Political intelligence that matters to markets

A business or an investment fund is simply a betting pool for people who have coin or credit. The bet represents all the information that the investor has acquired over some period and the dollar amount of her bet represents the minimum cost of the information acquired. This means that the actual cost of creating the investment fund, asset, or business means nothing to the investor.

All that matters is an outcome that recovers her cost for accumulating information that helps her determine whether her preferred outcome-a return of and on her capital-will be realized. Information on sunk costs mean nothing to her (much to the chagrin of the run-of-the-mill economist).

For information traders entering information markets what should matter is providing information that addresses existential threats to profits and revenues. The information trader must have awareness of the outcome the investor is interested in.

Investors watching political markets are interested in whether a decision poses an existential threat to a firm or a firm’s profits or revenues. Existential threats posed by government come in the form of a revocation of a license, denial of access to natural resources, or denial of access to financial capital. The investor wants to know the likelihood of the occurrence of these events.

In hind sight this is why the Trump Effect became vacuous. The expectations surrounding the Trump administration’s impact on investment never took into account government’s prime operational mandate which is to exploit the natural environment of a physical area. It does this by managing the extraction of resources from that physical area. In the case of American government, it has determined that extraction would best be carried out by a private sector driven by a profit motive.

Businesses provide efficient methods for extracting resources and converting the resources into “taxable events” i.e. goods and services for sale. Businesses convert human resources into taxable events by employing labor thus making humans available for taxation by government.

The subsequent uncertainty experienced by the financial markets post Mr Trump’s inauguration was the result of investors listening to the “emotional marketing” of the 2016 campaign. Rhetoric regarding bringing back manufacturing jobs into a political economy that favors information as its primary resource or building more bridges to nowhere via infrastructure knowing that the multiplier effect is limited by a project’s termination date was baseless but pulled on enough heartstrings of investors that they forgot or were forced to overlook even further government’s prime mission.

Also, the financial markets can’t risk forgetting that the U.S. is a federal system and states have to be considered when assessing the American economy. States have to be on board with any policies that address contraction or expansion of licensing or access to natural resources. For example, it is one thing for the federal government to increase access to radio frequencies by mobile telephone companies. But if the states do not put in place rights-of-way policies that allow mobile phone companies to deploy tower facilities, then having a license to transmit wireless signals is meaningless and the firm faces a scenario of less revenues.

When discerning what information matters, the focus should be on political information that threatens the continued existence of a firm or threats to its revenues and profits. Investors need to discern between the emotional or campaign marketing noise and substantive political intelligence that addresses a firm’s existence.

Learning how to disconnect from the State’s political noise

It has been two months now since I got rid of cable. The noise out of Washington has gotten to be a bit much. Americans appear to be ever increasingly losing their minds over the man sitting in the Oval Office. In less than three years his critics in the electorate will have an opportunity to enter a ballot box near them and vote for someone else.

If engagement in the ballot box and with C-SPAN’s Washington Journal were so fruitful we would have less tension or at least fewer reports on Donald Trump. Social media would be quieter or at least focused on something hopefully less mind numbing (I know that’s a lot of hope.)

As the good people at Reason.com reported back in 2012, one’s vote, in the end doesn’t matter. Given that voting is about the most active political engagement most Americans will engage in, voting amounts to a colossal waste of time.  Citing work done by the National Bureau of Economic Research, of the one billion votes cast in 40,000 legislative elections between 1898 and 2001, only seven contests were decided by a single vote. There are higher payoffs from just about any other activity than voting.

And what does government provide that we feel so emotionally invested in calling each other names, not speaking to each other, or worse, unfriending people on Facebook? Not much for our tax dollar.

For example, do you like the state of your roads or other infrastructure? The American Society of Civil Engineers gave America’s roads, bridges, and ports a grade of “D+” in a 2017 survey. The score has stayed relatively the same for the last 20 years, and given Congress’ inability to fund budgets, especially the transportation portion, I believe that grade will be on the United States’ report card for awhile.

How about America’s education policies? Are policymakers effectively addressing how well the State educates kids? Well, no. Remember Common Core, the initiative detailing what children grades kindergarten through 12th grade should know at the end of each school year? While enthusiastically supported by a Republican and Democratic president, a report by the Brookings Institution in 2012 determined that the policy would have little to no impact on a student’s ability to learn.

The news isn’t so rosy on the collegiate level either. For all its equating of democracy to equality, Blacks and Latinos are equating democracy to a racial disparity in accessing college education. In a USA Today article citing statistics from the National Center for Education Statistics, it was reported that Blacks and Latinos, while enrolling in college on a relatively similar proportion as whites, were enrolling in for-profit schools and community colleges at a higher rate than whites. This is considered problematic, according to the article, because of complications surrounding financial aid.

These are just some examples of the State’s failure to deliver on the benefits that it promises to its “extended employees”, the constituents who vote for the politicians that promise the good schools, good roads, and bountiful opportunities. One would think that more Americans would disconnect from a government that hasn’t kept its word, but on the contrary, like the population who have endured abusive relationships, there is that small fraction of the population that somehow believe that abuse is love.

So how does one disconnect from the State’s political noise? First remember that you cannot avoid the State. The State influences you via its rules and statutes; its courts; the media; and the taxes it levies. You cannot violate its rules without bringing harm to yourself. Your actions should lead to maintenance and survivability of self and family; top optimize your sovereignty. Your goal is to minimize contact with the State and replace its “services” with services provided via voluntary, private arrangement.

A couple approaches that you may have already thought of. For example, avoid owning property. The State encourages its citizens to own property so that a nexus for taxation exists. Work hard to improve the value of your property and every year there is the State swooping in for its cut.

A mistake I made was having my son educated in State schools. If you can, educate your children at home. This way you can devote more time to inculcating life survival skills and critical thinking skills very early. Schools focus primarily on programming children for allegiance to the State’s values. An independent thinking, self-actualized child is one of the biggest threats to the State. Trust me. It’s not some teen-aged gang banger that the State is afraid of. The gang banger can be shot down and no one will raise a fuss.

Another approach, stop voting. Don’t feel bad about not going to the polls. First of all, you are not required to. As we discussed earlier, your vote doesn’t matter. More importantly, the tyranny of the masses that is democracy is fueled by the vote. Why further threaten your individual sovereignty by giving wanna be master any authority to write oppressive rules.

Finally, divorce yourself from government issued currency and form a trading community that uses a non-government issued currency, hopefully one backed by a natural resource. The Treasury issued, Federal Reserve Bank distributed currency is backed by  an economic infrastructure that may be working for some but not for the majority. The currency’s demand should be a reflection of the economy that lies behind it, one that is productive.