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A Shattering Clash of Hard Plastic

Posted July 2, 2018 at 8:00PM

My easy pre-holiday commute to the office today was rudely interrupted by the battering ram-like force of an 1997 silver Isuzu truck slamming into the back of my Mustang. As my neck snapped back, I gave a brief and non-librarian thanks to whatever government regulation required headrests.

I’d hate to have taken that hit in a mid-60s muscle car. As it is, my formerly pristine GT will be saddled with a Carfax report for the rest of its existence.

Judging by the evidence, the instigators of this collision of hard plastic were feeding their baby and not paying attention, but this being Baltimore, they claimed that another car rear-ended them, swerved left, and drove away. There was no damage to their back end or, in fact, a third car...

In many ways, I felt empathy, as this was just a couple of middle-aged folks with a baby, and not a lot of money, playing the game and doing the best they can.

But it also erodes the general trust in the world. And without trust, finance would be a lot harder. For one thing, you’d have to pay cash for everything, including houses.

Degradation of Trust

But it's not just the little guy who lies to game the system. It's top down.

Take Argentina, a country that has defaulted 12 times in 200 years. It sold $2.75 billion in 100-year bonds just last year. The bank was hit with $185 million in fines.

They now sell for $0.75 on the dollar as the peso fell 25%. But just think, how many lies told by how many people did it take to sell that POS? There’s not enough lipstick for that many pigs. And how many kickbacks of what sort did it take people to buy them?

Tropical Gulags

Or how about the socialist President Maduro, the so-called “worker president” of Venezuela?

Venezuela began its “experiment” with Bolivarian socialism when crude oil was about $17 per barrel. Now it’s closing in on $80. And the country is broke, teetering on being a failed state. Inflation is up 40,000%.

The government has defaulted on a majority of its $60 billion in bonds. Foreign exchange reserves have fallen by about $2.5 billion in the last three months. And, of course, the state-run oil company (PDVSA) is falling apart.

The Financial Times writes:

Brent crude oil is up more than 64% this year. And as President Donald Trump cracks down on Iran via zero-tolerance oil sanctions, the international benchmark has rallied more than 8% this week.

Production at PDVSA — which accounts for 95% of export earnings in the country [Venezuela] and a quarter of gross domestic product — was cut in half from January 2016 to January 2018, according to the US Energy Information Administration. And as the crisis deepens, operations are continuing to wane.

Socialism is perhaps the world's biggest lie. It starts out with a worker's utopia and redistribution of wealth and ends in gulags and firing squads.

USA

While the U.S. ranks 28th on the Forbes list for world’s most reputable countries, it has problems.

How about Wells Fargo (WFC)? The company added 3.5 million people to its credit cards without telling them and then charged them fees! This ill-gotten wealth turned it into the U.S.'s biggest bank.

The bank was hit with $185 million in fines.

Then it happened again! Wells Fargo said in July it would make $80 million in payments to more than 570,000 auto loan customers who were charged for auto insurance without their knowledge.

But at least CEO John Stumpf is now cooling his heels behind bars...

No, I meant after driving his EPS and share price higher by ripping off 4 million of his customers, CEO John Stumpf walked away with a $120 million golden parachute. No jail. No nothing.

So, I get it. Why not lie to the insurance company? It’s all in the game.

Have a great Fourth of July,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.

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