(noun, etymology Dutch from ‘boedel’: estate, possession, inheritance, stock.). 1. Crowd, pack, lot, as in ‘the whole boodle.’ 2. a. Counterfeit money b. Money acquired or spent illegally or improperly, particularly when used in bribery for political purposes. 3. Slang for money in general.

Go Fish

Posted on: Jul. 26, 2011  |  By: Ronnie Kahn  |  Category: Advice, General

Belief in the Illusion that is Money

There is movie called “Catfish.”  The movie is in the style of a documentary where the filmmaker’s attempt to delve into the life of an eight-year old painter only to find out that the whole thing was manufactured online by the girl’s mother.  The mother turns out to be the artist who has painted the pictures and she is supposedly so lonely and in need of wanting to lead another life that she conjures up this whole world of other individuals.  As she goes on e-mailing and speaking to the filmmakers over the telephone, finally they discover it’s all a ruse.  Movie aside, rumor has it that there is also a definite possibility that the documentary itself is a ruse in the sense that it is actually a set-up, meaning that the filmmakers faked it all in the first place.  So we start with the concept of the basic documentary which is a structure to document something in real life but then we are left with where does the real world start and at what level does the truth lie?

For someone who sees money’s influence embedded in every aspect of our lives, I see this as fodder for the grand magic that we call money.  Perhaps it that I am person with a hammer that only sees nails everywhere but this postmodern treatise on social construction and entertainment parallels the world of money in the form of this movie and the public’s reaction to it.  In our money world, we cannot tell where the collective illusion starts and where does the fakery jump in.  Take the political and economical soap opera that we are all watching in regards to the debt ceiling.  The debt ceiling needs to be raised because the government takes in less than it puts out and is amassing more debt.  Normally, to raise the limit is supposedly routine.  Raise the debt ceiling and we can issue more bonds to get out of not having enough cash to pay our bills.  But now those who want debt reduction are holding the whole process hostage unless they get what they want.  While, each side wants reduction, one side seems to want to do it without new taxes and the other side thinks they cannot get reduction without tax revenue increases as well as not wanting to have to go through this whole thing next year.  Why is this a problem?  As most of you know after listening to talking heads for seven months on this (and especially the past month), the theory is that the government will not be able to pay everyone which will then cause its debt rating to get hit.  The effects could run deep since so much of the economy is tied to government spending.  This in turn will cause the interest to rise on new debt which combined with some of us not getting paid by the government will cause a massive global recession since confidence will by shaken the world over as everyone uses U.S. government bonds as the financial safety standard.  All of this is unprecedented and no one really knows what will happen to interest rates and how markets will be effected long term.

How does this relate to our documentary of hoaxes?  First, there are those that claim the whole thing is not that bad and the government will be able to get along fine and the whole world will not come crashing down.  Most, though, are worried about the doomsday scenario and want to know if our dysfunctional politicians will actually go through with this or wonder if it is just political theater.  We all consider some of this brinksmanship and public squabbling but wonder if politicians will actually go too far and bring everyone down in order get a handle on the debt.  No one seems to talk about compromise anymore and everyone seems to just scream the “my way or the highway” mantra.  However, to play this out further, wouldn’t this doomsday scenario just cause the debt to get even worse since there will be a deepening recession with lower tax revenues and higher interest payments?  Yet, the public and even both sides seem to agree that we cannot keep spending more than we have as a nation.  Which returns us to whether this is political theater or is there actually a chance that politicians will cut off their head to spite their face?

Which then brings us back to money.   I have had a few clients call me about the doomsday scenario.  They are rightfully concerned with what would happen to their portfolios if this thing is not handled.  However, the whole world economy would supposedly go into shock without one “real” economic thing happening.  In other words, this is not about the economy or companies doing poorly and supply and demand causing interest rates and the value of the dollar to plummet or some other macroeconomic cause and effect.  The avalanche would be started by political decision which would then hit economic confidence in the system.  If you say “boo” do I:

  • A) get scared
  • B) ignore it
  • C) turn around and try and find out if there really is something to be frightened about?

It doesn’t really matter what you do if everyone else gets frightened and starts to run’s for their lives.  One of my clients decided to put in sell orders, meaning sell when a certain lower price is reached, in case there was a nine percent hit on each of his positions.  When we first start out with a client, we do education meetings showing how bad the market can get and historically how long it takes to recover along with a client agreeing to how much variation they can live with.  I was proud that none of my clients panicked during the meltdown, including this client, and now those values have returned.  It is my job to get individuals to not act emotionally but rationally so first I referred to what we had agreed to in the beginning.  Then, I gave all kinds of rational reasons why selling would not make sense.  For one, even if the markets do tank, we do not know when to get back in and the market tends to go up or down in huge swings which we could miss.  Also, some positions have a high range of variation and may jump 9% regardless of anything fundamentally wrong with the company that would be sold but just that supply is outpacing demand.  Next, there are all kinds of things spooking the market right now, such as European debt problems which could start a selloff that has nothing to do with the U.S. debt ceiling process.  Most importantly, he has a financial plan in place that even if there was another crazy shock to the system, he has enough income coming in from the portfolio and other cash assets to survive for quite a while.  This means we could most likely wait it out for a number of years while allowing the markets to recover.  A long term perspective takes guesswork about short term crisis out of the equation.  The problem is that these types of decisions are not rational.  In this case, this person could not stomach the meltdown of 2008-2009 and does not want to go through it again.  This is about pain avoidance.  Yet, with one of the worst financial crises in history, their portfolio is back to early 2008 levels and definitely ahead from where we started.  Again, this person would still possibly have to watch their values sink again which they were not prepared to do.  This client also uses a way of looking at money that behavioral psychologists have pointed out which is called “anchoring.”  He fixes the portfolio at a highest point and then considers anything lower a loss even if he knows his portfolio has made money since its inception or for the last three years or whatever.

Even though most of us did not experience the 1929 crash and the Great Depression, many of our grandparents or great-grandparents did and many of our parents or grandparents were old enough to remember it.  If affected their decisions for the rest of their lives and even spilled over into some of later generations.   Now this last meltdown is imprinted on many of our minds and is affecting how we deal with risk and variation of value.

The point of all this is that there is no real truth when it comes to money and it is only what illusion we choose and what story about money we are willing to tell ourselves.  There is also this little thing in the back of our minds which knows that money is a hoax and worries about what will happen if everyone stops “buying” it?  So we feel we have to figure out a way to get ahead of the proverbial bank run if confidence is shattered.  Are sell orders going to protect us from doomsday?  We say we understand that risk is part of life but plummeting numbers on statements speak louder than words.  When the recent financial meltdown happened, someone was duping us by offering bad loans, bad packaged investments with top ratings, and homeowners duped themselves that they could pay for it since home values would just keep going up.    As was the case then, when the system is rotten, we will not know it in advance in order to put a sell order in.  The debt limit crisis though is not about being duped.  It is about when politicians try to be filmmakers.  Besides, when everything is manufactured illusion, there is no way to weed out what is fake and what is real.  What we need to tell ourselves though is that it doesn’t really matter if the money documentary is real or not.  What matters is that we are entertained enough that we watch the movie.  The film Catfish can be enjoyed if you are trying to figure out if it is a hoax or not or even if you think it is totally legitimate.  When we are entertained, meaning we are buying into money’s illusion, we pay the money and do not feel cheated or duped.  That entertainment makes money for thousands of people who then spend money on other things that eventually help make money for all of us as well.  Should we be offended if someone duped us into watching it?  You can tell yourself whatever you want to but it doesn’t really matter one way or another.

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