I wrote about it before
And I felt all depressed all over again.
And I wonder why I get depressed... So I thought more about it.
And I came down to a couple of points. It's a complicated network of issues and a lack of responsibility of a lot of people.
And it boils down to capitalism and specialization of skills and knowledge, and a lot of conflicts of interest in between.
Most normal people just want to live their lives. So let's say the average person wants to do his own work, earn a lot of money, and live well and usually want to live in luxury. They want to do their own thing and not bother about other things which they aren't specialized in.
So let's say, "the customer", the average worked, plumber, carpenter, shopkeeper, etc... They usually aren't financially educated. They just want to do their work and live their lives, they want to buy their homes, and enjoy their life. They expect someone else to "know" so they approach someone with "expertise" to advise them...
Then the mortgage specialist, wants to earn money, he has a boss to report to, he needs to dish out loans else someone else will make better sales than him. So he just grants the loans. He's just "doing his job". He's incentivized to grant loans to anyone, regardless of their credit abilities.
Is there a conflict of interest here? Of course there is.
Banks and bankers securitize the loans into ABS/CDOs...
Banks want these risky assets off their balance sheets. So they repackage the loans into investable assets and sell them to unknowing investors.
The banker is "just doing his job" he repackages the individual loans into sellable assets so that he can sell another product to investors. It's lucrative for him to pack "low risk" assets with good returns and they sell well. So he gets good bonuses.
Is there a conflict of interest? Yes there is.
The bank takes on little risk by giving out loans, cos they can repackage the loans and sell them away. So it makes sense for them to give out as much loans and repackage them to sell, so they earn from both giving out the loan and selling the loan as an investment.
The banks want the assets to sell well so they approach rating agencies S&P or Moody's to give a good rating. The rating agencies know if they don't give a good rating, the bank will just approach the competitor who will be willing to give the good rating. The rating agencies are supposed to be independent so that investors can have some form of "expertise" rate the assets for them. But... Conflict of interest again, cos the rating agencies are profit driven so they will be incentivized to take the business and just give a good rating. The worker at the rating agency "is just doing his job".
The investor, "the 2nd customer", buys the asset. Low risk high return assets. Could be an institutional investor or retail... In the end, most of them rely on rating agencies to give them some indication of the risk of the asset. Fund houses buy the assets, well... Even if they lose money, they will still get their management fees. It makes sense to buy low risk high return assets.
Then we repeat the whole process with CDS/STS and synthetics. Which is essentially "insurance" on the above products. But since it's the banks which are creating the product, then the banks can essentially price them at whatever price they want. Not to mention creating synthetic swaps, meaning customers can buy insurance on something that doesn't exist.
Cos once again, conflicts of interest, banks are profit driven. Bankers want their fat bonuses. Don't be too judgmental. If you were a banker, you'd probably have done the same thing.
And... The thing about most parts of life and capitalism, is that due to specialization, this issue above manifests in many places. Most people are so specialized that they don't know a lot about other topics.
In the show, Michael Burry wrote in his final letter to investors.
"...People want an authority to tell them how to value things, but they choose this authority not based on facts or results. They choose it because it feels authoritative and familiar..."
A simple example is...
Financial advisers and insurance/financial planning. There's a lot of conflicts of interest in the market. Most people don't know how to plan or what to buy, so the financial planner who is supposed to represent the client, is incentivized to just sell as much as the client can accept. The customer just doesn't know better.
Customers don't know how long they are able to keep preserved foods for. They don't know about expiry dates and what they mean/represent. They look towards the manufacturer to determine what's a reasonable date before the product is deemed unsuitable for consumption.
As a manufacturer, they are incentivized to set the expiry date really short so that customers will quickly consume the food and buy again, or dispose and buy again.
Once again conflicts of interest.
I wrote about that before too.
How about doctors or medical specialists? Most people aren't too well versed in medical issues so they trust the doctor to do "what's best for them". But a medical specialist may recommend surgery for the smallest of issues, cos that's where the money lies.
I wrote about that here too
Exercise, weight loss and healthy eating?
There are many products and specialists who try to sell the promise of weight loss, cos most people don't understand weight loss well.
In reality, it's a simple method. Eat less, exercise more.
You can even eat charkwayteow, but eat half plate la.
But no, people may buy into gimmicks or some special products or feel they have to make a radical life change. Some people don't believe it can be so easy. They think they must "suffer" else they can't lose weight.
Or they hope that there is some easier way to lose weight.
But yet, weight loss is very simple. But if they told you that, there isn't any money to be made.
Read about a professor who lost weight eating junk food.
I'm not saying to follow the dieting method. I'm saying it's possible to lose weight without any special product and that you can eat normal food but in moderation. Generally, all that's needed is to eat less.
So once again, conflicts of interest. Weight loss specialists usually want to sell something.
And conflicts of interest manifests everywhere. And usually, we don't need anything more to make our lives happier, but marketers want us to believe that we have something missing in our lives so they try to "fix" our unhappiness by offering us more products.
And we, as the "sheep" in society, are usually so clueless and just trust in the "experts" cos, many of us are so specialized and just want to live our own lives and it's so much easier not to get educated about another topic and just trust someone else to tell us what to do...
But... Are these "experts" really helping you? Or are they helping themselves? Or maybe they themselves are clueless and part of this ridiculous system?
They're just... "Doing their job" right?
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