Ig-Noblesse Oblige

.....a new term I have created that is a combination of "ignoble" (that which is base or common) and "noblesse oblige" (referring to the nobility's patronizing those less fortunate). I refer to the help that the "ig-noble" U.S. government has had to offer the ostensibly dashing aristocrats of Wall Street ("Masters of the Universe" just doesn't quite define them accurately anymore) in the last 9 months and to the unseemly ingratitude / outrage certain grandees in financial circles have expressed at the humilation of having to be rescued in the first place.

"How DARE you save me!". The image which flashes into my mind is that of a dissolute English Duke, who has fallen on his ass in a fox hunt after over indulging at lunch (for some bizarre reason I picture CNBC's Larry Kudlow, though he is not exactly the epitome of English landed gentry) and then venting his wrath at the poor footman who has had the temerity to help him up. Indeed there is a new found confidence among certain financial institutions on "Wall Street" that they don't need / no longer need or never needed any government assistence. "The worst is over! It's back to business as usual!"

...even though it's really not. This, in spite of the fact that everyone on "Wall Street" last September was in an "every man for himself" state of mind; thinking about raiding Costco for emergency suppies and of A) retreating to the woods of the Catskills or Apalachia (those earning from $500,000 to $ 3.5 million a year), and resorting to a hunter-gatherer way of life (the image of pasty-faced endomorphs fruitlessly pecking away at their Blackberries while foraging for nuts and berries is hilarious) or of B) feverishly burrowing into their climate controlled bunkers underneath their sprawling estates in Greenwich, C.T. (those earning $3.5 million > 100 gazillion + + + a year) to await the onslaught of the great unwashed.

This strange "on-again, off-again" disposition to accepting government aide is perhaps no better exemplified than by the "wild catters" in the east Texas of the 1930's virtually begging the federal government for intervention and help in regulating - REGULATING, the production of oil since rampant over production and the Depression made oil worth less than spit. How memories fade.

How To Get Rich Quick and EZ!!! No Money Down!!!

"Learn to be Rich! Free Training! Coming to Seattle / Tacoma / Everett!!!" But, not really. It's no wonder we are in the financial mess we are in now, when our be knighted consumer ostensibly remains so vulnerable to financial "gurus" like Robert Kiyosaki, with his "Rich Dad, Poor Dad" sideshow; visions of the snake oil salesmen trafficking their wares along the frontier in the late 19th century.

So Mr. Kiyosaki is now touring the country expatiating on the nobility of being rich and on the ignominy of being poor and on how easy it is for you to get to his own private Shangrila (Idaho being way too much a backwater, like Seattle); if only you will pay him for the advice! These game show host / used car salesmen / sub prime mortgage broker types might also qualify for an anchor spot on CNN or as an MC on American Idol or on Dancing With the Stars.

Yet Robert does so much better as an oracle of financial wisdom.....alongside Dr. Phil, Suze Orman and the legion of other would be financial "experts" lurking out there for new business. Here's my advice on how to get rich quick and easy: set yourself up as an expert on financial markets (the how is up to you, but these days it seems this is far easier than being the real deal...just say so!), then borrow some money, partner with a "Donald" and do infomercials! Bingo!

So Robert will be here in the Seattle area lecturing on his "Learn To Be Rich" strategies, but only in spirit! At the bottom of his internet ad, in 6 point font we learn that, "Robert Kiyosaki will not attend this event". He is far too busy with larger jurisdictions (like Chicago, New York, L.A.) to make an appearance in such 2nd cities as Seattle, leaving us troglodytes to his acolytes (for practice, per chance); who will no doubt one day set themselves up as Robert Kiyosaki disciples and carry the torch to a new generation of suckers.

Investment Banking for Idiots

There are 5 professions in Iceland (a land of 300,000 people and 9 family names): fisherman, aluminum smelter, civil servant, elf finder (no kidding) and until recently: financial services professional. The transition from fisherman to investment banker (via elf finding) it seems was EZ in the Iceland of 2003. The thing is, it is far easier to teach fishermen to trade currencies than it is to teach finance geeks to fish, according to people "in the know" in Reykjavík. So, in an Icelandic twist on an old aphorism, "Teach a man to fish, and he becomes an investment banker; give a man a fish and, well.............whatever."

Icelandic Banks

"You have a dog, and I have a cat. We agree that they are each worth $1 billion. You sell me the dog for $1 billion and I sell you the cat for $1 billion. Now we are no longer pet owners, but Icelandic banks with $1 billion (each) in new assets." Michael Lewis, "Wall Street on the Tundra", Vanity Fair, April 2009

American Values Redfined?

The more I read in the media these days about a secular, cultural shift away from the greedy and wicked ways of the past to a more practical way of life- rooted in simple Yankee austerity and time spent around the dinner table with family, the more I am reminded of the zeitgeist following the Crash of '87. For that is exactly what some wondered aloud in its aftermath. "As long as we have a roof over our heads, food on the table, family and our health then does the money really matter?"

Yeah, sure. "Maybe we can forget about the Hamptons and start a gift card business?" Right! I realize that at the age of 48 my speaking about the Crash of '87 to the 20 and 30 "somethings" of today I must sound like a guy who spoke about the Crash of '29 to the 20 and 30 "somethings" in 1987 (me). Yet as the subsequent bubbles and bursts have shown, the money does matter. We are only human. History does not repeat itself- it is the nature of humans which is constant.

After the fall of Rome someone might have wondered if the age of obscene self-indulgence and mob blood lust had passed forever into history; after all the barbarians were quite literally at the gate. The lost empire extant only in partially ruined marble, surely lessons had been learned! Been to a hockey game lately? Or any sporting event, for that matter? Please tell me that the mobs who pack our stadiums today are really any different than those who packed the Coliseum in imperial Rome.

Ancient Romans had no Blackberries and fantasy sports teams but I am quite certain they ate peanuts, tried to sit in the shade and went wild when their "team", or man either prevailed in the arena or was eaten by a lion. Forgive my cynicism (I warned you in my blog title!), but if the law today allowed for gladiatorial battles to the death in public arenas, there would be season tickets available on eBay. We have cage fighting though!!!

And clandestine dog fighting. Of course "Wall Street" has created far more than just citadels of money- it has helped create new businesses that have transformed our lives for the better in every field- from health care, to education, to communication and transportation. But just look at what the unfettered excesses of "Wall Street" have wrought: after witnessing the demise of "the financial world as we know it" comes the grim acceptance that the "too big to fail" crowd enriched themselves so far beyond what ordinary people can even imagine.

It's staggering; and as it now transpires, they did it in part with "our" taxpayer money or at least with the reassurance that they could always get bailed out. I cite the pension funds that were destroyed by the so-called "custodians", firms such as Lehman Brothers, who gambled it all away at 40:1 odds. I do not got to sporting events. I have no team, but I just might buy season tickets, peanuts and try to sit in the shade to see some of the Wall Street "oligops" fed to the lions!

Perhaps it's little more than a platitude, or statement of the obvious to say: there will never be an end to fear and greed, as long as the population of humans exceeds the material resources necessary for supporting itself in relative luxury. I realize this sounds quasi Marxist, but I am a capitalist! I don't like big government; but I also don't like revolting self-indulgence, especially when 97.825% of our citizenry lives in comparative poverty.

You have 7 houses, a helicopter (or 2), a Gulf Stream, 5 kids in elite private schools, eat out at the most exclusive / expensive restaurants in Manhattan almost every night of the week- maybe you even have a second family on the side, a personal fitness trainer, 17 in staff and gobs of money in the bank; yet even when you are full at the sushi bar, you cannot resist that 3rd plate of $125 O-toro sashimi.

The trouble with humans- one of many actually, is that we don't really know when to say "enough" until it is painfully obvious that you have had too much- often too late. Another manifestation of our communal self-indulgence? Gluttony and obesity in America today. One of the great ironies of this latter-day, bygone "gilded age" is that one of its princes, Henry Paulson ultimately became Secretary of the Treasury.

Not as ironic a development as Joe Kennedy morphing from predatory insider trader to head of the SEC under FDR, perhaps but ironic nonetheless. In 2000, when Paulson was the "top banana" at Goldman Sachs he led a delegation of other like-minded Wall Streeters to petition the SEC to relax its net capital rule from 15:1 to 40:1. Denied at first he got his way in 2002 and as a result suffered a near Dante-esque fate, spending his last days of public service sorting through the detritus (somewhere down the hall from Sisyphus with his rock).

I defy anyone to argue that, had 40:1 worked and the financial world as we knew it still been "printing money" today, another supplicant would now be petitioning the SEC for 85:1 leverage. So again- pardon my cynicism. Just as I embrace the maxim of "trust, but verify" I will believe that we have changed and will never go back to the obscenely self-indulgent ways of the immediate past, when I see it. And if I were a betting man.......

The Wisdom of the Financial Sages

"We're all learning that leverage works both ways..."

John Mack, CEO & Chairman of Morgan Stanley, in an interview with CNBC's David Faber on October 16, 2008

Permit me this 1 irreverence: "Duh!". Is this patronizing? Contrite? Or what? Here we have the CEO & Chairman of one of the most powerful and "storied" investment banking firms the world has known, confessing that he now realizes leverage works both ways. Forgive the comparison, but that is almost like a veteran card shark working the tables at Las Vegas suddenly announcing, "Gee whiz! You mean I can actually loose money here?"

And how much was John Mack paid last year? I don't not have the figure handy, but what does it really matter? It is so far beyond what he is worth, given the magnitude of his errors as helmsman at Morgan Stanley,and what this has cost shareholders- and after all, the buck should stop "there" and not with the board or with the nouveau scapegoats, the "compensation committee". Even if we cut John Mack some slack, and assume he was treading carefully in an interview- to suggest that he / they didn't understand what the pitfalls of leverage implied (as in

40:1 leverage) is to impugn his very ability to be where he is in the first place.

This is the way of "the Street"; has been for years and despite all the tribulations of the present will be the "way it is" for as long as greed remains the driving force on Wall Street: when you "score", you get all the credit and then can appear magnanimous in parcelling out money and "perks" to the underlings that serve you and the franchise. When you screw up, you can always parcel out blame to the board, the compensation committee, "the man" and to the regulators who should have known better than to trust you, and let you do what you did in the first place.

Jim Cramer Part 2

Famous Cramer Quotes:

"No! No! No! Bear Stearns is fine.....Bear Stearns is not in trouble.....Don't move your money from Bear. That's just being silly. Don't be silly." (CNBC, Mad Money, March 11, 2008.)

"It's time to buy, buy, buy!" (CNBC, Mad Money, June 13, 2008)

"Whatever money you may need for the next 5 years, please take it out of the market right now, this week." (NBC, The Today Show, October 6, 2008)

And this from the New York Times on September 30, 2008:

"...Mr. Cramer later told his TV audience to buy Wachovia, calling it one of only a few potential 'winners' in the $700 billion bailout...."

Jim had his "buddy" Robert Steel, the CEO of Wachovia, on Mad Money and pronounced that the $10.71 price of the common stock was a bargain. Within 2 weeks it was $1.81 (source New York Times, October 19 2008). Cramer has defended his rant about Bear Stearns by clarifying that he was not referring to the common stock, but to withdrawing money from Bear Stearns brokerage accounts, presumably due to SIPC protection. Yet SIPC protection only goes up to $500,000 for cash and securities (with only $100,000 in cash protected); and to state that Bear Stearns was not in trouble....well.

Jim Cramer

I hate to be late to the Cramer bashing party, but I thought I'd take my turn anyway in spite of, or perhaps because of all the financial carnage around us. I have just found him so consistently irritating, so consistently wrong, more harlequin than investment professional and such a shameless self-promoter. Is "Mad Money" about educating the public, or is it an infomercial designed to promote the Cramer cult, to sell books and to amuse the "slack-jawed troglodytes" out there who tune in after playing marathon sessions of Dungeons and Dragons?

Cramer is not someone you can rely upon for sound investment advice. The record will show that he has been both cheerleader in bull markets (1 year ago) and neurotic fear monger in down markets (now). His recent alarmist utterances about descending to the depths of another "Great Depression" are deeply irresponsible. It's one thing to call Fed chief Ben Bernanke names and to carry on like a wild man, shouting "They know nothing!", and to gleefully paste (sorry...split infinitive) corporate CEOs up on his "Wall of Shame".

It is quite another to keep saying that we are on the verge of another Great Depression and are about to go back to subsistence farming and living in caves. Funny as this may sound, one of the main reasons we are seeing the wrenching volatility and massive point swings on the Dow, credit markets locking up and the yields on Treasuries going negative is because of panic. Most Wall Street watchers concur that when you could hear that giant sucking sound of money leaving money markets a week or so ago (bound for safety deposit boxes or the redoubtable mattress) we were witnessing a 1930's run on the bank, "Y2K" style.

So thanks Jim, for pouring gasoline on the fire. Just as Harry Reid should be castigated for making that totally irresponsible remark about a major insurance company being on the verge of bankruptcy (last week), Cramer should be told to "...put a sock into it". What value is Cramer adding by warning that we are near Great Depression part 2? This borders on yellow journalism and only serves to cause more people to panic. And panic, after all is one major reason financial markets are in a catatonic state.

What everyone needs to do now is pause for breath, and maintain their composure. I grant that Cramer can be entertaining, in a "Bo-Bo the Clown at the state fair" kind of way. He gets credit for his enthusiasm and for getting so many people interested in the stock market. Without a doubt, millions more Americans are involved in our financial markets due in large part to Cramer's Mad Money show on CNBC and to his many books on the subjects of trading and investing.

That he has played Pied Piper, however and led his flock of lemmings off of a few cliffs in the last few years is beyond dispute. Perhaps this is one reason he will not publish any kind of an index of his recommendations is somewhat suspect (I know, I know.........the lawyers); but still. He was nearly rhapsodic about such stellar companies as: Crocs, E*Trade, Sirius and a host of other stocks that have gone "ker-flooey" since he turned somersaults recommending them. Oh, and then there's Google (GOOG).

Last year, every time GOOG would hit yet another high, Jim would say it was going higher. If it hit $600, then it was going to $700. When it hit $700, well then it was going to $800. At that rate, the stock would be at $3,800 by now........that is if it weren't for this little crisis we are going through. Granted, Jim was not the only Google cheerleader on the Street last year. I just wonder how scientific his recommendations are or have been. To that I am sure he would counter, "Hey! The trend is your friend."

Well then who needs Cramer? If all you need do is follow a prevailing trend, I mean: a monkey could do that........................speaking of which, what ever happened to the monkey on http://www.cramerwatch.org/? I have been tempted to time his show, Mad Money, in order to see just how much real analysis and advice he gives up in the 60 minutes allotted. I haven't had the time or patience, but I would venture this guess: when you subtract the commercials, the countless "boo-yahs", the frat house buffoonery and the shameless book "promos" you are probably left with a 20 minute show; if that.

I have no doubt that people have made money trading with Jim. I also am certain that people have lost a lot of money by acting on his advice. If you watch his show for comic relief- and these days that is just what we all need- then OK. If you watch his show looking for sage investment or trading guidance I'd suggest watching Fast Money instead.

Uh......

"Only those who will risk going too far can possibly find out how far one can go." (T. S. Eliot)

Perhaps.....but then again, try asking those poor souls recently employed by or invested in Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, AIG and Washington Mutual.

Adieu L'ancien Regime

Plucked from off the front page of the Weekend Edition of the WSJ today:

"For financial institutions, 'the clock is ticking a heck of a lot faster today,' said Matthew Kelley, a bank analyst at investment banking firm Sterne, Agee and Leach, Inc...".

So it's come to this: the days of quoting banking analysts at the storied investment banks (Goldman, Morgan Stanley etc....) are now gone forever. We are left to quote the obscure; no offense meant to the good people at Sterne, Agee and Leach. Wow......if ever you needed a handy way to measure the magnitude of change on the Street!

It's almost like the extinction of the dinosaurs.....when the giants that utterly dominated the landscape suddenly disappear; the furry, little brown mammals- so long trampled underfoot emerge timorously into the daylight- without fear of being squashed or eaten, to forage amidst the detritus, and pick up where the leviathans left off. Adieu l'ancien regime.