The Bystander Effect and Social Proof Tendency Lead to Bad Financial Choices

Spoiler alert: The conclusion; we need to think for ourselves

I came across an article yesterday from CNBC, titled: Here’s how Buffett partner Charlie Munger applies psychology to economics

It discusses the many different psychological phenomena that Charlie Munger and Warren Buffett have observed over the years. It is a very insightful article, and helps to explain investor psychology and the reasons why most people are not very good when it comes to making financial decisions.

With that said, there are two items, the Bystander effect and the Social Proof tendency that I wish to concentrate on for this article. These two phenomena are the most easily observable and are the causes of so many of the problems people experience with money, finance, and personal choices.

In the large aggregate these two observations are the primary causes of the the boom-bust cycles, as most people just copy what everyone else is doing at the time. Social media reinforces our confirmation bias and we convince ourselves that we are correct, even though, by definition, we are usually incorrect.

If we wonder why so many people go into debt, attend college with tons of borrowed money, complain that they cannot come up with a down payment for a house, buy expensive coffees at Starbucks, continue to bust personal budgets, and repeatedly make poor investment choices then we should first look at the social proof tendency and the Bystander effect as the root causes.

Social proof tendency 

The social proof tendency has had the most adverse impact on people’s finances. Of all the psychological phenomena I have observed over the years of investing and studying the human condition, this is the most detrimental predilection.

In his book titled, “Influence: The Psychology of Persuasion,” Robert Cialdini writes…

One means we use to determine what is correct is to find out what other people think is correct. We view a behavior as more correct in a given situation to the degree that we see others performing it.

In ambiguous situations, human beings are more likely to accept the actions (and inaction) of others. It makes our lives easier and our decisions simple.  This can be beneficial in many aspects of our lives, and has worked throughout civilization. Indeed, we rely on other people’s expertise and experience to make our own decisions. Unfortunately, as humans, we don’t only imitate good actions, but we also have a tendency to follow wrong actions and inaction of fellow humans.

Bystander Effect

The Bystander effect is the direct outcome of following such human inactions. According to Wikipedia, the Bystander Effect is a social psychological phenomenon that refers to cases where individuals do not offer any means of help in an emergency situation to the victim when other people are present.

Most of the times, these decisions are good and extremely helpful. In fact, according to James Surowiecki, in his book, The Wisdom of Crowds, he argues that the quality of decisions taken by a group is usually better than the one that a single member of group will make.

But when it comes to investing Munger disagrees. He insists that when it comes to investing, social proof and the bystander effect are costly. I agree. According to the CNBC article, Munger says that the bystander effect and social proof demonstrate that many investors are just a bunch of followers.

Social proof – the undoing of the average debt slave

Unfortunately, when it comes to money and investing the social proof tendency can have detrimental consequences. People tend to just copy the behaviors and decisions of those around them.

Now that we have social media coupled with the modern marketing and advertising of Madison Avenue, the average person is incapable of escaping; there’s a flavor for every idea and impulse.

So, the next time someone blames the US Fed or any political party for the debt woes of the average person, we need to stop and ask ourselves, is there anything that the debt slave could have done to change his circumstances?

Avoiding social proof tendency

So what can we do to save ourselves from these tendencies?  As always, the advice is simple to give here but difficult to master.

Thinking and acting independently is imperative but, the day to day interactions with numerous people and constant bombardment of information and various point of views make it an extremely difficult art to master. However, objectivity and independent thinking must be placed front and center, and we must not end up like a lemming running off a cliff.

Bottom line: We need to think for ourselves.




The Hive Mind Accelerates – Nearly a Third of Adult Humanity Hooked into Facebook

Financial Cycles To Accelerate and Deepen As the Hive Mind Takes Over

If you think the asset boom-bust cycles are extreme now, just prepare yourself as the hive mind guides the typical person’s financial decisions. Most people are no longer capable of thinking for themselves and now shape their financial decisions based on the hive mind. We need to comprehend that the upcoming asset boom-bust cycles are going to accelerate and deepen as the hive mind takes over humanity.

According to the Investors Business Daily, it took only five years for Facebook to double its number of users. Slightly more than 70% of Americans are using Facebook. There are currently about 250 million Facebook accounts in the US.

“We’re making progress connecting the world, and now let’s bring the world closer together,” Chief Executive Mark Zuckerberg wrote in a Facebook post.

Mental Fatigue Impacts Lives and Financial Decisions

There are many articles discussing the studies that demonstrate the adverse psychological effects of Facebook usage.

Forbes: Study Links Facebook To Depression: But Now We Actually Understand Why

Excerpt: Now, a new study in the Journal of Social and Clinical Psychology finds that not only do Facebook and depressive symptoms go hand-in-hand, but the mediating factor seems to be a well-established psychological phenomenon: “Social comparison.” That is, making comparisons, often between our most humdrum moments and our friends “highlight reels – the vacation montages and cute baby pics – is what links Facebook time and depressive symptoms together.”

The Harvard Business Review even discusses a study in their article, A New, More Rigorous Study Confirms: The More You Use Facebook, the Worse You Feel. It was a longitudinal study, which showed how the mental health of the participants changed over time. It gauged the beginning mental health of people who were initially non-Facebook users, and compared it to their mental health after one year of Facebook usage. The results were very sobering.

The average Facebook user reconciles differences by eventually conforming to the average, so the hive mind perpetuates and accelerates. If it took five years to add one billion users, how long will it take to add another billion? Growth is slowing, but in several years half of all humanity will be hooked into the Facebook hive mind.

If We Are to Succeed We Need To Stand Apart From the Hive Mind

Lessons from Orwell: Big Brother isn’t the problem. Conformity is the problem

Those stuck in the hive mind will be part of the sea of humanity professing bland conformity and political correctness. Their financial decisions will be made according to the consensus. This will be a globalist-inspired tsunami; causing havoc as it moves along.

Social Media like Facebook also deeply reinforce the “bystander effect” and “social proof.”

“The bystander effect occurs when the presence of others discourages an individual from intervening in an emergency situation,” according to Psychology Today. It also keeps others from acting independently.  Social proof is a phenomena researcher Robert Cialdini describes as “when people … do things that they see other people doing.”

Social media reinforce the tendency to seek reaffirmation. With respect to money the consensus is usually wrong, and by the time we see confirmation on our Facebook accounts investing becomes a losing game.

This conformity will be necessary to bring in the one-world financial system. Most will just opt into this system without a second thought. With this said it is going to take some time before the one-world government comes into focus. The one-world currency, based on the cryptocurrency platform, is not ready yet; the total conformity of humanity is still not set yet; and Russia and China are not ready yet to strike the west.

If people want to know when the next stage of humanity’s devolution is ready, I think they should estimate when Facebook usage reaches at least 60% of the population, the cryptocurrency platform becomes more accepted by the average consumer, Russia and China reach the required war readiness, and we see other things such as abnormal sexual behavior reaching 50% of the young adult population.

When we get to these levels then we can get the “black horse.”

If we are to succeed financially, we must disconnect from the hive mind. It engenders fear- and consensus-based financial decisions. The goal of the globalists is to bankrupt each one of us. Don’t give in to the hive mind. We need to be unique and independent thinkers.

By the way, Don’t look for my Facebook account, I do not have one.


Real Estate Deals to Be Made – Don’t Be Picky

As a real estate investor and licensed Realtor, I receive about a dozen inquiries a week asking me if they should wait for a drop in real estate prices. I have had people continually asking me this question since 2011, when I started buying and recommending real estate investments again.

Here is the bottom line: If investors or potential home owners wait until prices collapse (if they ever on the scale of 2008) They won’t be able to get houses anyway, unless they have cash. Lack of access to credit was why they collapsed in the first place. Lack of credit access will be the reason for the next bust.

Here is an example of one property I purchased last year in an all-cash deal. The numbers are explained in detail. I produce a 16% capitalization rate on a condo built in 1998. This is one example of a number I now own.

Identical properties in this development sold for almost 300k back in 2006-2007. The real estate collapse destroyed condo prices in Suburban MD, and many developments lost FHA certification, meaning that owner-occupied buyers could no longer get FHA and HUD mortgages. So, cash and conventional loans were the only ways to buy. Prices dropped from 250k to as low as 60k in 2012.

Yes, that is correct. It was a self-feeding loop, and the carnage was unprecedented. It still lasts today. Common charge delinquencies and large investor ownership were the primary causes of loss of FHA certification. But, before Obama left office he changed FHA condo development requirements from >50% owner occupied to >35% owner occupied. This means that buyers can qualify for FHA loans even if 65% of the condos in a project are identified as investor owned. Within a year, prices rose by as much 30-40%.

Rents were 1,100 in 2011, they are now hitting 1,600, and I get tons of responses from desperate people looking to pay it.

Remember, real estate is a bundle of rights, and if prices fall, the Feds will stand in to hand out more tax benefits.

So, I go across the twitter feeds like:

He has been pumping out tweets and blogs since at least January 2016, warning everyone to watch out below.

This scares the crap out of most people and keeps them on the sidelines waiting and waiting. The globalists like these people who dispense gloom. His confirmation bias is seductive to the patriots.

Remember, there is a lot of money to be made if you are not picky and can pick up on how to operate rentals for a business. Like the old saying goes, “there’s a lot of money to be made in s%*t.”

There are always boom-bust cycles. The next one will not take place the way the last one occurred. I think of all the lazy real estate “analysts” who just pick at stuff from the last cycles and throw it out for the reasons on the next cycle.



Cryptocurrencies – A Dark Force Creation and the Basis for the One-World Financial System (No Escape)

I have uploaded a new show podcast for June 28, 2017. Click here to go to the show archives page to listen. The latest show is on the top of the page.

-China (their privately-run central bank) is testing a national cryptocurrency that parallels the renminbi. It will scale with the economy, eventually replacing their paper currency.
-MIT (the research arm of dark intelligence) thinks cryptocurrencies are a wonderful creation.
-Russia (their privately-run central bank) is testing the cryptocurrency concept, too. They are going to scale it with their economy and financial system.
-Private central banks around the world will use blockchain to record everything; There will be no escape.
-The WannaCry ransomware attackers demanded payment in the cryptocurrency. These hackers are most likely government backed and provide the dialectic to get tight regulation – similar to what the government-backed 9/11 event did for bringing in the Patriot Acts.
-A further discussion on who is Satoshi Nakamoto. “I am no longer involved in that and I cannot discuss it. It’s been turned over to other people. They are in charge of it now. I no longer have any connection.”


June 25th Podcast Market Update – Remember, People Like The Lie.

I have uploaded a new update podcast for June 25, 2017. Click here to go to the show archives page to listen. The latest show is on the top of the page.

Bond yields are low not because of low inflation; they are low, because of official intervention. Imagine what bond yields would be if the central banks didn’t intervene with their trillions.

Jim Rickards and Martin Armstrong are geniuses, but if they talked conspiracy they would both lose all their clients.

When it comes to their money people like The Lie. They live The Lie, they talk The Lie and they sell The Lie. Everyone has a vested interest in perpetuating The Lie.

Beware of sound money outfits and alt-media financial sites like the Daily Reckoning and KWN. A quick commentary on gold and silver.


Things Look To Be Spinning Out Of Control, But Collapse Time Table Carefully Planned

There is no doubt that the global financial system is in a tenuous state.

Just type into Google “pensions insolvent” and key in items from the past month, and hundreds of germane items reveal a dire situation. Here are a couple Martin Armstrong blog posts describing the same thing:

ECB Declares Two Italian Banks Have Failed
Chicago Police Pension Goes Bust

Here are two charts showing the unprecedented central bank purchasing activity:

Real estate prices in high profile areas and other asset prices are way out of line from historic norms.

I can go on about this, but the bottom line is that something unprecedented is planned. The typical “Gambler’s Fallacy” dictates that a collapse of some sort, based on past cycles is in the works. We can also use the “Fundamental Attribution Error” and say that people are greedy and stupid.

Perhaps, we can take a step back and look at the gestalt, and say that we need to reanalyze all this and determine that something completely unique is transpiring. One of my main theses is that when the owners of the privately-run central banks have gained enough control of all the global assets, some sort of force majeure will necessitate the wiping of the slate. The restart button will be pushed and a one-world financial system will be introduced. The new global currency will possess many elements of the cryptocurrencies.

The politically-correct black horse of revelation will be hoisted upon each one of us to accept or reject. The upshot with all this is that there are still a few more years left. Long bond yields are still low, and the central banks are doing a great job at keeping them there. Also, as Joel Skousen says, Russia and China are not ready yet.


June 23rd Podcast – Is the US Fed Foolish? VP Pence is the Real-Life Frank Underwood

I have uploaded a new update podcast for June 23, 2017. Click here to go to the show archives page to listen. The latest show is on the top of the page.

How can the US Fed be foolish? It is a well-established rule in the patriot community that the US Fed was carefully crafted by the private banking families to bring about total control of the country.

Through the boom-bust cycles the private banking families have been consolidating the world’s wealth. So ask yourself, is what the US Fed doing now foolish? Of course, not. It’s all part of the plan.

The market bottom in 2009 with the S&P 500 close of 666 was the signal for the final phase implementation.

The economy and real estate markets will do fine until the banking families signal they are done. That will be noted by spikes in the long-end of the yield curve.

Mike Pence is the real-life Frank Underwood of House of Cards.


June 22, 2017 Podcast – Market Updates and a Few Trading Thoughts

I have uploaded a new market update podcast for June 22, 2017. Click here to go to the show archives page to listen. The latest show is on the top of the page.

Topics discussed – Gold and silver trading in a trendless market. Ethereum flash crash. Longer dated US bond yields still falling slowly; central bank buying spree can continue. How will AMZN consolidate WFM? Perhaps AMZN should have bought out Aldi or TJs. Alex Jones using false attribution error to blame everyone else about the nation’s problems. AJ continues to bash Megyn Kelly. Perhaps she rebuffed his advances. Oil and gas producers get more efficient. Drillers are short-term oversold (XOP). Listening to the gloom and doomers of patriot radio, like the x22 Report is like listening to a dystopian audio book.


June 21st Show – Psychological Bias Keeps the Patriots Broke and Bewildered

I have uploaded a new show podcast for June 21, 2017. Click here to go to the show archives page to listen. The latest show is on the top of the page.

Tonight’s discussion – 
The stock and bond markets are doing well. In many areas of the country residential real estate is doing fine. Rental housing continues to shine as rents creep up in over 80% of the country. The US dollar is holding its own. Gold is struggling. Inflation is low. But listeners of the alternative and patriot media have been hearing that collapse and hyperinflation are just around the corner since 2010. Despite being wrong for over seven years, the patriot and alt-news junkies refuse to budge, and have doubled down. The more wrong they are the more animated they become.  Perhaps it’s time to reassess their logic. Perhaps there is no logic at all.

The all-seeing eye has taken over the patriot media from the top down. The compromised patriot and alt-media are suffering from terminal psychological bias. I will discuss the five primary types of psychological biases that keep the patriots and alt-media followers in the poor house:

-Confirmation Bias
-Overconfidence Bias
-Gambler’s Fallacy
-Fundamental Attribution Error

This is being done on purpose. We need to walk away from their commentary and think for ourselves. We need to stick to the data – all the data.


Leave Psychological Bias at the Door – Rental Demand Continues To Move Higher

A couple weeks ago I finished rehabbing a condo I own and placed it on Zillow as a rental. I had it listed for about eight days. The only reason why I had it listed so long was that the property was about 35 miles away from where I lived, and that driving to it whenever I had a contact was impractical. With this said I am relieved it is off the market, as I had close to 60 inquiries and six applications scanned over. I went through the best one first, and it was leased and occupied two days later. The tenant makes close to 100k a year and has a stable government job. This house is in a nice working-class area of suburban Maryland, just outside the beltway.

While I continually come across the alt-media bubble talk concerning the rental markets, my experience and observation speaks otherwise.  The bubble predictions have yet to come to pass, and with the sharp rise in family formations (at least one million a year) supply is having a difficult time keeping up with demand.

Here is a link to an article from an industry publication titled, Research: Rental Demand to Escalate by the Millions.

-The primary catalysts behind the need are the as-ever delay in home-buying and the formation of new renter households as a result of aging and immigration. One million new renter households, on average, were formed each year over the last five.

-“Immigration affects rents and home prices far more than it affects the labor market,” said Alex Nowrasteh, immigration policy analyst at the Center for Global Liberty and Prosperity at the Cato Institute, at the 2017 REALTORS® Legislative Meetings & Trade Expo in May. Nowrasteh pointed to increases in home values and rents that parallel population growth, much of it spurred by immigrants.

Over the past six years I chose to concentrate on building a rental portfolio, as capitalization rates and IRRs were exceptionally high. This sector offered the best returns.

Open borders may be causing havoc in the job markets; causing the wage base to fall, but in the rental markets it causes rents to rise.

Based on my experience of the last property I just rented out, this observation remains fully intact.

Stop listening to the gloom and doom of the alt-media rental bubble talk. Stop concentrating on specific markets like Silicon Valley and Manhattan. I have little competition as a landlord.