A recent article written by Doug Casey (The Speculator as a Hero), made many cogent points about market myths.
Casey’s best point was "The government itself will eventually be replaced and currency will become worthless. And
there’s no way to truly protect against the risks of war, theft, fraud, and natural disaster. Investing for income—especially
in today’s climate, when cracks can be seen in the foundations of society itself—is the height of stupidity."
Doug Casey’s article is the inspiration of this article!
MARKET MYTHS!
Taking the risk of alienating some readers, I must first invoke the words of a master speculator.
"In the long run .... we are all dead." - John Maynard Keynes.
Keynes brilliant record as an investor is demonstrated by the publicly available data of a fund he managed on behalf of King's
College, Cambridge.
"From 1928 to 1945, despite taking a massive hit during the Stock Market Crash of 1929, Keynes' fund produced a very strong
average increase of 13.2% compared with the general market in the United Kingdom declining by an average 0.5% per annum.
The approach generally adopted by Keynes with his investments he summarized accordingly:
1. A careful selection of a few investments having regard to their cheapness in relation to their probable actual and potential
intrinsic value over a period of years ahead and in relation to alternative investments at the time;
2. A steadfast holding of these fairly large units through thick and thin, perhaps for several years, until either they
have fulfilled their promise or it is evident that they were purchases on a mistake, and;
3. A balanced investment position, i.e, a variety of risks in spite of individual holdings being large, and if possible
opposed risks (e.g. a holding of gold shares among other equities, since they are likely to move in opposite directions
when there are general fluctuations).
Keynes argued that "It is a mistake to think one limits one's risks by spreading too much between enterprises about which
one knows little and has no reason for special confidence ... One's knowledge and experience are definitely limited and there
are seldom more than two or three enterprises at any given time in which I personally feel myself to put full confidence."
"Keynes' advice on speculation, some might say, is timeless:
- (Investment is) intolerably boring and over-exacting to any one who is entirely exempt from the gambling instinct; whilst
he who has it must pay to this propensity the appropriate toll.
When reviewing an important early work on equities investments, Keynes argued that "Well-managed industrial companies do
not, as a rule, distribute to the shareholders the whole of their earned profits. In good years, if not in all years, they
retain a part of their profits and put them back in the business. Thus there is an element of compound interest operating
in favor of a sound industrial investment."
Therefore, according to the speculator who prospered through the Crash of 1929, there is no long run payoff in economics!
A bemusing observation when one looks at Keynes long term track record! Business cycles virtually guarantee that you must
lose, given the passage of enough time. Adam Smith talked about the "invisible hand", because Adam Smith understood the Great Wheel of Time. The laws of supply and demand, inter spiced with discontinuities from technological breakthroughs, wars, and natural disasters,
virtually guarantee that no one technique can be successfully applied consistently.
We usually assume that governments can mitigate and defeat the changes in economics The politicians, and their mandarins (the bureaucrats and intellectuals), constantly propagandize their citizens with this deception!
There is no greater lie in existence!
All governments have defaulted on their debts (promises and or obligations). There is not one exception in history. It’s
merely a question of time, because time guarantees that the politicians will pledge your children’s lives, and economic
freedom, to the current greedy mob! They always have, and they always will. This occurs whether the government survives or
not. It should be obvious that all governments eventually fail, or we would still be paying taxes to a Roman Emperor.
For those "innocents" who believe that the government has the power of immortality, please remember that Rome was the most
powerful empire in history. Where are they now?Empty rhetoric does not impress the Great Wheel of Time! The British Empire’s bluff was called by first called by New England colonies, and later by Gandhi. The last big bad
gas bag to pop was the USSR!
The bigger the collective mass, the sooner the funeral will occur. We have all agreed that the majority will must be served,
will be your response! Yes, they must be served, but who are they? Certainly not the man in the street! Edward Bernays proved long ago that the majority of the people are just creations of the media. They believe and act just the way they are
programmed by the pictures they see, and the words they hear from television, movies, and schools. Edward Bernays singlehandedly created your reality, or your world.
"The opinion of 10,000 men is of no value if none of them know anything about the subject." -- Marcus Aurelius
Doug Casey asks the question, "Why haven't any of the great millionaires of the past taken
advantage of the simple gimmick of compound interest to eventually take over the world? (If the Indians had invested their
$26 for the sale of Manhattan for a 5% compounded return, their money would be worth $2,790,729,193 today). It isn't because
they haven't tried, I'm sure. It's because no investment will give you a true 5 percent for even the length of a lifetime.
In fact, there's probably nothing that can be relied upon to yield even 3 percent over more than forty or fifty years. You
might comment, "What difference does that make? I'm not going to be here that long." But it does make a difference, because
it shows the futility of trying to stay ahead in any type of "secure" investment. Everything is a speculation, whether people
know it or not; those who settle for a low but "secure" return are penny-wise and pound-foolish in the most profound sense.
When you settle for a "conservative" return, even the slightest miscalculation, bad luck, or government fiat can wipe you
out. Taxes will always erode your capital, directly or indirectly. Inflation, for the foreseeable future, is sure to get worse
and fluctuate wildly as it does. Banks and insurance companies—the very institutions that have always gotten away with
offering low yields because they were so stable—will fail as they always have... especially given the current overvaluation
of most U.S. real estate and the underlying loans that are looking increasingly shaky.
The government itself will eventually be replaced and currency will become worthless. And there's no way to truly protect
against the risks of war, theft, fraud, and natural disaster. Investing for income—especially in today's climate, when
cracks can be seen in the foundations of society itself—is the height of stupidity.
If you invest for income, you're handing over responsibility for your future to others. You don't know what they're doing
with your money, you can't know how intelligently they're going to conduct themselves in the future, and you don't even really
know how sound their capital position is. That's a bad enough set of fundamentals for a madcap gamble, but in return for a
simple yield, it's absurd.
What, then, to do? What is the method to overcome this madness? The only answer I know of is to lay a solid financial foundation,
and then gather up your cash and your courage and learn the art of speculation. "
Those seeking to learn more about the tools of sound speculating will find the following site:
https://onlypill.tripod.com/toolsofthetrade
Doug Casey asks the right question, and then gives the correct answer! What is his secret? Doug Casey lives
in reality, and he knows better than to believe in the promises of mental defectives. Should you feel that this is too negative
an answer, remember that a promise is only as good as the promisor's ability to deliver the goods. Promising to deliver the
other guy’s goods to your voters works only as long as the victims tolerate this fraud!
Some will argue that this will go on until there is a bloody revolution. They would be wrong!
The only thing that has to occur is for the productive sector to scale back, and just produce for their own needs. The
"surplus" that is being stolen to give to the "voters" automatically disappears, and the voters will then destroy their elected
thugs! "Who Is John Galt?" is the speech that gives the solution. This is probably the most powerful rebuttal to the collective maw ever written!
Sir John Marks Templeton speaks on the cause of coming renunciation of all the promises!
KANGAS: Ok, but the gold stocks have been surging. Does this indicate trouble down the line? And wouldn’t they
make good investments, or do you think that that bull market is over for gold?
TEMPLETON: No one ever knows when the market’s over, but the great boom in gold is more
than half over. Let’s put it more broadly, Paul, that all currencies – not only the American dollar but all currencies
– always go down, mainly because of democracy. The voters will vote for the person who is going to spend too much, and
so you have to expect all currencies to go down. And just recently, America has started to spend too much, and the currency
has already gone down a lot. But other nations now realize that, and they don’t want to lose out to America, so they
let their money go down too.
One of the best investors in the world has spoken! Sir John Marks Templeton knows that you are going to default on all
your obligations.
I’ll bet that Sir Alan Greenspan agrees with Sir John Marks Templeton! Your money and your investments have no positive
long run!
DECEPTIONS!
For the purposes of this article, we define deceptions as those weapons of mass financial destruction utilized against
you by financial marketing. Their high priest, Edward Bernays, developed most of the psychological techniques that Madison Avenue utilizes to condition you. Think of your television as
a remote "Skinners Box". Movies, print media, and mandatory public school "conditioning" complete the box. Illusions, appeal to emotion, and Non sequiturs are the tactics that make marketing the bete noire of society!
As a pre-response to those who will allege that I’m overstating my case, I present the actual words of Bernays below:
Bernays (assistant to William Paley, head of CBS): Those who manipulate the organized habits and opinions of the masses
constitute an invisible government which is the true ruling power of our country....we are dominated by a relatively small
number of persons....as civilization has become more complex....the technical means have been invented and developed by which
opinion may be regimented....I must lead the people. Am I not their servant?
. . .The invisible government tends to be concentrated in the hands of the few because of the expense of manipulating the
social machinery which controls the opinions and habits of the masses.
. . .It is not generally realized to what extent the words and actions of our most influential public men are dictated
by shrewd persons operating behind the scenes.
- Edward L. Bernays, PROPAGANDA
Bernays thinks! Therefore, you believe that you are!
Stocks, bonds, and futures are considered intangibles. Intangibles are an abstraction for most people.
Because there is little or no knowledge of the subject in the potential investor’s background, the dream merchants
(Bernaysian wannabes) invoke images of wealth, success, and group approval when selling intangible. You buy this. You get
rich. No problem. See your local broker now!
A classic example of financial marketing was the E.F. Hutton commercial of the 1980s.
"Well, my broker is EF Hutton, and EF Hutton says
" (silence fills the room)
"When
E. F. Hutton talks, people listen."
[Note: The E.F. Hutton brokerage firm is now defunct. The firm pled guilty to several thousand counts
of mail and wire fraud in a check-kiting scheme. Read: Sudden Death: The Rise and Fall of E.F. Hutton by Mark
Stevens (1989)]
Smith Barney had a great run with the slogan We make money the old fashioned way.
"We earn it" (John Houseman - spokesman).
Just what "we earn it" has to do with doing business with Smith Barney was never explained. One was supposed to
assume that doing business with Merrill Lynch was not earning it!
Lest you believe that only the retail public is subjected to this subconscious manipulation, we must go back the Junk Bond
debacle of the 1980s, compliments of Michael Milken, and Drexel Burnham Lambert, Inc., the leading purveyor of high yield junk bonds at the time.
"
Drexel's 40-year-old senior executive vice president, Michael Milkin, was the undisputed junk bond wizard. A Phi Beta Kappa graduate of Berkeley and the Wharton School of Business,
Milkin's personal wealth was estimated to be around $1 billion. He made Drexel the foremost purveyor of junk bonds. Operating
out of swank offices on Beverly Hills' Rodeo Drive, and handling as many as 500 phone calls a day at his X-shaped desk, Milkin
became a principal target of the SEC's insider-trading probe thanks to Boesky's cooperation with the investigation. In September
1988 the SEC filed a 184-page complaint against Drexel. Manhattan's U.S. District Attorney Rudy Guliani hit Drexel and Milkin
with racketeering charges under the 1970 RICO (Racketeer Influenced and Corrupt Organizations) statute. On December 21, Drexel
pled guilty to six felony counts of mail, wire and securities fraud, paid a $650 million settlement fee, and fired Michael
Milkin. The cases against Drexel and its young junk bond king revolved around charges that secret arrangements were made with
Boesky and others to defraud Drexel's clients. Two months later, in Wall Street's biggest criminal prosecution ever, 98 indictments
of fraud and racketeering were brought against Milkin. On April 14, 1990 Milkin was sentenced to ten years in jail and agreed
to pay $600 million in fines."
The funniest part of this fraud is that it was worked on Harvard, Wharton, and MIT MBAs who were "professional money managers".
Yes, the mutual funds, and pension funds, went for this scam hook, line, and sinker! They should be complimented on doing
one thing right. They had the good sense to confine the losses to everybody else’s money
Long Term Capital Management is one of the more recent debacles that caught the elite money managers! Remember that
these money mangers were the creme de la creme of the system, complete with two Nobel laureates (prize winners)! The best and the brighest strike again. Robert Mcnamara and the Whiz Kids gave us Vietnam. LTCM gave us a bond market debacle so devastating that Alan and his merry
Band of Federal Reservists came to the rescue, bailing out the entire Western world’s financial system. Alan
was later knighted by the Queen of England. Sir Alan Greenspan took his place beside Sir Ronald Reagan, and Sir George Bush Sr. America is being taken over by the Tories.
The real question is "Can we afford more of the System’s best?"
Let us not forget the Baring Bank Fiasco!
"The collapse of Britain's Barings Bank
in February 1995 is perhaps the quintessential tale of financial risk management gone
wrong. The failure was completely unexpected. Over a course of days, the bank went from apparent strength to bankruptcy. Barings
was Britain's oldest merchant bank. It had financed the Napoleonic wars, the Louisiana purchase, and the Erie Canal. Barings
was the Queen's bank. What really grabbed the world's attention was the fact that the failure was caused by the actions of
a single trader based at a small office in Singapore."
SUMMARY
The evidence is overwhelming that successful investing is a little more difficult that sending your money to a money manager,
or listening to a broker.
Even a seasoned pro like Jim Rogers has found himself entangled in the current debacle at Refco.
All the Kings Horses, and all the Kings men,
can’t make another Keynes again!
Times are hard for everybody these days!
The Charge of the Individual Investor! copyright by WNK 2005
PhDs to the left, MBAs to the right, the Queen’s banks at your rear, and the parasites tax collectors in the front!
.... Onward rode the mighty individual investor, forcing the brokers to run in the night!
What can one do to protect oneself in this financial freak show? Who is one supposed to believe? What is one supposed to
believe? What must one know?
I must again quote Doug Casey. "If
you invest for income, you're handing over responsibility for your future to others. You don't know what they're doing with
your money, you can't know how intelligently they're going to conduct themselves in the future, and you don't even really
know how sound their capital position is. That's a bad enough set of fundamentals for a madcap gamble, but in return for a
simple yield, it's absurd.
What, then, to do? What is the method to overcome this madness? The only answer I know of is to lay a solid financial foundation,
and then gather up your cash and your courage and learn the art of speculation. "
Learn the market skills that have lasted through the centuries. Read the classic books on markets and speculation. Always
read the books written before the 1940s, as that is when modern marketing (Bernays’s spin) began it’s subtle manipulations.
You want to read what was written by successful people who spoke in plain language, without resort to meaningless statistics,
and history defying premises.
Reject all techniques that cannot be verified over long periods of history. Remember curve fitters will always find a short
period of time when any and all premises were valid But of what use are these techniques to the investor? Curve fitting was
the trick that caused the Junk Bond debacle of the 1980’s. Market conditions will change, and you (the investor) will
be stuck with the losses. Computer models wiped out Long Term Capital Management in spite of their Nobel prize winning geniuses
overseeing this debacle. This suggests that we must look elsewhere for the answer.
Suggested Reading
Reminiscences of a Stock Operator by Edwin Lefvre
Forty-Five Years in Wall Street by W. D. Gann
New Stock Trend Detector by: Gann, W. D.
How to Make Profits Trading Commodities by W D Gann
Extraordinary Popular Delusions & the Madness of Crowds by Charles Mackay
The Crowd, Study of Popular Mind by Gustave le Bon
A site with articles to assist you in your quest for financial freedom can be found at:
https://onlypill.tripod.com/toolsofthetrade/
Articles discussing the facts that the brokers and the media hide from you can be found at
https://onlypill.tripod.com/factsthebrokersandfinancialreporterswonttellyou/
The truth is free! But will you listen to it is the question?
These books are not to read casually, but to be studied, understood, and absorbed into your subconscious mind. This will
purge most of the Bernaysian subliminal programming from your investment decisions! Lefvre, Mackay and Gustave le Bon are
the antidotes for the programming. Gann will teach you some basic concepts that are battle proven. Gann also documents how
Wall Street (Sons of Bernays) uses the media to take your money! Lefrve, and Ed Seykota confirm this observation..
Enjoy the reading, and Good Hunting when you have learned.
So many sheep, so few
wolves!
"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway." by
Warren Buffett
Wayne N. Krautkramer onlypill@cox.net
https://onlypill.tripod.com/factsthebrokersandfinancialreporterswonttellyou/
