Bursting the Regulation Bubble with Ideal-Driven Investing

Like many American investors embedded in the rapidly globalizing world economy, I have been challenged by the recent domestic market conditions. The financial industry, crippled under the density of government intervention, has rapidly mutated from a system of rational self-interested agents to one of irrational entities who seem to lack a well-defined agency characteristic. Naturally, to succeed in this changing climate would require a drastic revision in one's strategic financial arsenal. Crucially, it also requires some unfortunate and unacceptable ideological concessions. Market models must account for what appears to be sub-culturally conditioned irrational behavior that is emergent in the neo-state capitalist system. In accounting for these effects, we implicitly acknowledge that existing models have failed. I argue that this is the wrong approach, and that these effects are an emergent property of our own ideological impurity.

No one would call it a stretch to read the past two years as hard evidence that the so-called failures of free market capitalism are actually the very proof of its intolerance for impure realizations. Simply put, when reason and logic no longer account for the rationale of the market, the tired laws of unidirectional causality suggests that one of two things must occur. Either our reasoning must change, forcing us to concede that what we thought of as rational behavior was actually irrational behavior masquerading as the rational, or the market itself must be manipulated into behaving rationally. We know this latter point to be a sort of inverse tautology, so the course narrows.

Through this deconstruction, one may easily arrive at a somewhat harsh reassessments of the so called "old" market models (namely, that they were incorrect) from their present failures, but is it not more powerful to reverse this causal relationship and say that the failures of these models are the very reason that they were wrong to begin with? In order to truly maintain ideological purity in this wasteland of conditional market freedoms, we must simply remember that when the market fails to operate rationally, it is because we ourselves have failed to interpret its behavior. However, it is obvious that this reversal technique fails when we claim that the impure realization of free market capitalism is merely a symptom of the implicit failure of free markets.

Accepting this, one can immediately see that the rules that govern rational behavior in the marketplace have all been warped into a sort of non-euclidean behavioral space. At the extrema, small changes in financial regulation produce enormous fluctuations in capital, while in the center of the policy space, truly substantially regulatory acts and longstanding policies seem only marginally effective. This produces a very widespread misperception that the federal government somehow has a one-to-one functional control over the health of the economy when it wields its tiny daggers. It is always a similar pocket of distorted forces that creates bubbles and overvaluations in every sector of the economy. The so-called government regulation sector is no exception, and mark my words, this bubble is about to bleed capital like a sliced artery.

It has often been said in hard social times: "We must not forget in our era of pillows and neckties that we are actually lions with whetted tongue, in search of meat." Indeed, as a set of animals, certain truths tend to be neglected in our daily interactions. One need only glance abreast at some of the more leftwing financial analysis publications such as "The Motley Fool" to see a flood of investment advice suggesting that investors would benefit from pre-empting this all-too-typical irrationality. The cost of all this is a loss of respect for the market process itself, and an undermining of the holistic faith in a deterministic economy. The solution, of course, is to funnel our investments toward the least regulated holdings and withhold as much capital as possible from those groups that are in bed with the powers that be. It is of course difficult to cut through the layers of obfuscatory publicity and the murkiness of the modern "annual report analysis" format. The message must be sent, however, at any cost. If a private firm lets this regulatory affliction touch its bottom line, then it is none but the investor himself who must step in and reject this state of affairs with his investment behaviors. They have always spoken louder than forlorn faces, angry words, votes and rifles combined.

At the very core of our behaviors, we must remember that while official government monetary value may no longer be unidirectionally deterministic, a compromise of value in supporting this turn of events is an implicit acceptance of them. When one invests in an overvalued "Green Energy" company, one is equally complicit in propping up the mythologies of green energy. Hence in order to objectively succeed in this climate, one's investments must no longer be viewed simply as a means of entrusting capital to establishments of sound financial constitution. Soundness is a term long lost for the rational agent. It is no longer ideologically sufficient to base one's portfolio on an optimally weighted formula for profit, because profit has been rendered meaningless by government overregulation. Though an eye must be kept on the calculated risks and rewards in reaping the milk from market ripples, one must remember the ideological precepts that make life possible and worthwhile in an asymptotically free-market.

In sum, a rapidly growing mass of the American public is beginning to awaken to the stark realities of investment in the new global world. In times of personal uncertainty, we must remember that our values and ideals are bigger than our own lives and certainly bigger than our governments. Generally, I feel no shame in admitting that my success has been furnished by the sort of persevering attitudes that have characterized all previous successful investors. Namely, timely currency speculation and a careful attention to consumer and financial industry trends. These are of course, timeless and indispensable strategies for a rational market, but they hardly tell the full story in the perpetual catastrophe that we face today.

Patrolling the Information Superhighway

On the heels of the Munich Security Conference, which many have compared to the Congress of Vienna in 1814 or the Conference of Berlin in 1884, many from the Hill to Hong Kong are all aglow at the prospect of truly global century. Among the topics on the agenda were the prolonged occupation of Afghanistan, a united attack on Iran's nuclear aspirations, and the first arms-sharing agreement between the U.S. and Russia. However, the most important collaboration to come out of the conference will be the first concerted effort by international magnates to monopolize and control the internet and permanently push back the ground lost in the past years through lack of focus on cyber-security issues.

While the blogger in me can't help but mourn the end of an era of n'er to be repeated net free-for-all, nobody can deny the immense benefit of laying down a few stop lights and sending out a few traffic cops on the information superhighway. Doing so will ensure that popular uprisings such as those in Tunisia, Egypt and Iran in the past year will not arise spontaneously or spiral out of control, meaning that we will be better able to transition regimes when necessary all while keeping a tighter grip on the transaction of goods.

There was, however, one point of concern that comes out of the global internet manifesto laid down by the major powers at the Munich Security Conference, and that is the persistent use of the archaic rhetoric of "terrorism" as a chief strategy for securing the internet. While the term terrorist when applied specifically to Muslim militants still has a little currency for some, in general, the public has gradually realized that this empty term is nothing more than a pretext or justification for otherwise illegitimate actions against states and free individuals. What's worse is that it has drawn attention to the plain fact that managing the globe does require killing innocent people. In this way, world governments have become trapped in their own venus fly trap of anti-terrorist rhetoric which technically brands them as terrorist regimes. While there had been a small push-back against the rhetoric of the war on terror in recent months, the Munich Security Conference and the internet debate have proven that many in the community are still unable to move past this old paradigm. Instead many are still echoing the tired words of Former Secretary of State Condoleezza Rice: "We're in a new world. We're in a world in which the possibility of terrorism, married up with technology, could make us very, very sorry that we didn't act." Indeed, it is a new, global world, and it is good that we are acting, but can't these measures be justified in some rational framework that will convince the bourgeoisie of where their collective interest lies?

Recycle for a Better Tomorrow

Analysts and Beltway insiders have been stunned by the ease with which U.S. operatives and sleepers in Tunisia, Egypt and Mauritania have catalyzed exactly the kind of regime-changing popular movements that the Orientalist dinosaurs of the Cold War era have insisted since day one of the New World Order could not be fomented in the complacent, fatalist and yet simultaneously fanatic Muslim societies of the Middle East. A few well-placed internet posts coupled with careful activation of the appropriate economic mechanisms have unleashed upon the ancien regimes of the North African a veritable weapon of mass destruction represented by a genuinely united and determined popular resistance at a negligible operating cost. The demolitions of the Tunisia and Egyptian projects that ran their course in 2008 have thus far been much cheaper and cleaner than critics had expected. What this means is that the old paradigm of "creative destruction" that gained currency in the 70s has given way to what policy wonks are calling the first genuine recycling plan of the postmodern era.

Though the term recycling is very recent, the concept is quite similar to the strategy used by the British Empire to control the Ottoman state for nearly a century and to a lesser extent the strategy employed by the League and NATO in China. However, the term was first coined in the 1970s for the Iran case, which in that December of 1978 appeared a model example of a recycled regime. The idea was to manage and reuse the same regimes, changing the faces and the rhetoric while maintaining the hard structure where possible. Profits would be significantly less than those of the "command and conquer" paradigm, but recylcing also in theory involved much less risk and promised a more sustainable option. Of course, when the revolution took a communist turn, NATO activated plan B (some say prematurely), and the rest is history. With the high-modernist recyclers out the door, a new paradigm emerged with the Iraq-Afghanistan corridor as its new test case: creative destruction. The logic behind creative destruction was that U.S. companies could reap massive profits by building up puppet governments, milking countries dry until it was time for the "demolition" phase, which involved a costly war, occupation and rebuilding project that would yield further economic gains for the pillar companies.

Recently, economists have indisputably proven that the cost of extracting, for example, the entire lithium reserves of Afghanistan over the course of 20 years as opposed to 50 would be tenfold, and thus, a steady reemergence of recycling has culminated in the events of this past month. Even the old hardliners have for the time being been willing to give recycling a second chance, no doubt secretly hoping that the revolutions take a theocratic turn.

Nobody is certain what the next few weeks will hold, and many are worried that the protests will veer too close to real revolution and once again the "Islamic card" will enter play. On this point, I must stress the need for patience. While the profits of creative destruction have been truly impressive, there is only so much space on the planet. We simply cannot continue to raze countries to the ground and rebuild them with the limited resources available in this day and age. Let's stop strip mining the planet and start farming it. Think of our children. Give recycling a chance.