Now, we’re talking about the backbone of the entire global chip supply chain. Every major chip maker on the planet depends on this one single company. So what happens when an entire country is forced to start liquidating shares of the most important stock in the chip industry? This isn’t hypothetical, right? That’s the math that we’re going to walk through today in this video, because this isn’t really about the Netherlands. It’s not about Dutch politics. This is about a concept that almost nobody’s talking about right now. And once you see it, you’ll never look at your portfolio the same way.

It’s called liquidation contagion. Now, it might be the biggest invisible risk in the markets right now. Now, before we get into the math, I want to zoom out just for a second, because this isn’t new. When growth slows and debt rises, governments are always going to do the same thing every time they turn inward. They look at domestic capital and they say, hmm, we need that. Now, France tried a wealth tax, capital fled, right? They actually lost revenue on this. We saw Cyprus, they seized bank deposits overnight. No warning, they just took the money. This is the pattern, right? The Netherlands, they’re not inventing anything new here.

They’re just applying the same logic to public markets in a way that nobody has really stress tested. But look, forget the politics. Let’s take a look at the data here, because the math is where it gets ugly. And here’s what caught me off guard about this. You see, the math shows that the people who get hurt the worst by this might not even live in the Netherlands. They might not even know that they’re exposed to this. Okay, so look, imagine a stock, let’s say that there’s only 10 holders to the stock. Now, each one owns a single share worth, let’s call it $1,000.

Now, the total market cap would then be $10,000. Now, let’s say that all 10 holders are Dutch. Here we are, tax day hits, and the Netherlands says that you owe 36% on your unrealized gains. So now what happens? Well, every holder now owes $360. They didn’t sell anything, but it doesn’t matter, right? The bill is due. So what happens? Well, holder number one, they go to the market and they sell their share, right? They get 1000 bucks. They pay the 360 in tax. They keep 640. Not ideal, but, you know, he’s fine. He’s out. He made 640.

But here’s the thing. That sell just added selling pressure to the stock. So then the price drops. Holder number two comes in. They sell at 960. They pay the same 360, but they keep 600. A little worse, still not too bad. But then holder three goes, sells at maybe 900, pays 360, keeps 540. And you can start to see the pattern here, right? Every sell pushes the price down further. But here’s the thing. The tax bill doesn’t move. That number, it was locked in at the top of the market before anybody started selling. So by the time half the cap table has sold, the price, it’s already in freefall.

And I mean like 60% of the float getting dumped. I mean, that’s not just a pullback, right? This is a liquidation event. And this is where the whole thing starts to break. You see, by holder number seven, by now the price, it’s collapsed down to say $200 a share. So he sells, gets 200, but the problem is he still owes 360. Now he’s $160 in debt on a gain that doesn’t even exist anymore. Think about that. He didn’t make a bad trade. He didn’t time the market wrong. He didn’t panic sell at the bottom. The government taxed him on a number.

But the problem is the number disappeared. And now he owes money that he doesn’t have. Now, by the time we get to holder number eight, nine, ten, I mean, they’re even worse off. By the time they get to sell, the price might be $100. It might be less. So even if they sell everything, it still doesn’t even cover the tax bill that they owe. And this isn’t a market correction. This is a debt spiral on phantom gains. Now the tax itself is what created this. But now here’s where this matters to you, no matter where you live.

Now, you don’t have to be Dutch. You don’t have to be Dutch for this to destroy your wealth. So let’s go back to the stock, right? Ten holders, all Dutch. But now let’s add an 11th holder. Maybe you, an American. Maybe you’re sitting in Texas. You’re sitting in Florida, wherever, right? And you didn’t get taxed. You didn’t sell a single share. You did absolutely nothing wrong. But those 10 Dutch holders over there, they just dumped their positions in a cascading forced liquidation. And the price, it went from a thousand to a hundred. So now your position just lost 90% of its value, but not because of earnings, not because of anything that the company did, but because someone else’s government forced the liquidation cascade on the same asset that you own.

And that is what we call a liquidation contagion. Now the tax is not contained to the people who pay it. It bleeds out into every single holder on the cap table. And now think back to what I said right at the beginning of this video. The stock most held by Dutch citizens is ASML. And that stock is sitting inside retirement accounts, inside index funds, inside institutional portfolios all over the world. So this isn’t just a Dutch problem anymore, right? This is a global portfolio problem. And right now, nobody’s even looking at this or pricing it in.

Okay, so now at this point, you might be thinking, okay, so I mean, this sounds bad, right? For everybody. It’s just a bad system across the board. But it’s not. And honestly, this is the part that should really bother you because there’s a rule buried inside the Dutch tax code that almost nobody outside the tax law even knows about. Now, if you own 5% or more of a company, you’re what’s called a substantial interest holder. Now, if you’re a substantial interest holder, a little bit of a tongue tie there, you get taxed on realization, meaning you’re not affected by this law, right? You choose when to sell.

You’re in control of the timing. But if you’re a minority holder, though, you’re just, you know, you’re a regular investor, someone with a brokerage account, maybe you’re buying shares, well, you get taxed annually. You get taxed on unrealized gains. You have no choice and no control. So think about what that means. The people who control companies, the owners, they’re insulated from everything that we just talked about. They pick when they sell. They never get caught in the cascade. But the people who are just trying to participate in the market, they’re fully exposed every single year, right? And that’s not a bug.

That is the design. But here’s where it gets even worse, because a wealth tax. At the end of the day, it’s a tax on optionality. And the people who have the most optionality, they don’t fight the tax. They don’t lobby against it. They don’t write angry letters about it. They just leave. And that doesn’t require anything complicated. All that requires is a plane ticket, an accountant, you know, maybe a second passport. The founders, they relocate. The family offices, they restructure offshore. The capital quietly redomisiles to a friendlier jurisdiction. And so who’s left behind? Well, everyone who couldn’t leave.

The middle class investor with a brokerage account and no exit plan, right? The person who’s just trying to build some wealth on the side. They’re the ones who have to absorb the full weight of this system. Now, the people who left, I mean, they didn’t just take their money. They took the future tax base with them. They took hiring, they took company formation, institutional energy, all the stuff that actually builds an economy over time. So what are you left with? Well, you end up with ownership concentrating even further at the top. Greater income inequality, control premiums going up, small investors getting forced out of compounding because every year, they have to sell a piece of their position just to cover a tax bill on gains they never took.

Participation in wealth building assets becomes way harder, structurally harder, right? For the exact people, the system claims to be helping out. And look, this isn’t just a Dutch thing. The list of jurisdictions thinking about this, it’s growing every single day. And the incentive is pretty clear when you see it. Don’t be a minority holder, right? Don’t be a minority holder in a jurisdiction that taxes unrealized gains. Of course, if you can leave, then leave early because the longer you wait, the more you’re subsidizing the exit of everyone who moves faster than you do. This might sound bleak.

And this is the part of the video where probably most channels like this would tell you to panic, right? They tell you to move your money. They tell you buy gold or whatever. But I’m going to tell you something more useful for you because what we just walked through, it’s not random. It’s not bad luck. It’s not even bad policy in isolation. You see, it’s the predictable outcome of a system that was never designed for you. And I want to explain what I mean by that because in my experience, there’s really two types of people operating in financial markets today.

There’s consumers and there’s owners. Now, the system treats them completely differently. A consumer, they invest a little bit on the side, right? Maybe they buy some index funds, they pick a couple stocks. They’re participating in the market, which is great, right? We want that. But that’s what they’ve been told to do. They’ve been told to save, invest, let it compound over time. But under a system like this, that person is now exposed to mark-to-market taxation. So every single year, the government looks at their portfolio and says, what’s it worth today? Great. Give me a percentage. Figure it out.

I don’t know. Sell whatever you have to. And so now that person, they can’t compound. They can’t hold through any volatility, any drawdowns. They can’t wait for the recovery on the other side. They can’t think in five or 10 year time horizons because every 12 months, the clock resets and they’re forced to realize whether they want to or not. And when you do that to one person, it’s annoying. But when you do that across the entire investor class, when you shorten everyone’s time horizon by force, you actually change how markets function. You have less long-term capital, more short-term selling pressure.

You have thinner participation. You have higher volatility. And over time, you have slower capital formation. Now, this is how markets structurally weaken. You shrink the pool of patient money and the whole system gets more fragile, right? So that’s the consumer side. Now, let’s look at the other side of the table here, the owner. Now, an owner operates completely differently. An owner controls when they realize gains. They don’t sell because a calendar tells them to, they sell when it makes sense for them to sell. An owner chooses the jurisdiction their assets live in. If the rules change in one place, they move calmly, quietly before it becomes a problem.

An owner builds legal structure around their holdings. They build trusts, holding companies, tax-efficient vehicles. Not to cheat the system, they design around the system. And most importantly, an owner compounds uninterrupted, right? Year after year, year after year, no foreselling, no annual reset, just growth on top of growth on top of growth. Now, that gap between the consumer who’s getting clipped every 12 months and the owner who’s compounding untouched, that gap doesn’t shrink over time. It continues to widen over and over and over dramatically. So when I say the system isn’t built for participants, it’s built for owners.

I’m not complaining. I’m not saying it’s unfair, right? I’m not saying someone should fix it. I’m just giving you the diagnosis. And again, once you see it, once you really understand how the game is structured, then you can stop playing the wrong game entirely. You can start positioning yourself on the right side of that structure because that’s the real choice that you have here, right? It’s not which stock to buy. It’s which game are you choosing to play? All right, so let’s bring this together here. Before you watch the video, you probably thought about risk the way that most people think about risk, right? Like volatility, the price going up and down, right? I have red days and green days.

Maybe there’s a bad earnings report or a Fed announcement that moves the market. And look, I mean, that stuff matters, right? I’m not saying it doesn’t. But now you understand something that most investors, right? Even a lot of professional ones, they never stop to think about. Risk isn’t just what happens to the price. Risk is structure. Risk is jurisdiction. Risk is who else is on the cap table with me. And what their governments could force them to do with their shares. And that changes everything about how you evaluate a position, right? Because it’s not enough just to ask, is this a good company? Is this a good price? Now we have to ask, who else holds this? And more importantly, where do they live? What happens to my position if their government decides to reach into their portfolio? Right? That’s a question almost nobody’s asking right now.

But after today, you should. Because the bigger picture here, what we’re watching right now in real time, is jurisdiction splitting into two species. On one side, you’ve got what I’d call builder magnets, right? These are countries and states with clear rules. They have a predictable tax treatment. Governments that are actively competing to attract capital, talent, and founders, right? They understand that the game has changed. But on the other side, you’ve got… redistribution regimes. We have rising exit rates, shrinking tax bases, governments that are trying to squeeze more out of the people who are still there. Because the people who could leave, they already left.

Now the Netherlands, look, no disrespect to the Netherlands for the Dutch people, right? I mean, they basically invented modern capitalism. They founded New Amsterdam, which became New York. I mean, my entire father’s side of the family is Dutch, right? But the math doesn’t care about history. And right now, the math is pushing them toward the wrong side of that line. And they’re not alone. This is happening across Western Europe, parts of Canada, blue states in the US and California, right? It’s a pattern. And once you see it as a pattern, you can’t unsee it. Because today, capital is mobile, right? It moves at the speed of wire transfers.

But states are still pretending it’s captive, still pretending they can tax it, restrict it, penalize it, and it’ll just sit there and take it. And it’s that gap. That gap between how fast capital can move, and how slow governments are to realize it. That’s where the next decade of wealth creation and wealth destruction is going to play out. So the question that you should be asking yourself right now, after watching this video, isn’t what should I buy? It’s where do my assets sit? Who else is sitting next to me on the cap table? And am I on the right side of this split? Because you don’t just choose assets, you choose the rules those assets live under.

Now, most people, they spend all their time trying to pick the right investment, the right stock, the right entry point. But sophisticated investors, they evaluate systems. They look at structure first, the jurisdiction, the incentive design. And then they build their portfolio inside the system that’s working in their favor, not against them. Now, that’s the difference. And that’s what separates people who build wealth from people who just participate and hope for the best. So if you want to understand how owners actually think about this, how they structure around jurisdiction and timing, and compounding without interruption, that’s exactly what we break down inside the wealth operating system.

I’ll put a link in the description. And if this video made you think differently about your portfolio, do me a favor, share it with someone who needs to hear it, because this stuff matters, and not enough people are talking about it. Alright, I’ll see you on the next one. [tr:trw].

See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.