This page has been archived and commenting is disabled.
Exploiting Economic Illiteracy
I think it’s important for people to understand the ideas of
scarcity and decision making in every day life so that they won’t be
ripped off by politicians...Politicians exploit economic illiteracy.- Dr. Walter Williams.
Those were the comments that resonated with me in the recent WSJ Op-Ed,The State against Blacks; Then I got to thinking, yah, not only politicians pal!
In the article, Dr Williams, a George Mason Economics Professor,
discusses how the welfare state has done more harm to African-Americans
than slavery did. And that “black people cannot make great progress
until they understand the economic system, until they know something
about economics”
Not to take away from Dr. Williams’ message, but I believe his
statement holds true for more than just the African-American
population. I believe its imperative for investors - of all stripes -
to have a basic knowledge of economics. With the cacophony of noise
emanating from Wall Street and politicians pushing their agendas, many
investors are tearing down the rapids sans a guide and indeed some
without a paddle.
A proper understanding of the true state of the global economy is vital for investors to avoid investment land mines.
Yesterday, Mark Cuban (who incidentally made his fortune in the stock market; during the Tech bubble nonetheless), blogged in Wall Street’s new lie to Main Street - Asset Allocation:
Today, your investment advisors want you invest in
things you have absolutely no fricking clue about and have pretty much
absolutely no fricking ability to learn about.
Although I agree with one half of his proclamation, I do not agree
with the other. With this one sentence, I believe he highlighted one of
many myths and misconceptions under which current investors toil, that
you can’t possibly, under any circumstances learn this stuff! Nothing ensures the longevity of myths and misconceptions like a modicum of half-truth.
The
misconception that economics and finance is indecipherable, is one that
isperpetuated admittedly, by many in finance for selfish reasons.
While the profession may not be seen as academically rigorous as the
legal or medical, it does take hard work and study to gain insight. And
even then, success is not guaranteed.
Investing is NOT a real science like physics although, the reams of
academic papers with unintelligible equations, talk of Chaos Theory,
Brownian Motion and Levy Flight would probably convince you otherwise.
Although many professional investors have used these theories
successfully, it didn’t happen overnight and it did require some
serious study and application of brain usage on their part.
Too many investors want a magic elixir that guarantees outrageous
profit with no risk, either to their pocket or their brain cells.
Should you invest in a 1 year 8.10% Callable Yield Note linked to the
performance of the Ishares MSCI Brazil Index Fund and SPDRS&P
Metals and Mining ETF? Well for starters, it would help if you knew
where Brazil was. Then maybe what’s in the index and the ETF before
thinking about the possible 8.1% yield.
While, I agree there is a lot of scuttlebutt floating about, as highlighted in my post, ETF Mania or: A Study in Herd Behavior,
I think everyone should be investing at their comfort and educationa
level. In The stock market is for suckers, MIT professor Andrew Lo proposes to: “license retail investors to educate and protect them”.
I'll leave you with two quotes I keep very much in the front of my mind:
There is nothing more frightening than active ignorance.
-- Goethe
And:
There are two ways to be fooled: One is to believe what isn't so; the other is to refuse to
believe what is so.
--Soren Kierkegaard
Happy Trading!
@macrotrdr - www.stonestreetadvisors.com
»
- advertisements -
It is easy... buy low, sell high? whats the big dif?
The big dif is knowing that the high is caused by a POMO pump and the low is a pre-planned dump that you/we aren't in the loop about.
I don't know of 1 college or university that teaches the truth about money, the history of money; and therefore there isn't 1 in 10 million college grads that knows anything about money.
People work 30-40 years of their lives, working for money, but they won't spend 1 hour to learn the truth about money and government ponzi schemes of taxes and inflation.
We need to decentralize the power, instead of a federal central bank, eliminate it and permit the states to all have their own banks (IE. North Dakota Bank). Several states are in the process of kicking out the primary dealer banksters, from managing the pension money, and to be reduced to american idol candidates in the secondary markets to co manage the money. Of course these state banks will all turn into toxic freddie mac/fannie mae wastelands of toxic IOUS, but at least we will cut out the wall street bonuses given on the backs of workers.
Obama is a weak leader, and rolls over every step of the way. I hope we don't have another Cuban missile crisis event, he is no Kennedy.
You don't need to be a genius to invest intelligently. All you need to know is that if you send your money to New York City it will be stolen. The same would happen to your wallet if you went there.
Wait a moment - I thought that we could get an 8% per annum return investing in "blue chip companies" and never have to think about it?
It's a no-brainer!
Intellectually lazy people with excess money are what allow frauds such as Madoff's to perpetuate. With the local library, Wikipedia, and all of our modern media, there is no excuse for remaining ignorant of at least the basic principles of economics, as with every field in existence. Yet I suppose the mass media can be complicit in encouraging herd-like mentalities when CNBC and USA Today offer their millions of viewers all the same investing advice.
Chumps get taken. Don't be a chump.
You really think us plebs should (en masse) get a grip on the basics of fiat money and fractional reserve banking rather than watching pop idol and x factor? LOL like that'd *work*...
"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
Henry Ford
ignorance of economics in America is intentional - an uninformed populace is easier to control and steal from
read G. Edward Griffins, "The Creature From Jekyll Island" - he details how the education system in America is controlled by altruistic-sounding foundations
I think people don't try to learn because they don't have time and are intimidated into thinking the subject is too hard. A bigger problem may be people who are absolutely confident they can call the future from just a superficial examination of one of the competing economic theoretical constructs.
u uzed big wordz; peeps try bc the conscrux are at we be toyz
"intimidated into thinking the subject is too hard"
the economic system and economic theory are intentionally obfuscated and complicated so the population will leave the subject matter to 'experts' - of course these 'experts' make their living by screwing over uneductated rubes ...
Iconvenient....more college degrees is an awesome idea. Did you see the article about the movement to require testing pre and post college...like a post-SAT. Doubt the colleges would sign up for that, speaking of ignorance or just plain sinister economics, college cost is one of the few things Not disturbed by latest 3 or so years of economic turmoil. As long as we keep paying 40k+/yr to go to a top school...why bother with what the success rate is.
On to financial education, I totally agree. I think there is a great need for education but there's no market for it! Brokerages need people to be in the dark. Very unfortunate studies have noted that many just don't read their statements, bother to check if fees have gone up a buck or two, and will stay with their broker if they feel he or she is nice to them. That's why the Fidelitys of the world have 900 families assigned to one person....and insult to injury have the balls to fire the same broker for lack of productivity if they can't meet Insurance Sales Goals. The brokerage house willing to educate and be less of a pig in collecting fees could put the major houses out of business, flat out.
Have to be honest here. I am one pissed off individual; stress individual.
I have out-lived my usefulness to the corporations as I refuse to give up independent education and thought.
Truly true. Finance; budgets. and most importantly how to spot a Ponzi scheme should be taught in Kgarten and up.
Then we go to utopia where children, from birth would be taught to think for themselves instead of being educated to be be life-long dedicated consumers of the global corporation hardsell mentality.
I watched the SoTU.
Was it my imagination, or were only half the people clapping when the POTUS proposed the US should lead the world in college degrees?
Does that count as active ignorance?
Kevin Bacon has seven degrees. He leads.
Doesn't have shit to do with GDP. U.S. needs plumbers--we gonna import em from Tijuana indefinitely?
No no...plumbers these days need a solid, degree-level understanding of thermodynamics, fluid dynamics, material properties and electrical theory. Back in the old days, they just needed to know shit flows downhill.
... and payday is on Thursday ;-)
. . . and hot is on the left.
There are many useless degrees running around out there as we speak. But, I guess we must maintain the profit system of universities and student loans. I guess the thinking is our ditch diggers and weed whackers and heavy machine operators and such need a bachelors degree, or, we can import illegal aliens to do that for us, therefore cutting out a wide range of jobs, forcing everyone to get a degree to be competitive for the remaining jobs.....this is what politicians like to call a "virtuous circle.":) An education and a degree are not practically synonymous, but the system makes them so.