October 4, 2006 –
It’s funny because someone wrote to me the other day, “Is your blog an investment blog or political blog?” I just simply replied that he should read the rest of my blog posts to understand that if you don’t understand politics that you will never be a top-tier investor. I’ll explain why in this blog entry.
Case in point. The past couple weeks, the overthrow of a Thai Prime Minister widely viewed as corrupt, the Amaranth hedge fund’s losses of $5 billion in two weeks, and Venezuelan President Hugo Chavez’s comments at the United Nations that “the devil came here yesterday” and “it still smells of sulfur” in reference to U.S. President Bush’s presence overshadowed a remarkable confession by Hungarian Prime Minister Ferenc Gyurcsany. The confession was remarkable not because of what he admitted but because he admitted to lying at all. Most corrupt politicians possess a certain level of arrogance and a God-complex that doesn’t allow them to apologize even in the face of damning evidence. Instead they usually repeatedly lie to cover up past lies, stating that they never said this or that, when you can easily find video and public records that refute their current lies.
When I mentioned that I believed Goldman Sachs had manipulated gas prices to produce a more favorable environment for President Bush for the upcoming elections, someone commented to me, “I don’t believe in conspiracy theories”. Well for the most part, I don’t either. However, because my views are logical deductions drawn from digging well underneath the surface of reported “facts” and thus, often in direct contrast to what the media reports, many people discount them because they like to bask in the comfort zone and “safety” of the major media. Surely if it’s in the papers it must be true. And if it’s not, then it can’t. That’s the “safe” spot for them.
Funny thing is, when the New York Times reported the exact same thing about potential Goldman Sachs interference in the price of gas five days after I did, I would bet the house that that same skeptic embraced that theory because it was now in the major media. And for that reason alone, of course it must be fact! Sad thing is the state of today’s thundering sheep herd is exactly what led to hysteria in the U.S. back in October 30, 1938, from H.G. Well’s radio broadcast of War of the Worlds. The following excerpt was actually reported in the New York Times on October 21, 1938:
“A wave of mass hysteria seized thousands of radio listeners between 8:15 and 9:30 o’clock last night when a broadcast of a dramatization of H. G. Wells’s fantasy, “The War of the Worlds,” led thousands to believe that an interplanetary conflict had started with invading Martians spreading wide death and destruction in New Jersey and New York…Throughout New York families left their homes, some to flee to near-by parks. Thousands of persons called the police, newspapers and radio stations here and in other cities of the United States and Canada seeking advice on protective measures against the raids.”
Non-Americans unfamiliar with this fact probably think that Americans were crazy for believing this back in 1938 but this is the exact same hysteria that I see today when people blindly follow the financial news reported in the major media. Back then, it was on the radio, so it must be true. Blind devotion to anything reported in the media as infallible existed back then and it exists, I would argue, to even a greater degree today. If the New York Times, the London Times, or the New Delhi Times reported tomorrow that the Euro had collapsed and was no longer an accepted currency, people all over the world would panic and try to sell their Euros as quickly as possible without even checking to see if it were true. This I am sure of.
But back to my point. Last week Hungarian PM Gyurcsany admitted lying to his country for at least the past 2 ½ years about the state of national finances just so he could win re-election. He said during this time, “We lied morning, noon, and night” and accomplished “nothing”. Such confessions have triggered two consecutive night of rioting in the Hungarian capital of Budapest. Again, there are a couple of remarkable things about this confession. Number one, it is remarkable how naïve the thundering sheep herd (and this thundering sheep herd is an international community) is. They are easily duped and will only riot after a top official admits to lying for years when all the evidence is there to uncover the lies if they take a couple of hours to dig down the rabbit hole.
In the U.S., a parallel situation exists today. It is evident that the government is massively lying not only about the level of inflation but the level of national debt that exists. Medicare and Social Security have funding deficits and retirees in the future should not be taken aback if all Social Security benefits are permanently suspended. The government just does not have money to fund this program in the future. Yet all is calm on the Western front, though these lies will have a thousand times the impact of the Hungarian PM’s lies on the world economy in the next decade.
The second thing that has been remarkable to me is the unwavering loyalty and staunch defense of political leaders that the average citizen demonstrates upon criticism of their national leader. From where does this 100% illogical pledge of allegiance to world leaders originate? I have seen people become visibly angry, veins popping out of their neck angry, when their national head of state is criticized by another person. Even when the evidence of the political leader’s corruption is overwhelming, people remain staunch defenders. Not only does it not make sense to me, but such blind loyalty is dangerous and will kill, and I mean kill, your ability to be a good investor. If you can’t suspend your feelings of political loyalty long enough to see the truth, then you will make bad investment decisions based upon your belief of your government’s honesty, and fall victim to deservedly poor results.
After all I have painstakingly pointed out on my blog entries in regards to the shams of government, for people that continue to ignore them and lose great amounts of wealth, there is nothing more I can do. Personally, I don’t trust 90% of government statements, regardless of their global origination, and would never make significant investment decisions based upon them.
Even in light of the remarkable “parallel” government in Mexico that is being enacted with the “parallel” President Obrador that many see as a “people’s” President more so than the officially elected Calderon, perhaps Subcomandante Marcos summed up the sad state of global politics the best. While Obrador’s camp is stating that Calderon’s Presidency is illegitimate and vice versa, Marcos stated that the clear differences that Mexicans believe separate the two politicians are fantasy, and that in his mind, both Presidencies are illegitimate because in the end they both serve corporate interests and not the people’s no matter what they publicly say.
As examples of the failure of perhaps even well-intentioned leaders to withstand the capitalistic juggernaut that is the global political machine, U.S President Dwight D. Eisenhower in 1961 stated that his official stance regarding defense spending was that the U.S. should spend “not one penny more” than was absolutely necessary to protect America’s borders. He felt that the runaway military spending that was taking place back then was taking food out of the mouths of poor and shelter away from the homeless. Yet, under his watch, defense spending exploded. Even as President, he was powerless to impose his beliefs.
More recently in Mexico, when ex-President Vicente Fox was elected several years back, I received many e-mails from my friends living in Mexico expressing their excitement about the positive change they hoped President Fox would bring to their country. After all, Fox was the first non-PRI party candidate to be elected President in Mexico in over 70 years. It didn’t take long for that hope to disappear. Just a short time into his Presidency, several of Fox’s key cabinet members resigned, claiming that they no longer recognized Fox as the same man they campaigned for during the elections. In response, Fox replied that, You say one thing when you run for President; You act a different way when you become President.
And, finally in Brazil, in 2002, enormous hope greeted the Presidential election victory of Lulu de Silva, the first working-class citizen that grew up in poverty to be elected President in Brazil’s history. Just four years later, after crumbling promises to the poor and widespread accusations of corruption plaguing Silva’s administration, much of that hope, too, has died. As opposed to his landslide victory in 2002, Lulu is currently involved in a runoff in the October Brazilian Presidential election. In the end, no matter the good intentions of a President or Prime Minister, the corporatocracies always seem to win.
In martial arts, for one to become a superior martial artist there must be harmony between shin (mind), wasa (technique) and tai (body). As a younger martial artist, like most young men, I tended to overcompensate technique with strength. However, as I learned more, despite my strength, I relied more on mind and technique. In reality, a proper mind is the most important of the triumvirate of mind, body, and technique in developing superior martial arts skills. Mike Tyson, at the prime of his boxing career, used to state that he knew that he had won many fights the moment he stepped inside the ring. Why? Because he could see the fear in his opponent’s eyes.
In investing, a sharp mind is the most important to success. Individual investors are bombarded with an enormous amount of deception when confronted with investment decisions. The overwhelming number of global investment houses deceive investors regarding universally accepted but fraudulent investment myths such as efficient markets, the Modern Portfolio Theory of diversification, and so on. Governments all across the world spread deception about their nation’s fiscal strength in the form of “official” federal economic reports. That is why the Kanji that occupies the top banner of our investment blog means “Zen shin”. In investing, without harmony between shin (mind), wasa (investment strategies) and tai (the body of knowledge one uses to make their investment decisions), failure is imminent.
Maholo, KAEHO.
