Trust is Why I Don’t Write About Economics Anymore

There are only two ways to be perceived as credible. To be credible or to say something that is perceived as going against your own self-interest.

I have been asked on numerous occasions lately (it’s the party season I guess) what I think about the economy, Europe, the Markets, investment opportunities and why I hardly write about it any more on SearchAmelia. Truly and honestly, it’s because I’m finding out as I turn the years, that there is truth to the expression: the more I learn, the less I know.

To be more specific, I still believe that general wisdom teaches me that no solutions have been applied to the current economic state of affairs and the only thing that is happening, is that financial and political powers that be continue to hang dollar printed wallpaper over the problems. We have seen 15 Summits in Europe since the Eurozone crisis began. And the result? Just more volatility. This week’s stock market jump I can as easily contribute to pre-Christmas eggnog abuse, as to consumers getting afraid that the money is soon going to inflate to nothing, now that the Feds are printing money again. Hence, the record sales volumes achieved over Black Friday and Cyber Monday.

Stock Market? I have always called it a sentimental reflection of a casino economy with very little insight into macro economics and directed by rogue traders and high speed computers. If you know how it works, give it a shot. If not, stay away; aside from the occasional lucky shot, you’ll lose your retirement. And if you don’t know enough about its mechanics and you have to work with a commissioned broker, the issue of TRUST should be etched in your forehead. Especially with a reminder that your broker only makes money if you trade, because if you don’t, he may not be able to cover his mortgage or car payment.
And while you’re at it, you should also extend this courtesy to your coin dealer, mutual fund sales person or every talking head on the networks and cable channels, who claim to have your prosperity and pension at heart, while working for the financial firms on Wall Street.

10 Years after Enron’s Demise

Trust is something hard fought over a long period of time and therefore subject to occasional re-alignment of forces. This week it was 10 years ago that Enron blew up in our face. At the time and in the aftermath I spent many hours studying what was at the time the biggest bankruptcy in the history of the US and I knew the company’s collapse was a canary in the coal mine, on many different levels actually.

I studied the Rise and Fall of Enron quite intensely, because I was already on the Internet very early on (1993), one field that Enron had clearly embraced and pioneered when it launched the first web based global transaction system ‘EnronOnline’ in late November of 1999. The power of this trading system, which was designed by John Siepiersky, an acquaintance of mine from the old days in Europe, facilitated it to trade as much as $6 billion in transactions a day. Obviously the system was proprietary, which means only Enron transactions took place, which was a clear and present danger to some commodity trading features, historically being the backbone of Wall Street.  Enron had in the timespan of less than a decade grown into the 7th largest (stockmarket cap) company in the US, constantly commended and awarded for its vision and values by every publication and TV show in the country and beyond. Enron was also way ahead of competition in technologies such as video streaming, on demand video, video conferencing and cloud computing, all recently introduced services, and long before tech sweethearts like Google, Apple and Facebook became household words.
That had caught my attention on the company in the first place. I watched the video Enron’s top executives made in 1998, with Ken Lay and Jeffrey Skillings exposing Enron’s Values and Vision by stating that “cutting corners was not allowed to happen at Enron.” Ken Lay even added: “Enron is a company that deals with everyone with absolute integrity, we play by all the rules.”

Life is about TRUST

It was all about TRUST. And like I said before, TRUST takes time. And in today’s economy I often find myself not trusting my own motives as they are influenced (as with anyone) by knowledge, likes and dislikes. I do believe that Enron’s top was earnest in their beliefs as I do believe that there are honest politicians, whose integrity warrants our trust, at least when they start out. But I also believe that we should re-visit our motives for trusting and distrusting regularly, because people and circumstances change when anger, power and ambition become part of an arsenal of weapons to manipulate public trust.

But Enron’s sudden collapse taught me that none of this matters in the bigger scheme of things. Enron was caught in time, because the company was too far ahead of the risk curve when the Internet boom collapsed, followed by the events around 911. Banks and investors shied away, and as a result of published opinion, the first model of the 21th century template company blew up in our face. We had not invented the term “too big to fail” yet and when the nation’s eyes and ears were focused on the calamities of 911 and long range B1 bombers dropping Big Bertha’s on Afghanistan, we were all looking for villains to punish and condemn. If Enron had been able to hold on for another 2 years, when money became so accessible and cheap that the company would have attracted every greedy speculator in the world, it would have covered its risky speculations in no time flat and by the time that the Federales started bailing out banks, car manufacturers and other “essential” companies in late 2008, ENRON would most likely have been “too big to fail” as well. Instead, the Federals called for blood in the aftermath of its Chapter 11 filing in December of 2001, just 3 months after the 911 Atrocities and facilitated by the ensuing passing of the 911 USA Patriot – Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism – Act five weeks earlier, ENRON turned from a Darling of American Entrepreneurship into a Villain of epic Proportions. It became the first victim of the law that changed everything the USA stood for. And that in itself ties TRUST to TIMING, which is the second canary in the proverbial coal mine.

Introduction of The USA Patriot Act

Most Americans never bothered to read or understand this piece of legislation, trusting that their government would do the right thing in the face of the World Trade Center attacks. Most people also never realized that this piece of legislation included such diverse acts as the  Electronic Communications Privacy Act – Computer Fraud and Abuse Act – Foreign Intelligence Surveillance Act – Family Educational Rights and Privacy Act – Money Laundering Control Act – Bank Secrecy Act – Right to Financial Privacy Act – Fair Credit Reporting Act – Immigration and Nationality Act – Victims of Crime Act of 1984 – Telemarketing and Consumer Fraud and Abuse Prevention Act.

It made the Wars in Iraq and Afghanistan possible, it made it possible for Obama to take military action against Libya without even considering asking Congress. It made many of us lose TRUST in anything from businesses to investing, to personal relationships and even ourselves on occasion. And in the bigger scale of things we have lost TRUST in our values, as media and government keeps insisting, that they have our best interest at heart. And to be honest I see far too many people who seem to have mastered the art of lying to themselves by interpreting things they know to be true, as something entirely different. And… they always use the justification that some news anchor or politician said so. To people who question for example the inflation issue and fear, I have a different set of measuring sticks. I don’t drive much anymore, as I prefer my bicycle to get around our flat island. So gasoline prices only rarely come up on my radar and seem to be quite stable for now. But I go to the supermarket and I notice that my favorite 11 grain bread is now $3.59 from $2.79 only 6 months ago and my staple Yoghurt moved from $2.29 to $3.29 in the same 6 months. Those are facts I trust; much contrary to a TV anchor or politician telling me that inflation is only 3%.

I’m not trying to create a knee jerk reaction, here other than to suggest you step back once in a while and check your assumptions, and not to be so quick to trust even your own eyes or interpretation of events. In other words, make a deliberate attempt to look at both sides of a story.

Trust comes from Longterm Credibility

One of the other reasons I do not write much about the markets anymore is because I’ve been in marketing and advertising all my life and operated the trust and credibility issue very hands on. Trust is built on credibility over a long period of time. BUT, there are only two ways that a person can be perceived as credible. The first is to just be credible, but the second is rather devious – it is to say something that is perceived as going against your own self-interest.

Obviously the first one does not need any explanation, but the second way is much more subtle. And people throughout the centuries have fallen for it. You’ll be the judge on for example a very successful broker working the crowds, using phrases such as, “You probably don’t want to open an account with me, I’m far too speculative for you.” Rest assured that by the time he’s done with his self-deprecating spiel, people can’t wait to throw money at him. The often heard expression, ‘he is so good he can sell Ice to an Eskimo’ is an expression that underscores that perceptions and assumptions are very dangerous behaviors to act upon. An Eskimo doesn’t need ice!

Politicians act much the same and I have learned that understanding the nature of government requires us all to be very skeptical. Is the government credible? Can I trust my government? Should you trust your government? Remember what former President Bill Clinton said on national TV about his relationship with Monica Lewinski? If not then refresh your memory. And I actually liked that guy!

The Cost of Democracy

I followed the local elections for city commissioners a couple of weeks ago, as everyone seemed to be excited that a pitiful 25% of the electorate came out to vote and I wonder if people realize how important the topic of trust is with regard to government. Almost everything we do and decide for our companies, our families and ourselves on a daily basis emanate from government.

For example if Washington says inflation is running at less than 3% and will remain contained forever. Do you trust that data? If so, then buying precious metals may not be the best move right now. If German Chancelor Merkel and French President Sarkozy act as if they have a solution to what ails Europe, do you trust that they do, or trust that their solution – which does nothing to address the piled-up sovereign debt – will be effective? If Bernanke says he will print money until the economy has turned around and the bail outs were too little if anything, do you trust that your retirement is safe and your children will have a fair chance of ‘prosperity’ in their lives? On Friday the Government’s Bureau of Labor Statistics (BLS) said that unemployment had fallen to 8.6%. Do you trust them to tell the truth? And if you don’t, do you care enough to study the issue?

I do, you see. I also study history and human behavior and I have learned that a misplaced trust in government usually has far more dire consequences than just robbing you of your retirement. It involves intangibles such as freedom of speech and the right to pursue happiness. I’m seriously worried for this country as it slides with growing speed into the abyss of a police state. I am worried about America’s reaction to pepper spraying a group of peaceful students with words like “Much ado about nothing, because pepper spray is a food product?!? But most of all I am worried about House and Senate passing a bill that gives the US Military the right to pick up and detain anyone they may think to be a terrorist- which of course is a very broad term- and detain that person without trial indefinitely.
And don’t make the mistake to think that this applies to aliens, illegal or not. This applies to American Citizens.

I live on one of the sweetest, most peaceful and beautiful barrier islands anyone can think of, but we are surrounded by less diversified, average red-blooded Americans who do not share my outrage for the very simple reason that their position is: “If you’re doing nothing wrong, then you got nothing to worry about. No big deal, get over it.” And in general terms I do agree with that statement, but history is layered with examples of things that were legal yesterday, but a crime today.
People should consult history books that show how quickly something legal can become illegal, but instead they raise their eyebrows and take another sip.
In the early years of the last century there was nothing wrong with being a Gypsy, Gay or a Jew in Germany. But then one day it became a crime punishable by death. We still have some time here before it gets that bad, but we may want to start taking notice and at least get back into the business of voting for what we stand for.

Obama has pledged to veto the bill in question and I would let him climb a couple of steps on my ladder of trust if he actually will do so, but I’m not holding my breath. After all he showed how much American Citizenship means when he approved the assassination of Anwar al-Awlaki, an American accused of being a terrorist. He may or may not have been, but I simply do not trust the judgment of authorities anymore, the way I used to in a different world. So if Obama doesn’t stick to his promise to Veto this aberration of a law, I guess a major relocation will be in my future.
And just to back up my notes here and show you I’m not unnecessarily paranoid, are a couple of links to the New York Times,  The Washington Times , and Wired in which the writing shows up clearly on the wall.

Trust is closely connected to time and timing

Accepting that I refuse to live my life in fear, even if there are legitimate reasons, I suggest to those who ask me what I think about the economy, Europe, the Markets, investment opportunities and why I hardly write about it any more, to start educating themselves on the variety of topics by starting to question everything and most of all authority. The true nature of today’s stock market for example has very little to do with investing, being driven by high-frequency traders using incredibly sophisticated computers that anticipate what you are going to buy and sell before you do so. Add to that the latest mash-up of financial legislation and whether it might contain within its hundreds of new regulations time bombs that will take the system down.
There are also no political principles left other than retaining power and no limits to the institutionalized manipulations that will be undertaken to keep the house of cards from collapsing until their retirements. But, as our global systems are based on the simple and fragile concept of trust and confidence, we don’t want our leaders and their talking heads to tell us what we can’t and won’t believe. And so in most scenarios, we opt to believe what they tell us, which is garbage.
Just as EVERY empire before us did, we CAN collapse! History has shown that when great nations mature and over-extend themselves, they revert to the paths of least resistance: borrow and/or print money and suppress the popular voice. They all did it and they all failed; this time will be no different and the telltale signs are there.

So if in our lifetime there has ever been a time to remember what it means to be self-sufficient, to do the hard work required to trust your own judgment when it comes to the important matters of your money, your family and your future, then this is it. Having a solid foundation of personally verified knowledge to inform your decisions, will make the difference between winning and losing.
I have been saying it for the better part of 6 years now, and frankly that’s why I prefer to write about inspiring thoughts and developments these days, about things that bring passion and excellence to the human race as part of us progresses.

Next year is a major election year, with stakes that go far beyond the garbage we see on TV. Yesterday Herman Cain decided that he lost the trust of the electorate and threw in the towel (suspended his campaign???), while come back artist Gingrich accepted a debate invitation from spotlight hoarder the Donald. I sincerely hope for once that the American people get a better selection of Presidential candidates for next year’s elections, because what’s available now, makes me long for a parliamentary democracy with a monarch as figurehead.