The “Cheap Money” Trap

The US Fed led by Ben Bernanke has created a fiscal death trap for unknowledgable investors. There is a mirage that has blinded investors and duped them into a sense of comfort and security. As the stock market continues to rage on with zero fundamentals it becomes more and more apparent that this is going to end badly.

GDP growth is an out-and-out lie... Real job creation is non-existent... Inflation is rising (don’t believe the government)... And let’s not forget America’s nearly $17 trillion debt that hovers over our heads like a 2 ton anvil.

The government and the media are all pitching an economic recovery, but just ask yourself does

·         Declining Incomes

·         Hidden Inflation

·         Hidden Unemployment

Constitute an economic recovery. Does 1.5% growth reflect an economic recovery?

The present fiscal policy is to continually print new money which keeps the Banks balance sheets looking good and this money also artificially keeps interest rates low. Presently the FED is printing over $1T per year to keep the Banks propped up. This isn’t capitalism; it is a private enterprise through government. Without all the printing the Banks would fail, in a true capitalistic enterprise the Banks would be allowed to fail and then the recovery could begin.

So now we have an artificially inflated stock market that is not allowed to correct itself as would happen in a true market. Make no mistake; stocks are only going up because of increased liquidity from the Fed and corporate measures that reduce costs (reduction in workforce and other general administration cutbacks).

 The average investor has no idea that 80% of trades executed in the stock market are done by high-frequency trading algorithms. And those algorithms are operating on flawed data (see: "official" unemployment rates). The flawed data is all manipulated through government controls and reporting. Do you really believe the inflation numbers, unemployment numbers and other leading and lagging indicators put out by the government? Just look around you, what is happening to food prices? What is happening with energy costs? How many of your neighbors are working at full time jobs?

So the only sign we have that things are going well is a stock market that's no market at all.

This week the FED once again decided to keep the pedal to the metal and continue to print more money. They know that if interest rates were allowed to rise in the short term we would be looking at a crash of the bond market, a real correction in the stock market and the insolvency of many banks in the system. The problem is that while the cheap money keeps the Banks and Stock Market afloat it also consistently erodes the value of the dollar. At this moment the markets are driven by bad news in an opposite direction; in other words bad news is good news and good news is bad news. The market is totally upside down in its thinking because investors realize that bad news makes the FED continue to print money. Sadly this ride has to end regardless of market conditions.

There is a point at which your debt is worthless and there are no buyers. Presently the largest purchaser of US debt is the FED. That means we are purchasing our own debt with money we are presently printing. The market for US debt is continuing to shrink and the only way to keep it going is for the US to print money and purchase their own debt. This type of strategy wouldn’t even be acceptable in an ECON 101 class.

The more damning dilemma is the reserve currency status. Presently the US has the ability to print their own money and control their interest rates because of the global status of being the reserve currency. The continued devaluation of the dollar will make it less attractive as the reserve currency. This will open the door for China to become the reserve currency and then the US will have to actually pay down the insurmountable debt that will be left.

Why is any of this important? Well you must be aware and make decisions which will allow you to keep your wealth. If you simply stand on the sidelines and wait it out you will find nothing left in your cupboard. It is time to take action and make smart decisions about money.

The Advocacy Network will be providing important and timely financial information on WMTS. We will have 4 hours of programming that will provide our listeners with practical and profitable financial strategies. You will learn about growth companies in Canada, Europe, Dubai and other Global international opportunities. You will learn how to best make these investments and where to find the best professionals to deal with. You will gain perspective and have the peace of mind in knowing that all our introductions are fully vetted and pass through the most diligent due diligence process.

Watch for the programming schedule to be announced soon, and get registered and set up at www.moneytalkstation.com

 

 

Smart Decisions about Money

Here is a re-post of one of the initial Advocacy Network blogs from Feb 2009, interesting now 4+ years later:

Feb 14, 2009

Today we take a look at the end of Reaganomics as we knew it. I remember as a young insurance professional in the early 80’s the public sentiment which was embodied in the actions of President Reagan, was for decreased taxes on the wealthy and decreased government involvement in the economy. Now, in 2009, public sentiment, which has been embodied in the speeches of President Obama, is for increased taxes on the wealthy and increased government involvement in the economy. The following are words taken directly from President Obama: “restore fairness to the tax code and provide 150 million workers with the tax relief they need and eliminate all income taxation of seniors making less than $50,000 per year.”

The Advocacy Network is committed to giving our members clear concise and non biased information that will assist our clients (members) in making smart decisions with money. We believe that practicing any political partisanship will not serve our clients. (that is not to say that we are not involved in the national and local political climate, as a responsible US citizen that is a fundamental right), yet our viewpoints are strictly towards events and how those will cause trends that all people need to be aware of in order to make smart decisions about money.

For every action there is an equal an opposite reaction, this is commonly referred to the Law of Unintended Consequences. Be prepared because there will be a mountain of unintended consequences in the decision to grow government involvement in the economy. That being said you can make these unintended consequences work for you instead of against you, it does however require that you be proactive in your decisions about money. Confidence is waning and that causes PROCRASTINATION. The most damaging impact that can be inflicted upon the market at any time is PROCRASTINATION, commonly referred to as the decision to make NO DECISION. These “no decisions” are in essence very powerful decisions which end up having huge impacts on the market place.

Let’s take a look at the present economic climate and potential impacts. The recent economic crisis has resulted in the Federal government taking substantial ownership interests in many of America’s Financial Institutions (whether you agree with this or not, it is what it is), this has led to an outcry for more governmental oversight as the public’s faith in private market solutions has been shaken. (More transparency should simplify this and hopefully allow people to regain confidence in the private market).

During the Reagan years with its lower tax rates on the wealthy (actually had the unintended consequence of choking off infrastructure investment (tax shelters) as much of the wealthy were willing to fund projects while at the 50% tax rate which while lowered was also hindered by the infamous passive income ceilings which in essence crippled the so-called tax shelter market) and its fundamental faith in the private market, saw a boom of innovative but increased risk products such as mutual funds and hedge funds. Now, many individuals see those products as too risky and are looking for safer places to put their money.

This will create a trend towards fixed rate products such as cash value life insurance and annuities. The trend towards protection products should have never decreased yet most of the buying public fell victim to a lack of clear transparency when it came to RISK. All investments are useful as long proper suitability is established. This suitability is reliant upon a client understanding the concept of RISK. No financial concept is more important to the American family then that of risk management. The financial risks of premature death, disability and living too long are the greatest risks our economy ever faces. So the movement back to protection products is not in any way a negative prospect.

Regardless of the given economic climate the great financial staples will always be tax deferral, guarantees and safety of principal. Once a foundation of protection is built then growth and accumulation can be directed and planned for. Getting back to basics of protection is a very positive thing.

The unintended consequences of the most recent governmental actions will be a strong market place for tax deferral, guarantees and safety of principal. Once again the communication and understanding of risk will be the most useful conversations individuals can have.

As to how the investment market place will be affected it is too early to tell, yet there are some factors that can give you a preview. Sectors to rely on will continue to be Technology, Financial and Energy. The recent government stimulus package included 50 billion for the energy industry, to put into renewable energy and clean energy programs. These programs will be driven by innovations in technology so it would follow that technology will enjoy and upward trend due to its causative relationship with energy. The Financial sector will be stabilized by the Insurance industry (mostly due to the previous points) but surely due to its consistent longevity and its basic economic fundamental to the American family and business owner as it pertains to risk management. Remember that the Life insurance industry has been around since just before the Civil War and has not just survived but thrived in such economic climates a World Wars, the great depression etc…, this industry has actually given the banking industry the tremendous opportunity establish itself. That very same banking industry has managed almost single-handedly to run our economy into the ground (discussion for another time).

We will continue to provide the latest and most prevalent economic information, our viewpoint will always take into account the principles of innovation, trending and clear transparency.

Myths, Lies and Damn Lies

The advent of social media has proven to be both a blessing and a curse. The double edged sword of vast amounts of information freely flowing 24/7/365 is filled with myths, lies and damn lies.

The perpetration of scams, fraud and predatory sales manipulation is easier than ever before. Instant credibility is created through well-meaning organizations and operations. Unfortunately these entities survive on advertising dollars and therefore take a position of enabler. When an organization thrives through advertising money they have a mandate to look the other way. They have no responsibility to provide any due diligence or do even nominal research on anyone who is willing to pay dollars to advertise. Of course there could be the perception of a moral and ethical responsibility to protect the investors, consumers and public from bad advice, mis-information and flat out lies, yet the reliance is on the archaic advertising laws.

An incredible amount of the investor and consumer public live under the false impression that “everything on the internet is true; it must be because it’s on the internet.” This lie has been promulgated by the major social network operations which I won’t bother to name because you know who they are.

One such business based social network organization has myriads of groups which are started under the guise of a source of information and education. Conceptually this would be akin to Napoleon Hill’s master-mind group concept. Sadly, these groups rapidly descend to spam, scams and other manipulative sales motivations. A master mind group is formed to share insight, wisdom, and experience and through such to generate greater impact then the individual could accomplish alone.

Napoleon Hill would be rolling in his grave if he could witness what many social media groups have turned his precious concept into. The many groups are passed off as Angel Investment, Venture Capital, Investment groups, and many other business specialties well too many to list. In all of these groups the moderators (when there is a moderator) cherry pick based upon their own conflicts of interest. Rarely is there a truly educational and informational group in the mix. The most damaging issue of all is that these groups become fertile ground for scams and frauds to be perpetrated. Now, scammers and fraudsters don’t even need to invest in the promotion of their dark intentions, as they can simply slip into any social media portal and prey upon the 100’s of thousands of available potential victims.

This all can be controlled and easily avoided through the process of having a 3^rd party advocate. An advocate is only concerned with the best interest of their client. There are no conflicts of interest, internal biases or ulterior motives. The advocate exists to inoculate and insulate the client. Total inoculation and insulation is developed through education, media sourcing such as webinars, tele-conferences and virtual web based activities.

The Advocacy Network is your master-mind group formed to enhance your ability to make smart decisions about money.

Over the coming weeks I will be producing blog spots that will identify common myths, lies and dam lies in the financial market place. Believe me when I tell you there are too many to list and I could produce pieces for the next several years and not cover even a quarter of the scams, frauds and sales manipulations in the financial markets. As an investor, consumer or business you need to be aware of the potential abyss vying for your dollars on a daily basis. I look forward to serving you in your quest to make smart decisions about money.

 

Karl Schilling

321-250-1445 O

321-947-3220 C

www.theadvocacynet.com

Skype: karl.schilling5

Brother Love’s Traveling Salvation Show, the Life Insurance version

The following is a real advertisement run in several insurance industry journals and promoted via email to licensed agents:

And now, for the first time ever on the planet, this amazing system is available for use; completely systemized, and ready to sell monster amounts of life insurance almost automatically for a few select life insurance agents.

This system is unlike any other ever created in that it has the ability to create large sales forces of enthusiastic clients that will eagerly and consistently give you referrals, encouraging their friends and family who qualify to seek you out and ask you to sell them life insurance.

No one else in our industry knows how to do this or knows that this system even exists.

This IS NOT fantasy.

It is reality. I've created the ultimate "easy button" for life insurance agents.

No more begging for business.

No more multiple closes.

No more attorneys or accountants killing deals.

No more tough and ugly prospecting. Instead, you will have eager, interested prospective clients calling you, asking you to complete a life insurance application for them.

ATTENTION: Discounting what I'm about to tell you could be one of the costliest mistakes of your financial services career. Before you finish this letter, you'll know beyond any doubt that what I'm saying is true and can instantly transform the way you do business, allowing you to quickly and easily reach the ranks of Millionaire Advisor at ZERO risk to you.

I'm allowing a limited number of advisors in your area to preview and license this system, and because this system is so powerful and so easy to use, the results are fully guaranteed. (Qualifying life insurance agents and advisors can license this system at no net cost to them. Complete details of this unmatched guarantee are covered completely at a free preview and business building seminar. You'll receive $2,308.95 in free gifts just for attending.)  (END of advertisement)

I have maintained my registrations and licenses in the Financial Services industry, but that has been to become an advocate to clients not an advisor, agent or representative. As an advocate I seek the best interests of those I serve. Above please see what has happened to a once proud and meaningful industry. The entire Life Insurance industry is at risk due to gimmicks and tricks like the above fore mentioned. The industry has no one but themselves to blame. I research over 14 industry periodicals monthly and can tell you that these so called educational and industry promoting publications are all guilty of taking advertising revenues from predators who offer so called silver bullet marketing scams to unsuspecting agents. There is more money being made selling useless information then there is in actually serving the needs of clients. If there was room here I would post for you the postcard this organization uses to lure agents into their game. Needless to say it is done with the allure of sex. Imagine in a professional field such as impacting people’s FINANCIAL well being, we have to be subjected to the same kind of marketing that was once used in Times Square to promote peep show palaces. Not exactly what I would call professional. Of course as you are not licensed or in the industry it has no concern for you, right? Wrong, over the coming days I will be writing a series on annuities, life insurance and other very important financial tools that you need to be aware of. In this series I will expose the realities and truths of this important vehicles and I will also expose the myths and sales manipulations you must avoid. (MOST IMPORTANTLY I WILL NOT BE SELLING YOU ANY PRODUCTS!) That is why I gave you a simple display of what agents in the industry are being taught. Of course you must believe that insurance companies and the industry as a whole doesn’t educate their agents this way, unfortunately as they take the advertising revenues and allow this to be pitched to the agents, they are culpable in this gimmick driven environment. Let me say right up front that all of this is TOTALLY legal and allowable, now as to whether it is moral and ethical is a totally debatable issue. I want to educate you on the importance and the realities of these financial tools and help insulate you and inoculate you against the manipulative techniques and myth pitches out there. Send you family, friends and associates to this blog so they can get the real scoop on financial services.

 

Psychological Triggers Exposed

So far we have discussed the normalcy bias, the silver bullet syndrome and the dangers of conformity. These diverse discussions all fit together in forming a puzzle of psychological triggers. The big picture can come together when you have all the pieces starting to fit together.

Earl Nightingale in his classic audio series “Lead the Field” told a story that fits this best.

“One day, a man was watching a professional football game on television. His five-year old son kept bothering him. So the man tore out a page of the Sunday paper. It was a full page airline ad that showed a picture of the world – the planet Earth as seen from space. He tore up the page into a dozen pieces and gave them to his son. He said to him, “Here, put this picture together with this cellophane tape, and show Daddy how smart you are.” He then went back to watching his football game. In a surprising short time, the youngster had taped the picture back together. It wasn’t very neat, but it was a very good job, indeed, for one so young. “Hey, that’s amazing!” the father said. “How did you put the world together so quickly?” The little boy said, “There was a picture of a man on the other side. I just put man together, and then the world was all together.”

The youngster was no doubt surprised by the big, warm hug he got. “That’s right, son,” the father said. “When the man is altogether, his world is altogether, too.”

Becoming aware of how the big picture comes together is a key component in making smart decisions about money. The small pieces that are torn apart are psychological triggers that come together to form the big picture. The sense that everything will return to “normal” (normalcy bias) is tied to the overwhelming hope that everything will work out well (the silver bullet syndrome), which leads directly into the complacency of conformity. It is the end result of conformity that leads investors running like lemmings toward a cliff.

These psychological triggers are ingrained in an individual’s thinking process. Napoleon Hill discussed this in terms such as accurate thinking, critical thinking and straight thinking. Hill, spoke in terms of rarity when discussing this form of thinking. Let’s briefly look at what Hill had written about “straight thinking.”

“Two great forces are working in the minds of all men to make them what they are. One is social heredity, and the other is physical heredity.

Physical heredity is the law of nature through which the sum and substance of all characteristics, traits and physical aspects of your ancestors, through the ages, have been handed on to you. You are unavoidably a product of all your ancestors.

Social heredity consists of every influence with which you will come in contact, from the time you reach a state of consciousness until you die. Your mother’s and father’s influence, your education, the conversations you listen to, religious influences, political ideas, the newspapers you read, the shows you see – they all have and will help to make you what you are. They are your social inheritance. Very few persons have what it takes to pull away from these and do some independent, accurate thinking for themselves. A few cast off their social inheritance and dare to be different and individualistic. When this happens, the world has an Edison, a Ford, a Thomas Paine, an Ingersoll or a Jonas Salk. But the vast majority of people allow themselves to become victims of social heredity. This is why straight thinking is such a rarity.”  (Source: PMA Science of Success Course. Educational Edition. 1961. Pgs. 504 & 505

Independent, accurate thinking is the absolute benchmark for making smart decisions about money. The inoculation and insulation from scams, fraud and predatory sales tactics direct require you to learn how to become independent and accurate in your thinking process. The reality of victimization is that people are unaware of the natural bias they have formed toward conformity and the lack of independence in their thinking process. A major part of this redundant vicious cycle is the normalcy bias, the silver bullet syndrome and the ease of conformity.

 Karl Schilling

321-245-1445 O 321-947-3220 C

Skype:karl.schilling5

advocacybz@gmail.com

 

When Too Many Think Alike

"As a general rule, it is foolish to do just what other people are doing, because there are almost sure to be too many people doing the same thing."
   -- William Stanley Jevons (1835-1882)

One of the sure-fire ways to financial failure is conformity. There is nothing more damaging then following the crowd. For the most part the crowd is listening to someone else who is listening to the crowd. It is a vicious cycle that ends with a death spiral.

The economic climate we now live in is a highly evolutionary vehicle. Gone are the ties to the past and the trends that were in existence for the last 100 years. This is not a bump in the road which ends with everything happily and comfortably returning to “normal”; there is a new normal being created. It is a source of dramatic change with new rules and new patterns and trends.

The simple facts are those so-called experts are out of their depth as they have now become novices along with everyone else in this new age of geo-political driven economic events. The financial markets are being re-created and this requires all investors and consumers to become counter-intuitive in their thought processes. The financial decision making process that may have served you well in the past has been made meaningless into the future.

There are many dangerous myths built into your financial decision making process, we already covered the normalcy bias and the magic silver bullet syndrome, now you must confront the conformity of “everything old will be new again.”

"In speculation, as in most other things, one individual derives confidence from another. Such a one purchases or sells, not because he has had any really accurate information...but because some else has done so before him"
-- J.R. McCulloch 1830

The following is a story that best clarifies what is happening in the financial markets today:

Everyone has had a taste of success. The explanation for it all is "the world is awash in liquidity". Everyone is also feeling rather complacent & secure. It reminds one of the Red Indians....

"It was autumn, and the Red Indians on the remote reservation asked their new Chief if the winter was going to be cold or mild. Since he was a Red Indian Chief in a modern society, he had never been taught the old secrets, and when he looked at the sky, he couldn't tell what the weather was going to be. Nevertheless, to be on the safe side, he replied to his tribe that the winter was indeed going to be cold and that the members of the village should collect wood to be prepared. But also being a practical leader, after several days he got an idea.

He went to the phone booth, called the National Weather Service and asked "Is the coming winter going to be cold?" "It looks like this winter is going to be quite cold indeed," the meteorologist at the weather service responded. So the Chief went back to his people and told them to collect even more wood in order to be prepared. A week later, he called the National Weather Service again. "Is it going to be a very cold winter?" "Yes," the man at National Weather Service again replied, "It's definitely going to be a very cold winter."
The Chief again went back to his people and ordered them to collect every scrap of wood they could find. Two weeks later, he called the National Weather Service again.
"Are you absolutely sure that the winter is going to be very cold?" "Absolutely," the man replied. "It's going to be one of the coldest winters ever."

 

"How can you be so sure?" the Chief asked.
The weatherman replied, "The Red Indians are collecting wood like crazy."

Conformity in financial decisions leads to calamity!

 And, so the question is are you following “Red Indians” in the financial markets?

Karl Schilling

The Advocacy Network

321-250-1445 O

321-947-3220 C

Skype: karl.schilling5

The Magic Silver Bullet Syndrome

Great wealth for little or no effort, free money, quick returns, overnight success, zero risk, risk free, GUARANTEED! This is the rhetoric of the magic silver bullet syndrome. The one consistent behavior trait that supersedes even cynicism and skepticism is the belief that one can get rich quick. This has long been the implied promise in all scams, frauds and predatory sales tactics.

When you grasp a very simple concept you can let go of this tragically destructive belief pattern. In fact the ability to be inoculated and insulated against scams, fraud and predatory sales tactics is built upon a foundation of behavioral change. The ability to change any behavior pattern relies on the foundational change of a belief. Many times beliefs become deeply ingrained and as such are sub-conscious triggers which we are unaware of. When these triggers are launched the results are a pre-ordained decision-making process which has been built upon the underlying beliefs about any pertinent information.

The simple truth is if you believe the sky is black then you will make all your decisions based upon this information, regardless of the fact that the sky is blue. You ultimately see what you believe and therefore the sky is black and no amount of evidence will shake this ingrained belief.  The old adage goes I’ll believe it when I see it, but the truth is I’ll see it when I believe it. Now, of course this is a very extreme example but it highlights how the sub-conscious process works.

Beliefs about money are just as extreme, every individual has developed certain beliefs about money and all their financial decisions are made based upon their beliefs. If you have been ordained to believe that “money is the root of all evil” and to be wealthy would be destructive then you are repelling money on a daily basis and all you decisions are made with this simple belief driving your sub-conscious mechanisms.

With this awareness you can now understand the common urge to find quick money and find shortcuts to success. On a conscious basis the vast majority of individuals want to believe that there is a magic silver bullet that will take care of all your needs and get you out of any difficulties. It is simply a natural mindset to feel comfortable with the chance to win the lottery and have all the problems melt away. Of course the statistical probability of winning the lottery is just a tad above zero, but the chance is the addiction. We are addicted to chance. We want to believe and we want to win with no sacrifice, no risk and want a guarantee that if we fail we came be made whole immediately.

The reality is there is no winning without work, there is no success without sacrifice and there are no guarantees in life. One of the greatest tools in a scam artist’s tool bag is the impression that there are guarantees and there are risk free opportunities to become immensely rich and have everything you ever dreamed of. This fantasy is portrayed time and again in every commercial venture you are exposed to. It is played out emotionally in scams, fraud and predatory sales tactics though.  

So what is the simple answer to this tragically destructive belief? Here it is:

There is no such thing as a magic silver bullet!

The magic silver bullet in any deal, opportunity, marketing proposals etc… doesn’t exist.

Debating interplanetary aliens, Big Foot, the Loch Ness Monster and the many other real or unreal is good for scientific and intellectual debate none of these beliefs directly endanger your financial future. (Unless of course the scam or fraud is driven around a space trip or a big foot excursion).

The existence of a magic silver bullet keeps scams and fraud alive and well. When you give up this one belief and accept that success is possible through a structured work ethic, great financial results can be had through the use of solid due diligence, intelligent use of time, capital, and rate of return you can eradicate the magic silver bullet myth. That financial success can be had through the oversight of risk profiles and how risk relates to return and how growth expands when risk, return and chance are properly executed. When you remove the magic silver bullet you can think logically and rationally. You can attach your emotional connections to the elements of your life that require strong emotional support. Money is simply a concept it is not a living breathing organism and it does not have any emotional value. Unfortunately most people have attached an emotional value to money and it is this emotionally driven impact that gets in the way of making smart decisions about money. Money can be an ally or a great misery. The choice is up to the individual.

Repeat after me: “There is no magic silver bullet”

 

Karl Schilling

The Advocacy Network

321-250-1445 O

321-947-3220 C

Skype: karl.schilling5

www.smartdecisionsaboutmoney.wordpress.com

 

The Normalcy Bias and Procrastination

Presently there exists a uniquely positioned psychological dilemma in our financial markets. For private businesses and small cap public entities the capital markets have come to a standstill. There are no banking opportunities and now the investor side of the equation has all but dried up completely.

The major causative factor in this phenomenon is the normalcy bias. The following best describes the normalcy bias:

"A quirk of the human condition is for the mind to desire normalcy so intensely as to consciously or subconsciously disregard knowledge that is disruptive to a pre-conditioned reality. This phenomenon is an important part of crisis management and market psychology. The consequence of a normalcy bias is that warning signs of a potential crisis go unnoticed or are interpreted optimistically. When a crisis occurs people are so overwhelmed by events inconsistent with a desired reality they lose their ability to make decisions. Researchers believe when the mind encounters an entirely new experience or event it attempts to match that reality to relevant experiences of the past. If there are no matching experiences the mind enters into a kind of feedback loop resulting in passivity. This lack of action as a response to risk is called negative panic and it culminates in a dangerous inability to act assertively in crisis. In essence, the psyche struggles to come to terms with what is really happening, paralysis follows.

The afore-mentioned paralysis exists in the form of procrastination which is always a negative factor for any financial decision making process. One can always measure their loss in both the present and the future based upon procrastination. Nothing good ever comes from procrastination, it is a no-decision which is in itself a very discernible decision.

Investors of all types large, small, fat, skinny, intelligent, ignorant etc... Are suffering this malaise. Once they understand and become aware of it, they can be awakened and the ability to make smart decisions about money will return like fresh meat after a thaw.

We now have many people who are stuck in the paralysis by analysis cycle, this is why so much money is on the sidelines and people believe they want to stay in cash. By treating the symptom we will not cure the disease. The core of the procrastination is the normalcy bias, which is being promulgated in a continuous state of unawareness.

The initial step in correcting this psychologically driven procrastination cycle is to overcome the fear of change. Just as the normalcy bias overcomes individuals in disaster based crises, it now exists due to the ineffective awareness of a permanent changing economic environment. Everything old will not be new again. Gone are the days of happily reminiscing for a return the good old days of the past. We have recycled into a global economic trend and investors need to start embracing the way opportunity will present itself in this type of environment. Of course it will look, feel and be abundantly different. Old trends have become meaningless and provide no benefit for any forethought into smart decisions about money.

Not only do investors have to make this leap, but investment advisors, financial planners, family and business advisors such as CPA’s etc.. all need to make the leap as well. The ostrich approach to sit around and wait until things return to normal is a sure-fire failure driven approach.

The second step once fear is lifted is to practice a counter-intuitive approach to investment observation. Plain vanilla investment approaches will not keep you above water in the present financial environment. The need to embrace alternative investment opportunities is paramount to financial survival. Understanding the motivation of Wall Street institutions and their direct connection with government impact on the economy becomes more necessary than ever before. Your investment success is now mandated upon several additional factors including geo-political factors that impact the entire universe of industries and investment sectors. How does taxation, regulation and government oversight impact the entire industrial universe has to be taken into account when looking at any single business entity within that specific universe.

These are big changes and they are difficult adjustments for investors and consumers alike. By embracing these changes and fearlessly diving into the new financial market place you can master the on-coming surge of great opportunity and successfully overcome all obstacles in making smart decisions about money. What you cannot afford is the infinite losses assured through procrastination.

Learn the Psychological Triggers that will inoculate and insulate you against scams, fraud and predatory sales tactics.

www.karlschilling.com

Check out Advocacy Network on radio Today!

The Traders Network

SCHEDULED GUESTS FOR TUESDAY, NOVEMBER 06, 2012

2-3pm Central

Segment 1 - Laif Meidell, President - www.financialhealth.com

Segment 2 - Karl Schilling, Founder - www.karlschilling.net

Segment 3 - Norm Winski, Editor & Publisher - www.normwinski.com

Segment 4 - Anthony Cherniawski, Chief Investment Officer - www.thepracticalinvestor.com

CLEAR CHANNEL DALLAS – KFXR/1190-AM And Streaming Live @ www.yorbamedia.com

Visit Yorba TV at: http://yorbatv.ning.com/?xg_source=msg_mes_network

The Pitfall of Mental Accounting

The majority of investors have a bucket list when it comes to money. They separate money into buckets and prioritize those dollars usage. An example of this behavior is a college fund. When investor puts the dollars into the college fund they lock it up and wouldn’t consider any other usage of those dollars, even if those dollars were being eroded by inflation they would stay in the college fund bucket. This is commonly referred to as mental accounting.

Mental accounting creates a disconnect with the big picture overview for financial decision making. We are much more likely to take risk with money perceived to be “house money” as is witnessed by the casino behavior with winnings. By example, when we go to the craps table with $100 and win an additional $200, we are more likely to take a bigger risk with that $200 then we would if the money was our own to begin with. The perception is that the money isn’t really ours and we didn’t work to earn it so we can risk it with impunity.

Where this disconnect displays itself best however is with tax returns. Our tax return represents money that we worked for and earned yet we ultimately perceive it as found money and are willing to frivolously spent or risk it. It is not the same circumstance as the casino effect but it is the same result.

So how does mental accounting endanger an investor as a potential victim? The psychological trigger used by scammers is a twist in the mental accounting behavior practiced by individuals. The twist is in the offer of tremendous gains, when triggered the individual reverses the fear of loss to the gain and not their initial investment. The mental accounting fast forwards to the gain and sees it as the risk involved. When the con explains how you will earn 3 million dollars on the upside, he has triggered your mental accounting to the gain. Now the impact of investing $100K seems very reasonable and the fear of loss is focused upon $3 million. The sense of urgency is created and the initiation of personal greed has blinded the victim from the real fear of loss which should be focused on the $100K being risked. This twist of mental accounting is one of the common triggers used in scams, fraud and predatory sales tactics.

The take away here is that money is always just money. It doesn’t come in separate categories such as found, house or risk free. It is a financial means to an end and has stated value. The opportunity to increase and multiply through risk is a transactional event that needs to be fully vetted for due diligence and risk analysis. In the end though the money requires no mental accounting.

www.karlschilling,net

The Power of Confirmation Bias

A resulting impact from anchoring and overconfidence is an additional form of bias referred to as confirmation bias. This bias puts us at risk in the way we perceive information. We continually extrapolate our own beliefs unconsciously and treat information that supports what we believe or want to believe more favorably.

During the decision making process for financial decisions we will refer to information that supports our decision more favorably. We rarely give the obvious negative much consideration. This is due to confirmation bias.

Sales predators are well aware of how individual biases will impact an individual’s decision making process. Surely you have sat through many sales presentations and have not picked up on the unconscious (subliminal) messages. These messages go right to you core belief system and trigger your confirmation bias. You unconsciously are seeking information that supports your beliefs and desires. Unfortunately common sense often is over ridden in this process.

For example you may have a favorite industrial sector you has been very good to you over a period of time. Let’s say energy for example. You will be much more inclined to believe information that supports you positive experiences in this sector and disregard any contrary information. In essence you will continually discount any negative information that could well make a difference in your decision making process.

Hindsight also plays a predominant factor in a confirmation bias. This creates a tendency to re-valuate our past behavior surrounding the decision after we have full awareness of the outcome. Our judgment of a previous decision is tainted by a bias formed to accommodate the new information. In a stock investment once we know the outcome of the stock’s performance we adjust our reasoning for purchasing in the first place. When updating our rationalization in this manner prohibits us from viewing past decisions as objectively as we need to.

The focus effort required here is to once again journal your experiences as they pertain to your decision making process. In order to recognize your internal biases you must have data to review. Without this data you will continue to groove ruts in your decision making process. We become creatures of habits in our decisions. By having a record of the thought process and emotions involved in any decision you will be able to review results with clarity and full transparency. By treating all information with full objectivity you will not fall victim to confirmation bias in your decisions.

Next time we will cover the disastrous impact of procrastination.  

www.karlschilling.net

Anchoring and Decision Making

The cognitive bias that describes our common tendency to place too much emphasis on one trait or piece of information when making a decision is called anchoring. This occurs during the normal decision making process when we rely too heavily on a specific piece of information which governs our thought process.

Once the anchor is stamped in our mind there is a bias set towards adjusting all information to reflect the anchored information. This cognitive bias is often developed at a young age when it is reinforced through our learning process.

Anchoring has a strong impact on our beliefs about money. The financial decision making process an individual moves through is reflective of their perception of money. For example, a person looks at investing in a company they may focus excessively on a certain element of fundamental analysis and use those criteria as a basis for evaluating the value of the investment, rather than considering all the proper elements of complete due diligence. The bias will cause the investor to view all future information in a manner that reinforces their decision.

These decision traps commonly lead to investors staying too long with an investment as well as developing a very large blind spot with regards to the initial investment decision.

Understanding the psychology of your decision making process will allow you to eliminate pre-conditioned bias’ which reduce your probability of making successful financial decisions. Awareness will also help you develop an objective decision making process.

Scam and fraud victims are manipulated through the knowledge and experience their perpetrators have in the field of psychology. In order to insulate and inoculate yourself fully you must understand the psychology behind your financial decision making process. You don’t stand a chance if you haven’t gained full awareness of your anchors. Believe me when I tell you that the professional scammers and fraudsters will find your anchors very quickly and devise a strategy to use to their best interests.

Your focus points for this concept are simple; return to your journal and review your last 5 investment decisions. Take the time to reflect on the answers to several questions:

1.      What is the most important aspect of an investment for me?

2.      What is my due diligence process?

3.      What must an investment not have that makes me decide to say no?

4.      What must an investment have for me to say yes?

5.      Why do I want to invest?

The BIG SCAM!

"Business as usual" Of course Pres Obama ran on a platform that was going to put an end to this philosophy. I remember the platform of full disclosure, clear transparency and other rhetoris. Now we see that the Obama adminstation not only mislead the America voter, they intended to become the MOST corrupt administration we have ever had in office. The buying of votes for the totally dysfunctional Heath care" or Health Insurance" reform bill proves that this is well beyond business as usual. Now there are states that have been finanically protected buy the Federal government and states that will need to pay the bills for the favored states. Let's put aside that this obviously cuts across party lines so in essence it is a form of political blackmail, what really happens here is that this administrtaion has begun a count-down to re-igniting a civil war! How many states are going to sit back and pay medicare, and health bills for other states who cut sweetheart deals to vote for a dysfunctional act to begin with? Forget about battles in court over constitutionality, get ready for a tea-party unlike anything seen before. WIll you really sit back and fork over hard earned dollars so States that were bribed for votes can stay fiscally sound. This not only stinks it is rotten to the core. And you thought that Red vs Blue was the next danger?
Talk about hypocrisy, let's look at the compensation Czar. This week, GM, Fanny Mae and Freddy Mac all had their CEO's pay approved. The lowest in this group was $6 million dollars. Coincindentally all these companies are Government controlled, the same Government who has ripped private enterprise and the so-called abusive salaries of those in management. Of course the excuse was these companies failed and still got big salaries, forgive me but it seems that GM, and the Fannies failed and potentially their failures led to the so-called failure on Wall Street, they at least contributed largely to the failure. Yet it is perfectly sound for these companies CEO's to have the so-called abusive salaries. This is not the only hypocrisy coming out of Washington. The FAA's recent confernce spending abuse proves that they are differnet from AIG having the sales and marketing conferences. More retoric and spin, we certainly deserve better than this.
Wake up and realize that BOTH parties have just made a huge money grab from you the American taxpayer by using several smoke-screens. Health care and Cap and trade are both red herrings. The health Bill is the first pay now and get benefits much later piece of legislature ever proposed and passed. You will never see an ounce of benefit from this legislature, nor was there ever any intention of you getting any benefit. This is simply a way of getting you pay for the decades of excess that has finally come due. The Federal government must make you believe that you are paying for a major benefit and the fact that this benefit doesn't begin for 6yrs or more is simply a small inconvenience. Imagine buying a house, car or any other useful commodity and making 6 yrs of payments before you can move in, drive away or use the product? Would you do this? Well both parties have just pulled the woll over your eyes and they have made you believe that this wasn't done bi-partisanly! It is a bi-partisian decision. In fact it is the very type of decision that should make you fired up come election time, this entire Congress and Senate need to be shown the door! We need leaders who welcome, TERM LIMITS, TORT REFORM and a strong ANTI-CORRUPTION act. From here on any politician caught taking bribes both public and private should be shown the insides of a Federal prison for a Long-Long time. Lets clean up the political system, and stop relying on the lies that are constantly perpetrated by smoot talk and no action. Let the Obama administration be the best thing that ever happened as it can be the bell ringer that opened everyone's eyes to the LIES, CHEATS and THIEFS that consistently gain the Americans vote. Just say NO to all incumbents and send fresh blood to our leadership.

Unintended Consequences

I am constantly amazed at how so-called intelligent leaders can continually make knee-jerk reactionary decisions with little to NO consideration to the consequences. Now that the auto-scam program is displaying just how inept a government run program can be, it helps shed considerably light on the potential disasterous Government Health Care plans. There is not enough time to go point by point, but rest assured that every step in the poorly designed Health care bills will elicit incredibly bad unintended consequences.

Start with businesses and Health Insurance. Ask yourself what you would do if you were a business owner. Put yourself in the following position: presently you are the CEO of a company with 100 employees. Your company provides Health Insurance, Dental and a 401K plan. You also provide a medical expense account and the program is administered through a 125 plan. The costs to you for these benefits equal approx 37%or so of payroll. The health benefit portion represents 18% or so. The Health portion also takes up the largest amount of admin time in employee education, registration etc.. this would include the compliance issues with regards to COBRA. Because of COBRA it is very difficult to make decisions about lay-offs as an employee still has the modest parachute of COBRA. Are you with me so-far. Under the plan the Democratic leadership is so desperate to race through this CEO will be faced with the following NO-BRAINER business decision. If the company offers Health Insurance it will continue to cost them approx 18% of payroll along with time and many treachous compliance issues. Or the company can TOTALLY drop ALL Health Insurance coverage and pay an 8% payroll tax penalty. Also by doing this there is NO more COBRA issues to deal with so lay-offs become easier then ever. So you're the CEO what do you do, continue to pay 18% plus headaches or pay 8% with NO difficulties whatsoever? Save 10% of your payroll expenses by choosing the 8% penalty.

I can tell you this a vast majority of CEO's will choose the 10% savings. Why wouldn't they? So, the unintended consequence is YOU will NOT get to KEEP the PLAN you are HAPPY with! Sound familiar? The second unintended consequence is LOSS of JOBS. It will now be easier to rid your payroll of poor performers and vested high salaried employees (which can now be replaced by younger and cheaper alternatives)

For every action there is an equivalent and opposite reaction. This health plan will create numerous unintended consequences, not to mention out of control expenses, loss of qualified Physicians, less service providers, rationing of care, death of elderly and much, much more....