Juggling Dynamite

Since 2007, Central banks and governments have been like reckless dam operators indiscriminately flooding good money after bad through global asset markets. All of this has been added to the debt tab and diverted capital from substantive investment in things needed to support productivity and efficiency in human life. The US national debt has nearly doubled in the past 8 years, along with staggering leaps in corporate, auto, student and all other types of debt, in pretty much every country in the world. While trillions are wasted on gimmicks, the real world weakens through an ongoing investment drought.  This is bringing an abrupt end to the most recent era of globalization as explained by Desai on Bloomberg this morning.

Meghnad Desai, emeritus professor of economics at London School of Economics, discusses the global turn against globalization and free trade agreements. Here is a direct video link.

As vapid in content as Trump generally is, on the topic of using debt for infrastructure spending, rather than financial gimmicks, he is actually quite lucid. See this clip.

Republican presidential nominee Donald Trump weighs in on the negative impact of low rates on the market, and the doubling of the nation’s debt.Here is a direct video link.

While market cycles, valuations and careful discipline drive financial results over time, stock promoters and soothsayers promising to pick ‘winners’ attract gullible followers the world over. ‘Twas ever thus. This example from China is classic human behavior.

Li Daxiao has become one of China’s most popular stock prognosticators, through the colorful tips and videos he distributes on social media. Here is a direct video link.

Our daughter started her first year of university last week.  Talking to her last night she complained that the campus is inundated with representatives from all different banks trying to sign students up for credit.  She said that kids can’t go 100 feet without another sales rep propositioning them in the halls and outside on the grounds.  When our daughter declined, one of the guys said “you’ll be back looking for me in 2 months when your student loans run out.”  Revolting pitch.  It may well work for him, but it’s not in the best interests of inexperienced students (or anyone) to be peppered by credit pushers posing as ‘experts’.

None of this is surprising however, since the banks run pretty much unfettered today.  The revelations at Wells Fargo may be extreme, but they are reflective of an aggressive sales culture that preys on human weakness and financial illiteracy.  This is toxic precisely because the sellers are allowed to market themselves as financial advisors.  This has to end because it is bankrupting our nations.  See Wells Fargo’s questionable cross-selling strategy:

From a bank’s perspective, cross-selling is great because customer acquisition costs are lower, and customers that use more products from a bank are less likely to shop elsewhere.

From a customer’s perspective, buying several products from one bank often means they are not acting in their own best interest by shopping around for the best offers.

In the commoditized market of banking services, the only way to base a growth strategy on cross-selling is to assume that the bank’s employees are master salespeople. It is simply not that hard for individuals to compare credit-card offers and get the best deal.

Cross-selling of banking services has its uses. But as the Wells Fargo fiasco illustrates, institutions that lean on it excessively to drive sales will hit limits. At Wells, a strategic rethink may be needed.