Tuesday, June 23, 2009

Anything But A Financier

Attention all media personnel:

Please cease referring to Alan Stanford as "a Financier". If your prose is feeling naked and you are looking for an appropriate job description might I suggest "Ponzista", "Contrapreneur", "Confidence Man", "Trickster", "Financial Huckster" "Snake-Oil Salesman", or "Pathological Liar", Barricuda, Bilker, Bunco, Cheater, Clip Artist, Crook, Deceiver, Fleecer, Flimflammer, Fraudster, Hoser, Hustler, Mountebank, Scam Artist, Scammer, Shark, Sharpie, Smoothie, Swindler, or Antiguan Anti-Christ. Should you feel these tags a tad premature (editorially-speaking), do not hesitate to preface it with "alledged", or for those willing to go out (but not too for out) on a limb, "likely".

Thank you,


Sunday, June 21, 2009

The Reith Lectures: 2009

BBC's Reith Lectures are always both thought-provoking and illuminating. This year Harvard's Michael Sandel examined morality in a variety of venues - first markets, then politics, and, the third coming up, in science with respect to genetics. The first two of Dr Sandel's talks are well worth one's attention, as I am certain the final two will as well.

Needless to say, I am a big fan of the both the format and purpose. They are, at once dense yet approachable - attributes that in an ever-increasing world of complexity is useful for non-specialists to fathom the nuances of the deliberated subject. The BBC describes their history and purpose as follows:
The Reith Lectures were inaugurated in 1948 by the BBC to mark the historic contribution made to public service broadcasting by Sir John (later Lord) Reith, the corporation's first director-general.

John Reith maintained that broadcasting should be a public service which enriches the intellectual and cultural life of the nation. It is in this spirit that the BBC each year invites a leading figure to deliver a series of lectures on radio. The aim is to advance public understanding and debate about significant issues of contemporary interest.

The very first Reith lecturer was the philosopher, Bertrand Russell who spoke on "Authority and the Individual". Among his successors were Arnold Toynbee (The World and the West, 1952), Robert Oppenheimer (Science and the Common Understanding, 1953) and J.K. Galbraith (The New Industrial State, 1966). More recently, the Reith lectures have been delivered by the Chief Rabbi, Dr Jonathan Sacks (The Persistence of Faith, 1990) and Dr Steve Jones (The Language of the Genes, 1991).

While some will argue that the internet and huge range of similar content now-available has made this redundant, but I'd argue that the exponential the Public Interest is still-served by the mediation and editorial policy of a trusted source. Yes one can still argue about who best serves this role, but I am pleased to benefit from the Beeb's filtering on our behalf. Hope you enjoy them...

Tuesday, June 16, 2009

Moving Blues

My family and I are moving. Across an ocean. Large upheavals for the entire lot of us. Leaving friends and an indolent but simply honest way of life will be challenging for children and parents alike. But this is no time for regret as the die has proverbially been cast. As a result, I've had little time to write - much to my chagrin - hence the spartan posting of late, as the practical details associated with sifting and sorting more than a decade-and-a-half of accumulated shite and entrenched life that seemingly must (and now as I edit this, has) found its way into boxes and crates before floating across the azure, and hopefully placid (lest the container slip off), sea.

Down-sizing is a time-consuming though cathartic exercise. One gets lost in the endless photos, letters to or from friends, loved-ones now passed and old flames, pondering the whereabouts of old acquaintances whose address on a scrap of paper or business card has been used as a bookmark in a half-finished novel, or in ruminations upon mementos such the unusual brass desk calendar (something like this) with a fine 70-year old patina that turns to flip the two-sided cards within in order to change the prevailing day, (twice at the end of the month if it's a short one) ... one of the few tangible relics I possess from my grandfather, that made the cut on all prior moves, and will, again, this time. As I packed, I wondered of the origins and stories of these oddities and curios - the seemingly endless accumulated junk like the pair of E&Y mini-binoculars handed out at some function or another, never used, having consumed resources, the energy of asian labour, shippers diesel, the forwarders trans-shipments, multiple deliveries and manifests that brought it hither only to land (with one of it's siblings, no less) in a drawer, still-protected by its hermetical seal. Multiplied by five people, and untold drawers and shelves, now binomially at the crossroads between the increasingly pregnant rubbish bag, and membership in the growing tower of #42, #52, and #62 cartons, the exercise is arduous. Will the stuffed animals ever be re-cuddled, the re-match of "Clue", ever re-played, or the old cards and letters ever be re-read?!? Yet a few days later, with the boxes gone, I cannot tell you what became of most of them, such was the frenzy and blizzard of the removal. Now, I am profoundly unsettled. Not because of the impending move, but because I am not proud of the hoard. In fact, just the opposite. I am at once shocked and horrified by the obscenity of clothes, linen, PVC, toys, games, DVDs, CDs stuffed animals and all type of shiny, glazed colourful bric-a-brac that we human magpies collect (or, at least my family unit has collected). And yet, prior to this, I thought (or romantically imagined) we were parsimonious - at least compared to our peers. "Quality, not quantity". "No No No, you CANNOT have that - it's a waste...". The unending pleas to grandparents NOT to buy more junk. "Need little, want less", the wise catchphrase, over at Jesse's Cafe I hold out as a core value to demonstrate good non-acquisitive non-materialistic values. And yet, before me are boxes with too-many-multiples and sets of errrr ummm well, nearly everything, evidence I've failed in my attempts. Despite continual shedding of excess to friends, acquaintances, and the needy, the substantial purge of what will shortly be incinerated, and the sale of all the pedestrian furniture, devices that will not operate on 220v, what remains seems inconceivably vast, I feel empty, and ill as a result. I wish for that feeling when I first discovered DT Suzuki, identified with anicca and annata, and swore a now-broken oath that I'd never find myself where I presently am.

Analysing how this happened without my noticing, I begin to suspect that there is something allegorical in my predicament, both with respect to The Credit Bubble in general, and the erosion of America's fiscal position, and household balance sheets in particular. For just as I never set out with a plan to mindlessly consume and acquire, so too did America not consciously embark upon a credit-induced death-wish, nor the State and Her households conspire to burden themselves with untenably servicable quantities of debt. Incrementalism was the path. Manana, manana, manana was the mantra of denial that insured the difficult choice, the painful option, the road less travelled, was rarely contemplated let alone set out upon. Just as one doesn't become hugely obese by the pull of a rip-cord, the extension and multiplication of credit is not instanteously conjured. It is a slow-motion result cumulating from innumerable small decisions, each not life-threatening and reversible in themselves, but when conjoined, and embedded in feedback-loops, result in veritable disaster, be it fiscally, in one's waistline, or, in the accumulation of stuff. One's child desire's a brightly coloured plastic widget-thinger. One is tired, so one relents, makes the bargain with the devil and buys it - a respite from incessant demands, a bribe to keep the polity content. But intuitively, from wisdom and experience one knows it will rarely be played with thereafter, as are the multitudes of birthday presents, holiday gifts from family close and far. One knows the moment of weakness, far from currying favor or satiating demand, will only amplify it. One knows intuitively it's wrong and wasteful. But few are strong enough. Few people in the heat of that decisive moment - be it a mindless "toy" or an omnibus appropriations bill take into account cost vs. benefit analyses or an assessment of negative externalities. A plant, a book, a poem, a perennial bulb, a sketch, a charitable donation, all devalued in favor of PVC plastic bakelite injection molded synthetic rayon nylon stuff with imagination engagement values measured in the minutes or hours, but environmental half-lives measured in the centuries. Or deficit-spent consumption at the expense of investment. It is the same. How did we get here? Haven't more people noticed?

Does this stuff have value to anyone else? Would it find a market in its hovel of origin, outside of the salvage value from the materials from which is was constructed? Were they thinking of the gullible buyers, as I wonder about who made it? Decorative votive holders? Harvest motif napkin rings? Endless junk and clutter, some once useful, others never approached any reasonable utility. There is no secondary market value for most of it. Even the local charity ceased to accept clothes excepting those of a suitable pedigree. Beggars, it would seem, can, and are, choosy.

Now, I have shed [much of] my excess, filled my boxes, and sent them on their way in the container. Now, I am living in a minimalist purgatory for a couple of months until my [remaining] belongings arrive at their destination. I miss none of it. I feel liberated. If the container fell off of the ship, was waylaid by Somali pirates, or jack-knifed on the A7 enroute to delivery, I would shed no tears. I have my family, my health, a piano, some books, a trusty bicycle (which I've yet to figure out how to bring to its new home), and my running shoes. But this is potentially where the allegory stops. The last twelve months of de-leveraging at first glance, appeared to provide some strong introspective incentives. The upper boundary of aggregate credit appeared to have been reached, and the consequence of the mass-realization of this fact, combined with the cascading impact upon asset prices of system-wide reactions was too much to countenance. While I've satirically and bitterly mocked how we got there, as we were getting there, I do believe in the predicament at the moment, that stabilization of the patient was necessary. Just seven months ago, we had innumerable 'Ghost of Xmas Past' moments. "Never again" , "How could we have been so foolish?" "XYZ is the new normal", etc. Now, with asset prices on the mend, and feedback loop, well, feeding back in the prevailing direction, there is the belief that the worst is passed. Recovery is purportedly here (at least if viewed through the eyes of risk premia). Jimmy Stewart is already forgotten, as are the sleepless nights of what systemic obliteration might have meant. The promises of change and pleas of obedience to the deity of choice have been transgressed. Or at least so say the price action of the commodity complex and diversified inflation hedges.

This may true. But the crucial question, put most simply is: Has the denoument of the crisis passed, or is this merely the eye of the storm?? I am but an economist with a very small "e", however, as I wrote in favored post "If You Can't Tell Who The Sucker Is...", the question of what is likely to appear to be normal in hindsight is not (if this is The Big One as I believe it is) what is popularly perceived. "Peak Credit" has come and gone, and with it, the Era of Stupid Loans passed - for this generation anyway. In hindsight, we will wonder NOT why credit was crunched, but how the hallucinogenic wheat fungus that caused those with capital to, along with pixie dust conjured from it, to give it away to anyone and everyone who wanted it with such reckless abandon. So IF the era of Stupid Loans is finished, there will be no recovery. There will be precious little inflation, and it is likely deflation will persist.

I want to be bullish. I want asset prices to already be south of some long-term equilibrium, and be ready to rise. It would be less painful for The People. But with employment shocks still to ripple through the chain of dependencies, household balance sheets compromised, continued real-estate indigestion, our position between a fiscal rock & a hard place, and continued financial sector deleveraging, we collectively are the place that I've just been. We collectively are just beginning to sift through our shit - mentally sizing up what's important, what to take and what to leave. We are just beginning to realize that tough choices lie ahead - in all facets of life. We are just beginning to understand that these choices do not include 5-litre Cadillacs, absurdly over-applianced kitchens, or $5 iced-frappucino lattes. But, on the bight side - you won't miss most of it as much as you ex-ante believe you might...

Monday, June 15, 2009

Don't Break the Law When You're Breaking The Law

When I was in Aspen in April, Patrolman Joe sirened me to a stop as I came over the Bridge into town. "What's the rush Sir? - Is someone ill??" "Do you realize you were doing 37 in a 25 zone?" "Ummm ummm no sir, I KNOW it's a 25 in town and I crawl safely like everyone else there. I thought I'd slowed down. I didn't realize the zone began at the bridge... I have no excuse, as I was clearly guilty".

"License and registration Sir..." he demanded politely. "Are you going to be arrested?!? my son called from the back seat. My daughter had her head in her hands embarrassed by her groveling parent. My spouse gloating with "I told you so looks and tongue clicks". He ran my license. Didn't catch my outstanding offense from 1987 for non-payment of a non-applicable fine that I'd neglected to clean up. Back he came. "Now, IF I were going to give you a ticket it would be $140 and three points. Of course, you're not from here so I am sure you don't care about the points. All the same, it would be expensive. But, I can see you're well-intentioned, so I'm just going to give you a warning...Please drive safely in our town!

Two months later, they pulled over another hedgie (report here). Perhaps the arresting Officer was invested in the driver's Fund since since the offending Driver of the Green Land Rover was clearly not as lucky as your's truly. I still remember the sagely advice of a local villain where I grew up (obviously unheeded by the driver below): "Don't Break the Law When You're Breaking The Law..."

(hat-tip CB!!)