[Vancouver] Scammers, Italy, the Debt Situation, and the Role of the Broker Explained

John Lett  (About)  (Readings)

There is so much to discuss right now as the supposed debt situation in Europe continues to unravel. I am personally getting more involved and hearing more about it. Without revealing too much, I can say that a number of people I know quite well are looking to get out of Western Europe… not forever, but they are tired of the contract situation and stagnant wages. Quite frankly, reading between the lines, I think that people are worried that once the price of bonds starts to affect the population, they are going to be taxed out of all of their holdings. Let me reiterate once again to those who believe that increasing taxes on the wealthy will solve everything, you could tax everything and everyone at 100% and it would still not be enough to cover all of these debts and their service charges (interest). This is a situation of very clever financial instruments that have occasionally gotten out of hand or have been algorithms that are too swift, or cases where traders and institutions have done deals that they knew would go awry, but have gone on with them because 1) governments are likely to bail out the institutions and nations, 2) someone else would do it if they didn’t do it, and 3) it is mostly legal or ambiguous whether or not it is legal, so there is not a clear moral obligation in the minds of many participants. As we have been trained to believe this is an era of scarcity, it is natural that people will act with greed in order to try to save themselves.

Unlike other postings, I’m going to divide this into a few sections in order to address so many issues.

I. SCAMMERS

I have been looking at going into financial planning for the last several months, as between tarot and some sense for money, I have been able to help people save money and connect more people to products and services. Ideally this would involve working for an institution and as you have seen with Value$: A Mixed Economy from last year, I have had an ongoing conflict between a respect for helping people get ahead with investments and the insidious side of the swindling these institutions inevitably often are prone to. At any rate, the only postings for positions I have found for finance or investment have been companies looking for people to sell whole life or universal life insurance or other packages (annuities, securities if the seller/broker becomes licensed, etc.) by referrals and with no terms set as to what kind of commission would be received (in other words, a non-qualified person doing the interpersonal relationships, the licensed person registering the money in a program, and if anything goes wrong, the relationship person being on the hook in the investor’s eyes). While some advantages exist with these products, I can’t say that I would feel comfortable selling most of them, and a lady running such an outfit here in Vancouver left me with the feeling that I would lure people in so that she could sell them marked up junk bonds.

Investment is about lifting people up and having someone in a more secure position say “I believe in you, I want to take a risk in you, and collect a small fee for this endorsement. Later, when you succeed, you will be able to do the same. All of this adds value to the community, nation, and makes growth possible.” What I have found in the Vancouver market, often from seemingly legitimate firms (I can’t name them, but their names are atop some high-rise buildings here) is “Everyone is holding on to their money, but if you are the tool that can convince someone to part with their money, we’ll be glad to have you – on commission and with no benefits, of course.” I watched the aforementioned lady play into this speculative situation, and while some of her strategies would help others, the markups on some products she described made me feel sick. The major presentations to potential investors were taking place at the top country clubs in Vancouver (one beginning with “A”) and with the aide of someone from the number two bank in Canada by market capitalization.

Eventually I will get a Certified Financial Planner Certificate and Certification so that at night I can legally straighten out people’s finances and hopefully there will be more ethical practitioners and guides out there overall.

A Solution

I have been hearing that more people are drawing up their own loans among friends or acquaintances in order to finance homes for their friends without the use of banks, and to also get a better return on their investment, as a certificate of deposit or term deposit pays about 1% per year now (Australia and South Korea are the only “advanced” countries that pay in the 4-5% region, but this has already decreased and is still decreasing). At the moment, I am looking into this, as you may be able to finance your friends’ mortgages at a lower-than-market rate of 3-5% and also get this return on your money if you draw up a sane contract. An action such as this would redistribute wealth on a scale imagined by Bank Transfer Day, which has been moderately successful with getting consumers to move their money to smaller banks and credit unions. A man who stayed at my hotel said that a number of his friends from Alberta, Canada have been doing this and plan to continue it on in Detroit, Michigan, where one friend bought 20 houses in a private auction (bankers and housing associations barred from bidding) for an average of $900. Look to the future and research ways to make you and your friends come out ahead outside of the system!

II. GREECE AND NOW ITALY

While Italy has long been considered unstable and needing more improvement, the wealth and productivity of this small country is very impressive and should not be underestimated (we addressed this in Tarot of the Day #7: Germany’s Pre-Eminence when the savings rates of Germany and Italy were compared). My personal prediction is that Mr. B. is too closely linked to a recently deposed and killed leader from Libya, and so now the country has to be pushed to an overt crisis level in order to have a “change” movement in Italy. There will be a new face to lead there and I have no idea who it will be, but it will be someone quite discrete in the long-run and allow the corruption to go on, but less publicly.

The supposed debts that will bring down the world are nothing new, and we never acknowledge prosperous times as being so when they are here. There may be serious political and social problems that arise, and we will all be personally touched, but do not let the anxiety stop you from doing something good, so keep the good deeds passing and keep your friends in business… this will curtail the feelings of scarcity that dominate our times. Most of us do not really understand money, so therefore we can’t see that the situation we are in is only possible because we do not produce the money ourselves, and once we have it, many people do not look at it responsibly.

III. THE ROLE OF THE BROKER AND HOW THE SYSTEM WORKS

I found a great explanation of the role of the broker and how the confidence games work from a poster called “LetMeExplain” from the response section of the MSN article “Bottom Line – If Rome Burns, the U.S. Will Feel the Heat.”

A lot of people I know think that investing their money with the experts is the way to go, but at this time, no human can compete with the algorithms that the big players have in motion. I have so many people close to me that just dump their money off at the investment house and inquire no further (“I’m sure xxxx knows what he is doing, and anyway, his money is invested right in there as well.”) Remember that investments are not tied to logic or real value; they are attached to sentiment and now controlled by machines that make inferences and buy and sell in fractions of a second. While your broker wants to do the best for you, it is a very high stakes game they are stuck in, and they get to be the ones to deliver you bad news when they were just as duped as you may have been.

This is all directly from the posting of “LetMeExplain” a poster I have found to be quite prescient in their views elsewhere on the web:

I must say that I had thought until the news broke of MF Global demise that MF Global was one of the few true Investment banks who had made it through this financial melt down on the merits of it investing and trading abilities, not the insider thievery and corrupted money games all the other firms capitulated from.
Well I was wrong; the depth of the reach of greed is even deeper than my jaded expectations …
Wall Street Bankers are all traitors and crooks unless proven not to be.
kpmgkilledjaneforfun sounds like a broker who is about to be framed by MF Global, and has decided not to be their fall guy. Good luck, here is where the upper killers trade each other off for the witness protection program. That won’t stop them from throwing you the broker in the way of anyone who lost in this as these crooks scuttle under their rocks.
Credit Default Swaps = Whatever Bank/Government is holding the bag gets completely screwed when the money stops coming in.
Sort of like a Banks on Banks version of the airplane ride, the last one that got suckered into buying the “security” pays all the other banks losses, it is written in a way that even the greediest of bankers couldn’t understand it, someone in their bank made huge money in a back door deal to sell it to them, and they bought it to keep from looking stupid.
The greedier screwing the greedy.
This is how it works:
Brokers are paid a percentage of the funds they raise from investors, once the investor invests his money the broker will not receive any more pay unless he brings in new money, as in another client, or his existing client base sends funds a second time.
The broker is usually the only one the investors ever speak to, and he has the least power in the company with no meaningful input as to where the money goes after it is received by the company and does not have any access to his client’s accounts.
The broker hopes his client does well so that he may recommend further investments, but in reality has no way to influence this other than to do as much diligence as possible to recommend a legitimate investment, that could still fail legitimately.
The investors still see the broker as who they sent the money to no matter how well this is explained if/when they loose their money.
Investors make money on the profitability of the company to balance all of this and pay a handsome share price. Risky business even when everything is completely legitimate.
Killers, the upper investment bank management all the way through the traders all make percentage money when the trader’s win their trades/(Wall Street bets), and receive salaries, and guaranteed severance packages commonly known as Golden parachutes.
Here is where the train comes off the rails:
Killers make a huge percentage off of the winning trades and or investments and it is guaranteed in their contract with the company, but these same men do not have to pay back the company from their salaries or previous win percentages when the traders make loosing trades or loosing investments.
Make money when you win, pay nothing when you loose.
You ask who in their right mind would give these men a contract like that.
And the answerer is they give it to themselves.
The Killers started the company, gave it a name, incorporated it and thereby gave it legitimacy, put some money in it, brought in some of their golf buddies and made sure they got their money for referrals no matter what, found brokers to sell it, and that’s the way it works.
If you will recall when the US government was about to bail out the banks there was a very large stink about paying all these men their huge commissions even though their banks failed, that’s what happens when you have the Killers contract.
So if you are positioned right as a Killer you could keep trading day in and day out … win some, loose some, still making huge commissions until you finally gambled away all the investors funds away.
Then exit with your guaranteed severance as well, and all salaries due as the company become’s insolvent with all the investors money gone, and never go to jail.
Then of course start a new bank with a new name and run the same game again.
Italy and Greece’s problems are a direct result of their bankers trading losses just like the US bankers, when they fail someone’s bank/government is going to have to pay the Credit Default attached to their losses … since this is brand new territory nobody knows what is going to happen … that’s why the US Government opted to bail out the larger banks rather than see, and that’s why Europe tried to bail out the m—— in Greece, nobody has ever had to face the Credit Default Swaps, in the 1930’s they did not exist.
I do not believe this will be the catastrophe it is being touted to be.
It will be a long series of lawyers, in a long series of court battles to decide who owes whom what, then another long series of lawyers negotiating amounts, followed by another long series of bankruptcy’s finally leading to nobody actually paying any body anything except the lawyers fee’s ending about 10 years from start to finish, or until it becomes so boring that it is swept under the rug.
#1.22 – Mon Nov 7, 2011 10:56 PM EST

IV. THE MESSAGE

There is so much hype about countries going broke now. Any political satire about countries going broke (which started with making light of the assault on Iceland in late 2008) is really off-color and wrong, as well as inaccurate. As far as your personal stake in the world economy, there is not much you can do except for to stay away from what you do not personally understand and try not to overextend yourself. Try to utilize your local networks and if you want to make or take out loaned money, work it out locally (with proper legal documentation to protect both sides) and go to the banks as a last resort. Lastly, I say once again, be suspicious of any claims made about “failed” countries or economies.

John Lett  (About)  (Readings)

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7 Responses to [Vancouver] Scammers, Italy, the Debt Situation, and the Role of the Broker Explained

  1. Another good commentary! If you get a CFA (charterd financial analyst) certification, it would be just about the most difficult test you ever took and there’s no guarantee it would help you, career-wise, but as for my being a former registered representative and also getting a quality MBA, I don’t regret any of it because I understand investing and finance now. When there’s something I do not or cannot understand, I avoid it.

    I had a Series 6 and 63 license(s) in NYS in the USA and was able to broker but mainly worked for a quality mutual life insurance company. Even at this time, over 20 years ago, it was hard to make any money, and when I left, that company reaped the rewards of my hard work. I couldn’t take it with me!

    It was fascinating, working with individuals of all types, and businesses. Many people, with their own personal financial planning, do not want to think long-term and have discipline. Systematic savings, diversification, understanding everything you’re doing, having adequate insurance coverage for the near- and long-term (insurance is NOT all a rip-off, just largely one, ha ha!) living debt-free, waiting years to buy anything or do anything — most people will not consider this! They want it all at once!

    Europe has seen economies and governments come and go. The average European has their daily priorities straight and is not nor is likely to ever be in any state of panic. The EU is a very, very long-term project. Europeans are almost as long-sighted as the Chinese, often thinking generations ahead. “This too shall pass.” It’s almost fatalistic in approach. So what if people go extinct? Let the ferns grow and the bugs run around for a long time, and we’ll see what happens!

    My first visit to the Continent, in 1981, I went to college in Italy. I asked people, “Aren’t you worried? There’s no government here!” They laughed at me! A currency, a government . . . these things come and go. I live in France in the original capital of what was France at the time (it was very small!), Saint-Denis, to the North of Paris. Barbarians invaded in the Dark Ages, so they built a wall, then later, another wall as they expanded. The city is still here, the Lendit market still runs as it has for nearly 2,000 years (it is now the largest market in Europe, and is no longer called Lendit, but an optician on the square still uses that ancient name!) and people carry on.

    I will never go back to the United States — not even to visit. My trip there alone last year for my second group show at MoMA in NYC was too scary. The airport security, the shuffling zombies who called themselves New Yorkers, the fluoridated tap water, the fracking in the USA . . . no thanks! I left after two nights and rushed back to Europe.

    • The CFA exam would not be so much to make a career as it would be to save people from the disasters around them by knowing the laws and parameters better.

      I do recall from your videos that your universal life policies have been quite a lifesaver because you were committed to them for the very long-term. They do work if you have a pretty solid company selling them.

      There is much more I would like to say about the virtues of saving. Upon some looking into the videos you have posted over the last year, it seems you even lived without a proper bed for many years because you had financed everything in cash as it was affordable to you. People think that these sacrifices are unbearable, but they are actually quite invigorating and empowering.

      As you can see, my prediction appears to be correct as Berlusconi announced stepping down about 12 hours after the post was written.

      • Not universal life, whole life.

        Yes, it took me ten years to save up for a bed over here in France. We slept on a mattress on the floor for the first decade, and I have scoliosis and other disabilities so it was painful, but necessary. We lived the first seven or eight months without a fridge, the first two years without a washing machine, the first three years without curtains . . . it was several years before we went to a movie or ate in a restaurant. It was kind of a drag, but, oh, well. We had to save up for things!

        Interesting about Berlusconi. I can’t believe he’s lasted as long as he has. Good call!

        It used to really be a hassle for me getting people to “get real” about their personal financial plans. One guy confessed his weekly “porn budget” was 200 dollars! I suggested he cut that in half and he refused! I had helped him get a good career, too. Last I heard from him, he has false teeth and is only in his 50s (he always refused to brush his teeth), has been long-term unemployed (his big pharma employer laid off 10,000 employees in 2007), had let his private disability income insurance and whole life insurance policies lapse, though they were inexpensive, and he’d gutted his 401K plan to treat an illegal alien girlfriend and her pals to restaurants for a long time. He’s married now to a wife he found on the Internet, and she has chased off all his friends. He’s on Zoloft. sigh

        People simply don’t want to hear they have to plan long term and live within their means. I started saving 20 dollars per week in 1978 and even when homeless or unemployed, I was able to keep doing that. I tell people if they cannot put aside 20 per week, something is seriously wrong with their lives! I get a lot of downcast looks and denials. I lived on five dollars per day in NYC and could afford a yogurt every Sunday! I hated it, believe me, and I was medically malnourished, but hey. I come from a poor white bg, and I’m female, which is, statistically speaking, the kiss of death in the USA. Fortunately, I was too naïve to understand this at the time, and just forged on ahead!

        I just got a question on YouTube about how I make money. I referred him to my website for some ideas, but it’s no one’s business. I am legal and declare all income, in France and the USA. I seek only to earn 500 or 600 euros per month minimum, and our household goal per month is to earn 300 euros above and beyond taxes for our investing activities. My spouse earns just above minimum wage. By keeping things so frugal, we don’t need to pull in all that much. The extra gets saved, and yes, it is a stone drag. I get to resenting that I have to cook from scratch daily, but he does all the shopping now and is a real commando at that. It’s nearly all local, seasonal stuff, so I just have to get out the cookbooks and be creative.

        We saved for five years for a vacation in Iceland, in 2001, and I loved talking to the locals. I said to our taxi driver in his 4 wheel drive van thing, “I hear life is hard here,” and he chuckled and said, “Oh, no, but . . . these people . . . some of these people . . . they want EVERYTHING!” He was an older man and his English was a bit shaky, but I understood him well and we had a laugh. All this under a very spooky midnight sun between the international airport and the capital, which is a fair distance. It looked as though we were on the Moon, and I found it very disquieting. A couple of days later, we were in the swim. I really like Iceland, and all the silence there!

        My best to you. And I assure you, no one here in France around me is going nuts over “the collapse of the Eurozone.” They’ve seen all kinds of turmoil. It’s in their DNA to get on with their day and . . . take a siesta!

  2. Acas says:

    Tis a scary scenario you paint but I am apt to agree with Europe knowing governments come and go. We will get through this. We need to Embrace people, food, wine, and love.

    Re: getting out of this mess. Taxing wont work because it is only a bandaid. There is a point of diminishing return.

    I heard one woman in her 70s who makes 2k a month walking dogs mention all money received is tax free
    She said “If GE And google don’t pay, I won’t either”. She also mentioned she will think like the illegals from now on. That’s how some plan to get out of the mess. Most highly taxed states have healthy black marks;)

    • I thought I had replied to this seven months ago, but perhaps it was lost in the shuffle.

      I agree with your assessment of sticking to the priorities of people and proximity matters, as this we can actually control, rather than worrying about abstract financial circumstances that are highly manipulated.

      The highly taxed places are more solvent, for the most part, but sometimes if it is a Middle Man country, like Singapore or South Korea, they can get by on low taxation.

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