Lead Us Not Into Temptation

The WealthCycles Staff

60 Minutes just released a segment that is getting a lot of heat, no doubt due to the fact that it targets high-ranking members of Congress.

In short, the report says Congress members have the ability to trade off insider information and that this insider trading is not illegal (Click here to see the full video).

In fact, the report implies that this information is one of the many ways Congress members are able to leave Congress multimillionaires.

For anyone else, insider trading is highly illegal. The Martha Stewart insider trading case is one of the better known examples. In the early 2000s, Martha Stewart received information not yet made public (i.e. insider information) from her stockbroker about a drug company—information that would drastically and negatively affect the stock price. Based on her broker’s tip, Martha sold her stock before the information became public, committing insider trading. On March 5, 2004, she was found guilty; she spent roughly five months in federal prison and another five months under house arrest.

Certainly, political graft, insider trading, or just plain corruption is not new. Obviously, individuals will use their power and access to their own advantage. We know that. That is why the U.S. Constitution was set up the way it was—to prevent officials from becoming hopelessly corrupt. The oft-quoted James Madison:

“If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.”

-James Madison Federalist 51

Predictably, this mantra has been corrupted over time, resulting in this 60 Minutes story.

But this type of enticement or temptation happens all the time, even with people who are not in political office.

For example, about one-third of all lotto winners go broke only a short time after winning. What’s the reason?

“For many people who come into wealth suddenly — whether they win the lottery, receive an insurance settlement or an unexpected inheritance — if they have not acquired good money skills prior to this windfall, often they struggle and make poor choices.”

-"Cash Windfall Can Lead To Downfall" Bill Kirk and Emily Young

Until individuals win the lotto, they are subject to external controls. They may have wanted to blow all their money on big houses, nice cars, and fancy clothes, but they had to eat. They literally could not afford to spend foolishly.

But once they win the lottery, that external control of not having enough money has been removed. Now they have all the money in the world, or so they think. All that is left is internal controls, or in other words, their own will power to control their spending. If they did not have sound money management skills before, those internal controls are most likely nonexistent.

At WealthCycles, we invest with the cycle. We believe that we will make more money by investing in precious metals because they are in their cycle. However, if the investor does not have the internal controls in place to control him- or herself, that new money will be for nothing. The investor will end up losing the proceeds because they didn’t know how to manage it.

Just like Congress members, we as investors have to learn to control temptation. External controls will help us in the short term: external controls (laws, regulations, etc.) will help prevent insider trading on Wall Street. But since, as 60 Minutes reports, there are no external controls in D.C., all that are remains are the internal controls of will power and discipline, apparently lacking in many of our elected leaders.

While it’s important to educate yourself on how to recognize a stock or real estate deal, it’s also important to train yourself to be more disciplined.  To bring this point home, we’ll leave you with a quote about temptation and self-control from the great investor Warren Buffet:

“Success in investing doesn’t correlate with IQ once you’re above the level of 100. Once you have ordinary intelligence, what you need is temperament to control the urges that get other people into trouble in investing.”

Nice one.

Thanks for all the work you do mike,
the sheeple seem even less switched on here in the uk but it seems at least the politicians get away with less than in the USA.
I'm less and less shocked at the one-sided laws in america that mean the powerful and rich dominate the ordinary people more and more yet the politicians constantly meddle in and comment regularly on how the rest of the world are doing things the wrong way.

THANK YOU for a sane and rational analysis of the sinking world money markets. I too am a convert to heavy metal.

I am so grateful I am sending you this $500Trillion banknote. Oh... its from Zimbabwe, so cash it soon.
However with more Quantitive Easing [the race to the bottom] I may soon be able to send the same in US$ £ or Euros.

James

ps. why not start a lobby 'QE -The Man Who Showed Us The Way' to have Bob Magabe enshrined in Mount Rushmore?

The bottom line is: Socrates had it right all along
2400 or so years ago: moral men who are competent (or ladies)
and just because you have a degree from Harvard doesnt = competence.

do an honest days work for an honest days wages don't steal from your freakin grand child's grandchild you moronic a holes!

we are a cancer so get God cause we will need him!

RS

Upon watching a couple of hours of the republican debates, it became more and more apparent that all but seemingly two of the candidates would operate from a paradigm leading the US down the road of more problems. It follows that if we are to believe the assumptions around gold's rapid increase over the next 1-5 years, we must also believe that the power of externalities will at some point be stronger than the power of D.C.s 'internalities'. Is suspect that the revaluation of US currency is more likely to occur due to international pressure than it is via political intelligence. Ideally,the latter 'spark' would be best as it fits in with the acronym "Tear the band-aid off quickly" rather than agonising the pain. The "tearing the band aid off quickly" philosophy is, I feel, more in tune with candidate Ron Paul's intelligence. The other candidates, except for another 'outsider', are less desirable for this reason, basically.

If you don't know how to make it (money) , you won't know how to keep it.

Great, loved it.
George(NZ)

I would like to thank Mike Maloney as well as Robert Kiyosaki for increasing my knowledge about investing. As we all know, knowing is half the battle. Having knowledge allows you to remove the emotional aspect from the investment and become a smarter investor.

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