An eerie cold wind is blowing off the Baltimore harbor this morning, ushering in these chilly autumn months. And what better way to ring in the cold weather than with the Federal Reserve’s QE taper that has been softly breathing down our necks for months now, sending shivers down our spines.
If the market reacts to the choking off of that free Fed money the way I think it will, we’re in for quite a ghoulish Halloween…
Is the economy stable enough to start pulling back the QE? Will stocks get creamed when the rug is pulled out?
Should we ever trust the Fed to look after the interests of individual investors?
No way…
With that in mind, today I’m going to give you a sneak peek into my personal finance newsletter, The Crow’s Nest. Why the strange name?
In the days of naval conquest, explorers were only as good as their lookouts. Perched atop the crow’s nest, the lookout could see for miles and identify hazardous waters, storms, or traps well before they threatened the ship. Not only did he spot the dangers, but a good lookout could spy land and opportunity to guide the captain to safety and prosperity.
It is for this reason the fate of most ships depended on the crow’s nest.
Today’s financial landscape shares much with the high seas of pirate lore. The world of personal finance is filled with tricks, traps, fees, and scalawags — only instead of Blackbeard coming for your booty, you have bankers, money managers, and government officials with their beady eyes fixed on emptying your pockets.
That being said, let’s frame today’s discussion around the “Pirate’s Code.”
We’re going to compare the rules and regulations for bloodthirsty pirates and see how they stack up against the code by which Wall Street and the Fed conduct themselves. Surely these institutions should hold up against the ethics and morality of high-seas thieves and scoundrels… right?
Well, let’s start with the Wall Street/Fed code: Don’t squeal on each other. As economist and poster boy for the
revolving door between the government and Wall Street, Larry Summers once said: “Insiders don’t criticize other
insiders.”
That has been the modus operandi for Wall Street and the Fed for a long time now. But how did bloodthirsty
pirates keep each other in check? Surprisingly, in a much more ethical and democratic way than the Fed…
Here is the official code for how pirates deal with one another:
I. Every man has a vote in affairs of moment; has equal title to the fresh provisions, or strong liquors, at any time seized, and may use them at pleasure, unless a scarcity makes it necessary, for the good of all, to vote a retrenchment.
II. If they defrauded the company to the value of a dollar in plate, jewels, or money, marooning was their punishment. If the robbery was only betwixt one another, they contented themselves with slitting
the ears and nose of him that was guilty, and set him on shore, not in an uninhabited place, but somewhere, where he was sure to encounter hardships.
III. No person to game at cards or dice for money.
IV. The lights and candles to be put out at eight o’clock at night: if any of the crew, after that hour still
remained inclined for drinking, they were to do it on the open deck.V. No man to talk of breaking up their way of living, till each had shared one thousand pounds. If in order to this, any man should lose a limb, or become a cripple in their service, he was to have eight hundred dollars, out of the public stock, and for lesser hurts, proportionately.
I’d like to break these down one at a time and see what the Wall Street Fed cartel can learn from the swashbuckling buccaneers of old…
I. Every man has a vote in affairs of moment; has equal title to the fresh provisions, or strong liquors, at any time seized, and may use them at pleasure, unless a scarcity makes it necessary, for the good of all, to vote a retrenchment.
This sounds reasonable and fair. Everyone should enjoy in the spoils of the ship to an equal degree. I’m not
making a socialist argument here, just pointing out the facts. In the market today, the ultra-rich have far outpaced the individual investor like you and I.
When asked about the Fed’s quantitative easing programs, billionaire investor Stanley Druckenmiller was quite up
front about it: “First of all…I love this stuff. OK, this is fantastic. It’s fantastic for every rich person. This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”
Even the Fed’s own research shows this. In its Survey of Consumer Finances, it states:
Only families at the very top of the income distribution saw widespread income gains between 2010 and 2013. The top 3 percent of households claimed 30.5 percent of all income in 2013, up from 27.7 percent in 2010,while the next 7 percent held steady at nearly 17 percent – and the bottom 90 percent’s share declined to 52.7 percent.
So the super-rich have been taking the lion’s share of the strong liquor and leaving us with their backwash. They’ll also be the first ones out when things start crashing down. So while pirates may have the ethics to “go down with the ship” and make sure one another are equally respected, we expect no such treatment from the Fed and Wall Street.
There’s nothing the rest of us lowly crew members can do about it.
And while pirates were allowed to actually vote on whether or not to keep up the spending or pull it in depending
on their current status, we have no vote on the matters of the Federal Reserve — it is a private institution, by the
way — and we sure do not have any say over how Wall Street conducts itself.
No vote of retrenchment here, we’re slaves to whatever they feel necessary.
II. If they defrauded the company to the value of a dollar in plate, jewels, or money, marooning was their punishment. If the robbery was only betwixt one another, they contented themselves with slitting the ears and nose of him that was guilty, and set him on shore, not in an uninhabited place, but somewhere, where he was sure to encounter hardships.
This I love. If you betray the trust of your fellow pirates and try to cheat them out of money or steal their
possessions, you’ll find yourself bleeding from the nose and ears on a deserted island — left for dead.
I guarantee you if we instituted this policy on Wall Street criminals, you’d see things shape up pretty quick. But right now, there is still nobody that has even served hard jail time for Wall Street’s crimes. They act with total
impunity knowing that their insiders at the Fed will look the other way. More on that phenomenon below.
III. No person to game at cards or dice for money.
Isn’t this the definition of Wall Street? One big rigged casino? The beauty for them is that the Fed and Wall Street
are the “house” and we are the addled-gamblers, shoving coins into a rigged machine and praying for that unlikely payday.
They don’t call slot machines the one-armed bandit for nothing. The house always wins…
IV. The lights and candles to be put out at eight o’clock at night: if any of the crew, after that hour still
remained inclined for drinking, they were to do it on the open deck.
While I’d say that a 8pm bedtime for a group of drunken scalawags and scoundrels seems rather quaint, on the
other hand, Wall Street never sleeps. They are working out inside deals while we are sleeping soundly, waiting for
the market to open. By the time we rub the sleep from our eyes, high-frequency traders at the behest of Wall Street investment firms have already set themselves up for huge paydays, acting on insider information before we can even open up our brokerage accounts for the day.
At least pirates were forced to embrace their vices on the open deck, where they could actually be accountable for their actions. The Fed and Wall Street operate in the shadows — far out of view from us, the sleeping crew.
V. No man to talk of breaking up their way of living, till each had shared one thousand pounds. If in order to this, any man should lose a limb, or become a cripple in their service, he was to have eight hundred dollars, out of the public stock, and for lesser hurts, proportionately.
Pirates basically made sure the crew was taken care of with the most basic of necessities. Should a fellow crew
member lose an arm doing battle with an enemy ship, they would be compensated and cared for. This metaphor is totally appropriate when talking about Wall Street. When they take a blow — like the 2008 financial crisis — and set themselves up for complete disasters, do we leave them to take their medicine and deal with the consequences of their reckless actions?
Hell no! The government steps in and BAILS THEM OUT!
This is akin to only bailing out the Captain when the ship is sinking, and leaving the crew to a watery grave.
Have you ever lost money on a stock purchase? I certainly have… and there was most definitely no life raft for me.
You’re just supposed to walk the plank…
Now, I’m perfectly comfortable living with my own decisions — good or bad — and am ready to suffer
consequences. Wall Street has no such code. That’s why we’ll continue to have bubbles and crashes as they devise more and more instruments of financial destruction while the Fed looks on knowingly with a bag of money in hand in case they get in too deep.
In essence, you are far more likely to be treated fairly dealing with a group of bloodthirsty pirates than you are by Wall Street or the Fed.
With this type of “code” at the helm, we’re doomed to live and die by their actions. And all of their recent maneuvers have simply been setting the stage for another crash of epic proportions.
That’s why I started The Crow’s Nest, so like minded people like us could band together and claim our share of the wealth, outside of this crooked system.
That’s what we’ve done with our latest Crow’s Nest recommendation: I have found a way to safely gain 11%, 14% even 18% gains by actually fighting the Big Banks. In fact, this revolutionary company is scaring the pants off of the big banks and brokerages, and is threatening to put an end to traditional banking entirely.
In fact Well’s Fargo is so terrified, they’ve actually banned their employees from investing in the company altogether.
And the best part? This safe investment is totally divorced from the pumped up stock market and the Fed’s free money policies.
You can read all about my shocking new strategy in with your complementary trial of The Crow’s Nest.
All aboard!
P.S. Meet Me at The World MoneyShow Toronto — October 16-18, 2014!
Come join us in beautiful downtown Toronto as I join Outsider Club founder Nick Hodge and our Wealth Daily
colleague Christian DeHaemer in a round-table dialogue about the most overlooked investment trends of the
2010s.
We’ll all be available for questions and discussions as well. You’ll also be able to rub elbows with financial
luminaries like Peter Schiff of Euro-Pacific Capital and Roger Conrad of the Capitalist Times.
You’ll get the latest stock picks, current market outlooks, most profitable investing and trading strategies, and
more when you attend the Show at the Metro Toronto Convention Centre.
Registration is free, so reserve your place today!
