a new logic of responsible investing

Who do you identify as the person most interested in the results that you produce?

 
a) you                         b)  anyone else besides you    
 
 
What people would the most interested (besides you) in the results that you produce?
 
a) people who know that they always directly benefit or suffer from the results you produce (perhaps even in partnership with you)
 
b) people who know that they might or might not indirectly experience  some benefit or cost from the results you produce 
 
c) anyone else
 
 
So, when someone else has a share in your results, we can sometimes measure the fraction of their interest. For married couples who legally share all assets and revenues, they share the results totally- up to a 100% interest. In other cases, may they have an evenly split interest, like split in to two halves or in to four quarters. In contrast, in the case of huge business, a single share of stock ownership may be worth only a very tiny fraction of the total ownership of the business.
 
We are in the midst of an extreme historical development. Huge numbers of people have invested in the financial operations of a huge number of companies, typically with almost no understanding of the actual operations and finances of the companies in which they buy thousands of dollars of shares of ownership (especially when indirectly buying through “mutual funds‘). 
 
Merrill Lynch & Co.

Merrill Lynch & Co. (Photo credit: Wikipedia)

 
Consider the case of a prominent company filing bankruptcy, like K-Mart and Merrill Lynch did a few years ago. What portion of the people invested in those companies were aware of the horrible financial situations of those companies the minute before they found out about the bankruptcy filing? What portion were surprised? Anyone who was surprised obviously did not already know about the financial trouble that the company was in. 
 
Note that filing bankruptcy does not make a financial situation worse than it already was the minute before filing. Filing bankruptcy merely invokes the protections of a court in regard to preventing certain involuntary transactions like garnishments, foreclosures, and levies. Bankruptcy merely reduces the burden of debt. Filing bankruptcy (at least filing a “chapter 11” corporate bankruptcy) is typically an improvement in the financial situation of a company.
#8531 bankruptcy notice

#8531 bankruptcy notice (Photo credit: Nemo’s great uncle)

 
Wouldn’t the financial situation of a company be of particular interest to someone who has put 10% or 20% of their retirement investments in to a single company? How is it that so many people pay so little attention to the financial situations of the companies that they invest in… such that they would be at all surprised when a company that they invest in files for bankruptcy protection. Did they not care enough about the results of their own investing methods to do a little research and learn how much financial stability  a company has? Or would they not be able to understand a typical corporate financial summary? If not, should they really be investing at all? That is like gambling not only without knowing the odds of winning or losing, but not even knowing that there is such a things as odds!
 
These people investing in mutual funds and stock shares are partial owners of those companies. Yet they are so unaware of the finances of the businesses that they are surprised to find out about an update that is not more like prior reports. It like going around driving without learning first that traffic signals can change from green to red. That could be a problem!
 
 
Consider another example. If your neighbor and three other people were in business together, but over time the entire operation was facing a huge debt burden and so the other partners were exploring bankruptcy, wouldn’t you expect your neighbor to have had SOME idea that the business was in financial trouble BEFORE they heard the word bankruptcy? What about if they were shocked to find that the business in which they were a 25% owner had already filed bankruptcy because the other three participants had the power to file bankruptcy without your neighbor? What if your neighbor was actually completely surprised that the company (in which they are 25% owner) was even in any financial trouble at all?
 
That lack of attentiveness is about how detached most stock market investors are from the simple and obvious reality of the businesses in which they have purchased shares of ownership interest. But even though they may choose to invest without being familiar with the business, there is also the issue of their following the guidance of people with a vested conflict of interest with them: sales people.
 
 
When a realtor shows you some real estate to buy (and they make a percentage off of the sale), then they have a vested interest in you buying, but without any contractual investment in your future results. They work for commissions, right? They do not have any shared interest with the buyer. 
 
Can you imagine a realtor saying to an eager buyer “you know, maybe you should consider something quite a bit cheaper” or how about “I really do not recommend that you buy real estate at all. Have you thought about renting?” That would be very strange. That is not their job, right? Their only job is to produce commissions. Discouraging exuberrant spending of borrowed money would be as much against the interest of realtors as it would be for mortgage brokers, right?
 
 
How about this? If an insurance broker tells you that an annuity investment is safe, are they even competent to have made that determination from their personal analysis of all relevant factors? They work for commissions, right? When insurance companies make so much money off of an annuity contract that they give huge bonuses to brokers for selling that specific investment, that may suggest that the contract is not a good bargain for you. 
 
Insurance companies are legally-protected ponzi schemes. They need new premium revenues to cover the immense promises that they make. If they do not have enough new premiums to cover the old promises (less whatever reserve assets that they have available, then they will go bankrupt like recently happened with AIG.
 
Annuity contracts have guarantees though. Let’s look closely at the value of those guarantees.
 
That means that if the insurance company cannot afford to keep a particular promise (like if the promise was too good to be true from the beginning), then you are legally entitled to sue them. Keep in mind that you and thousands of other people all suing them is not going to make them suddenly able to afford to keep the promise (which was unrealistic from the beginning). If they file for bankruptcy protection from you (to prevent you from getting all of what they owe you), then note again that they actually improve their already weak financial situation upon the moment of filing bankruptcy.
 
 
Now, here is another kind of business operation that is like a legally-protected ponzi scheme: governments. They make promises (in the form of government bonds, for instance) and then they bill the taxpayers (by writing “bills” and then approving some of them for execution).
 
Who has a direct interest in governments borrowing a lot of money? The people who have money to lend to those governments! Many lenders strongly prefer lending to a business that the lender believes has the military resources (and political capacity)  to extract wealth by force from the underwriters of that government (the taxpayers).
 
Another group that is interested in government spending is the companies who sell things to governments, like military subcontractors. (Most homeowners just do not need an attack helicopter or a submarine with nuclear missiles, right?) When those lenders and those subcontractors get together to pour millions of dollars in to lobbying governments, consider that they are very deliberate about their investing strategy.
 
So, how can governments raise revenues? They can raise taxes, criminalize more things and then collect more fines, or collect more fees for things like license plates for a vehicle or a required annual inspection for a building.
 
If any of this is at all a shock to anyone, that might be a bit surprising. Isn’t all of this quite obvious?
 
Don’t we all already know that governments regularly makes promises beyond their existing capacity to fulfill? Don’t we all know that they need regular streams of wealth to come in so that they can continue to enter new unfunded liabilities (and to redistribute wealth toward the privileged subcontractors that spend millions of dollars for lobbying to remain the recipients of those huge government expenditures)?
 
But why don’t the media and public schools tell us more about this? (Could they be influenced by the same commercial interests that influence all of the rest of government?)
Why do the media and public schools distract us and hypnotize us with programs of programming that program us to be reliable, quiet taxpayers? Could it be that the public schools and media are specifically designed to produce quiet, reliable human resources (especially “good” taxpayers)?
 
Why would any of that be at all surprising? The system is specifically designed to do whatever it is doing. Propaganda that tells the masses “the system should not be how it is” is just more diversion. Consider that the system should produce that propaganda because it is specifically designed to produce exactly the propaganda that it actually produces, just like it is designed to produce all of the other outcomes that it actually produces, such as entering huge debts to fund military subcontractors. That is the specific design of governments which is why that is what governments actually do.
 
 
But, technically, governments are not ponzi schemes, at least not to the general public. Ponzi schemes imply a real intention to keep benefiting all participants for as long as possible. People who lend money to governments may look at governments as ponzi schemes, since governments are making tangible specific promises to the lenders who lend money to governments by “buying bonds” (transferring money to a government with a promise of a specified interest rate over a specific period of time as well as a return of the entire principal of the loan).
 
In contrast, governments do not actually have any practical obligation to the masses of their citizens or to anyone else. Governments only have a practical obligation to their lenders (at least to the extent that their lenders are politically capable of the military violence required to interfere with the operations of those governments).
Further, another group with very high concentrations of interest in the continuing operations of governments are the military subcontractors.  In contrast, imagine a person who is owed $5,000 or perhaps a total of $500,000 by a government and notice that such a person just does not have much interest in the day-to-day operations of that government (or not much interest relative to contractors who make net profits of $5,000,000 per day from government contracts).
 
United States Secretary of the Air Force

United States Secretary of the Air Force (Photo credit: Wikipedia)

 
So, what group has been the primary beneficiary of governments worldwide for the last several hundred years? In Europe, the various kings were crowned by the local agents of the pope in rituals called coronations. 
 
The kings swore oaths in these rituals to be faithful agents of the pope and then the kings faithfully set aside portions of the proceeds of their ongoing operations of forced collection of wealth and then paid those specific portions to their superior, the archbishop (for further transfer to the pope and the Vatican treasury). Note that in 1302, the pope explicitly claimed (in a document published in Latin) to be the ruler over all other rulers, or what is sometimes called the “king of kings.” In other public documents, various popes have claimed authority over the material wealth of the entire planet as well as granted the right of various European agents of the Vatican to conduct military crusades for the purpose of collecting treasures, controlling real estate, and either enslaving or exterminating heretics, pagans, indigenous populations, and so on.
 
 Note that even if there were no public documents issuing specific commands to conquer and enslave the entire world, the history is clear enough. Even if there were no primary hub of imperialism, the historical fact of imperialism and colonization is obvious. Most North Americans have high portions of genetic ancestry from other continents. The same is true in Australia and of course in “Latin” America, where latinos and latinas may not actually be fluent in the Latin language, but their ruling priests have been. 
 
Some of the groups who used Latin words in their court-room rituals also use Spanish, and some use English, and others Portuguese or Dutch or German or French or even Russian. All of those court rituals of all of those branch cultures derive from the single trunk of Rome, and many court buildings (and banks) also have the Roman columns to identify the buildings as sacred temples of the Holy Roman Empire.
 
 
Now, you may notice that I have not offered any words of condemnation or terror about the system which has been evolving for at least several hundred years. What interest would I have in condemning it? I say beware of those who condemn it. Beware of those who claim to be against it. Are they really so against the banks and the courts and the systems of currency invented by the court systems when dictating to the public which form of payment will be sacred within that court jurisdiction and be accepted by the ruling priests in their black robes, such as gold? 
 
There are of course tribes who do not participate in the Holy Empire and who do not use court-approved currencies. However, courts dictate which form of payment will be accepted in the payment of mandatory taxes and if the courts happen to select the use of a mineral like gold or silver right after the Vatican secures exclusive access to all relevant mines through their military branches, is that evil or genius or evil genius or what? 
 
It is predictable. It is “good business.” In fact, it is very good business.
 
 
So, I do not set myself against them. I recognize that I have been participating in that system already and I plan to continue to do so tomorrow. 
 
However, with my clarity for how economics works, and my clarity for what stocks are (shares of ownership interest) and what stock markets are (tools for the disproportionate redistribution of wealth), I have an offer you. I may be willing to partner with you in regard to my insight and your investment capital. 
 
By partner, I do not mean that I have something to sell you on which I will earn commissions. I am an analyst, forecaster, and trader. I can trade investments for you for a share of the profits.
 
As a note, I published forecasts (which you are welcome to read) of the major developments of recent years, such as the fall rise of fuel prices in the US and Europe, the decline of real estate borrowing in the US and Europe, the decline of prices of real estate itself, of the housing sector of the US stock market (starting in 2005), as well as of other sectors sensitive to real estate such as mortgage lenders (like FNMA, FDMC, etc) and the financial sector in general, and then the overall stock markets of the US (and Europe). I understood in advance why those behavioral trends and prices would change. I understood at the time why they were changing. I understand now how they are extremely like to proceed.
 
However, obviously I did not tell you the detail of all of that, (which is not my interest because I value the outcome of you hiring me, not you learning all that I know and then working without me). Of course most of the basics are already public anyway from my 2003 and 2004 publications, but I find that most people seem to me to lack intellectual precision- without falling in to terrified emotional argumentativeness-  such that they apparently fail to recognize what I find rather obvious. Briefly, the most predictable factors that led to the economic changes of recent years were that the baby boomers began to retire (which was about as predictable as anything could be) and that global fuel prices reversed the trend of the 20th century in 1999 (which had been a long term decline in inflation-adjusted fuel prices) and began a predictable rise (I believe that first prediction in that realm was in the 1950s by a geologist in the US named Hubbard). 
 
So, here, instead of focus on the logic of the forecasts, I simply demonstrated my dispassionate analytical ability to you in my comments about other subjects. I will briefly review them now as my concluding remarks.
 
Yes, the Vatican is the source of many geopolitical trends of the last several hundred years. Yes, governments are fundamentally extortion operations (but they do not like competition, so quite predictably they criminalize unauthorized extortion operations). Yes, insurance companies are all ponzi schemes (and annuity contracts not only sound too good to be true, but in fact are just that- far too optimistic to be realistic, thus leading to things like the bankruptcy of AIG). Also, when a company files bankruptcy, that usually represents an improvement in their financial situation, not a decline. 
 
However, last but not least, most people are so naive and irresponsible in their investment choices that not only are they surprised by occasional bankruptcy filings (rather than having done diligent research and recognized which companies were closest to bankruptcy), but then they cover the shame of their naivete by blaming various politicians (or whoever the media trains them to blame). But I am sure that everything will be fine for them as long as they just keep the same investing methods that they just realized are horribly disappointing and, while continuing to use the disappointing investing methods, they focus instead on reforming the system in the right way and electing the right politicians and generally doing everything except altering their perspectives, their actual financial choices, and their actual financial results. After all, if they were to enter a partnership with someone who is competent to make reliable forecasts and has a vested interest in promoting extraordinarily favorable results in which they will share a portion, then that could reduce the commissions of insurance annuity sales people and, as someone once said to me, “well I like him so much though, so I will stay with my old investment advisor and his old methods, even though his advice has been a disaster for my finances and he has no logical explanation for why it might eventually be in my own interest to continue to leave my investments where he gets a nice residual income just from me being invested in that contract or fund.” 
 
Yes, the masses are just plain terrified. That is what the system is designed to do and it does it so well that the masses are even terrified of admitting that they are terrified (or that they even could be terrified- instead they fiercely and desperately and hysterically argue against the possibility that they might have ever been naive- so of course they stay invested in extremely disappointing methods and target some villain as the cause of a disappointment that is obviously temporary and could not be at all related to the actual prudence and wisdom of their investment choices). No, the results of anyone’s own choices is just some politician’s fault, or the fault of some advisor, or some commission-earning salesperson.
So, that’s why most of the masses are going to keep investing in the people that they blame. Not very logical, is it? But, in a way, it is extremely predictable, isn’t it?
 
 
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