, coding and decision making can be automated, potentially eradicating the need for these other players.

That little memo gave birth to an “AI Scare Trade.” IBM Corp. IBM 0.00%↑ shares plunged 13.1%, the biggest one-day drop in a quarter century. DoorDash (which was specifically mentioned) fell 7%. Accenture PLC ACN 0.00%↑ dropped 6.58%.

And there were plenty of others.

The “Doom Loop”

Remember, a company’s stock price today is the net-present value (NPV) of how much business that company will do “tomorrow.”

So sell-offs like this are SWAG (scientific, wild-a**-guess) responses to bad news.

But the “Citrini Scenario” is actually much, much uglier — creating a kind of “doom loop” that would crater the economic and financial systems as we know them.

I’m talking about a process in which:

• AI tools lead to massive productivity gains.

• So companies target one of their biggest costs — people – and slash their workforces.

• With those cost cuts, expenses go down so corporate profits go up — initially.

• But out-of-work Americans have no money — so they cut spending.

• Spending cuts eventually lead to “top-line” (revenue) squeezes as companies start selling less of what they make or offer.

• Revenue is the “raw material” of profits, so if the top line falls, the bottom line eventually gets squeezed, too.

• If sales and profits fall, stock prices crater, too.

• As I know from my business reporting days, when a company’s share price falls, the top execs respond — usually by cutting costs.

• The easiest cost cuts are workers — meaning new rounds of layoffs come along.

• Now more folks are unemployed, so the jobless rate skyrockets.

• There’s more competition for fewer jobs, making it a “seller’s market” (advantage: employers), which puts the squeeze on wages.

• Lower income means there’s less money to tax. Taxes are the No. 1 revenue source for the federal, state and local governments. So tax revenue falls.

• Lower tax revenue = lower service levels, leading to drops in public safety, road construction and maintenance, schools, water-and-sewer systems.

• Or (as an option), governments raise taxes — which takes money out of the economy by taking cash out of our pockets.

• Consumption falls further.

• And then it starts all over again.

The scenario I’m talking about here is “disinflation.”

• Productivity surges, but consumer demand collapses.

• Jobs disappear.

• Wages fall.

• Money flows into AI data centers and energy infrastructure – and away from the consumer markets.

• Money velocity falls.

• Many markets contract.

• Asset prices (like stocks) fall.

• The U.S. dollar collapses as a means of exchange – and “real assets” (like silver and gold) gain even more prominence as stores of value and means of exchange.

Welcome to the “Ghost Economy?”

You’ve all heard of a “computer loop” — where a PC, mainframe or supercomputer is programmed to repeat a set of instructions, until a condition is met or something changes?

With the “Citrini Scenario”, we’re talking about a “Doom Loop” — where a bad situation feeds on itself, keeps getting worse over time and creates a downward spiral that’s super tough to arrest.

Think of it like this:

Problem A causes Problem B → Problem B makes Problem A even worse → the cycle repeats.

This leads to “Ghost GDP” — where AI boosts (traditionally measured) productivity. But machines don’t buy cheeseburgers, or coffee, or baseball cards, or SUVs. So those productivity gains don’t circulate through the greater economy.

To be clear, I’m not criticizing Citrini Research — or the work the guys there did. They were creative. They did some deep thinking. They wanted to provoke thought and discussion. And they truly positioned their “memo” as a “scenario,” not a “prediction.” They said they didn’t anticipate the blitz that resulted.

The blowback — in hindsight — is understandable, since that memo:

• Was vivid.

• Was detailed.

• Named specific companies and how they’d get tripped up.

• And voiced fears traders already had — but hadn’t yet priced in.

It also spawned lots of discussion.

For instance: If this is really gonna happen, what should we do?

What Comes Next

Here at Stock Picker’s Corner (SPC), we’ve been talking with you about some of these growing pitfalls. About the risks to the “American Dream.” About the risks to the economy.

And I’ve been talking with folks in my “Platinum Rolodex” — the network of experts I’ve built over my 40-year career.

Citrini’s Alap Shah proposed an “AI Tax” — one that’s based on AI-driven gains — as a means of cushioning job losses and maintaining economic stability.

Several of my colleagues see a “Future America” where there’s “Universal Basic Income” — where every adult gets a monthly check from the government … no strings attached.

Think of it as survival bucks — not luxury money.

I have to say that, as a guy who believes in fair-and-free markets, I hate this idea. It goes against the American innovative spirit – something that shows up strongly (repeatedly) throughout our history.

✔️We wanted independence — so we fought a war against the British.

✔️We wanted to be bigger and stronger — so we bought Louisiana and Alaska.

✔️Everyday folks wanted a shot at the big prize — so they went to California to try their luck searching for gold.

✔️And entrepreneurs keep creating new things — new products, new technologies, new ideas, new companies.

We value self-reliance. We value independence. And we believe that, if you want to better yourself, you can work harder, smarter and longer than the “other guy” — and get rewarded for it.

Here’s something else: So-called “command economies” — places like the Cold War Soviet Union, where everybody gets the same thing — have been proven (time and again) to not work.

If UBI happens, it’s not for a long time — probably not until long after I’m gone.

(If you really want to get extreme here — since we’ve been talking about movies — how about some combination of Logan’s Run (1976) and Soylent Green (1973)? The first one is about a future society where everyone lives a hedonistic life but that life ends at 30. In the second — set in 2022, believe it or not — a dying planet leads to massive food shortages. The solution is “Soylent Green,” a nutritious “wafer” that’s made out of … well, you have to watch it.)

Another colleague — a former Wall Streeter who sees it all through an institutional lens — said that a good way to play this is to “go short” on endangered companies. Both now (as the knee-jerk panic continues) and in the long run (as endangered sectors write their own epitaphs).

That’s not an answer for everyday investors. There’s too much risk.

And, in the long run, I see another trap. If you do win with a “big short,” what happens when it comes time to convert those winnings into greenbacks? Will the dollar no longer be a safe place to store money?

I know what you’re thinking at this point: Okay, Bill, so now that you’ve graced us with this knowledge, what do we do with it?

And I’ll bet you already know the answer …

“We’re Wealth Builders … we improvise … we adapt … we overcome. Surrender is not in our creed.”

We’re on top of this. We are here to help you. It’s what we do here …

There are moves to make … now … today — to get ready for whatever may come.

We’ll talk more about this soon …

Oorah …

You can read the Citrini report here.