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 !


Mar 17, 2015 - 8:07am

How a strong dollar is threatening emerging economies like India

In India, it is a leading electric utility, Jaiprakash Power Ventures, that having increased its debts thirty-fold in six years is now selling off facilities and negotiating with lenders to avoid a default.

In China, it is one of the country's largest real estate developers, the Kaisa Group, threatening to pay only 2.4 cents on the dollar to its creditors in the face of corruption investigations and a mass resignation of executives, leaving countless would-be Chinese homebuyers stuck in the middle of a multibillion-dollar standoff.

And in Brazil, a wave of bankruptcies among sugar producers has been driven not just by falling sugar prices, but also by debts that they owe in US dollars, which are becoming more expensive practically by the day compared with the Brazilian currency.

Years of low-interest-rate policies from the Fed have encouraged companies in these fast-growing economies to borrow dollars because they could do it more cheaply than if they took out loans in their local currencies, like the Indian rupee or Brazilian real. So they did: By September 2014 there were $9.2 trillion of such dollar loans outside the U.S., up 50 percent since 2009, according to the Bank for International Settlements.

Mar 17, 2015 - 8:09am

Indian gold imports for April-December period stands at $26 bn

NEW DELHI: India imported gold worth about USD 26 billion during the April-December period of the current fiscal, Parliament was informed today.

In a written reply to a query in the Rajya Sabha, Minister of State for Finance Jayant Sinha said 664.29 tonnes of gold worth over USD 25.74 billion was imported during April- December period of 2014-15. The country exported 38.11 tonnes of gold during the nine month period, worth USD 1.55 billion.

Mar 17, 2015 - 8:58am

Bank of Montreal lowering

Bank of Montreal lowering interest rates on its five-year, fixed-term mortgage, effective immediately. The bank said the mortgage will now have a posted rate of 2.79 per cent, down from 2.99 per cent. fyi.

Safety Dan
Mar 17, 2015 - 9:39am

Jim Rickards Reveals What He

Jim Rickards Reveals What He Does Differently in Exclusive Interview With Keith McCullough

James Rickards, best-selling author of Currency Wars, spoke with Hedgeye CEO Keith McCullough about how he finds the truth, the continuation of the currency wars, what the Fed gets wrong and much more in this exclusive interview.

Jim’s first appearance on Hedgeye TV in May 2014 was met with wide acclaim, and he did not disappoint in his return to Stamford for Hedgeye’s first ever live “Market Marathon” held in January. After 45 minutes of raw & unfiltered commentary on markets and the people that move them, Rickards and McCullough turned it over to the viewers, offering an extended viewer Q&A session powered by user-submitted questions.

This very long video interview runs for 73 minutes, so pop the top off a cool one before you hit the play button. It was posted on the hedgeye.comInternet site yesterday---and I thank Harold Jacobsen for digging it up for us.


Mar 17, 2015 - 9:40am

Nice article CALawyer Thanks.

Nice article CALawyer


Safety Dan
Mar 17, 2015 - 9:42am

Koos Jansen: Yuan's inclusion

Koos Jansen: Yuan's inclusion in SDRs likely will carry gold with it

Drawing upon official statements and comments, Bullion Star market analyst and GATA consultant Koos Jansen writes today that the Chinese yuan's imminent inclusion in the International Monetary Fund's calculation of special drawing rights will probably carry gold into the SDR too.

This is just an extension of what Jim Rickards and others [including myself] have been saying for a decade or more. But, having said that, it's still very much worth your while. Jansen's longish commentary is headlined "China, Gold, SDRs, and the Future of the International Monetary System" and it was posted at Singapore website on Monday local time. I thank Koos for sending it my way---and Chris Powell for the headline and the preamble.


Safety Dan
Mar 17, 2015 - 9:44am



Video unavailable

Includes excerpt of interview with Dr. Tenpenny. Please circulate this information; links are below. Thank you.


Safety Dan
Mar 17, 2015 - 9:47am

Headed to Saudi Arabia? Think Again..

Already 45 Beheadings in 2015 – Saudi Arabia on Pace to Easily Beat 2014’s Decapitation Level

One of last year’s most popular posts was titled: Record Beheadings and the Mass Arrest of Christians – Is it ISIS? No it’s Saudi Arabia. Here’s an excerpt:

In the past month, a group of radical Islamic extremists based in the Middle East beheaded at least 23 people and enforced a ban on Christianity by arresting a group of people for practicing the faith in a private home.

No, I’m not talking about ISIS. The real culprit is the Kingdom of Saudi Arabia, one of the America’s closest global allies.

I have highlighted the inhumanity of the Saudi regime frequently recently in order to demonstrate the incredible hypocrisy of U.S. foreign policy. While America’s phony politicians and useless mainstream media will often hype anti-Chrtistian bigotry and humanitarian issues when it suits the status quo message, the true driver of U.S. foreign policy can be summarized with two words: CORPORATE PROFITS.

Mar 17, 2015 - 9:47am

ok suckas

Ok suckas, try to trade THAT

Mar 17, 2015 - 9:48am


Well, I've got to say that the takedown of gold back to the November lows was relentless and brutal.

That was either the mother of all retests, or a setup for the nuclear destruction by algos set to detonate at the release of FOMC minutes tomorrow.

Someone knows. And it ain't me.

Remember, when there is informational assymetry, someone is going to make an ass of me, no matter what I try.

boomer sooner
Mar 17, 2015 - 9:49am

Welcome back CaL

Congrats on the trial! Don't stow the proceeds in just one pond tho. Great write up. We just need someone on the inside to give the 12 hour heads up. Like the window teller taking the bet. Happy St Patrick's Day to all. Today I'm 47. Some green beer in my future, I just know it.

Safety Dan
Mar 17, 2015 - 10:03am
Mar 17, 2015 - 10:14am

Excellent post

Always looks forward to reading your articles, CL !!!

Katie Rose
Mar 17, 2015 - 10:31am

Farm Update

CL, there is a rumor buzzing around here that an eighth grade educated man took on Bank of America in Federal Court in Spokane and won! The judge ruled that fraud had been committed and that made the contract null and void. The court ordered that he and his family be given free and clear title to their home. He had no attorney. He was his own attorney.

Since it has been a very long time since I posted an update I think I will start with alfalfa. I have been trying to get this farming down and I have learned a few things. If you live in a cold climate and have farm animals everything revolves around hay -- either alfalfa, grass, or mixed hay. Last year our local farmers sent their hay to the west side of the mountains. They received $100-$200 more a ton than the locals are willing/able to pay. Their transportation costs were $40.00 per ton. That left the locals in a panic.

I have a neighbor who grows fabulous hay. We have an agreement -- when TSHTF he gets free milk from me in exchange for the fantastic price he gives me on the hay he delivers and stacks for me. This was his idea and I am ecstatic with our agreement.

Next comes greenhouses. Living in a cold climate with frequent unexpected frosts I have become a greenhouse freak. In simple language that means that I refuse to do anymore outdoor gardening. Last spring just when the outdoor garden's little seedlings were peeping their heads out of the ground we got a fierce hail storm. It killed everyone's plants. Then those who replanted were devastated the last week of August by a hard frost. No one expected it. Tomatoes, squash, etc. all gone. So for me there is only one solution -- more greenhouses/hoophouses.

My hubby and I are getting ready to build numbers six and seven. These greenhouses give us an additional 2+ months of growing time. We have tried many kinds of greenhouse film and 55% white film works the best. Unbelievable, but true. The plants love the light coming in and go wild. And there is an extra bonus of not needing an additional $150+ per greenhouse for shade cloths.

Greenhouses also provide much better use of water. Until a few days ago we were looking at a terrible drought this summer with wells going dry. Folks got together and prayed for rain as a community. We just received nearly 2 inches of rain and are very, very grateful. Without water there is no food.

I have been "ordered" to get more hair sheep. Last years lambs were so wild I vowed to never get them again. That was until we tasted them. Now in order to keep the peace I will be getting three once they are weaned. I am not looking foreword to it at all.

And now for the best news. On the eve of my wedding last summer I learned that I had breast cancer. I won't go into the details but it was not looking good. So I asked my fiance' if he wanted to call the wedding off. His reply was, "Are you crazy? Do you think I would abandon you now????"

Two weeks ago we flew in a woman with the gift of healing to pray for us and others here who were ill. We looked at our bank account and realized that we could not keep up the cost of the ND and the supplements he wanted us to take. We were spending nearly a $1000 per week -- way too much. There was no $ for anything else.

I received word on Thursday that my cancer is gone! Wow! just Wow!

Mar 17, 2015 - 10:46am

@California Lawyer

Glad to see you back. That read like a good Kurt Vonnegut novel. Well penned young son. Enjoy the day.

EDIT: Got water . . . . . . .?

Joseph Warren
Mar 17, 2015 - 11:10am

Damned Fine Article CL . . .

Do you mine if we send it on to (clueless) friends and family ? It could help explain taking appropriate actions with the limited information available.

P.S. - one point to add- - Not even the powers that be have complete 100% information. There's the black swan factor that often destroys the plans of mice and men. In that realm, they have no information advantage over anyone else. (It's also why they try to set up structures for watching & controlling everyone and everything, everywhere. At the center of that is their fear of that Unknown. - 'Controlling' that is ultimately futile and impossible, of course.)

Mar 17, 2015 - 11:46am

Congratulations Katie!!

I am so happy to hear of your recovery. In fact, all your news sounds very good.

Please keep us updated on all your news. I look forward to your posts, and am always interested in how you all are doing.

Mar 17, 2015 - 11:59am

Katie Rose

Welcome back. Sounds like you found the right husband.

Congratulations on beating cancer. Don't be a stranger, as I am sure we all enjoy your updates.

Mar 17, 2015 - 12:30pm


The RSI is a bit oversold, but we've seen it go lower

The beatings will continue until morale improves.

Mar 17, 2015 - 12:34pm


Great story, and thank God you are healthy! Keep up the posts, I enjoy them.

As far as the guy taking on Bank of America, I hear stories like that all the time. They are not so rare any more, but here in California, the judges follow their own law. The case of Glaski was severely criticized, and basically, the judges are loathe to grant a home free and clear no matter the fraud/bad behavior of the banks. It does happen, but it is the rare exception.

What DID happen, as lots of us attorneys who saw this emerging trend of "loan mods," was that the shysters and crooks literally came out of the woodwork overnight. I chalk this up to "unintended consequences" of the housing bubble and the free fiat money that sloshed around through the system in mid 2000's. Eventually, those borrowers that took out the loans, had to repay them, but could not, and overnight, shysters appeared and made promises too good to be true.

One such crook was a guy that advertised heavily on local radio. Attorney Siringoringo [that's his real name], was operating a HUGE operation, had something like ten lawyers, four offices in So. Cal. He took in over $44 Million from unsuspecting borrowers. Eventually, the State Bar investigators, who were inundated with complaints of the lawyers' misconduct, swooped in, and charged him with ethics violations and suspended his law license. Shortly after that, the criminal investigators launched their effort. Last week or so, he was charged with dozens of felonies. Most of his associates were also charged, and apprehended. One fled.

What is my take?

Easy. The fiat scheme, that is, creating fiat currency out of thin air, has years to run before it collapses. It is literally ten year after the peak of the housing bubble, and still, the repercussions of the failed Keynesian experiment percolate to the surface like methane bubbles in a stinky swap.

When will it end? The Chinese and Russians know.


Donate Shop

Get Your Subscriber Benefits

Exclusive discount for silver purchases, and a private iTunes feed for TF Metals Report podcasts!

Key Economic Events Week of 4/15

4/16 9:15 ET Cap Util and Ind Prod
4/17 8:30 ET Trade Deficit (Feb)
4/17 10:00 ET Wholesale Inventories
4/18 8:30 ET Retail Sales (March)
4/18 8:30 ET Philly Fed
4/18 10:00 ET Business Inventories (Feb)
4/19 8:30 ET Housing Starts and Building Permits

Key Economic Events Week of 4/1

4/1 8:30 ET Retail Sales (Feb)
4/1 9:45 ET Markit & ISM Manu PMIs
4/1 10:00 ET Construction Spending (Feb)
4/1 10:00 ET Business Inventories (Jan)
4/2 8:30 ET Durable Goods (Feb)
4/3 9:45 ET Markit & ISM Services PMIs
4/5 8:30 ET BLSBS

Key Economic Events Week of 3/25

3/26 8:30 ET Housing Starts (Feb)
3/27 8:30 ET Trade Deficit (Jan)
3/28 8:30 ET Q4 GDP final guess
3/28 10:00 ET Pending Home Sales (Feb)
3/29 8:30 ET Personal Income (Feb)
3/29 8:30 ET Consumer Spending and Core Infl. (Jan)
3/29 9:45 ET Chicago PMI
3/29 10:00 ET New Home Sales (Feb)

Recent Comments

by Nijle, 2 hours 56 min ago
by J Siefert, 7 hours 14 min ago
by scoremore, 7 hours 52 min ago
by scoremore, 8 hours 42 min ago
by Wizdum, Apr 19, 2019 - 11:44pm