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Financial Humor Bulletin, 2007

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iTulip.com - The Contrary Market View

Ladies whose husbands are undone by Bubbles,
Meet at a Tavern to Lament their Troubles,
At length they all agree upon Petition,
To Pray the State to Mend their Bad Condition

The Epicurean Dealmaker Eat the Bankers

You know, Dear Readers, having been an investment banker for lo these many moons, I long ago abandoned whatever starry-eyed dreams I might have entertained in my callow youth of obtaining a measure of social respectability for the stature and gravitas of my chosen profession (accompanied, of course, by a comfortable pile of shiny simoleons). Investment bankers, in modern capitalist society, seem to fall into that social class of people which everyone else despises vociferously as greedy, money-grubbing whores, unprincipled shills and hucksters who are only marginally less despicable than personal injury lawyers or Flavor Flav. Of course, this universally fashionable scorn is never in evidence when the citizen in question is desperately trying to get into Harvard Business School so he or she can become an investment banker, wheedling them to donate to his or her favorite charity, attempting to sell them an overpriced condominium in a brand new building stuffed to the gills with other investment bankers, or persuading them to marry their comely daughter (or him- or herself).

And yet—at the risk of incurring the opprobrium of the chattering classes by tooting my own horn—I will assert that there are indeed a number of admirable traits and characteristics which can be fairly laid at the gilded doorstep of Homo investmentbankicus. While it is true that many are venal, corrupt, and/or have the interpersonal skills of Mr. Hyde on a bender, it is also true that quite a few are charming, politic, and even genuinely nice people. I am sure I will strain your credulity somewhat less by also asserting that, as a group, investment bankers tend to be better-educated, more worldly, and harder working than the average capitalist wage slave. While they are neither necessary nor sufficient for a successful career in investment banking, native intelligence, grit, and ambition are character traits which are liberally sprinkled throughout the cohorts of Wall Street. And, the last time I checked, these traits tend to be the same ones which most Americans claim to admire as valid tickets to the good life.

Certainly, there is very little about the monetary rewards accruing to the successful investment banker which is due to nepotism, cronyism, or inherited wealth or position. (The pre-1973 days when investment banking was an undemanding profession populated by the dull and unambitious sons of wealthy WASPs is long gone.) If you can't cut it on your own pluck, skills, and drive, you have no place in this industry. There are no Rigas, Murdoch, or—dare I say it?—Bush or Clinton dynasties in investment banking: it's too bloody hard. Scratch your average investment banker's Kiton suit, and you will usually find a genuinely self-made man or woman underneath.

So what's not to like? Well, the common complaint is that we make too much money, and we add little value to the economy or society.

But I'd be careful, if I were you, about adopting such an opinion without thinking it through. After all, how much "value" does your little profession add to the common weal? By whose calculation? And since when has capitalism paid laborers for the value they contribute to the general good anyway? My economics professors taught me that wage rates are set by market forces, which follow their own internal logic almost wholly divorced from such concepts as social good, intrinsic value, or even the difficulty of the work in question. If that were not true, then surely the soldiers under fire in Iraq and Afghanistan would be making a hell of a lot more money than your (or my) sorry little ass.

And like it or not, investment bankers do perform a function which is inseparable from the proper functioning of a capitalist economy. At its most basic, investment bankers are middlemen: we grease the wheels of commerce, of investment, of capital formation and allocation, and of wealth creation. Strictly speaking, investment bankers perform none of those actions themselves. When we do, our role blurs, and we become investors, capitalists, or hedge funds. Some of us eventually become Goldman Sachs. But the point is that these wheels need greasing, and "The Market"—whatever the hell that is—pays handsomely for the service. Invent a magically self-greasing economy, and you will eliminate the investment bankers. Good luck. Finish that task, and I'll give you another assignment: get rid of all the cockroaches in the world, too.

[Dec 20, 2007] Now that rates are 2 sizes smaller, what's a Who to do - USATODAY.com

Those nasty old Grinches cut rates in a wink,

They cut rates so low that CD yields stink.

When WhoBank's bankers pay interest, you see

The interest they pay wouldn't feed a Who-flea.

            —From How the Grinch Injected Liquidity Into the Monetary System

[Dec 20, 2007] The Shock of a Thousand Trillions

...my eyes opened when I saw the Opednews.com article by Sharon Kayser, titled, "Hey Buddy, Can You Spare $1,000 Trillion?"

Instantly, I knew that someone had erred! A thousand trillions? Hahaha! What a preposterous number!

So I was instantly on the phone to call Ms. Kayser so I could tell her that there has been an error in the title, and then maybe, you know, she could drop a line to my boss and tell her what a nice guy I am and how firing me right before Christmas is so tacky, no matter how well-deserved, or maybe she could get me a job there with her or something.

So imagine my horror when I learned that there was no error! We are talking about a quadrillion freaking dollars! Instantly I knew that she was doing that on purpose to give me a heart attack!

The actual excerpt is that "there is currently at least a $1,000 trillion dollar black hole in the world economy", what with "$600 trillion in world liabilities, plus more than a $400 trillion-derivatives neutron bomb, all of which will go off when the Westerners (from EU and US) will no longer be able to borrow."

So, with trembling hands I feverishly punched the calculator, adding 400 trillion plus 600 trillion, which is 400,000,000,000,000 and 600,000,000,000,000,and then I think, "That's too many zeroes! It won't even fit on my calculator screen, for God's sake!"

So I do it by hand, and it keeps coming out as "1,000,000,000,000,000", and it looks so weird that I knew that had to be wrong. It can't have that many zeroes in it!

So, I go to the dictionary and look up "quadrillion", and it says that it is "a one followed by fifteen zeroes." Except in Britain, where it is 24 zeroes, for some reason.

Anyway, it really IS written out as $1,000,000,000,000,000!

That number must have stunned me into insensibility, as the next thing I knew, it was later in the day, things were coming into focus, people are yelling at me to wake up and get back to work, and asking when I am going to do a little work around here, and how about getting a little work done? Naturally I responded to their inquiries by yelling obscenities and spitting on them, when right in the middle of the discussion about my work habits, here comes Ms. Kayser again, saying, "Talking of jobs, did you know that in 1972, wages reached their peak? Today, real wages are nearly one-fifth lower - inflation adjusted!"

If I wasn't so engrossed in teaching some manners to my fellow office workers, I would have said, "No, but I do know that you can't have economic growth if prices are rising faster than incomes!"

Now that I think about it, this is a perfect segue to a Loud Mogambo Discussion (LMD) of how inflation eats away at the buying power of your income, and how the damnable Federal Reserve and the despicable Alan Greenspan destroyed the dollar and the American economy when he was in control of the Federal Reserve and how this means that anybody who sees Alan Greenspan should be able to slap his nasty little face, and maybe beat him with sticks, and throw rocks and him and his nasty little car and when he has to pay a lot of money to have the dents taken out and repainted, maybe he will think to himself, "Hey! That Mogambo Idiot (TMI) was right! I was a stupid little man who created too much money and credit, and now we are going to be destroyed by inflation in prices! For example, look how much the repair shop wants to fix my stupid car!" Ugh.

[Dec 19, 2007] A Letter From Santa Claus - Forbes.com

My dear Alyssa Bernanke:

I have received and read your special Christmas letter sent Nov. 1. I am so happy to learn, after thinking about your wishes, that you already know the true meaning of Christmas.

Click here for a 30-day free trial subscription to the Oberweis Report.

I know from your letter how much you want to help your father. I have to admit your letter was a challenging one, and I agree your pops has a difficult job. It took me a long time to understand the words you used--inflation, recession and subprime, for example. These are words not often found in Santa's letters.

As for the part about American dollars, well, with this I have some understanding. All around the world, kids don't want dollars this year. At first I was not sure I could help your father. While I am great at guiding Rudolf and Blitzen, economies are another matter. But after I thought it over, I realized that we've learned a lot up here at the North Pole over the years. Please humbly accept these ideas and send my best to your father, Mr. Ben Bernanke:

No. 1: When we make too much of something, nobody wants it anymore. My elves love candy canes. One year I thought I would give them each 1,000. By the end of the season, they were so sick of candy canes no elf would even trade broccoli for them. This sounds like the problem you described with dollars. My recommendation to your dad on dollars: The more he prints, the less people will want them.

No. 2: When things are free, or almost free, people are wasteful. You told me about his problem with interest rates. I can tell you how it works with children. Kids love toys, but some children have more toys than they need. Kids with more toys than they need don't play with each toy. Some of the toys are wasted; some are even lost. Kids with very few toys usually choose them wisely and take good care of them. My recommendation to your dad: Be careful about letting those interest rates drop too fast. If it's too easy to get money, wasteful spending will surely follow. It's easy to keep kids happy in the short run by giving them lots of toys, but too many toys leads to wastefulness and potential losses over time.

No. 3: Naughty kids only learn when they have to face consequences. I never like to give any child a lump of coal, though coal is worth a lot more than it used to be. Even so, it is still a good way to get the kids to think before they act. If they thought they would get a gift no matter what, we'd have a lot more naughty kids. I'm not sure, but this lesson seemed to fit well with your "subprime" situation. It sounds like those banks were very, very naughty. And some of the people who chose those adjustable-rate loans need to learn that the easy way is not always the best. Even Santa Claus can't always be popular.

No. 4: This year's winners will not be next year's. Every year, parents and kids go wild about a few of my elves' new products. They sometimes forget how many other wonderful gifts come out of my workshop. But I've noticed that over time, the craziness over those top few popular toys goes away. Kids begin to remember their old favorite toys again and begin to trade. Our favorite toys sound like your description of emerging markets. Today, everybody loves them. But maybe your daddy does not have to worry as much as he thinks. Things will change again. Indeed, there's nothing like a nasty November to brighten Christmas spirits. It's better than after-Christmas sales!

Don't tell anyone, but even I've got my eye on Hasbro (nyse: HAS - news - people ). Heck, given the level of the dollar, I'm even sending some elves back down to America for sourcing.

So, my Alyssa, my Christmas gift to you is this: When times seem bleak, when your confidence is low, when nobody else seems to want you, these are the times when your opportunity is best. So jump on your sleigh! And wait for the day! Just wait, just wait, it will all be OK. Look for the time, and the time may be near, when the time for stocks to be bought will be here.

Remember my cookies, my dear young lady, and have a Mer-r-r-r-r-y Christmas!

With warm regards,
your loving Santa Claus

[Dec 18, 2007] themessthatgreenspanmade.blogspot.com

Can you believe that this is written by a person who claim to be a staunch libertarian and Republican?  Is he just an political opportunist, a chameleon who does not have his own views ?  Should not this quote be put on the frontage on the next edition of his Memoir "Age of turbulence" (aka "Decade of Bubbles from the Master Bubblemaker") ?

"Cash from the government", presumably deposited directly into the bank accounts of homeowners who are about to lose their homes, is the former Fed Chairman's solution to the current foreclosure crisis. He added, "Cash is available and we should use that in as large amounts as is necessary to solve the problems".

Alan Greenspan

[Dec 16, 2007] The Epicurean Dealmaker

John Stewart: "John, in your expert opinion, what has caused this steep decline in the value of the dollar?"

John Hodgman: "I would have to say God. I mean, it's right there on the dollar, 'In God We Trust.' We counted on Him, and we were fooled. I mean, what kind of Benevolent Deity would allow our money to be equal to that of Canada?" — The Daily Show

[Dec 16, 2007] Bloomberg.com Opinion by Mark Gilbert

(Bloomberg) Dear investor, we'd like to update you on this year's performance of our hedge fund, Short-Term Capital Mismanagement LLP.

Actually, we'd prefer not to. We'd rather disappear. We read somewhere that Panama is a really nice place to retire to, but our lawyer says that would be a bad idea. So here goes.

This has been without doubt the most turbulent period we have experienced in our 15 minutes of multistrategy, multiasset- class, Bentley-driving hedge-fund manager fame.

Our Widows & Orphans Enhanced Money-Market Fund is under investigation by the Federal Trade Commission. It seems our use of the word ``enhanced'' is deemed incompatible with ``real sorry we gambled that dollar you gave us for safekeeping on collateralized-debt obligations and ended up losing a cent or seven. Or 20. We're not entirely sure yet.''

Our Structured Investment Vehicle has burst its tires and looks like it was designed by a teenager on acid after seeing one too many documentaries about Frank Gehry. Our off-balance sheet conduits have maxed out their MasterCards and every time we try to value them, we are reminded that some things in life really are priceless. Our only investment that made money in December was our long position in Led Zeppelin concert tickets.

Nevertheless, we are proud, nay, ecstatic, nay, absolutely flabbergasted to report that our fund is still sashaying on the dance floor, which looks less and less like a ballroom and more like the aftermath of a frat party.

Kayaking to Panama

Admittedly, we broke a heel an hour ago, the rip in our tutu threatens to reveal more about us than money ever can, and the sick, dizzy feeling has nothing to do with the seventh banana daiquiri and everything to do with yearend money-market rates. We can still hear music, though, even if it does sound increasingly like a funeral march.

Frankly, there have been times when we've considered leaving a pile of clothes on the beach, climbing into a shiny red kayak and paddling away for five years. Did we mention what a nice retirement destination Panama is? It's just a shame that we lost the paddle when we headed up SIV creek all those months ago.

You know the saying ``pay peanuts, get monkeys''? It isn't true. We have been paying our traders peanuts since the fund's inception, and it turns out that the annual rate of nut inflation is killing us at 11.5 percent given how low our investment returns have been.

Memory Chimps

So we're shifting to bananas to hire some real chimps. Not just any chimps, though. Memory chimps. You may have seen some on television recently, thrashing college kids in memory tests. Hell, these chimps can buy and sell and eat a banana simultaneously, whereas Bob, our recently departed mortgage-bond trader, couldn't even walk and chew gum at the same time without blowing the P&L on some cockamamie subprime-debt security.

We figure these 5-year-old chimps might have a better chance of remembering stuff like Russia's default or the savings-and- loan crisis or the collapse of Long-Term Capital Management, from their financial-market history classes. They can't be any worse than the monkeys who decided to bet on the creditworthiness of U.S. bond insurers last month.

Still, we remain optimistic about the coming year. That's mostly because while Santa Claus only pops down the chimney once a year with his sack of presents, Helicopter Ben Bernanke flies by every six weeks and showers us with bags of cash in the form of lower interest rates.

Under Ben's Umbrella

God bless the policy makers at the Federal Reserve. As Grammy-nominee Rihanna would undoubtedly have sung if she only knew of our plight, ``They're gonna cut their rates forever, now that it's raining more than ever, so we can stand under Ben's umbrella, ella, ella, eh, eh eh.''

Not like those monetary fascists at the European Central Bank. Just because inflation is running at a six-year high and money-supply growth is the fastest in almost three decades, they didn't just close the lending window, they slammed it shut on our grasping hands. How can they contemplate an interest-rate increase at a time like this?

Finally, a cautionary tale. It is customary at this festive time of year for our schedule to be even busier than usual, as our brokers escort us to the finest establishments in town and ply us with drink in gratitude for this year's business and in anticipation of the trades that will flow their way next year.

Oddly, the telephone hasn't rung and the mailbox is bereft of embossed invitations. It seems our relationship managers are too busy schmoozing their new clients in Dubai and Singapore and Shanghai and Abu Dhabi to bother with their old hedge-fund customers.

Fine. Don't come crying to us, Mr. Hokey-Cokey Bank, when the combination of a plummeting share price and a devalued dollar makes your institution a takeover target for some Sovereign Wealth Fund turbocharged by petrodollars.

Yours, Hedge-Fund Guy.

[Dec 16, 2007] Bear Stock Market Blog - Stocks Gold US Dollar Bullish on the Bear Market By Charles Zentay

ThinkInvest.Blogspot.com
November 7, 2007

Ben Bernanke: Hello, how may I help you?

Robert Rubin: Dr. Chairman, it’s your old friend Bob over at Citi.

Bernanke: Oh Bob, what a pleasure. It’s nice to hear from you again. What can I do for you?

Rubin: Well Ben, we’ve got some problems over here. Now I trust you will be discrete on this. We can’t let this get out in the market. I think we’re insolvent.

Bernanke: What?

Rubin: See we have about $65 billion in capital, but we have $55 billion in Super Senior CDOs, and no one will buy them from us.

Bernanke: No one?

Rubin: We can’t sell them for $1. I’m now being told that if no one wants to buy pieces of paper from you, it turns out they are worthless. Believe me. I’m as shocked as you are.

Bernanke: But don’t you have a lot of cash flow? That’s what I’ve been hearing on CNBC.

Rubin: Well, in addition, we have $80 billion in SIV exposure, an additional $80 billion in conduit exposure, and a lot, lot more in derivative exposure that might not be worth what we said it was when we paid out our bonuses over the last couple years. I talked to some ex-traders, but they aren’t inclined to give back the bonuses. You add it all up, and we don’t have enough money to meet our liabilities.

[Dec 16, 2007] America Online To Build Three Million Home Pages For The Homeless

The Onion

VIENNA, VA—America Online announced Monday that it will do its part in the fight against U.S. homelessness by constructing three million World Wide Web home pages for the nation's homeless citizens.

"In this, the richest nation on earth, no one should have to know the pain of being without a home," said AOL president and CEO Steve Case, announcing the home-pages-for-the-homeless plan. "That's why we're working to make sure that all Americans have a place to call their own."

"There is room enough for everyone in cyberspace," Case said.

Beginning next week, the popular online service will give every homeless citizen his or her own home page, training in the basics of HTML coding, and 512K of storage space.

[Dec 15, 2007] RGE - The consensus is moving from the soft vs. hard landing debate towards how severe the hard landing will be

Well what if we had a recession and no one came? Used to be you would need 200,000 new jobs per month just to keep unemployment levels flat and now {with a much larger population than before} they cheer 84.00 new jobs as a great report ? Used to be that inflation took into account food and energy prices and the price of houses (vs our present day where the housing metric relies on rent; minus food and energy). Hard landing or soft landing will or won't happen until everyone hears the Captain announce it's time to buckle up. But the Captain is drunk on war whiskey, gasping on toxic SIV cigars, shooting low interest heroin, while bombarding his own house with our National Treasury. Delusion reigns supreme in the cockpit, while all the passenger's can worry about is when the stewardesses will hand out the next bag of peanuts. If they can fake or alter every other economic statistic that defines a recession. Then what defines a hard or soft landing is irrelevant, since they expect few if any survivors after this crash. They own the plane, the intercom, traffic controllers and jet fuel supplies and when it's all over it will be their crash site investigators that tell you what really did or didn't happen. How many simulated landings will it take before we know what a real landing is?

[Dec 13, 2007] Implode-Explode Forums View topic - Underwriter Blame, not accurate

An engineer, a physicist, and a loan officer were being interviewed for a position as chief executive officer of a large corporation. The engineer was interviewed first, and was asked a long list of questions, ending with "How much is two plus two?" The engineer excused himself, and made a series of measurements and calculations before returning to the board room and announcing, "Four."

The physicist was next interviewed, and was asked the same questions. Again, the last question was, "How much is two plus two?" Before answering the last question, he excused himself, made for the library, and did a great deal of research. After a consultation with the United States Bureau of Standards and many calculations, he also announced, "Four."

The loan officer was interviewed last, and again the final question was, "How much is two plus two?" The loan officer drew all the shades in the room, looked outside to see if anyone was there, checked the telephone for listening devices, and then whispered, "How much do you want it to be?"

[Dec 10, 2007]  FT Alphaville » Blog Archive » An investment banking lexicon The post-credit squeeze edition

Investment bank-speak is a universal language. From maximising shareholder value to full and fair offers, bankers are well versed in the art of keeping their clients happy.

But four months into the credit crisis and their words have taken on a new meaning. Here is an explanation.

SUBPRIME

COVENANT-LITE

COMPETITIVE AUCTION

EMI

STAN O’NEAL

DEBT AVAILABLE FOR BUY-OUT

ATTRACTIVE INVESTMENT OPPORTUNITY

INFRASTRUCTURE

MULTIPLES

DUE DILIGENCE

BANK’S CHRISTMAS PARTY

PIPELINE IS FULL

EMERGING MARKETS

STRATEGIC REVIEW

This entry was posted by Lina Saigol on Monday,

[Oct 5, 2007] Asia Times - A potent inflationary cocktail by The Mogambo Guru

Finally, the Federal Reserve showed its true inflationary colors, and Total Fed Credit went up by $6.6 billion last week. The significance of this is that when you take another $6.6 billion in bank credit and multiply it by the current fractional-reserve multiplier (infinity), this calculates out to (according to my rough calculations) exactly 6.6 jillion gazillion umpty-ump quintillion dollars that can be created by the banks, which is just about enough money to bail out everybody in the Whole Freaking World (WFW), which (according to the bizarre current economic theory and practice) is the new purpose of a central bank; create a bubble by creating too much money and credit (which finances the bubble) and then bail everybody out of the ensuing bust by creating another bubble by creating too much money and credit again and again! Hahahaha!

This is the "genius" of Alan Greenspan? Hahaha! What a moron! Hahaha! I laugh in Utter, Utter Mogambo Contempt (UUMT), which unfortunately sounds like a sick raccoon retching and coughing, and which probably explains why, as John Hoefle at Executive Intelligence Review says in his essay, "The Bankers Know: Something Catastrophic This Way Comes", that, "By now, most people are aware that former Federal Reserve chairman Alan Greenspan is on a 'not my fault' tour, proclaiming to everyone who will listen that he is not to blame for the collapse of the financial system. By saying he 'didn't really get it,' Sir Alan is choosing to cloak himself in the mantle of incompetence, in the hope that he won't go down in history as the worst central banker of all time."

[Sep 26, 2007] Fed Drops the Inflation Bomb

Have you noticed? Chairman Ben (not to be confused with that all-powerful chairman from another time and place, Chairman Mao) has recently acquired a new nickname. No longer is he referred to merely as "Printing Press" or "Helicopter" Ben, those playful nicknames of yore which poked fun at his threats to stave off deflation via massive inflation. Those silly nicknames no longer accurately depict the amount of inflation he is prepared to produce, nor the destruction that such inflation will inevitably cause. Ben won't merely be tossing money from helicopters, content to let it flutter to the ground. His new nickname signals that he's deadly serious about his mission and he's pulling out the heavy artillery to prove it. The new nickname references the destruction the Fed's policies will inflict. Say hello to B52 Ben, who stands on the ready to carpet-bomb the world with the catastrophic effects of the inflation bomb.

[Sep 18, 2007] Politics in the Zeros » Fed to dollar. Drop dead

The Fed is indeed “Hell Bent On Punishing Dollar Holders”. That is the plan. I have been telling people for months that the Fed does not give a hoot about the dollar.

The top three Fed concerns are as follows:

* Bailing out their banking buddies
* Bailing out their banking buddies
* Bailing out their banking buddies

[Sep 11, 2007] Mark-to-market gave a new life to old joke:

There are three types of accountant: those who can count and those who cannot.

[Sep 10, 2007]  In The Know Are America's Rich Falling Behind The Super-Rich The Onion - America's Finest News Source

Panelists discuss a new study showing the gap between the wealthy and the absurdly wealthy is widening, and how we can help the merely rich catch up.

[Sep 10, 2007] Commentary Dude, Where's My Bailout

An open letter to Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and Senate Banking Committee Chairman Chris Dodd

Honorable Public Servants: As you know, the conflagration in the subprime mortgage market is beginning to singe the very fabric of the American dream, by which I mean life, liberty, and the pursuit of home equity. I was elated to hear everyone from bond guru Bill Gross to Democratic Presidential hopefuls endorsing the idea of a government bailout of homeowners facing foreclosure as the payments on their zero-money-down mortgages soar.

Bad credit? No credit? No problem! Uncle Sam has your back.

I don't have a mortgage, much less one that's about to blow up. But I have no shortage of other losses, some of them quite painful, from the many well-considered investments I've made over the years. Therefore, under the equal protection clause of the U.S. Constitution, I'm entitled to a bailout as well. At least that's what my law school buddies tell me.

Here's an annotated invoice:
STOCKS. In the dot-com heyday, I had the misfortune of buying shares of two companies that went poof within 12 months: Excite@Home, the residential high-speed Internet provider, and Allied Riser, a commercial broadband startup. (I was diversified—homes and offices.) Subtotal: Seven long years of regret and pitiful looks from my CPA have encouraged me to repress the exact sum of my capital losses, but for expediency's sake let's put it at $60,000.

MUTUAL FUNDS. I also invested in a tragicomic Putnam fund that somehow managed to lose an average of 44% a year between 2000 and 2002. It turns out that Putnam Investments (MMC ) was also at the heart of the market-timing scandal. Yet I never got any checks in the mail from Eliot Spitzer or from the investment pros who all but forced me to buy the shares. Subtotal, including compounded pain and suffering: $10,000.

PERSONAL RELATIONSHIPS. At about the same time, I was getting irrationally exuberant about a beautiful brunette, spending my paper stock gains on a series of expensive dates in Manhattan. There were mezzanine seats at Broadway plays, candlelit dinners in Greenwich Village, and enough orders to 1-800-Flowers (FLWS ) to line the streets of Pyongyang on Kim Jung Il's birthday. Oh, and cab fares. Lots of those. Then, sometime between NASDAQ 5000 and the end of the Elián Gonzáles saga, said brunette dumped me. She broke my heart, but only after she broke my bank account. Subtotal: About $3,000, including $1,000 in self-prescribed Johnnie Walker Blue.

COLLECTIBLES. Twenty years ago, I was the last kid on my block to score a coveted "first series" Garbage Pail Kids trading card, for a total consideration of $25 in cash, three bags of Doritos, and the guitar Dad bought me in the second grade. Then the Garbage Pail market crashed. But the Los Angeles Dodgers dramatically won the '88 World Series, and my enthusiasm shifted to baseball. By 1990, with bar mitzvah winnings in hand, I shelled out for a José Offerman rookie card. Fifty bucks bought me the Lucite-encased visage of this dynamic Dodgers infielder, who knocked a home run in his first major league at bat. I figured it would double in price during every season of Offerman's promising career. Instead, his résumé came to entail mediocre stints with seven teams, culminating with the August clubbing of a pitcher in an independent-league game that invited two counts of second-degree assault. Subtotal: How can I attach a cold sum to the shattered dreams of a middle schooler? Sigh. $1,400.

Please remit my $74,400 by check, money order, or PayPal (EBAY ). Rest assured that I will cycle the dollars back into economically vital investments. I hear some hedge funds are slashing their minimum buy-ins to $10,000, and that half-finished condos in Miami can be gotten for pennies on the original dollar. In any case, my efforts to bolster the U.S. gross domestic product could surely be strengthened by a series of interest rate cuts, so please see to those, too. After all, gentlemen, while intrepid investors like me crank the engine of American capitalism, times like these call for all of us to pitch in.

By Roben Farzad

Bloomberg.com News A Wall Street Trader Draws Some Subprime Lessons By Michael Lewis

Sept. 5 (Bloomberg)

So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people.

Don't get me wrong: I have nothing personally against the poor. To my knowledge, I have nothing personally to do with the poor at all. It's not personal when a guy cuts your grass: that's business. He does what you say, you pay him. But you don't pay him in advance: That would be finance. And finance is one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund.)

That's the biggest lesson I've learned from the subprime crisis. Along the way, as these people have torpedoed my portfolio, I had some other thoughts about the poor. I'll share them with you.

  1. They're masters of public relations. I had no idea how my open-handedness could be made to look, after the fact. At the time I bought the subprime portfolio I thought: This is sort of like my way of giving something back. I didn't expect a profile in Philanthropy Today or anything like that. I mean, I bought at a discount. But I thought people would admire the Wall Street big shot who found a way to help the little guy. Sort of like a money doctor helping a sick person. Then the little guy wheels around and gives me this financial enema. And I'm the one who gets crap in the papers! Everyone feels sorry for the poor, and no one feels sorry for me. Even though it's my money! No good deed goes unpunished.
  2. Poor people don't respect other people's money in the way money deserves to be respected. Call me a romantic: I want everyone to have a shot at the American dream. Even people who haven't earned it. I did everything I could so that these schlubs could at least own their own place. The media is now making my generosity out to be some kind of scandal. Teaser rates weren't a scandal. Teaser rates were a sign of misplaced trust: I trusted these people to get their teams of lawyers to vet anything before they signed it. Turns out, if you're poor, you don't need to pay lawyers. You don't like the deal you just wave your hands in the air and moan about how poor you are. Then you default.
  3. I've grown out of touch with ``poor culture.''  Hard to say when this happened; it might have been when I stopped flying commercial. Or maybe it was when I gave up the bleacher seats and got the suite. But the first rule in this business is to know the people you're in business with, and I broke it. People complain about the rich getting richer and the poor being left behind. Is it any wonder? Look at them! Did it ever occur to even one of them that they might pay me back by WORKING HARDER? I don't think so. But as I say, it was my fault, for not studying the poor more closely before I lent them the money. When the only time you've ever seen a lion is in his cage in the zoo, you start thinking of him as a pet cat. You forget that he wants to eat you.
  4. Our society is really, really hostile to success. At the same time it's shockingly indulgent of poor people. A Republican president now wants to bail them out! I have a different solution. Debtors' prison is obviously a little too retro, and besides that it would just use more taxpayers' money. But the poor could work off their debts. All over Greenwich I see lawns to be mowed, houses to be painted, sports cars to be tuned up. Some of these poor people must have skills. The ones that don't could be trained to do some of the less skilled labor -- say, working as clowns at rich kids' birthday parties. They could even have an act: put them in clown suits and see how many can be stuffed into a Maybach. It'd be like the circus, only better.

    Transporting entire neighborhoods of poor people to upper Manhattan and lower Connecticut might seem impractical. It's not: Mexico does this sort of thing routinely. And in the long run it might be for the good of poor people. If the consequences were more serious, maybe they wouldn't stay poor.

  5. I think it's time we all become more realistic about letting the poor anywhere near Wall Street.  Lending money to poor countries was a bad idea: Does it make any more sense to lend money to poor people? They don't even have mineral rights! There's a reason the rich aren't getting richer as fast as they should: they keep getting tangled up with the poor. It's unrealistic to say that Wall Street should cut itself off entirely from poor -- or, if you will, ``mainstream'' -- culture. As I say, I'll still do business with the masses. But I'll only engage in their finances if they can clump themselves together into a semblance of a rich person. I'll still accept pension fund money, for example. (Nothing under $50 million, please.) And I'm willing to finance the purchase of entire companies staffed basically with poor people. I did deals with Milken, before they broke him. I own some Blackstone. (Hang tough, Steve!)

    But never again will I go one-on-one again with poor people. They're sharks.

(Michael Lewis is the author, most recently of ``The Blind Side,'' and is a columnist for Bloomberg News. The views he expresses are his own.)

To contact the writer of this column: Michael Lewis in Berkeley, California, at mlewis1@bloomberg.net .

[Sep 5, 2007] FT Alphaville » Blog Archive » SIVs, junk and rock n’ roll Global ABCP summit ‘07

As immobilienblasen noted "They should invite the manager from the IKB , Landesbank Sachsen and Barclays as key note speakers...... ;-)"
Ever been to One Of Those Parties? You know, the ones more like a wake than the raucous brannigan the shiny invitation promised.

No? Then why not pop along to the 2007 Global ABCP & SIV summit, the [former] glittering jewel in the crown of the financial alchemy party circuit.

This year’s conference has had an “amazing response” say its narcotized organisers, and numbers should be “good”. As long as everyone can manage to hold down their jobs for another couple of weeks that is.

A heavily edited press release gives little away. But here, dug out by FT Alphaville are some “notable quotables” from a few months back they might live to regret:

The asset-backed ECP market has now evolved to a primary, stand-alone funding source for the biggest asset backed market players. IMN’s Paris conference brings together the players and the source in a unique two-day interface designed to take advantage of the latest developments
- Tony M. Gioulis, Head of Securitization UK/Europe, NABCapital

The growth of the European ABCP market is likely to further accelerate significantly in 2008. In addition to the underlying economic conditions, I see recent legal and regulatory developments as positive for this market. We will explore these often complex factors at the Global ABCP and SIVs conference this September. I expect some lively discussion there.
- Omar Bolli, Senior Vice President, Head of Asset Backed Finance, Norddeutsche Landesbank Girozentrale

And FT Alphaville’s favourite:

In an environment plagued by subprime related volatility, SIV’s represent a relatively safe haven of stable risk adjusted returns facilitated by structural protections designed to withstand and effectively respond to market vagaries.
- Kumar Tangri, Principal, Eiger Capital

[Sep 4, 2007] Modern version of Damocles sword fairy-tale

In ancient times, of course, no one had access to credit cards. So when Damocles wanted to attend a sumptuous banquet at the royal palace, he had to agree to some unusual terms. To teach him a lesson about the perilous nature of his desires, King Dionysius had a sword hung from the ceiling over his seat, suspended by a single hair. For the entire feast, poor Damocles had to remain in that precarious position, which would wreck just about anyone's appetite.

[Sep 4, 2007] The common joke about Mankiw is that he couldn't forecast his way out of a paper bag.

[Sep 3, 2007] Bloomberg.com Opinion Granddad, Did You Believe in Central Banks Once?: Mark Gilbert By Mark Gilbert

June 21 (Bloomberg)

 ``Granddad Benny, is it true that central bankers used to believe they could steer the global economy with quarter-point twitches in overnight rates?''

Granddad looked up from his GoogleSoft iSpreadsheet, where a flashing red ``health care'' box was blocking 2027's planned expenditure from matching the income cell. ``Yes, Joel. For about a decade we all believed central banks could ensure people had jobs, and could afford food and housing and such. That all changed after the Gigantic Global Bubble Burst of 2008.''

Joel put down his Mandarin dictionary. ``That's what my socio-economics teacher says we'll learn about next week. She called it the Giglobubu. What happened in 2008, Granddad?''

``We're still not sure, Joel,'' Granddad said. ``At the time, some accused the New Zealand central bank, some said it was the bond market, while others blamed the aftershocks of a slump in the U.S. housing market. If she's smart, your teacher will probably spend a lot of time talking about China.''

``Did China cause the Giglobubu, Granddad?''

``It played a big part, Joel. At the start of the century, China started to engage with the global economy. We were able to buy stuff like clothes and televisions really cheaply from China's factories, making everyone feel wealthy enough to spend and borrow instead of putting something aside for a rainy day.

``All of that borrowed money had to come from somewhere, and most of it came from Asia. When China stopped turning up at bond auctions in 2007 and started investing directly in companies instead, alarm bells should have rung. They didn't.

Billions of Spenders

``What everyone failed to realize was that the billions of people in China, Vietnam and other Asian countries didn't want to spend the rest of their lives living in huts in the countryside and working in factories for a pittance. They started to demand and get higher wages and a better standard of living, and went on a spending spree of their own. Their governments, meantime, built roads and hospitals and schools to keep people happy.

``Even though central bankers in the West had been puzzled by low bond yields and wage increases, they still took the credit for slow inflation! So when prices started to surge at the beginning of 2008, they were surprised when raising rates turned out to be powerless in the global economy. They were even more shocked when energy costs soared and they realized China controlled most of the world's power-producing capacity.''

Three Strikes and Out

Joel whispered ``2008 Giglobubu Causes'' into his Apple iWatch, and watched as the holographic multimedia display scrolled into life six inches above his wrist. ``Granddad, it says here that the New Zealand central bank made things worse?''

Granddad rubbed his beard as Joel's watch beamed graphs and charts into the air. ``Well, that's a bit unfair. They were quick to spot that prices were rising, and tried to curb inflation by driving up borrowing costs. Their mistake was trying to stop their currency, the New Zealand dollar, from rising. After the first two attempts failed, they should have given up. When the third attempt went wrong, people panicked because they started to realize how impotent the financial authorities were.''

``Granddad, it also says here that hedge funds and the derivatives market made things worse. What are hedge funds and the derivatives market?''

``Well, they are illegal now, Joel. As the global economy started to crumble under the weight of soaring raw material costs, financial markets melted down, with prices of stocks and bonds whipsawing. Hedge funds were supposed to be clever investors; it turned out that they had all made the same bet on the global economy staying wonderful for ever.

Tangled Webs

``Companies thought they'd borrowed money from their bankers. Instead, hedge funds had bought up all of the IOUs. When companies started struggling to make their debt payments, instead of having a friendly chat with their bank managers, they found themselves eyeball-to-eyeball with the hedge funds' lawyers, who weren't interested in the survival of the companies and just wanted their money back.

``Lots of the banks had sold insurance on those IOUs and on a bunch of other stuff that they bundled together into derivatives called collateralized debt obligations. When those investments started to blow up, we all realized that nobody knew who owed what to whom. And banks and hedge funds had become such a big part of the global economy that they dragged everything else down with them.''

``I've been meaning to ask you, Granddad; what are all those funny little rectangles of green paper in that big frame on the wall next to your desk?''

``They're called dollars,'' Granddad said. ``We used them to buy things in the olden days. In 2015, a group called the Single Global Currency Association convinced the Bank for International Settlements, which by then was running the world's financial systems, that everyone should switch to one type of money.''

``And they didn't choose the dollar, Granddad?''

``No, Joel. There was a global referendum to make the decision on which currency people wanted. Which is why we now use the yuan all around the world. Anyway, it's getting late. Back to your Mandarin homework, young Master Bernanke.''

(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net

Last Updated: June 20, 2007 19:14 EDT

In the spirit of "full disclosure" and "truth in advertising," we renamed academic fields with longer but more honest descriptive names:

Old Name:  Finance New Name:  Legalized Gambling For Rich People

Old Name:  Accounting New Name:  Sneaky Tricks Disguised As Something Really Boring

Old Name:  Economics New Name:  Fantasy Worlds For Grown-Ups

 Old Name:  Human Resources  New Name:  Micromanagement Far From The Value Chain (But With Huge Delusions Of Power)

 Old Name:  Marketing New Name:  Common Sense Camouflaged In Lots And Lots Of Statistics

 Old Name:  Operations New Name:  The Only Thing More Boring Than Waiting In Lines (Studying Them)

 Old Name:  Entrepreneurship New Name:  Splashing Yourself With Steak Sauce In A Jungle And Shouting "Here Kitty Kitty..."

And finally, while we're at it, what do you get if you take two classes in each of the above subjects?
Old Name:  Master of Business Administration

New Name:  Marginally Better Analyst



Etc

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