Propaganda and The Financial Markets

Propaganda is defined as a form of communication intended to influence opinions, behaviors, and attitudes. It involves the use of selective information and persuasive techniques to achieve political or other goals. Many experts believe that propaganda is best seen as any attempt to influence public opinion through the manipulation of facts or dissemination of incomplete or false information. Propaganda can take many forms, including media such as films, books, photographs, television commercials, news broadcasts and even cartoons. At its core though, propaganda involves distributing information meant to shape how people think by changing their perception or opinion on a given subject. As traders, we need to be constantly aware of propaganda and its effects.  This article will discuss how successful traders deal with pervasive effects of propaganda and navigate the financial markets.

Propaganda is referred to as “spinning” because it can supplement or cover up certain facts, and make a negative situation seem positive. This technique is something used by governments, journalists, marketers, publicists, and even influencers on social media. It has been around since ancient Greece when PR was used to get merchants talking about their products. In modern times the term “spin doctors” refers to those who attempt to repair a client’s reputation in light of bad news publicity. The term arose in the late 1980s during the term of a British Prime Minister – Margaret Thatcher – who had several advisers dedicated to promoting her message, while avoiding any unfavorable repercussions from damaging stories leaked out at the same time.

Traders in the financial markets must always be painfully aware that they never have complete information on what they are trading. A typical scenario that often occurs in the trading world is that a narrative is created which promotes a broader objective. We often do not know if the narrative is truthful or fictitious and it is this uncertainty that often paralyzes decision-making. The great challenge and dissonance that new traders often experience is they want markets, their narrative, and trading to make sense. In other words, they want the prevailing narrative and the underlying trend in the market to support one another. Rarely does this occur! Seasoned traders on the other hand have come to appreciate that the only thing that matters in the markets is price. A seasoned trader has learned through experience that market price action is never wrong, but opinions often are. Seasoned traders are always focused on finding exploitable trends.

When a publicly traded company gets caught in a bad news story, the stock market’s reaction can be quite severe. This is where spin doctors come in. A spin doctor’s job is to take an unfavorable situation and turn it into something more favorable for the company. In essence, they aim to minimize or even eliminate any long-term damage from the ordeal. For example, JP Morgan Chase was mired by scandal after its so-called ‘London Whale’ incident, where a trader’s bad bets cost the company billions of dollars. In 2012, J.P. Morgan experienced a massive financial loss in their London branch due to the misconduct of Bruno Iksil, commonly referred to as the ‘London Whale’. The incident was an unfortunate example of how complex financial instruments, such as derivatives, were used in investments without clear risk management structures in place to prevent large losses. Iksil had made a series of complex derivatives trades that resulted in the bank receiving net losses totaling nearly $6 billion over an extended period; these trades highlighted both the risks contained within derivatives and weaknesses with risk management processes. To address this issue, J.P. Morgan adjusted executive compensation and increased surveillance programs to better identify similar investments and prevent future problems from occurring. The spin doctors went to work on the PR hit and did everything from engaging shareholders directly to increasing transparency across other areas of the bank. This allowed JP Morgan Chase to both rebuild its reputation with investors and potentially regain some investor trust that had been lost due to the scandal.

Another excellent example is when Apple experienced heat over working conditions in their Chinese factories, as raised by a 2013 BBC documentary entitled “Apple’s Broken Promises”. The documentary “Apples Broken Promises” released in 2013 provides a cautionary tale of the potential consequences of modern consumer culture. It delves into the controversy surrounding Apple’s labor practices and its suppliers worldwide, showing how those organizations have sometimes prioritized profit over the wellbeing of the workers involved. The main message of the film is that although economic success may come easily with such practices, we need to be aware that there are intrinsic human costs for bringing about this prosperity. Whether it is through progressive regulations or simply increased corporate responsibility, something must change if we are to find a balance between human rights, environmental protection, and economic growth. This documentary kicked off some intense negative press coverage, but Apple’s spin doctors were able to reverse much of it by addressing worker complaints and releasing a set of ethical standards for its suppliers which corrected the working issues.

Edward Bernays, seen as the father of the public relations profession, wrote a book in 1928 called Propaganda that explored how conscious and unconscious ideas could be manipulated by governments, corporations, and public relation specialists. In his book, Bernays proposed a few primary rules of effective propaganda. First and foremost, he suggests that to reach the public more effectively one should focus on emotional appeals. Additionally, Bernays recommends target-marketing based on understanding different social demographics and using expert opinion to influence people’s minds. Bernays notes that greater success can be achieved when message founders are industry leaders rather than spokespersons for those wishing to spread their message. Finally, he stresses that gaining the support of trusted or authoritative figures could prove useful in achieving propaganda goals. These principles remain as relevant today, as when they were first promoted by Bernays in 1928.

As a thought exercise simply ponder what a world run solely on propaganda would look like. If a world was controlled by propagandists, it would undoubtedly have substantially detrimental consequences. People in positions of power could easily manipulate the masses to believe whatever is convenient to their agenda, without regard for truth. Human rights would be forfeited for political and societal control – citizens would be made to blindly trust those in authority and conform to predetermined standards, leading to a society entirely devoid of free thought, liberty, equality, and justice. Moreover, due to a lack of diverse voices and perspectives, technological development in our modern age could flatline or move backwards, further reinforcing the oppression already present.

The long-term financial planning of both individuals and organizations is always adversely affected by the use of propaganda. Propaganda techniques can effectively influence how people think and act, causing them to make decisions which focus on short-term gains instead of long-term stability. For example, a government may be tempted to declare an artificial economic boom to prepare for impending elections, resulting in that government making unsustainable economic commitments beyond its means. People in the grip of propaganda are incapable of making rational decisions.

Consider for a moment the “Too Big To Fail” policies which were implemented during the Great Financial Crisis of 2008 in order to prevent a potential catastrophe. The theory behind these policies was that, had it not been for the intervention of the government and other financial firms, the entire global financial system would have failed. The impact of such a collapse on everyday citizens, businesses, and markets would be catastrophic and cause irreparable damage that could take years and even decades to recover from. As many things in life are often interconnected, a knock-on effect from one failing business or stock exchange can soon spread rapidly throughout an entire industry; thus, the narrative made sense for policy makers to seek to create safety nets in place to prevent any similar crisis from occurring again in future years. 

But was anything ever successfully fixed? 

Why have we never addressed what caused the Great Financial Crisis?

What is the cost to society when the Fed adds $9 trillion in debt to its balance sheet to keep unviable companies alive? 

When I studied economics in school what was agreed upon was that money should be treated as a scarce and valuable resource. It was further maintained that a dollar could be invested for productive growth in the economy or to pay for government expenses.

Today this kind of thinking no longer exists. Many leaders print and spend so they can kick the can down the road and avoid being held responsible for their poor judgment and performance. Our money is continually debased, and more and more resources are used to pay for the soaring cost of government debt.

Companies that are publicly traded have a responsibility to promote the interests of their shareholders and often use propaganda as one way to do so. Examples include McDonald’s providing nutrition information on the company website to encourage people to believe that their products are healthy, Apple using inspirational music to associate its brand with positive emotions, and Budweiser emphasizing patriotism to boost sales. Propaganda can be useful for public companies when used responsibly but can sometimes be misleading if truthfulness is not a priority.

As I reflect on the last few years in the financial markets, I can’t help but ponder the most memorable moments of propaganda that we have all experienced. 

Specifically, I am referring to our government’s decision to create massive stimulus and spending to the tune of $6 trillion while we were ensured this would not create inflation. 

Then we were ensured that inflation would be “transitory.”

Then after the yield curve inverted in May 2022, which is always a precursor to a recession, our top monetary authorities assured us that we were not in a recession.

The classical definition of a recession in economics is two consecutive quarters of falling gross domestic product (GDP) or a yield curve inversion. GDP measures the market value of all goods and services produced by an economy, while a yield curve inversion occurs when long-term interest rates fall below short-term interest rates, indicating that results from economic surveys are weak and lowering economic growth expectations. The two-quarter and yield curve definitions have remained among the most used criteria for determining when the economy has entered a period of negative growth. Yet despite these facts, our monetary authorities have spent the better part of 6 months spinning a counter reality.

The bottom line is this: If you got caught in the narrative and the storyline your results were undoubtedly disastrous in 2022  The SPIN doctors were very much in play at work in the markets in 2022.

But getting the story right is always inconsequential.

Markets do not reward critical thinking, or sound logic.

In an age where savers are penalized, traders and investors need to be committed to finding the most solid and predictable trends.

It’s about price.

If you do what price does, you will make money.

If you don’t do what price does, you will lose money.

This is why artificial intelligence is so important for traders.

Check out the following graphic of all the UP and down forecasts made by the Vantagepoint A.I. Triple Cross Indicator in 2022 for the S&P 500 Index.

The point I am making is to never let opinions get in the way of the FACTS you need to be successful trading markets. 

Opinions are just a story.

The TREND is the FACTS.

The trend always plays out regardless of the storyline.  While we would love the storyline, narrative, and the trend to make sense and support one another, if you trade the markets long enough you will come to appreciate that the ONLY THING THAT MATTERS is PRICE!

This is why artificial intelligence is so important to traders today.

It’s about two words.

IS and SHOULD.

Traders must become obsessed about what “IS” happening, not what “SHOULD” happen.

Has this ever happened to you as a trader?  A company reports fabulous earnings and growth prospects and the stock tumbles 15% in a matter of weeks.  Or vice versa, a company reports horrible earnings and growth prospects and within a month it manages to rally 20%. All seasoned traders witness these types of events hundreds of times a month in the financial markets.  My reasoning for pointing them out is to illustrate how toxic the “narrative and stories” can be to successful trading. Getting the story right is not what makes wealth grow.  The only thing that matters is PRICE.  It is the price that makes you wealthy or poor.  Yet despite this basic truthful reality, we ALL want the prevailing narrative to line up with the price action.

The financial markets are full of propaganda that is difficult to spot amidst the noise.

The best way for traders to identify whether a market is laden with propaganda is by analyzing raw data and making observations about behavior over a period. Looking at price movements, trading volume and other indicators can provide insight into the actual state of a market rather than what someone might be trying to make it seem like. Taking the time to really understand trends, common practices and prevailing sentiment can help savvy traders better assess when they may need to take extra precautions in volatile or unreliable markets.

The good news is that this is the function that artificial intelligence, machine learning and neural networks perform in their trend analysis.

The entire purpose of artificial intelligence is to simplify the decision-making process for traders by determining if a trend is Up, DOWN or SIDEWAYS.

End of story.

Over the past year we have published our perspective on the events that shape the macro trends. Here are our favorite posts for your review. These macro trends will shape the markets for years to come.

Inflation, The Fed, and Corporate Insiders – Are We Witnessing A Major Stock Market Top?

A Recession by Any Other Name Would Still Be Bad!

Are We Witnessing the Beginning of a Sovereign Debt Crisis Internationally?

Are We Witnessing an End to the Petrodollar?

I find all of these stories to be very troublesome for effective long-term planning. I don’t know if the Fed will continue raising rates. I don’t know if the Fed will PIVOT. What I do know and can find comfort in is the trend as defined by artificial intelligence.

We are in uncharted waters.

Traditional economic theories don’t work for traders.

The only thing that a trader is concerned with is being on the right side of the right market at the right time. 

And that means harnessing the power of VantagePoint’s artificial intelligence.

Everything else is just noise.

The race to debase is very real. This economic environment is forcing traders into much shorter time frames as everyone in the marketplace chases yield.

Do you have the tools and ability to find the strongest trends at right time in this economic environment? 

What is your plan for maintaining your purchasing power as this trend accelerates?

Artificial intelligence is so powerful because it learns what doesn’t workremembers it, and then focuses on other paths to find a solution. This is the Feedback Loop that is responsible for building the fortunes of every successful trader I know.

If you think about this question, you will begin to appreciate that A.I. applies mistake prevention to discover what is true and workable. Artificial Intelligence applies mistake prevention as a continual process 24 hours a day, 365 days a year towards whatever problem it is looking to solve.

That should get you excited because it is a game-changer.

It sounds very elementary and obvious. But overlooking the obvious things often hurts a traders’ portfolio.

The basics are regularly overlooked by inexperienced traders.

The beauty of neural networks, artificial intelligence, and machine learning is that it is fundamentally focused on pattern recognition to determine the best move forward. When these technologies flash a change in forecast it is newsworthy. We often do not understand why something is occurring but that does not mean that we cannot take advantage of it.

A.I., through advanced pattern recognition, analyzing hundreds of thousands of data points, and crunching millions of computations, finds the highest probability trades and is indispensable in separating fact from fiction.

I’d like to invite you to visit with us at one of our free live Master Classes where we show how artificial intelligence is the only means to stay consistently up to date on the risk and reward opportunities in this environment.

What all traders and investors want is an accurate, proven solution that alerts you when a high probability trend is unfolding. The Vantagepoint A.I. forecasts have proven to be up to 87.4% accurate in determining the trend three days in advance.

Visit with us and check out the A.I. at our Next Live Training.

It’s not magic.  It’s machine learning.

Make it count.

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