Lies, Damned Lies, and Misinformation

I used to think the democratization of information was a good thing. Now, I’m not so sure.

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When I landed my first job in finance, I knew next to nothing about the financial markets. A neighbor who was in “the bond business” got me an interview at a startup securities firm. In 1983, the fact that I had sales experience was all it took for them to sponsor me for the securities exam.

I couldn’t afford to screw this up. All my friends were getting jobs at places like IBM and AT&T. I’d flunked out of the University of Arkansas spectacularly, so this job was my chance to redeem myself. Every other guy (there weren’t any women) in my cohort of would-be securities brokers was a former car salesman. I’m certain I was the only one in my group who had attended college. I was also the only Black person.

Out of two dozen candidates, only four of us passed the securities exam.

My employer was a now-defunct Little Rock bond house that operated like the 2000 film Boiler Room. The only difference was that our clients were financial institutions instead of individuals.

The company was licensed to sell several securities, but management was only interested in selling one type of security: mortgage-backed bonds. These bonds are the subject of Liar's Poker, the book that made Michael Lewis a famous author. The same bonds are featured in The Big Short, Lewis's book about the start of the housing crisis. In the mid-2000s, more complex versions of the securities helped blow up the entire financial system.

You might wonder why we only sold that security. The answer is simple. Only two Wall Street investment banks dealt in mortgage-backed bonds, and we were one of the few regional firms that had access to their inventory. Our target clients were banks with less than half a billion in assets. Wall Street couldn't have cared less about these financial institutions. To them, a bank with a few hundred million in assets was small potatoes.

This presented an opportunity for a no-name boiler room in Little Rock, like the one where I worked, to make a ton of money. And boy, did we ever. Our little bond shop had a commission quota of $300,000 a day. To hit that number, we charged our customers as much as the law allowed—sometimes more.

Our commissions were so high some days a single salesman would hit that number all by himself. At the time, the median income in Arkansas was around $20,000, so for uneducated, twenty-something guys to make this type of money was unheard of. Guys who barely made a living a few months earlier were buying big houses and Porsches. One salesman even purchased a sailboat. People referred to newly rich bond salesmen as “bond daddies.” If you look up the definition, you’ll see it's not a compliment.

I never made that kind of money at the firm, but one month I made more than my father made in a year. When my relatives found out, they were concerned I was doing something illegal. I was no angel, but I was honest. Anyway, I didn't need to break the rules. They were so opaque it was easy to operate in the gray area.

The most valuable commodity I know of is information. ~Gordon Gekko, Oliver Stone’s Wall Street

Keep in mind there was no CNBC or Bloomberg Television in the early eighties. Nobody had a mobile phone or an app to check their investments. All the average person knew about “the market” was what they saw on the evening news or read in the newspapers.

If the president of a small-town bank or rural savings and loan wanted real-time financial information, they depended on a salesman like me to tell them what was happening in the financial markets. None of my clients understood how mortgage-backed bonds functioned, let alone what they were worth. My job was to educate them. As long as they gave me their business.

A lot of what my clients knew about the bond market activity they learned from me, a college dropout whose financial literacy was limited to one security and a script of talking points. But over time, my clients wised up and found other brokers, just to keep me honest. After six months, I left the company for a more reputable investment bank. By then, I’d figured out that as much as I was in the bond-selling business, I was in the information business.

During my time in finance, I had access to more information than most people in the country. My information advantage gave me the credibility to persuade billion-dollar financial institutions to trust me with their business. Since I left finance over a decade ago, information is more democratized than ever. Unfortunately, that’s not always a good thing.

Why lie so much? Because it works.

We’ve come to accept the notion that politicians bend the truth to their benefit, and until a few years ago, we considered the news media to be an honest source of information. But the sheer volume—and the audacity—of lying and deception in both places is beyond anything we've seen.

If you saw last month’s vice presidential debate, you might have noticed that JD Vance responded to most of the moderators’ questions by lying. Perhaps Vance’s biggest whopper—one of many—was regarding the number of undocumented immigrants currently in the United States.

Vance claimed there are twenty-five million undocumented immigrants in America when according to most estimates, there are fewer than half as many. Vance's outlandish claim isn't an anomaly. In a June interview, Marco Rubio, the Republican senator from Florida, said there may be as many as thirty million undocumented immigrants in the country, with ten million entering the country under the Biden administration.

These inflated immigration claims have been debunked, not only by the Department of Homeland Security but by independent researchers. Even the Federation for Immigration Reform (FAIR), a group both the Anti-Defamation League (ADL) and the Southern Poverty Law Center (SPLC) have called out for their ties to eugenics and white supremacist groups, only estimates 16.8 million immigrants are in the country.

As a general rule, the most successful man in life is the man who has the best information. ~Disraeli

Information is king. Even if it's not true.

Unless you know someone kind enough to share a password or send a gift link your way, reading The Washington Post, The New York Times, or The Wall Street Journal will cost you. We consider their reporting reliable, even if we don't always agree with their editorial points of view.

On the other hand, access to the purveyors of conspiracy theories and misinformation is almost always free. This content, once relegated to the fringe of media, has seeped into the mainstream. Here are two examples.

When I worked in New York City, The Epoch Times was a free newspaper you could get on any street corner in Manhattan. But since 2016, the paper has been all-in for Donald Trump. The paper's ownership is associated with the Falun Gong movement, a Chinese spiritual community whose goal is to take down the Chinese government. Brandy Zadrozny and Ben Collins of NBC News wrote about the paper's MAGA turn in 2019 (emphasis added):

By the numbers, there is no bigger advocate of President Donald Trump on Facebook than The Epoch Times.

The small New York-based nonprofit news outlet has spent more than $1.5 million on about 11,000 pro-Trump advertisements in the last six months, according to data from Facebook’s advertising archive — more than any organization outside of the Trump campaign itself, and more than most Democratic presidential candidates have spent on their own campaigns.

Those video ads — in which unidentified spokespeople thumb through a newspaper to praise Trump, peddle conspiracy theories about the “Deep State,” and criticize “fake news” media — strike a familiar tone in the online conservative news ecosystem. The Epoch Times looks like many of the conservative outlets that have gained followings in recent years. But it isn’t.

The Epoch Times peppered Facebook with so many lies and conspiracy theories the social media giant banned the publication from running ads on their platform. Just take a minute and think about how badly a business must behave for Facebook to stop taking its money.

The Epoch Times says it's the fourth-largest newspaper by subscriber count. Since they aren’t audited by the companies that collect circulation data, we don't know if that's true. But in just two years the paper’s revenue has jumped by 685% according to their most recent tax records. In 2021, it hit $122 million.

The paper’s performance would be impressive except that, according to the Department of Justice, the entire enterprise may be the front for a massive money laundering operation. Last June, the company’s chief financial officer was arrested for allegedly funneling millions into company accounts using stolen identities. From New York Magazine (emphasis added):

[F]ederal prosecutors in New York charged the Epoch Times’ chief financial officer, Bill Guan, with bank fraud and conspiracy to commit money laundering for allegedly moving at least $67 million in illegally obtained funds to bank accounts in the media outlet’s name…Guan was in charge of something (rather suspiciously) called the “Make Money Online” team, in which Guan and underlings “used cryptocurrency to knowingly purchase tens of millions of dollars in crime proceeds.” The alleged scheme was fairly simple, relying on prepaid debit cards, which are a common method in crypto laundering. The Make Money Online team, based abroad, would allegedly purchase “proceeds of fraudulently obtained unemployment insurance benefits” loaded onto prepaid cards. The team then allegedly traded them for cryptocurrency at 70 to 80 percent of the cards’ actual value. After making the deal, the Feds claim that those funds would then be transferred into bank accounts associated with the Epoch Times as well as into Guan’s personal bank accounts.

Then there's the Gateway Pundit, a digital site specializing in peddling conspiracy theories. The site made so much money spreading COVID-19 conspiracies during the pandemic, that Google demonetized them. At the risk of being repetitive, just think of what it takes to make Google stop taking a company’s money.

The company just settled a defamation lawsuit with the same two Georgia election workers who took Rudy Giuliani to the cleaners. Despite the site’s sketchy reputation, Maria Bartiromo of Fox Business recently cited the site’s “reporting” as evidence that the upcoming election may already be rigged.

Before Mario Bartiromo joined Fox Business, she spent twenty years with CNBC. She was the first journalist—male or female—to broadcast from the floor of the New York Stock Exchange. To this day, she sits on the board of trustees at New York University.

Traders, me included, used to hang on Bartiromo’s every word. In all that time, her reporting was never political. Since moving to Fox, the primary source of information of the people for whom the lies and conspiracy theories are intended, Bartiromo has become an unrecognizable version of her former self.

As I've mentioned before, my family lives on a small island in North Carolina. Very few people here subscribe to the New York Times, Wall Street Journal, or Washington Post. The televisions in local businesses are set to Fox News or ESPN.

A few days ago, a free copy of The Epoch Times landed in my mailbox. It was one of those mass mailings, so everyone in the area received a copy of the newspaper. Many of them may become subscribers.

Like the country bankers I once sold mortgage-backed bonds to, they have no idea they’re about to be taken for a ride.