Saturday, July 26, 2014

Radically Conformist


I'm not sure which I find more distasteful: the mindless corruption of the dominant socio-economic paradigm that drinks the blood of war to feed its supremacy and energy addiction or the post-modern counter-culture movements which predictably and futilely enter into utopian impulses engaging the utilities of the very systems they revile.  And my generalized contempt is predicated on a simple observation that seems to be neglected in the inertia of conformity as much as it's unconsidered by those who advocate for change.  Namely, the foundation of a system determines what can be built upon it and if you don't consider the foundation, you cannot credibly advocate for anything other than fa├žade alterations.

In its present understanding, our economic system is inextricably an agency of war.  And by this, I don't mean low-grade animosity with occasional flare-ups.  I mean good old fashion murder, rape, pillage and plunder.  As far back as our revisionist modern histories take us, the utility of exchange for commerce has been predicated upon imperial conquest pure and simple.  And conquest - the indenture and enslavement of land and peoples - has never been done without the shedding of blood.  From the point of the spear to the white phosphorus hell fire chemical atrocities in Palestine today, we do not have a social narrative devoid of sociopathic foundations.  Today's Christian church doesn't exist but for the Edict of Milan and the 325 Council of Nicea paid for, and built upon the solidus - a gold coin minted by the converted emperor to control inflation across the empire.  Take away the coin of the realm and we'd still be celebrating Celtic and Norse feasts.  Faith didn't win - the compensated sword did.  We don't have bank notes or reserve banks but for the conflict justified as the purge of the infidels (both sides called each other that despite sharing the same God).  Land, life, and limb were sacrificed upon the altar of war consecrated by the forced tithe of the faithful - in both commodity and currency.  And while one can reasonably argue that the Japanese and Chinese feudal trade societies were not as persistently violent on a macro scale, the violent suppression endemic within social hierarchy had every bit of tyranny as did their European counterparts. 

Broken promises, hollow treaties, and violent extermination and dislocation are etched into the fabric of the great "experiment" known as the United States and Canada.  And, as if our Founders' tyranny wasn't sufficient, now that we know that the appalling lands that we used to extinguish the cultures who once stewarded the forests and plains are laden with gas and oil, we suddenly now covet the very cursed land to which we condemned these communities and use monetary slight of hand to rob the dispossessed with reckless abandon. 

Recently, several groups have asserted monetary sovereignty based on treaty obligations - many times using International Bills of Exchange or IBOEs - as an alleged basis for alternative monetary power.  Claiming compensation for things as varied as energy and mineral rights to one of the more obscure - compensation for keepers of British Crown lighthouses - those who have been marginalized now seek redress calling for accountability from and recognition by the very powers that enslaved and murdered them.  And countless "alternative" society impulses from the Pacific to Atlantic find themselves lured to contemplate their capacity to become powerful through their enlightened use of these artifacts of war crimes. 

Just to be clear - the U.S., Canada, and the U.K. - never intended to keep promises made to the stewards of the lands they stole anymore than the Catholic Church intended to "save" those cultures who happened to live on gold and silver mines.  The justification for murderous theft is no different today than it was 600 years ago and we still use the coin of the realm to seduce and deprive those who steward what our current system cannot otherwise afford.  An IBOE today is worth the same as the treaty that was first broken at its duplicitous construction.  Expecting accountability from treachery is a fool's errand.

Thoughtful construction of an economic system necessitates a considered discipline that accompanies few social transformation endeavors throughout human history.  There are a few general observations that I've made that may be worth contemplation if we really want to see a More Perfect Union.

1.         Stewards of commodities have been - throughout the whole of modern history - enslaved and impoverished.  Any system that seeks to align humanity with economics must integrate the world of the steward with the world of the consumer such that anonymity of supply chains is explicitly confronted and extinguished.  "Value add" must be transcended by "Values Persisted" in which the wisdom of the land, its peoples, and their values must be explicitly communicated to all subsequent users of commodities. 

2.         Consumption to extinction must be transcended to embrace utilitarian engagement in which our systems don't cul-de-sac in linear supply chains but persist in respiratory pulses.  Is the CO2 you exhale more or less important than the O2 you inhale?  The question is answered by whether you're a tree or a person.  And really the question is answered in the recognition that neither photosynthesis nor phosphorylation can claim preeminence over each other.  Both are woven into a delicate dance of perpetual, generative, motion.

3.         Promissories are only as relevant as the knowledge of the counter-parties of each other.  The average person has no more knowledge of the birth, persistence, or death of currency than they understand quantum physics.  While it is used with profligate abandon, it is not comprehended.  A meaningful economic transformation would involve making and keeping productivity-linked promises where bills of exchange would be for knowable and known goods and services provided by persons of repute and confidence. 

4.         Wealth would be defined by the capacity to access the flow of value across networks rather than the capacity to store and horde. 

If We The People aspire to a system that works for humanity and not for the selective few, it'll take emancipation from the manacles we place on ourselves forged from the utility of war, tyranny, and imperialist expropriation.  If we don't take this first step, we're just conforming to the timeless, futile reflex that has left us precisely where we are.   

Saturday, July 19, 2014

In regione caecorum rex est luscus

I admit it.  This week my ego received a terrible blow.  As is always the case, such wounds are self-inflicted  because the perception of injury can only arise from the a priori notion that one is defined, in part,  by some externality (like the perceptions of others).  I was on a call with a colleague who wanted me to speak with an investment professional because, "you have so much in common."  This colleague has recently seen me as an advisor and has extolled my insight to others as someone "worth listening to."

To say that I shared nothing in common with the person with whom I was introduced would not be appropriate.  As we both have lived in the world of capital markets for much of our professional endeavors, we share a common lexicon.  Words and phrases between us justify the perception that we are similar or "alike".  However, in a few short minutes, I heard this individual promoting investment advice and behavior so entirely antithetical to my values that, for a moment, I was at a loss to know what to do.  Do I create an awkward situation for my colleague and abruptly point out that the dissonance is too great?  Do I accommodate the investment advisor's predatory arrogance and ignore the depth of moral depravity that I'm hearing?  Do I sit and say nothing?

For those of you who know me, you know that the third option doesn't stand a chance.  If I sit and say nothing, someone should check my pulse because I've probably sublimated into pure light and a corpse is all that's left to show for me.  The second possibility is problematic as I'm increasingly concerned with the error in accommodation when the fullness of a message, once delivered, can be assimilated by its audience as a plausible hypothesis - not on its merits but rather because of the contextual unfamiliarity of the hearer.  And, regrettably, the first option affords neither my friend nor his acquaintance the level of respect and decorum with which I choose to enter into communication.  And, seeing no good option, I proceeded to take an introspective view of the situation and there, staring me in the face, was the real paradox.  I am being judged to have valuable insight and experience by a person who does not have the foundation from which to discern the value, or lack thereof, of what I've got to say.  The evidence is in the simile.

It is disheartening to experience the uniform obsession people have with economics on a personal or macro scale when one sees the abject ignorance of the systems upon which economics stand.  Our willingness to allow intercessors to stand between us and our money is only rivaled by our cultural acceptance of consensus illusions about accessing the divine; and then, not by much.  And just because a person uses the same language in no way suggests that they share common values, motivations, or perceptions.  Whether you are an individual investing in a 401(k) - the great tax-deferred illusion that has seduced millions - or a wealth manager or family office; my trouble with 'advisors' is their predictable reflex to view 'safety' and 'risk management' (often pitched as "being conservative") as a justification for herd behavior.  The problem with this is two-fold.  First, herds by definition mean revert.  By this I mean that they collectively act, for the most part, together.  That's kind of the point.  But my bigger objection is that herds attract predators.  And predators have evolved to attack the weak, the young, the desperate, or the feeble.  If you wonder why your investment portfolio is not doing as well as the market, I've got news for you.  It is!  The problem is that you're market exposure is passing through the sticky hands of 'managers' and 'advisors' and they're collecting the return that your money is making.

I recently watched an amazing Planet Earth special on a few lion prides and their hunting behaviors around a watering hole in Africa.  Wildebeest after lumbering wildebeest fell prey to the hungry lions and their training cubs.  Gazelles and other small deer got blind sided by giant paws and teeth as they innocently bent to quench their thirst.  And all the while the monkeys were going nuts trying to scream and warn their quadruped neighbors to look out because there were lions.  The monkeys - none of whom got eaten - provided ample warning and the wildebeests and gazelles grazed on. 

What I realized this week is that I've failed to communicate my true financial insights adequately because I'm too often associated with the pride of predators.  Just because someone has a particular ethnicity, attends the right church, mosque or synagogue, or shows up in a gathering of 'enlightened', and uses the same words I use does not mean that they share my principles and values.

My values are simply articulated (and differentiated):

1.  Value exchange should be linked to productivity and mutual benefit.  Monetary returns that are solely based on manipulations of a market at a micro- or macro level are parasitic and predatory.
2.  Transactions must be done in full transparency when both parties confirm equivalent understanding.  If I'm taking benefit from you based on an incomplete set of information or because I know something that you don't know, that's unethical and unacceptable.
3.  Investments and returns must be understood before they're deployed or redeemed.  If you don't know the reason why there's a gain or loss, it's best not to place the assets you steward into that financial product or venture.
4.  Investment returns must have a basis in real transactions.  Value can be ephemeral but returns should be objective.  When these lines get blurred, someone loses. 
5.  Duration of investment and expected return should be defined and understood.  Nothing grows perpetually.  Nothing operates in perfect linearity.  This is to say that pulses and cycles must be understood so that expectations are appropriately set.
6.  Investing with ethical awareness up front obviates the need for 'charity' and other money-laundering exercises to buy back conscience later.  You can't ring the blood of the miners out of gold no matter how many NGOs receive your generous contributions to end slavery and abuse.  If you're ignorant or morally apathetic with your investment now, there's no "better you" or "better use" that can justify your greed-fueled neglect today.

There's so many more places to go with this but the moral to my story is simple.  I'm not an advisor and I'm going to be more cautious about how I'm promoted by others.  This is, to quote the title of this post - the domain of the blind - and we don't need more kings!  We need to heal the disease that has robbed the land of sight.  The 16th century Erasmus of Rotterdam diagnosed the social disease correctly - he just didn't offer a clear alternative.  But, maybe he was a Cyclops… who knows?

Sunday, July 13, 2014

Too Bad to Be False


Let's say that I'm driving through Chicago late at night and I'm stopped at a traffic light.  A guy steps up to the side of my car, taps on the window and I look to see him pointing a Glock 9mm straight at my head.  He calmly tells me to get out of the car.  Looking around, I see two or three other shadowy figures each with guns drawn and I realize that stepping out is a risky proposition but staying in the car seems unlikely to end well either.  I step out of the car leaving behind my wallet with all my credit cards, my money, and my phone.  In a flash, the guys jump into the car and speed off into the night.  Only then do I look across the street and see a person slumped in the doorway of a convenience store.  He's bleeding but not fatally wounded.  At once I know that I've just provided armed robbers a getaway car and, in all likelihood they'll rob again. 

Pause.  Got the scene?

Let's say that I'm at a country club in Raleigh, NC.  I'm a basketball player with about $20 million in compensation and endorsements.  I've been invited to lunch with a wealth manager who I'm interviewing to be responsible for my investments.  "You really want to protect your hard earned wealth," one of the advisors says, "and we know that you're a responsible, conservative guy.  We think that you should probably put about 30% of your portfolio into fixed income, 25% in growth equities, 15% in value equities, 15% in real estate and the rest we'll put in a cash management account for you."  I don't know the difference between general revenue bonds, corporate high yield, short-term sovereigns.  While I eat my chicken Caesar salad, they don't stop and explain how they came up with the assets or proportional allocations other than to say that the last 5 guys they've worked with have done the same thing.  I wouldn't know the difference between "growth" or "value" anymore than these guys could dunk.  They've got a glossy brochure emblazoned with a logo of a bank that everyone knows.  And at the end of lunch, they tell me that they'll only charge 20 basis points to manage my money.  I've never heard the term 'basis points' but they explain that I'll be charged a fee for them insuring that my money is well-managed.  Sounds fair. 

What's the difference between the Glock and the Glossy?  The perps in the first story got away with $40,000.  The perps in the second story got away $400,000.  Both were opportunistic predators.  Both used fear and ignorance in a strange environment to destabilize good judgment.  Both will go on to rob again.

I met with a number of professional athletes this weekend.  We were engaging in an important conversation regarding financial literacy.  Like the work I do in community education in mining and energy extractive resource regions of the world, I have come to realize that the status quo economic system is incapable of acting in the absence of predation on fear and ignorance.  The wealth advisor in the second scenario and the armed robber in the first are indistinguishable save their - you guessed it - socio-economic status and selection of weapons.  But don't think for a minute that there's one shred of difference in the animating impulse between the two. 

Quick check: what's in your head?  Do you know the clothing each character is wearing?  Do you know their skin color?  Do you know the sound of their voice?  Do you know the scene and who else is around?  Why does this matter?  Just to be clear, the same thieves in the second story pull off the exact same heist with a few of the billionaires I know and it robs the billionaires of tens of millions of dollars that they're told is just the way the fickle market works. 

Now, here comes the tragic part.  We'd probably agree that in the first instance, I wouldn't track down the robbers, give them my cell phone, and tell them that I'm about to come into another few million bucks and that they should call again after I sign my next contract.  The truth is that in the second story - the real one - the player actually receives e-mails loaded with financial terms and jargon rife with phrases like, "you should feel good about how your portfolio is doing."  Once a quarter he gets a statement with pages upon pages of stocks, CUSIP numbers, and monetary amounts with gains and losses blurring down each page.  He's never been told that a geographic overweight to munis is not wise.  He's never been told what a benchmark to the MSCI Global means.  And in the few instances where new opportunities are presented, he's advised that investing in deals outside the careful management selection done by the manager's firm is "too risky" to consider. 

Deepening the tragedy, the fact that every other player in the league - well at least the ones who aren't just blowing their money on cars, women, luxury, and general hedonism - is basically working with the same advisors means that being exposed to the evidence of the theft triggers a remarkable and devastating reaction.  "I should probably set up a call with my investment advisor and see why they're doing this," is a frequent response.  That's right.  Call the thief and see if he'll confess to his crime!  Seriously?!

On more than one occasion I found out that being the bearer of facts and knowledge - both of which could actually emancipate individuals from their predators - is met with skepticism and mistrust.  "You're not asking for anything for this information," I was told with incredulity.  And here comes the kicker.  By the way - this is the reason why this post is a partial response to my dear friends and colleagues in the commercial spirituality and self-help business who are struggling with the monetary exchanges that make them feel uncomfortable and unsavory.  My life choices have been simple (albeit misunderstood). 

1.         If someone or a group of people is being harmed (or is inflicting self-harm), my intervention is not predicated upon a transaction for money.  I have not, nor do I ever intend to profit from interrupting the evil inflicted upon any person or group.  My reasoning is simple.  If you're engaging in a time of real or implied danger, expecting a counterparty to act in a fully informed fashion is impractical if not impossible.  Rational actors don't stay rational when they're in crisis.  I recall the evil of a church group I knew that agreed to build homes for victims of Hurricane Mitch in Honduras only for those who "accepted the Lord."  Blackmailing people into behavior with their own survival is consummate evil.  Charging admission to well-being and wholesome engagement is unjustifiable.

2.         I will not demand value before evidencing the ability to deliver it.  I've seldom encountered a situation in which I cannot provide something: knowledge, experience, resources, connections, etc.  When I choose to engage, I want to know that the counter-party with whom I'm working is fully informed of the expected outcome before I stipulate a value attribution to my involvement.  I can be entirely correct about the quality of an investment, for example, but if my insight cannot be enacted due to a lack of knowledge or an imposed incapacity, that insight is of no value in the impotent environment.

3.         I will not accept any value for investment or compensation unless I know that both the counterparty and I are equally aware of what I propose to do and what the expected outcome should be.  This means that I spend inordinate effort to educate those with whom I engage to make sure that I'm not running the risk of pulling the wool over someone's eyes.  In many instances, this means that I educate a person or group only to find out that they've elected to work with others - at times even expropriating what I've shared to my ultimate economic detriment.  That is a far more acceptable risk than being the perpetrator of abuses of information asymmetry. 

These three simple precepts are directly responsible for my success in my endeavors.  And, for the record, this means that much of my wealth comes in forms not denominated in monetary units.  In fact, it is my desire to never have my net worth more than 16.7% in monetary terms.  (For those of you who are puzzled here, read about Integral Accounting).  At the same time, living by these principles means that most people will chose to discount this alternative and embrace abuse through ignorance, fear, and scarcity because it's a more "understandable" path.

And it's this last point that leads to the title of this piece.  I've been accused of offering investments, corporate models, personal insights, and compassionate engagement that is "too good to be true."  It saddens me every time I see people experience kindness and generosity and then imagine that it must be coming with an ulterior motive leading to its derision and rejection.  This pain has attended most of my life and has been part of many relationships.  But I'll gladly wear this cloak rather than acquiescing to the tyranny of using my intellect, access, and experience to become another predator.  Whether it's a wealth manager in North Carolina, a thug with a Glock, a mining company corrupting governments to misappropriate mineral rights - they're all using the exact same modus operandi.  And until some of us step up to the plate and offer an alternative - equivalently accessed by ANYONE - we're guilty of complacency or complicity.  And both of those are too bad to be false. 

Sunday, July 6, 2014

Free and Fair


I get a kick out of the breathless news that keeps flowing around the NSA's spying on Germany.  We're supposed to be surprised or shocked that the U.S. would hack Chancellor Angela Merkel's phone.  Ooohhh!  Say it isn't so!  How could the land of the free and the home of the brave, the house on the hill, the greatest power on Earth, stoop so low as to reduce itself to petty tricks that despotic tyrants use?  Thomas Oppermann, the parliamentary leader of the Social Democrats reassured Germans that he, "expect(s) this issue to be thoroughly clarified."  Rest well, Germans.  You're about to be bamboozled by political double-speak and the truth will not set you free!  That's for two reasons.  First, you'll never be told the truth.  And second, you've never been free and that's not about to change.  And the 31 year old German who was just arrested - like our dear Edward Snowden - will either be vilified (if he's dumb enough to have played his whole hand) or relegated to anonymous containment (if he's smart enough to keep better dirt on both the U.S. and Germany than what's been leaked to date).  Never mind though, Merkel and Spy-In-Chief Obama were on the heavily tapped phone yesterday talking about Ukraine.  I'm sure the Russians were listening.

I'm a bit surprised at how cheaply intelligence is being sold these days.  According to Bild, this spy only pulled in about 25,000 euros for his trove of documents.  You can't even get a good German car for that to say nothing about the grand old days when spying could get you matching Jaguars!  Like everything else in this damn digital world, Moore's Law is sucking all the premium out of espionage.  In a few more years, James Bond will have to take the Metro and stay at Holiday Inn Express.

And while we're watching Spy vs. Spy play out across the Atlantic, we're ignoring a much greater crime unfold.  Now I know that many of you are tired of hearing about this one but I'm going to keep writing until you pay attention and rise up to take a public stand on a great injustice of our times.  

I don't know how many times the Corporatocracy has been codified into the laws of a country in direct violation of its Constitution but a recent set of events in Papua New Guinea have once again risen to international media attention (everywhere but where investors look or care).  In the 1992 Mining Act of the Independent State of Papua New Guinea, the laws of the country were expressly forced (by Australian advisors and their Corporate Patrons) to exclude the U.N.  and Australian government authorized Bougainville Copper Agreement Act of 1967.  On June 6, 1967, the Australian company - Bougainville Copper Pty. Limited (owned by Rio Tinto) - negotiated with the "Territory of Papua New Guinea" (read Australian colonial appointed government) to steal the copper and gold from Bougainville.  Steal.  Isn't that a harsh characterization?  Absolutely not.  At no point was there ANY market competition or compensation for the right to develop the resources.  At no point was there ANY objective education of the people from whom the land would be taken to explain what they would receive and what the mine would cost.  And now, 47 years later, NO AUSTRALIAN, MULTI-LATERAL agency, Securities Enforcement Agency, or any other authority is standing in the way of a repeating of the exact same unconscionable acts being carried out by BCL and Rio Tinto today.

On June 25, Bloomberg's David Stringer wrote an article stating that "Proposed Laws May Impact Bougainville Lease."  Bloomberg - a news firm for which I have enormous respect - carelessly reported that Bougainville Copper Ltd (BOC) "controls a number of mining rights on Bougainville, including over the site of the former Panguna mine…," never mentioning the fact that these rights expired with the license over a year ago.  David's in Melbourne.  His "responsible editors" - Jason Rogers, Andrew Hobbs and Madelene Pearson - failed to insure that the reporting was based on facts appealing instead to the overt misrepresentations of the company and its hired guns.

If one reads the denial of Appeal in the case brought by citizens of Bougainville against Rio Tinto (Sarie v. Rio Tinto Plc, 02-56256, U.S. Court of Appeals for the Ninth Circuit ) one can readily see how far we've come from fairness and the rule of law.  The Court, ruling against the Plaintiffs concluded that "only Plaintiff's claims of genocide and war crimes fall with the limited federal jurisdiction of the Act" (Alien Tort Statute) and that unfortunately, the extraterritorial nature of this genocide and war crimes activity tied the Court's hands from being able to adjudicate the case.  In addition, Rio Tinto contended that they couldn't be held liable because they were a corporation and that the Alien Tort Statute only applies to people.  The Court (both majority and in dissent) found that it would be too imperialistic to use the Courts of the U.S. as the arbiter of genocide and war crimes.  I find that an ironic standard given the fact that U.S. investors, U.S. pensions, and U.S. tax authorities have no problem in benefiting from the activities of Rio Tinto.  When it comes to their revenue and investment income, we have jurisdiction - when it comes to morality and war crimes - not so much.

Rio Tinto and BCL are now working to coerce the Autonomous Government of Bougainville into granting them a de facto supra-legal status in the proposed new mining Act.  During this same time, the citizens of Papua New Guinea and the residents of Bougainville are watching as their government does nothing to pursue the legitimate economic claims due the people - compensation from as far back as 1989 which could be used to actually enable the citizens to have self-determination.  Over PNGK 140 million was earned by investing the people's money held by BCL in Rio Tinto's investments.  The Autonomous Government and the National Government in PNG are not doing anything to insure that this fact is known.  Rather they're letting their brand get sullied by well-meaning but misinformed media outlets who are letting BCL and Rio Tinto drive the message.

This is not right.  You can do something about it.  If you've got a 401(k) chances are you are invested in Rio Tinto.  Let them know that you're not interested in profiting from a Company that has to buy government officials, write laws to subvert citizens' interests, and obfuscate economic benefits so profits can be stolen.  And if you can't find their investor relations address, stop investing.  It's even a greater offense to anonymously support genocide and war crimes while pretending to be helpless in its face.  

We should worry about what's happening in NSA spy rings.  We should be concerned about the fact that we can't win if we haven't bribed the refs.  That's poor form and bad sportsmanship.  But its worse when we've got the facts right in front of our faces and do nothing!  That's a real crime against humanity.  Your own!