What Tomorrowland Says About How Our Goals Have Been Downsized

If Mad Men’s Don Draper were tasked with creating a vehicle to showcase the future, space, theme parks, youth and Coca-Cola, he would have produced, Tomorrowland. The movie is meant to open our hearts and minds to the possibilities that stem from feeding the optimistic ‘wolf’ within us, not the pessimistic one. All we need is hope. (And a place in which to be creative that is dimensions away from bureaucracy).

Tomorrowland is more about Walt Disney’s past vision of the future, with updated effects though, than it is about our current ability to invent a vastly different future from today. This is not a flaw of the filmmakers or the film, but a reflection of where we stand vs. where Disney and past ‘Imagineers’ thought we would be when Tomorrowland (and Disneyland) first opened, 60 years ago, this July.

The most prevalent new and modern innovations tend to be the kind funded by venture capitalists and big Wall Street IPOs, and are increasingly accessible through a Smartphone. They are simply less grand than the public-private accomplishments of the past in terms of novelty factor from a physical perspective. Constructing interstate highways to crisscross the country was a majestic feat. Reaching the moon was a dream for centuries that became a reality when Neil Armstrong took that giant leap for mankind in July, 1969.

Now, we can use millions of apps while barely moving our fingers. Compared to walking on the moon, that’s tiny stuff. Rather than compressing time and space across geographies, we compress time and the consumption of friendships, news, music and video clips. We are the product and the user in these relationships, thereby relinquishing our external point of view. Rather than gaze upward and outward in wonder as Galileo through recent generations awed by rocket launches did, we hunch our shoulders, and look downward and inward. The scale of our dreams and the types of innovations that garner the most current success in financial terms, have rendered ours a smaller world, more connected electronically, but on a reduced physical scale.

Space features prominently in Tomorrowland as it did for the Disney theme park area on which the film is based. The story opens with precocious optimist, Casey Newton (Britt Robertson), trying to halt the demolition of Pad 39 at the Kennedy Space Center, in a scene partially filmed at a NASA location. (NASA’s space shuttle program was dismantled in 2011.) The meaning here deserves closer inspection. The National Aeronautics and Space Administration (NASA) itself was established in 1958 by President Dwight D. Eisenhower with a bend toward peaceful applications of space science, the kind of unity to which Tomorrowland and Tomorrowland aspires, albeit steeped in product placement.

As a boy, Frank (Thomas Robinson) visits the 1964 New York World’s Fair, where he presents his homemade (flawed) jetpack to an ornery scientist, David Nix (played by an excellent Hugh Laurie). There, Frank encounters a young ‘girl’ with big eyes, Athena (Raffey Cassidy), who tells him “I’m the future.” He follows her and Nix to the “It’s a Small World” ride that takes him through an inter-dimensional portal to a utopian city of gleaming inventions and intentions, where his jetpack works.

The first Tomorrowland opened when Disneyland did, on July 17, 1955 in Anaheim, CA. It represented the future in 1986. Like Disney films in later years, Tomorrowland and Disneyland showcased the future as partly a Walt Disney vision, and partly a vision developed by sponsoring corporations. Monsanto Company, American Motors (a General Motors competitor), Richfield Oil, and Dutch Boy Paint were among the firms exhibiting products there in the early years. The TWA Moonliner, a cornerstone of Tomorrowland, was itself a product placement championed by TWA’s Howard Hughes in partnership with Walt Disney. Autopia, an opening-day attraction, offered views of the future National Interstate Highway System. It remains the only attraction open since the start of Tomorrowland.

Charles Erwin Wilson, head of General Motors when President Eisenhower selected him as Secretary of Defense in January 1953 assisted in the planning of the Interstate Highway System that was authorized by the National Interstate and Defense Highways Act of 1956 on June 29, the year after Tomorrowland opened.

General Motors (GM) is promoting the new Chevrolet Volt in conjunction with Tomorrowland. It’s based on five concepts from the past. Firebird III, debuted at the 1959 Motorama. Firebird IV was an experimental car created to explore automatic highways and built for the 1964 New York World’s Fair. Aerodynamics, intrinsic to the Volt’s design, heavily influenced the Astro II first revealed at the 1968 New York Auto Show. Astro III was a two-passenger experimental car in 1969 fashioned as a jet. In 1987, Chevrolet built its Express concept as part of a government project regarding high-speed, limited access commuter roads for specialized vehicles.

GM has backed several attractions at Disney theme parks. It is currently a corporate sponsor for the Test Track attraction at Epcot in the Walt Disney World Resort. In addition, Shanghai General Motors and Shanghai Disney Resort just signed an agreement announcing a longer-term co-branding strategic alliance. As the resort’s official vehicle, the Chevrolet brand will have presence in Shanghai Disneyland.

According to Chevrolet, “At their core, Disney and Chevrolet are entities of optimism, believing that with a little ingenuity, anything is possible.“ The 2016 Chevrolet Volt and EN-V concepts feature throughout the film. “Tomorrowland is a place where nothing is impossible, which is something that Chevrolet believes can exist in the here and now,” said Tim Mahoney, vice president, Global Chevrolet.

GM isn’t the only big sponsor of Disney in the film. It ends with visions of youth in peace and harmony saving the world as in the iconic Coca-Cola commercial. Disneyland’s Tomorrowland Terrace with its hydraulically lifting concert stage and Disney World’s Tomorrowland Terrace Noodle Station, were sponsored by Coca-Cola from its opening in 1967 until Tomorrowland was redesigned in 1998.

Brad Bird and writer Damon Lindelof, used concepts in Tomorrowland from Space Mountain, Cinderella’s castle, Epcot’s Spaceship Earth, and more. But, It’s a Small World, the water-based ride emblematic of international peace has dual meaning, as a portal in the movie, and to the real past. The ride debuted at the 1964 New York World’s Fair on opening day, April 22 (a day that became Earth Day in 1970).

According to the 1965 Official Guide Book to the New York World’s Fair, it was “A salute to the children of the world.” Indeed, “Children of the World” was the ride’s working title. But upon Walt’s request, Robert B. and Richard M. Sherman wrote a song that could be “easily translated into many languages and be played as a round.” In the wake of the 1962 Cuban Missile Crisis, “It’s a Small World (after all)” carried a message of global peace. Walt renamed the attraction after the song.

In Tomorrowland’s apocalyptic present day, Armageddon type predictions about the environment, war and disease threaten to destroy the planet. Newton is an optimistic dreamer. She and her robotic companion, Athena (Raffey Cassidy), travel to the home of the adult Walker (George Clooney), to enlist his help to get them back to Tomorrowland, which has ceased to function properly.

In the film, Casey, who “knows how things work”, does not scientifically solve the world-ending issue. Because the film is all about selling optimism, she saves the world by feeding the right wolf, instead.

The problem levied by Nix turns out to be one of negative messaging, a metaphor for feeding the wrong wolf. The Earth and its citizens careen towards destruction because they didn’t embrace better. The solution in the film (and its theme) is to alter the message, be positive and positive things will follow. That said, at the end, it’s the “robot” children that must find new earth children to exist in this utopia and re-invent, or re-imagine the world. To borrow from vintage Don Draper trying to rally his team and himself in season 8 episode 3, “I know we cannot be defeated, because there is an answer that will open the door. There is a way around this system. This is a test of our patience and commitment. One great idea can win someone over.”  Our minds are portals to our actions and imaginings.

Looking beyond the plot of Tomorrowland to what it conveys about discovery and creativity, serves a greater purpose than dissecting its box office gross. It provokes thought in the combined spirit of past inventors, imagineers, Walt Disney himself, and the optimists of today. The world is small, but our dreams can be big –  that’s a point worthy of expansion.

This article first appeared in Forbes.

Big Banks: Big Fines: Business As Usual

Last week, the Department of Justice announced that five major global banks had agreed to cop parent-level guilty pleas that rendered them all official corporate felons. The banks will pay more than $2.5 billion of criminal fines on top of a slew of past fines, plus regulatory and other fines of $3.1 billion, on top of a slew of past fines. It doesn't take a genius to see the pattern. Crime. Wrist-slap. Rinse. Repeat.

Here’s the thing. These kinds of penalties cause no financial damage; the profit was booked and releveraged long ago. The costs of the fines were set-aside in tax-deductible reserves awaiting this moment. Pleading guilty to one-count of felony level price rigging yet being allowed to maintain their status also alters nothing. These foreign currency exchange (FX) market manipulators – or “The Cartel” as they call themselves - Citicorp, JPMorgan Chase,  Barclays, The Royal Bank of Scotland, and UBS AG (who also received a $203 million fine for breaching its prior LIBOR manipulation settlement) will feel this punishment like an elephant feels a gnat, maybe even less.

As is customary after these sorts of fines are announced, the Department of Justice, aided in its investigations by a host of international regulatory and judicial bodies that are financed with taxpayer dollars and missed what was going on for years, waxed triumphant.

“Today’s historic resolutions,” remarked newly appointed Attorney General, Loretta Lynch, “serve as a stark reminder that this Department of Justice intends to vigorously prosecute all those who tilt the economic system in their favor; who subvert our marketplaces; and who enrich themselves at the expense of American consumers.”

She claimed that the penalties levied against these banks were commensurate with the “long-running and egregious nature of their anticompetitive conduct.” She further added that they “should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare.”

But they won’t deter anything. Of that particular pack and this particular time, UBS was the only firm that agreed to pay extra for repeat crimes, but the rest of the crew are all repeat offenders in their own right who have had no restrictions placed on their might or market share as a result.

On the urban streets, recidivists get thrown behind bars. In the hallowed corridors of banking, financial goliaths only have to say they’re sorry, pay a fine, and promise not to do it again. In the real world, being tarred a felon makes it harder to get a job, a mortgage, and a personal loan. In the financial realm, it means business as usual following mildly unpleasant press releases and tiny fines from proud arbiters of justice and vigilance.

Since the 2008 financial crisis, some $140 billion worth of settlements against major banks have been announced by the Department of Justice, international regulators and class action legal teams. A normal person could be forgiven for losing focus of the details. It gets fuzzy after mortgage fraud and money laundering. By the time we reach manipulating LIBOR (London-Interbank-Offering-Rate) or rigging FX rates, it can seem mind numbing. Consider this, anything that costs you money has been influenced or manipulated by the big banks. Why? Because of their size and ability to use it against, or on the gray line of the law, to their advantage.

For not one, but for more than five years, from December 2007 and January 2013, euro-dollar traders at Citicorp, JPMorgan, Barclays and RBS – “The Cartel” – used an exclusive electronic chat room to coordinate their trading of U.S. dollars and euros so as to manipulate the benchmark rates set at the 1:15 PM European Central Bank and 4:00 PM World Markets/Reuters fixing times in order to maximize their profits. 

They would withhold buying or selling euros or dollars if doing so would hurt open positions held by their co-conspirators. In the global game of profit extraction, these sometimes-competitors protected each other in a manner similar to two mafia families locking arms (or firing shots)  to keep a third away from encroaching on their territory.

Each bank will pay a fine “proportional to its involvement in the conspiracy.” Citicorp, who spent the longest time rigging the FX markets, from as early as December 2007 until at least January 2013, will pay a $925 million fine. Barclays will pay a $650 million fine and a $60 million criminal penalty for violating its 2012 non-prosecution agreement regarding LIBOR rigging. The firms will fire 8 people, though not the CEO.

JPMorgan Chase, involved from at least as early as July 2010 until January 2013, agreed to pay a $550 million fine; and RBS, involved from at least as early as December 2007 until at least April 2010, agreed to pay a $395 million fine. 

Citicorp, Barclays, JPMorgan Chase, RBS and UBS have each agreed to a three-year period of corporate probation and to cease all criminal activity. (I’ll take the under on  when the next set of criminal activity related settlements hits them. )

Adding in the $4.3 billion from their November, 2014 related settlements with US and European regulatory agencies, last week’s FX “resolutions” bring the total fines and penalties paid by these five banks –  just for their FX conduct – to about $10 billion. 

Citicorp settled for the largest criminal fine of $925 million, on top of a $342 million Fed penalty. The other banks were fined relative to the fractional portion of the crime time frame.  No jail sentences were imposed – not even a day of house arrest or ankle monitors.

Size does matter. Sort of. According to the agreements,  “the statutory maximum penalty which may be imposed upon conviction for a violation of Section One of the Sherman Antitrust Act is a fine in an amount equal to the greatest of: $100 million, twice the gross pecuniary gain the conspirators derived from the crime or twice the gross pecuniary loss caused to the victims of the crime by the conspirators.”

But since there’s no way the DOJ totaled all the fractional losses non-Cartel members felt over the five years (which would likely include your by the way), it means that they believe the five banks at most collectively made $5 billion over five years, or $1 billion each (give or take) or $200 million (give or take) each from FX manipulation per year. I’m calling hogwash on that; $200 million per year rigging FX rates would have been such a pocket change game that the Cartel would have lost interest in it quickly.

JPM Chase’s press release didn’t mention the word ‘felony’ instead opting for the more demure term ‘violation.’ In keeping with his normal reaction to the financial crimes of his company, JPM Chase Chairman and CEO Jamie Dimon used the “bad-apple defense.” Calling this latest revelation of felonious activity a “disappointment,” he stated, “The lesson here is that the conduct of a small group of employees, or of even a single employee, can reflect badly on all of us, and have significant ramifications for the entire firm. That’s why we’ve redoubled our efforts to fortify our controls and enhance our historically strong culture.”

That’s not quite true. Not only was the supervisor of Foreign Exchange at JPMorgan not fired, but as Wall Street on Parade reported last week, that “individual, Troy Rohrbaugh, who has been head of Foreign Exchange at JPMorgan since 2005, is now serving in the dual role as Chair of the Foreign Exchange Committee at the New York Fed, helping his regulator establish best practices in foreign exchange trading.”

Stock values of the Cartel-Five banks only mildly underperformed the overall market on the day of the announcement, since their chieftains made it clear that money had already been set in reserve for these fines. They rebounded the next day.  In other news, last Tuesday, Jamie Dimon’s annual pay package of $20 million passed a shareholder vote.  

As for Citicorp, the firm’s settlement with the Federal Reserve included the entry of a cease and desist order (for criminal activity) and a civil penalty of $342 million. Citi also reached a separate settlement  in a related private class action suit for $394 million.

Michael Corbat, CEO of Citigroup, said, “The behavior that resulted in the settlements .. is an embarrassment to our firm, and stands in stark contrast to Citi’s values.” He added, “We will learn from this experience and continue building upon the changes that we have already made to our systems, controls, and monitoring processes.”

Investigations of other crimes continue. The EU, for instance, is re-evaluating its [4-year on hold] antitrust probe into whether 13 of the world’s largest banks conspired to shut exchanges out of the credit-default swaps (CDS) market in the years surrounding the financial crisis. Goldman Sachs. Bank of America, Deutsche Bank AG, JPMorgan Chase, Citigroup and HSBC Holdings are among the multiple-offender banks accused of colluding in this game from 2006 to 2009.

The upshot is this. These fines don’t matter. Felony pleas are a nice touch, but none of these punishments impose solid structural change, nor is any being suggested. Putting the fines in perspective, Citicorp's criminal fine of $925 million is equal to 1/20th of 1 percent of its assets. For JPM Chase, the fine of $550 million is equivalent to about 1/50^th of 1 percent of its assets.  Why would that deter anything?

Words of contrition from bank CEOs have repeatedly followed the unearthing of fresh crimes or settlements for correlated criminal or quasi-criminal behavior. Words of triumph from justice officials or regulators have proceeded more manipulations and discoveries. Aside from our tacit support for these banks by keeping our money with them or using them for more humble services, we citizens pay for the people-hours of public officials in a myriad of ways including funding the bodies that are supposed to keep us financially safe from bank shenanigans.

How many more crimes do these banks get to commit before these judicial and regulatory bodies, and the rest of Washington wakes up and breaks them up? Bigger banks, bigger crimes. Smaller banks, smaller crimes. At least, a size reduction would be a step in the right direction.

Four Factors Behind Rising Volatility And How To Deal With Them

No one could have predicted the sheer scope of global monetary policy bolstering the private banking and trading system. Yet, here we were - ensconced in the seventh year of capital markets being buoyed by coordinated government and central bank strategies. It’s Keynesianism for Wall Street. The unprecedented nature of this international effort has provided an illusion of stability, albeit reliant on artificial stimulus to the private sector in the form of cheap money, tempered currency rates (except the dollar - so far) and multi-trillion dollar bond buying programs. It is the most expensive, blatant aid for major financial players ever conceived and executed. But the facade is fading. Even those sustaining this madness, like the IMF, are issuing warnings about increasing volatility.

We are repeatedly told these tactics benefit broader populations and economies. Yet by design, they encourage hoarding, or more crafty speculative behavior, on the part of big financial firms (in the guise of obeying slightly adjusted capital rules) and their corporate clients (that largely use cheap funds to buy their own stock.) While politicians, central banks and multinational government-funded entities opine on “remaining” structural weaknesses of certain individual countries, they congratulate themselves on having staved off more acute crises.  All without exhibiting the slightest bit of irony. 

When cheap funds stop flowing, and “hot” money shifts its attentions, as it invariably and inevitably does, volatility escalates as it is doing now. This usually signals a downturn, but not before nail-biting ups and downs in the process.

These four risk factors individually, or collectively, drive rapid price fluctuations. Individually, they fuel market volatility. Concurrently, they can wreak far greater havoc:

1. Central Bank Policies
2. Credit Default Risk
3. Geo-Political Maneuvering
4. Financial Industry Manipulation And Crime

Events that in isolation don’t impact markets severely can coalesce with more negative results. This is important to understand when prioritizing personal investment decisions. In this two-part report, I will outline driving forces behind today’s volatility and provide suggestions as to what you can do to protect yourself, and even thrive, going forward.

Take Central Banks First

Two weeks ago, stock and bond markets dipped when Federal Reserve Chair Janet Yellen announced, “equity market valuations at this point generally are quite high."  She admitted,  “There are potential dangers." She saw no bubble. The Fed continues to claim its policies have fostered sustainable - if slow – growth for the mainstream economy.

This wasn’t the first time Yellen has said as much. It won’t be the last. In November 2013, she saw no equity or real estate bubble, either. In July 2014, at an IMF lecture, she said the Fed wouldn’t raise rates just to burst bubbles, rather when the US has a healthy job market with stable prices.  She has assumed Ben Bernanke’s mantras in this regard.

Each time she speaks, the media enters interpretation overdrive and markets react similarly. They drop initially, then rebound to slightly lower levels than before. The pattern is becoming increasingly pronounced, though, as is the associated volatility.

Recent volatility spikes underscore the fragility of markets inhaling cheap money due to the global central bank policies that began with the US Federal Reserve, and spread to the European Central Bank, the Bank of Japan and the People’s Bank of China.  The IMF has recently stated that, despite rising volatility, a dose of “QE-Plus” may be needed.

Since the beginning of 2015, the stock market has fluctuated between new highs and turning negative for the year. Movements are mostly linked to the rate hike timing guessing game, amidst a roster of other commonly circulated “threats” from Grexit to erratic oil price behavior. Associated speculation is marked by lengthy media debates about what the word ‘patience’ means regarding Fed talk on rate hikes and smatterings of the realization that artificially stimulated markets don’t promote real long-term growth.

Growing Credit Risk

Yellen also mentioned "compression of spreads on high-yield debt, which certainly looks like a reach for yield type of behavior.” Obviously.  When high-grade debt interest rates are low, the only place to grab yield is in riskier securities. A credit bubble develops. This awareness has not been met with deterrent policy though, leaving the propensity of compressed spreads (and credit default spreads) to blow out (widen) from these levels.

The Fed’s goalposts on rate hikes keep changing. Globalization of low to negative interest rates and dampening of currency exchange rates relative to the dollar has helped keep US rate policy where it is, though the Fed doesn’t say this. The Fed’s zero-interest-rate and QE policy has propped markets, encouraged corporate share buybacks, caused yield seekers to buy riskier securities, and provided banks incentives to leverage it all.

Yellen isn’t wrong in her diagnosis; she’s just ignoring the Fed’s role in it. So is every other central bank and multinational entity. They offer liquidity crack and then wonder why junkies multiply. The Fed missed the last bubble and is missing this one. Meanwhile, the rate-hike guessing game increases market volatility.

From Geo-Politics to Manipulation

Excessive speculation also provokes volatility, especially as enacted by the major market players that control the narrative and the trading volume. This occurs with stocks, bonds, and commodities.  Often such moves rely on geo-political tensions as a cover.

When the US and its Euro-friends slapped economic sanctions on Russia over its actions in the Ukraine, the fallout was used to explain weaker market days.  Oil price drops were partially attributed to Middle East tensions, ostensibly because OPEC didn't agree to withhold production. They were also used to explain Russian economic weakness, allowing the Obama administration to gloat about the success of its sanctions.

Energy volatility, widely reported as oil price movements, can impair household budgets and the overall economy. When oil prices are elevated, associated household costs rise. When they drop, media stories about resultant layoffs can dampen markets and household investments in them. To the extent that prices are manipulated in either direction by financial players and not end-producers or users, they cause excessive volatility.

Big banks don’t care about any of this. They have the capital and global agility to leverage whatever situation arises. If Russia is weak, head to Latin America. If US hedge funds force Argentina into technical default, press Obama to lift sanctions and head to Cuba. It’s a merry-go-round of institutional speculation followed by volatility and decline.

Financial firms, including banks, hedge funds and less regulated players, exert tremendous power through leveraging capital, trading positions and public predictions. They can hype up prices to attract money into their market of choice and quickly reverse course, aided by a media eager to follow the story-du-jour for page-views or ratings.

The power of the large trading players to move prices remains vast. The Big Six US banks control 97% of all trading assets in the US banking system and 95% of all derivatives. Thirty Globally Systemically Important Banks (GSIB’s) control 40% of lending and 52% of assets worldwide. As volatility rises, ongoing concentration in these still-too-big-to-fail entities that can manipulate financial markets, produces triple digit stock market swings that capture headlines and stoke people’s fears.

Subsidization for the elite banking class can’t last forever. But it has already overstayed its welcome many times over, so predicting a specific end date is not easy (though I’m going with mid-2016, when the ECB will be done with this round of bond-buying.) In the interim, rising volatility signals an unraveling of current polices that can’t be ignored.

The uncertainty surrounding the inevitability, if not the exact timing, of multiple and possibly overlapping volatility drivers is itself a source of volatility. For the average person, these signs can be scary. Taking steps to avoid the circus as much as possible, such as extracting money from the markets, securing personal assets, and waiting out the swings, can be a source of emotional comfort and future financial stability.

(This Piece was Part 1 of a two-part piece marking the inauguration of my partnership on such topics with Peak Prosperity)