Information Asymmetry

Tue, Mar 17, 2015 - 1:47am

Well lookey there! The lawyer pops up from the foxhole!

Recess is over. Time to get back to analysis.

Let us start with a most simple observation, and apply it to the many, important, global events unfolding seemingly every day. The concept is not radical. It is just the way things are, based on the fact that we are imperfect human beings. So let's look at it, intelligently, and use it to our advantage.

There exists at once, both the known, and the unknown. Just the other day, physicists discovered that particles of light are intertwined over space and time. Up until this time, that fact was not known. This discovery will change things, for sure.

Here is what it means for us. At any given instant, there exists information that is known to perhaps no one, or perhaps only a few persons, or perhaps to many persons. Some information is critical, time-sensitive information, which, once revealed, radically alters the given circumstances forever.

Humans appreciate, if not crave, stories. We love the drama, the emotion, the sense of intrigue, the challenges, all of it. Heck, I am a trial lawyer, I tell stories trying to persuade people on a jury to vote for my clients. Stories are what we humans gravitate to, and what we use to pass on knowledge and understanding. We need context to make sense of things, because our evolved brains learned long ago to adapt and survive based on remembering stories.

Applying these principles, take for example, the simple professional sporting contest, like the recent Superbowl. That was dramatic. The game was close. The Seahawks were certainly going to lose, because Tom Brady's Patriots scored late in the game to put it away. Only a miracle would win it for the Seahawks. Sure enough, Russell Wilson makes an incredible throw, and an impossible catch is made. First and goal, with the best running back in the game, 4 chances to go four yards? Surely the game was over and the Seahawks would win! Oh, the drama!

But what the hell happened? Pete Carroll, one of the best coaches in the game, called a play, a mistake was made, and oops, ball game. Patriots win. <obviously, I am NOT a Brady fan . . .>

So for all the drama, all the excitement, all the anticipation, the Patriots won the game, as they were favored to do all along. Bets were made. Some won, some lost, on to the next sporting contest.

But what do we know about information asymmetry and how does that relate to the Superbowl?

Here's how. What if someone knew in advance the outcome of that game, before it actually happened? Would that not be important information to have? If one had that information, and say, laid down a big bet at a casino, then such information would benefit the one that had it first, so long as the game was still not decided. In other words, there was a time component that added value, and it was NOT simply knowing the information.

So too is the information advantage today, applied on a much broader scale. This information asymmetry applies to EVERYTHING! It is the basis for arbitrage. It is the basis for valuing some human labor.

It certainly is the basis for valuing what I do for a living. I am a trial lawyer. I read and assimilate reams of information. I cull through that information in a timely manner that adds value because I have a distinct educational and experiential advantage over a non-lawyer, and even over other lawyers because I have done so many jury trials that I know what to look for and what is valuable.

It is NOT because the information is so magical and wonderful. It is simply because there is SO MUCH INFORMATION, that knowing WHICH facts to emphasize and WHICH facts to minimize makes all the difference in the outcome. Of course, in retrospect, it was obvious all along!

I mention all of this, because the similarities between what I do for a living, and the absolute bombardment of streams of disparate information at once contradictory and impossible to reconcile require some knowing, experiential differentiation or else the information stream is impossibly complex and ceases to be valuable for any purpose other than a distraction.

Take, for example, the Putin ten day absence, and the firestorm of speculation that it unleashed. I read with great interest, hoping that world war III was not going to start. Thankfully, at least from my point of view, Putin is alive and well, and the next war is still not yet underway.

But what about the most obvious information asymmetry that confronts us DAILY?

Of course I am talking about the US FED and the fiat paper we call the dollar. All of us here on this wonderful blog know full well, without reservation of any kind, that the fiat paper dollar is worthless, except for the time being because it is mandatory legal tender. We also know that holding paper positions, or ethereal digital positions, is at best a gamble, as all of it is subject to disappearing without recourse in an instant should the fiat system collapse or suddenly be deemed "replaced" by something different.

This information asymmetry is being used by the central banks of the world, and their owners, to spew forth worthless fiat dollars and other currencies, in a race to the bottom, while simultaneously trading those worthless scrips of paper for real assets, like land, and minerals, and energy supplies. The rest of the world, not knowing the truth, plays in the dark, unaware, perhaps purposefully so. Others, who have taken the "red pill," view things with more knowledge, but still, not full knowledge, and it is here, at this frontier, that we denizens of tfmr, ply our intellectual craft.

Who of us truly knows the full story? Jim Willie? Trader Dan? Mr. TF? Mr. Fix? The simple answer is easy. We all know instantly that we do not know!

So, because we do not know it all, and none of us ever will, then we can confidently state, without doubt, that SOMEONE, at a minimum, will have an information advantage. That is, someone will have information asymmetry with us, placing them in a better knowledge position than us, at least for an appreciable amount of time, however slight. That position of information asymmetry, is valuable, for a period of time. Then it is not. Then it becomes common knowledge. Than it passes into the history of time, and we all know that history is written by the victors.

So what do we do with the information asymmetry being used against us? Easy. We use the information asymmetry we DO have, against the others who are not as knowledgeable. Why do we struggle mightily for the same understanding that the TBTF banksters have, when we know, without a single doubt, that silver and gold are true money, have stood the test of time, and will hold their value like they have for 5,000 years? In two years, or twenty, my silver and gold holdings will still be silver and gold, and they will still weigh the same. What I can exchange them for will be anybody's guess, but I can tell you all for sure that those stacks of coins and bars will be worth far more than stacks of fiat paper! So, do I care to know more? Damn right. But is it killing me to NOT know the very minutia for which I can trade the Fedlines? Hell no.

Do I care whether gold breaks out of its downtrend? Sure. But not just yet. I have a big purchase to make. My biggest concern is whether to buy more gold than silver, or more silver than gold. I have already resigned myself to NOT be in the paper system. If that decision turns out to have been a bad decision in the long term, bad on me. I am prepared for that outcome. I was also prepared for the outcome of leaving my first wife. It seemed like such a dramatic move to make way back then, but now, not so much. Life is strange like that, because we ARE humans.

Enjoy the information asymmetry we do have, and use it. Stop worrying about that information which is unobtainable in a timely manner, and start using the information advantage which we already enjoy.

Prepare accordingly.

About the Author


Pounds of Money
Mar 17, 2015 - 1:52am

Hey CL!

I'm first!

Now I'll read.

Pounds of Money
Mar 17, 2015 - 1:54am

Whoops. This doesn't count as 2nd.

Not intentional, I swear. And I'm certain I didn't hit the submit button twice.

Mar 17, 2015 - 3:07am


Stack silver!

Mar 17, 2015 - 4:36am

Welcome Back.

Welcome back California Lawyer. I always look forward to your postings.

Mar 17, 2015 - 6:07am

Great post Cal Lawyer

Why did we get instantaneously so pulled in to the Putin mystery? With the number of diplomatic gaffes the Bummer group has come up with, U.S. citizens stand scared that what is separating us from WWIII is the calm diplomacy and decision making of the other side. Sometimes its better to face the devil that you do know than the devil that you don't. US Citizens were afraid they now would have a more unpredictable and unproven new opposing leader.

From Putin's standpoint, it made sense after Nemtsov (if the Russians didn't do it), to withdraw and find out how that could happen on his doorstep, to ferret out the enemy on his grounds. The more it seems he is out of control, the more lapses might occur. Cut electricity to the Kremlin, listen closely for backup communications chatter etc. There's a fire, but its the scaffolding that miraculously caught fire when the electricity was secured. All ways to create minor chaos. And maybe he was just testing what the US response would be to his disappearance should he need to go underground in the future.

What about the US side? I see 2 possible scenarios, could be either one, or both.

Never one to miss an opportunity, our very own Dr Janda got roped into something more sinister, did our own agencies capitalize on the disappearance of Putin to then try to ferret out their own "Russian spies". If Russia was being attacked real Russian informants would be trying to contact their Russian counterparts for directions on what to do, and the US would be listening closely. Wouldn't it make sense to exaggerate? There are helos all over, and tanks, and fires and, and, and...

Does it also afford the opportunity to falsely accuse US citizens in the future of traitorous inclinations via given circumstantial evidence? Are you a Russian informant of convenience? Did you google Pravda, Isvestia, RT, Sputnik to find out what was going on? Of course. Did millions of others? Yep, but it does become part and parcel of a story that then can be written about any dissenter of the current administration, "communications with Foreign publications" or whatever silly description would be stamped on to make it all sound so official.

Well, I hope I am wrong. These are only thoughts, after mulling over why Dr Janda was contacted when he was, with the information he was given, it's what makes sense to me. Especially since the info was intentionally inflammatory and just plain wrong. Something tells me it wasn't just an Aprils Fools day type prank.

Doesn't mean any of these theories are right, just what I am putting out there for consideration. Sometimes you just can't help thinking about the unknowns.

Mar 17, 2015 - 7:14am

Pattern matching

is what the human brain excels at. It's also called experience & it's there for survival purposes.

eg Waterhole in the bush, animals come to drink & coexist in a sort of truce state at the waterhole. Except for the crocodiles. For them it's feeding time. Without the knowledge and the subsequent timing decision, you end up as the fresh meat on the balcony.

CAL (Crocodile Dundee of the courtroom?? )- you have matched enough patterns to be able to see where the crocodiles lurk in your particular environment.

It can also be used against you because a known pattern is reacted to in a tried & true way. This is important to understand because it leave you open to manipulation.

TF has spent the last couple of years figuring out that someone has snuck a few extra crocs into the pond - identifying a new pattern. The management of the specs & funds into the BB's end of the pond is a spectacular success. Fat crocs who know when dinner is going to arrive.

What we have to watch for (anticipate a pattern shift) is when someone drains the pond or another safer pond appears within reach.

New PM exchange opening soon = new safer pond. It will be interesting to see what the croc breeders come up with.

My guess? lots of fancy shoes & handbags.

Mar 17, 2015 - 7:50am

I'm reminded

Of the woman in Cyprus whose grandson told her to close her account every Friday and reopen it every Sunday. So week after week, month after month, she engaged in the silly activity of taking all her money out on Friday, and putting it back the next Monday. Until the Monday when her actions weren't silly at all.

Mar 17, 2015 - 7:57am
Mar 17, 2015 - 7:58am
Mar 17, 2015 - 8:05am

Very good post, welcome back

Your point about your gold and silver weighing the same in 2 or 5 yrs is a good perspective for every to remember.

Here is an oldie but a goodie

Donald Rumsfeld Unknown Unknowns !


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