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How to Keep Your Name Off Wall Street’s “Suckers Lists” The Daily Reckoning U.S. Edition

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The Daily Reckoning | Wednesday, December 28, 2011 Keeping your name off Wall Street’s target lists, From tragedy to anarchy...a true story of voluntarism at work, Plus, Bill Bonner on gold, stocks and turning Japanese... ------------------------------------------------------- Why I’ll “Pay” You $7,403 to Cancel Your Subscription*** I know that sounds funny — me “paying” you thousands of dollars to cancel... But that’s exactly what I want to do today. Please look here to get to the bottom of this insane situation. ***For-your-eyes-only invitation expires promptly on January 4th, 2012 [Ed. Note: Before we continue with our Daily Reckoning Best of 2011 Series...a quick note from Bill Bonner regarding the Bonner & Partners Family Office project... How to Keep Your Name Off Wall Street’s “Suckers Lists” Bill Bonner Dear Reader, If you have money, you will know one thing about the financial industry. It is largely parasitic. A parasite attaches itself to you and drains you of your blood. Its interests are at odds with yours. The stockbroker, for example, wants to encourage you to buy and sell — when that is precisely what you shouldn’t do. And the fund manager, the dealmaker and the structured products engineer — they all make their money by encouraging you to spend yours...often on things that make little sense. Wall Street sells dreams...hopes...and pies in the sky. Sure, its labor force tends to dress well. They often go to the best schools. They are smart. They are presentable. But get close enough, and you will see they struggle to mask the moral strain of flogging hopeless investments to people who they believe were “born yesterday.” Wall Streeters are not bad people. They are not dumb people. Neither saints nor sinners, they are just like the rest of us. But their industry encourages a huge fraud: that they are there to help you make money. They are not. They are there to help themselves make money. How? By taking it from YOU. The financial industry is very large and very profitable. The service it pretends to provide is helping to match worthwhile investment projects with the capital they need. The service it actually provides is separating fools from their money. But the financial industry isn’t equally bad to all comers. It reserves a special zeal for the “suckers.” A friend of the family used to own a brokerage on Wall Street. And in conversation on the work my son Will and I are doing on our family office research advisory, Bonner & Partners, came up. Will was talking about the many pitfalls of second-generation leadership of the family’s wealth building effort. And our friend mentioned that every big Wall Street brokerage has a “suckers list.” Evidently, there are two types of people on the “suckers list.” First, there are the guys that hit it big, but not because of any financial skills or investing experience. For example, the inventor of the breakthrough medical device. He is worth $80 million. And as our friend put it, “He’ll put $5 million into anything.” The other group on brokers’ “suckers lists” is made up of widows and children who were left sizable estates without the ability to competently manage that wealth. This is the list that brokers hit with their new deals and products. A few whales on this list can mean big profits for a brokerage. Of course, even if your broker isn’t ripping you off directly...there are the commissions, costs and hidden fees. That’s why spinning, leveraging churning and frenetic trading are the hallmarks of the financial industry. The more you trade, the more it earns in commission. Most people don’t give it too much thought. But if you have managed to accumulate substantial wealth, you will understand that all this “friction” in the system is one of the biggest wealth destroyers. You just don’t notice because it’s a death by a thousand cuts...each one is small enough to make you bleed only a little. Of course, what I call “Old Money” — family money that has been around for an extraordinary long time — has ways to avoid the parasites on Wall Street...and still come out on top. At Bonner & Partners Family Office — the small research service I set up to help modern-day families learn how to protect what they’ve earned using “Old Money” techniques — we focus on super low-cost plays we call “beta investments.” These may be simple...and low cost. But they are also powerful wealth builders. In fact, using “beta investments”, savvy investors could have multiplied their money 150 times over the last 40 years by making just three low-commission...and low friction...trades. What can Wall Street offer you? Well, in 2011 the average fund fell by about 9%. But hedge fund investors who only lost 9% were the lucky ones. If you’d asked hedge fund superstar John Paulson to look after your money for you, in 2011 you would have been down 46% through November. Of course, not before he charged you the typical “2 and 20” skim off the top. If this isn’t parasitic, I don’t know what is... Sincerely, Bill Bonner Founder, Agora Inc. P.S. Membership is currently closed at Bonner & Partners Family Office. The next intake — our only one of the year — is January 2012. If you’d like to receive an invitation to join at that time, simply fill out this brief declaration of interest here. Only 62 People Know Exactly Why These Four Companies Could Change the World Now you’re #63 “on the inside” — and you’re on the verge of raking in lasting wealth. This could go down in history as the story of our era. Click here for all the details. [Ed. Note: We’re not always “doom and gloom” here at The Daily Reckoning. Truth is, there is much in this world to celebrate. However relentlessly the state grinds down on the backs of good men and women, individual acts of freedom and voluntarism are indeed cause for hope and optimism. One such inspiring event rose out of a natural tragedy in Australia earlier this year. The story follows... “In Praise of Anarchy,” which first appeared in these pages on January 23, serves as today’s installment of our Daily Reckoning Best of 2011 Series. Please enjoy... The Daily Reckoning Presents In Praise of Anarchy Joel Bowman Left alone, good people tend to do good things. And, when unobstructed by coercion, force, violence or any other tool employed by the state in order to foster and maintain a more “responsible,” “socially conscious” citizenship, most people tend toward being good people...all on their very own. Nowhere was this sentiment better expressed during the past few weeks than in the flood-stricken state of Queensland, Australia (and, more lately, in the state of Victoria, to Queensland’s south). The rains that inundated an area the size of France and Germany (combined!) across the Sunshine State wrought havoc and destruction upon its people. Lives were lost, property damaged and industry crippled. When the worst of Mother Nature’s wrath had subsided, Queensland residents were left with a monumental clean up. To their credit, these individuals, in the face of near-immeasurable disaster, performed admirably. They did what came naturally. Contrary to the patriotic rally cries of politicians, they didn’t do what Queenslanders do; they did what good people do. And it was beautiful. The general feeling was perhaps best summed up by Wally “The King” Lewis, a retired national football hero, who spent the last week of his holidays helping his fellow Brisbane residents prepare sandbags and to bail rising flood waters out of their homes. (It is worth pointing out here that, for many Australians, there is no higher office to be attained in the land than that of venerated sporting legend.) Speaking to National Nine News from the waterlogged front yard of a neighbor — whom he had never met — Wally said, “If someone’s doing it tough, I think it’s the right thing to do to put the hand up and ask them if they want any help.” The interviewer then turned his microphone to another volunteer. “What was your reaction when Wally Lewis turned up?” Typifying the laid back disposition of the crowd, the young man casually replied, “[Laughs] Yeah, I was a little surprised but...you know...people help out. It’s all good.” The Australian people appeared to be perilously close to discovering something very important about themselves; something, perhaps, they’ve always known; an instinctual tendency toward human solidarity, the natural urge to help a neighbor in distress, to lend a hand; in short, to volunteer. Alas, barely had the first piece of debris been cleared away when the media, as it typically does, lost sight of the bigger picture. Alongside inspirational stories of non-violent, voluntary cooperation, the local papers turned their attention to the state’s role in the cleanup. Should the state and federal governments remain focused on returning “their” budgets to surplus, or should they deploy funds to assist those in need of help? In other words, how “best” should the state spend its citizens’ money...as if the only just, honest option had not already expired on point of expropriation in the first place? [The answer, in other words, is not to steal it.] While sifting through the news reports and reading comments about what the state “should” do, we wondered how people who are so ready to do what is natural, to cooperate freely with neighbors and “mates down the street,” could so miss the overarching lesson in all this tragedy. Why do hostages of the state turn to their captor when it comes to arbitrating issues of freedom, issues they are, individually and through voluntary cooperation, demonstrably capable of resolving for themselves? Perhaps it has to do, at least in part, with the misrepresentation of the concept of anarchy itself; a misrepresentation that serves not the interests of individuals, but of the state itself. We are taught that “anarchy” means violence, looting and the aggressive form of chaos that all-too-often flourishes in the wake of natural disasters. We are told that this is what happens given the absence of state control. Nothing could be further from the truth. The state IS control. It is the very incarnation of force and violence from which it purports to protect us. As Murray Rothbard, the man credited with having coined the term anarcho-capitalism, expressed in Society and the State: “I define anarchist society as one where there is no legal possibility for coercive aggression against the person or property of any individual. Anarchists oppose the State because it has its very being in such aggression, namely, the expropriation of private property through taxation, the coercive exclusion of other providers of defense service from its territory, and all of the other depredations and coercions that are built upon these twin foci of invasions of individual rights.” We can expect nothing more from an agent of force than that which is its primary, defining characteristic; namely, more force. A mule is no more capable of giving birth to a unicorn than the state is capable of “granting” freedom. Last night, with all this in mind, your editor telephoned his father. Dad lives about an hour south of Brisbane, where the post disaster clean up continues. In the aftermath of the flood, volunteer posts were set up around the city where groups of concerned individuals could assemble to donate their time and/or resources to help get the place back on its feet. “Sixteen thousand people turned up to help on the first day,” Dad told us. “They came with their own equipment and made their own way there. In the end, they had to turn people away. “I put my name down to lend a hand,” he continued, before adding, with sincere disappointment in his voice, “but I haven’t been called up yet.” Then, as a man who has spent his life helping people, he added, enthusiastically, “but I’ve still got two more days of holiday left, Sunday and Monday. Hopefully I’ll have the chance to get up there and help out then.” To those who would argue that coercion is necessary to foster freedom, that force is a prerequisite for peace and that the expropriation of individuals’ property on threat of violence is compulsory to fund an agency that, alone, is capable of guaranteeing safety and prosperity, we say: you don’t know the real meaning of anarchy, you don’t know what voluntarism is and, until you do, you will never know what it means to be truly free. Thank you to all the people in Queensland — and around the world — who do understand these concepts and, through their fine example, prove statists everywhere and always wrong on a daily basis. Regards, Joel Bowman for The Daily Reckoning Make “Big Oil” pay for your retirement Oil fat cats got rich on $4 gas. Now how’d you like to make them pay you back? This little-known “loophole” let’s you collect up to triple the retirement income most stocks or bonds pay... without touching the stock market... and all while “Big Oil” gets stuck with the bill. Click here now for all the details. And now back to Bill Bonner, with the rest of today’s reckoning from Baltimore, Maryland... Gold in the Next Calendar Year Bill Bonner We’re not getting any older. Or, are we? Yes, dear reader, it is all coming together...and falling apart. First, this is a quiet time in the markets. The Dow barely moved yesterday. Gold, however, fell $10 to close under $1,600. You know the drill. Sell stocks on rallies. Buy gold on dips. This formula has worked beautifully for the last 12 years. We don’t see any reason to give it up. Has anything important changed? Is there a new man at the Fed who is determined to save the dollar and the bond market? Has Congress suddenly decided to stop spending more than it takes in? If so, we haven’t heard about it. And so what if gold falls to 1,400? Or 1,200? You know what we call that. A buying opportunity! But a lot of people don’t agree with us — thank God. They think gold has made its big move. They think we’re back in 1980...looking ahead to another big bull market in stocks and another big bear market in gold. Not that there aren’t similarities. Let’s see...similarities...hmmm...hmmm... Oh yes. The Fed chief then and the Fed chief now both walk on two legs! But seriously, as Warren Buffett says, if you’re in a poker game and you can’t identify the patsy, you’re it. These people who see parallels between 1980 and 2011...who expect a recovery...and a boom...they must be the patsies. If they’re not, we are. They are buying stocks and selling gold. We’re doing the opposite. But you know something, dear reader... You know what we really think...? We consulted the Mayan calendar. It began on August 11, 3014 BC. And it ends...you guessed it...in 2012. And you know what that means? We can stop putting on seat belts. And stop worrying about M-2. Or M-1. Or any other M. We mean, what’s the point...with the end of time coming and all? And we can stop taking those nutritional supplements. Instead, we’re going to have an extra drink. What harm can it do? After all, if the Mayans are right, we’re not getting any older. By the way...we’ve all heard of how Mayer Amschel Rothschild built his banking empire. What we don’t hear much about is how his wife, Gutle, did the hard work — preparing her children for the challenge ahead. We know now that any fool can run a bank...it’s almost a job requirement. But not any woman can build a team of children who are capable of running a banking empire. Gutle outlived her husband. Despite the family’s great wealth, she lived all her life in the same tiny house in the Frankfurt Judengasse (Jewish alley) where she and Mayer had started out. When she was in her 90s she consulted a doctor. “What do you expect,” he said to her. “I can’t make you any younger.” “You misunderstand, Herr Doctor,” she replied. “I want to be older.” And more thoughts... We think gold has further to fall. We also think bonds have further to rise. And we think this Japan-like slump has further to run. Here’s something interesting. We have been predicting that the US would “turn Japanese” for nearly 10 years. Maybe more. Many were — and are — the parallels between the US and Japan. But one thing that never seemed to line up was the population trend. The Japanese are getting older...and fewer. Americans are still relatively young...and the population is still growing. But wait. What’s this? The latest census data tells us that immigration in the US has fallen to a 20-year low...and population growth has slowed to 0.7% per year — the lowest level since before the Baby Boom generation was born. Maybe we are turning Japanese after all. Regards, Bill Bonner for The Daily Reckoning