October 7, 2008
Dow Down – 508 points
Why are the Financial Markets like the International Drug Cartel?
When things are as strange as they are these days in the financial markets with the guillotine of fear chopping the heads off of many peoples’ nest eggs, I tend to look for analogies to help me make sense of events.
I was reading an article about the upsurge of violence in certain Mexican towns, noting that the violence, including a bomb blast at a wedding, was widely blamed on the drug cartel.
And as repugnant as these violent crimes are, I noted a strange similarity to current events in the financial markets.
Here’s how my twisted thinking goes…
Like the drug trade, the financial meltdown occurring worldwide is not the result of a single manipulator (sorry global conspiracy fans!). And in my analogy, drugs just don’t show up on the streets of LA by themselves. In fact, it seems that the drug trade is the result of scores or even hundreds or immoral and illegal actions by a large number individuals, starting from the coca farmer in the hills of the Andes to the corrupt customs agent, to the mule who carries the drugs, to the lab owner, managers, runners, enforcers, paid off cops, money launderers, all the way to the thousands of dealers on the street.
Now, how is this like the financial crisis?
Last week after dropping my son off for first his first year at the University of California in Santa Cruz, my wife and I were having brunch with our CPA who also happened to be in town at the same time. As our CPA is also a mortgage broker, real estate agent and registered securities broker, she has some strong views on the subject. While sharing with us the pressure she saw being put on appraisers by brokers to falsify home values, a guy at a nearby table piped up. Honestly, he looked like another Santa Cruz neo-hippie kid. But when he opened his mouth I knew I was wrong.
Turns out he’d been with a big Bay Area real estate firm and had seen first-hand, appraisers and other front line folks in the real estate business being strong armed by lenders and mortgage brokers to lie about the values of homes that they were appraising. If they didn’t go along, they’d be, in effect, black listed and wouldn’t get any more work. As a result he resigned from his job.
And he agreed wholeheartedly that a corrupt chain of individual decisions from the front door of new construction homes led all the way to wall street and beyond to banks and financial institutions around the world.
The old news about drug dealers is that the little fish always get caught, but the big fish are slippery and hard to fry.
While I seriously doubt that the US government would ever bail out the international drug cartel, I’m not sure why our government should be using our tax dollars to let the big fish off the hook in the financial mess. Unlike the drug cartels, the financial world is supposed to have been regulated.
But crooks will be crooks. And like the drug cartel they find ways to corrupt officials ignore laws and evade investigators.
The drug cartels have an advantage though, their business still gushes cash. And the down economy hastened by the failure of our financial institutions is more likely than not to provide them with a surge of new customers.
At your service,
Marc
Your Ultimate Survival Guide to Help You Thrive in Challenging Times
Survival Tip #3
Hang up on your phone company.
The belt tightening felt around the world hit our household last month. My wife went back to work and I started looking for ways to cut costs around the house.
We reviewed our monthly expenses and discovered an amazing money saving opportunity that I want to share with you.
For several years, we have had our home phone service provided by Verizon and our cable and internet service from Time Warner. An offer from Time Warner to take advantage of new digital phone service had been ignored by us for a few months because we’d heard of some bad experiences of friends in and out of state about its quality.
But then we ran the numbers.
By reducing the number of cable channels we received and adding digital phone service, we could save almost $1000 dollars a year!
I’m not kidding – a grand a year.
Digital phone service, including unlimited in state and US calling plus the basic cable package and high speed internet was $99 a month. And we got to keep our existing phone number. We were paying $60 a month for unlimited phone service with Verizon, plus the bigger cable package and internet was $114 by itself.
In one fell swoop, we put almost $1000 back in our pocket.
Granted, the $99 rate is a 12 month teaser, but it only goes up to $114 for the same service at the end of the first year.
We also gave back a second cable box to save another $9 a month. Afterwards, I hooked the office TV directly to the cable line and guess what — we still get 25 channels on it.
Go figure.
And how do we like digital phone service?
I honestly can’t tell the difference…except in my checkbook!
