5 Common Things That Aren’t What They Seem
Case Studies in Surfaces and a little fun with Bernie Sanders
In my recent article Analytic Lessons from Behind the Curtain, we examined the theme behind The Wizard of Oz. The book and movie both have plots that are not quite as they seem. This article will examine several common things that are also not as they seem. Poor perception is not just a phenomenon found Over the Rainbow.
Real Estate
Home ownership is the American dream. Too bad, it is never really true. With all deference to Bernie Sanders, this land is neither your land, nor my land. Your home belongs first and foremost to the state. If you don’t believe that, try not paying your real estate taxes.
The Real in Real Estate is arguably based on the term for royal in many Latin based languages or it may just mean true. Regardless, the true owner of your house is the local taxing municipality. If you have a mortgage, you aren’t even second!
The mortgage, or dead pledge, is a securitized loan. If you don’t pay, you lose your house. Effectively, the bank has the rights to your home, right behind the state. When you hear the question — Do you own a home? — the answer is NO.
Bank Account
Do you have money in a major bank? That is a trick question to… you don’t. When you opened your bank account, you made an unsecuritized loan to the bank. Sadly, banks routinely charge 20% for a similar privilege, so how does that 0.5% feel now?
While at the moment, this seems a lot like a bunch of legalese on a paper. This reality could have grave consequences. While the FDIC may insure your account, at least today. This subtle little adjustment of reality means that Greek and now Austrian-style Bail Ins are possible in the US as well.
Primary System
Recently this topic has gotten a lot of attention. I could have titled this section Democracy. The fact is the US is a representative republic and the political parties operate election models based on their own rules — not some career politicians wistful oversimplifications of our political system. Sorry Bernie.
The Primary System and our Presidential Elections in general are based on electing delegates who are held to a dizzying and changing array of standards when they vote. For all the attention the Republican party’s rules have gotten of late, the Democratic system is even less democratic and more convoluted. Look up in the sky! It’s a Super Delegate! Poor Bernie…
Social Security Tax
Where to start here? The realities of Social Security are convoluted at best. A tax on people, that is actually levied more heavily on companies (on behalf of their employees). While your paycheck reflects a 6–7.5% social security tax, that is only half of the reality. Your employer is making an additional 7.5% contribution on your behalf.
That money then goes into the Social Security Lockbox, aka the congressional slush fund. No money has ever truly been locked away for future generations. The social contract made with prior tax payers is really just the whim of the sitting congress. The whole system is in fact a giant Ponsy scheme. The younger generation’s contributions subsidize payments to the elder generation. Wealth redistribution at its best — from the poorest to the best connected. Not sure which Bernie to reference here — Sanders or Madoff…
Car Leases
One more example to round out this article, the car lease is not always what it seems either. As with other financial instruments, the car lease is often an entirely different financial relationship than you were aware of as well. In some cases, rather than a true lease where the vehicle is held as the security, many car dealers utilize a balloon-payment model.
This often seems like a case of six of one and a half dozen of the other. In both cases, the car is effective securitized and the debt is fully held against the customer with a fixed expiration date. Behind the scenes, this alternate model is handled differently by lenders, creditors, regulators, taxing authorities, and even credit bureaus. While the customer may not suffer, that does not change the fact that their perception is flawed.
There are plenty of additional examples of perceptions that differ greatly from reality. Sport’s contracts and student loans, insurance programs and government regulation — our world is full of perceptions that don’t actually conform to reality. Investor, entrepreneurs, and innovators often leverage these as opportunities — do you? How might perception be holding you back?
Next thing you know, we will learn Bernie Sanders wasn’t even a registered Democrat. Oops, sorry Bernie.
That’s okay — Trump is.
