Sunday, December 17, 2006


You can smell it in the air. The scent of the yule log burning, egg nog heavily spiked, the sap of the Christmas tree. And the strongest odor of all is that of money. Money! Money! Money! Bonus time! It's been a good year on The Street and everybody is getting into the Christmas spirit of crass conspicuous consumption. Sure, most everybody made good money this year. But over the past few years, the divide between those at the top of the pyramid and the rest is wider than ever. In fact, the top are not even on the pyramid; they're sitting atop Mt. Olympus. Never have so few made so much. Once upon a time, the top dogs had an annual take of $20 to 30 million. Now, that number is $300mm, $400mm, $500mm, maybe higher. What in the name of old St. Nick is going on?

Yes, the markets overall have had a decent year. But the markets had much better years in the 80's and 90's and guys didn't take home that kind of stupendous, mind boggling pay. No, what has happened is that money managers have somehow managed to game the system so that their take has increased ten fold. And the vehicle that has driven them to financial nirvana is the hedge fund.

Ten years ago, there were a few hundred hedge funds managing around $100 billion total; now there are over 8,000 managing over a trillion dollars. It's not hard to understand why money managers would opt to go hedge fund. Mutual fund managers get a little over 1% of total assets managed as their take, while hedge fund managers get that as well as 20% of the gains. And investors once had good reason to put money into a hedge fund. Back when there were just a few hundred funds, the returns generated by hedge funds usually beat market indicies by a wide margin. If the S&P, for example, returned 10%, hedge funds might generate upwards of 30%. That's how good the relatively few guys in the game were back in the late 80's and early 90's. Guys like Paul Tudor Jones and George Soros. And so investors, mostly individuals with high net worths, vied to get into these exclusive clubs.

The game changed when institutions decided that "alternative investments" such as hedge funds made sense for them as well. All of a sudden, trillions of dollars were available. The response to this exponential increase in the investor base was a exponential increase in the number of hedge funds to service it. But increase in quantity does not mean increase in quality, and among the thousands of new hedge fund managers were very few Paul Jones or George Soros. Call it the dumbing down of the hedge fund industry. And so many managers chasing so few good trading ideas has resulted in lesser returns for everybody, including the most talented traders.

One would have to go back to the days of the Robber Barons to find a similiar time of wealth creation. But Rockefeller, Carnegie, Frick, et al made their dough by creating something of real economic value, such as a national rail system or the steel industry. The newly mega rich today have developed no new technology or new industries, but are money changers. We don't make "things" anymore, we make markets. And many of the newly minted hedge fund newbies are not really good even at that. Whereas hedge funds in the beginning would easily beat the market indicies or trounce their mutual fund brethern, over the past few year hedgies in general haven't beaten the S&P. This year hedge funds will average 11% return, not even keeping pace with the stodgy old Dow, which is up over 16%. Kind of pathetic.

And yet over this same period, the hedge fund gang has amassed riches that were unthinkable ten years ago. Forty something year old centillionaires, even billionaires with five, six, seven mutli-million dollar homes scattered all over the globe, hosting private parties with the Stones as entertainment, spending millions on fine art which they don't really understand, hundred of thousands spent every year on jewelry, spas, electronics, dropping $10,000 on a bottle of get the picture. Everybody on the mutual fund side, everybody on the sell side, everybody and his brother and cousin are angling to get in. I know nincompoops I wouldn't trust with my savings account who are now trying to start up hedge funds. It's like these guys wake on Saturday morning with a to-do list: 1) laundry 2) get haircut 3) start hedge fund. Guys who don't have a clue but who know that if they can amass say $100mm in assets, then the 2% "management fee" gets them $2mm, for doing nothing, for just putting a shingle on the front door. And like I said before, most of these guys can't even beat the Dow. A lot of these guys can't even do better than a money market fund. But hey, 2% on $100mm and next thing you know $10,000 for a bottle of wine is no big deal.

So who ultimately is paying for all these nincompoops to get into the hedge fund business? The answer is even a bigger class of nincompoops, namely the public servants who run pension funds for state and city municipalities, the administrators of non-profit foundations, the bureaucrats who oversee university endowments. In other words, guys who are as far from Warren Buffet when it comes to investing as Gomer Pyle is from George Patton. DUMB MONEY. These guys used to be content investing with mutual funds charging 1-2% management fees. But now they can't resist the glamorous allure of hedge funds. Hobnobbing with the hedge fund swashbucklers partially makes up for their middling government salaries. You can picture these guys at the neighborhood barbeques, bragging about how they had lunch at the Four Seasons with some billionarie hedge fund titan.

The result has been one of the greatest transfers of wealth in generations. Money is being passed from old age pensioners, college students receiving aid, charities relying on foundations, literally orphans and widows to the fattest of the Wall Street Fat Cats. And hardly a word is uttered in protest.

The only bigger scam and racket that I can think if the Fund of Funds game. But don't get me started on that.......

Tuesday, November 21, 2006


Ok I wrote it, the word that no one dare write or speak. Are you shocked? Are you going to call the police? Does the writing of that word consign me to the inner most circle of politically correct Hell, assuming a politically correct person were benighted enough to believe in Hell?

George Carlin used to do a routine in the 70's called The Seven Dirty Words. These were run-of-the-mill cuss words that one could not say on TV. Carlin was poking fun at the uptight mores of American establishment that restricted the hip and cool crowd from being hip and cool. What does he have to say today about a word that is so shocking that proper people allude to it only by its first letter, N? Even George Carlin is not brave enough to take on that one, no matter how silly that people go around saying "The n-word" instead of nigger. Where are all the Free Speech advocates, the rebels who are constantly battling society's strictures on our personal freedoms? Where are the iconoclasts who are so eager to chip away at cultural taboos?

How did such a state of affairs come about that people are literally afraid to speak a word in public? Doesn't such fear hearken back to medieval times, when some words were thought to have infernal power and were forbidden, banished from public discourse? The prohibition on saying "nigger" is even more peculiar in that some people are free to say the word as often and as openly as they wish. Somehow, somebody determined that blacks are free to call each other nigger or nigga or niggaz and their doing so does not connote the same dastardly meaning as it does when non-blacks say it. I don't understand the logic of that. I can't think of any other word in the English language the meaning of which depends upon the skin color of the person who utters it.

Matters have gotten so absurd that some people in certain communities have advocated the banning of HUCKLEBERRY FINN from public libraries for no other reason than that the Great American Classic contained the nigger word, a word of common parlance in Twain's day. One reason that O.J. got off was detective Mark Furman's admitting that he used the word at one time several years before. George Allen, running for the US Senate in Virginia, got into trouble when someone claimed that he had used the word in the locker room when he was a football player at UVA 30 years ago. Heavens to Betsie! Can a word have that much power, that much efficacy, that much evil potency?

I grew up in the South and hardly a day went by that I didn't hear the word. More often than not, it was spoken not with malice or hatred; it was simply the accepted way of referring to African-Americans. As the Civil Rights movement gathered steam, most respectable Southerners gradually became embarrassed by the word and amended to it "niggra," at least in polite society. I can remember the headmaster of my prep school standing before the student body during Friday morning assembly and talking about the "niggra" school that we would be playing in football that night, the message being that we should watch our for our possessions and personages.

I understand why blacks are offended by the word. Even if people spoke it in a pedestrian way without any underlying tone of hatred, the word did convey disrespect. I don't like the word and never use it. I appreciate how it evokes an horrible time in our nation's history, especially for blacks. What's disturbing about the word isn't so much the word itself as the times that it evokes. But there are many bad words that have mean and ugly connotations, and they are not eradicated from the language.

I am bemused by the special status that that the word has attained. Take the case of Michael Richards, the guy who played Kramer on "Seinfeld." He's gets pissed off at a couple hecklers during his stand-up and calls them niggers. And for the past three days, the incident has been all over the news, just after stories about how Iraq is coming apart at the seams. Richards horned in on his friend Jerry's appearance on Letterman to give an apology to the nation. Ok, the guy made a mistake and said a terrible word. Does that mean he has to grovel on national TV and ask for forgiveness? For saying one word. Gimme a break. My opinion of him was even less after his apology than it was after his racist rant. Are Chris Rock and other black comedians now going to give apologies when they offend whites and other ethnic groups during their stand-up routines?

But Richards doesn't have to worry too much. As Brittany and Paris have shown, there is no such thing as bad publicity in this day and age. This incident will end up being the best thing that has happened to his career since Seinfeld went off the air. I guarantee that his stand-up shows will be booked solid the rest of his tour.

Monday, October 23, 2006


I never believed that F. Scott quote, "The rich are different from you and me." And the fact that I hear it quoted every other day reinforces my contrarian skepticism. The rich eat, shit, fuck and die just like the rest of us. We are all alike in the we want a lot of jack, moola. The rich are different only in that through luck, brains, beauty, pluck or moxie, they have been able to achieve the goal that we are all aiming for, namely financial independence, or in more common parlance, "fuck you money."

Before I proceed, maybe I should first describe who I mean by "you and me." You and I are just a couple of guys (or maybe you are a gal) who are hustling our way through this hardscrabble world, trying to reach an increasingly higher level of income, standard of living, professional status. We go about our business, play by the rules, live and let live, don't expect handouts from the government or anyone else (and obversely, don't like paying taxes). We are slowly grinding our way to a better and better life and don't appreciate anybody standing in our way upwards.

I know two or three guys whom I would label as "super rich." They are all hedge fund guys with net worths in the scores of millions of dollars. I have noticed that these guys have changed in one respect once they have reached Mt. Olympus: their politics have switched from caveman conservative to limosine liberal, or in these cases, Gulfstream liberal. This phenomenon has become prevalent enough that for the first time more hedge fund money went to Democrats than Republicans this past election cycle.

These guys I know had never pounded the drum of some defined, deeply held political philosophy. But they once had a healthy skepticism and suspicion of bureaucrats and politicians and, like Ronald Reagan, believed that government was often the problem and not the solution. They didn't think some assholes in DC should be telling the rest of us how to live our lives. Like most Southerners they were pro-military and thought that the US of A should spend enough on defense to always remain the toughest, kick-butt bad ass on the global block. They hated taxes. They cracked a lot of gay and ethnic jokes. They dressed like they had just jumped out of a Brooks Brothers catalogue. They loved to hunt. Growing up, they went to church every Sunday and then the country club afterwards for a big family lunch. Their main goal in life was to get filthy rich. In short, they were by nature and nurture, a Republican.

But at some point on their ways to amassing hundreds of millions of dollars, they changed. They became an environmental "champions." I saw a photo of one of these guys in the newspaper at some Greenpeace gala attended by a bunch of buck-toothed Kennedys. A couple worked their way into the Hollywood crowd, and to do that you have to swear allegiance to the liberal creed. To my shock and dismay, I discovered that one of my mega bucks buddy was one of Al Gore's biggest financial backers. Somehow, these guys had turned into a liberal Democrats.

What causes such a radical transformation? What changes hedgies and other super-duper rich folk from the conservative Republicans they were on the way up to liberal Democrats after they have attained their enormous piles of lucre?

Is it some kind of guilt? I don't think so. It isn't as if these guys obtained their wealth like the 19th century Robber Barons did, i.e., through monopolistic plunder, sweatshops, extortion and bribery. These are for the most part law-abiding citizens who just happen to be extraordinary traders or investors. I, for the most part, geniunely respect and admire them.

I have a theory that what makes these guys change political stripes and become the exact opposite of what they had been before is a need for special kind of status. Once they become mega-rich, they ask themselves, Is that all there is? Once attained, the goal of becoming filthy rich seems hollow, not worth the stupendous effort. They find that their money buys them a certain amount of respect but not love and adoration. And guys who get to their levels of success are mightily driven by something, and usually it's a profound need to be loved and adored. Someone once said that at the beginning of every great fortune, you will find a crime. I would amend that and say that at the beginning of every great fortune, you will find a deeply insecure person.

These guys don't won't to be adored by just anybody. The affection of the hoi polloi is not worth having, is best shed on professional wrestlers and Britney Spears types. No, our Hedgie Hero has high and finicky tastes when it comes to whom he wishes to be loved by. Only the best will do. Simply put, he wants to be in with the In Crowd.

The In Crowd consists of media moguls like Ted Turner, Harvey Weinstein, members of the intelligentsia like Frank Rich, celebrities such as Madonna, Gwyneth Paltrow, super nova athletes like Tiger Woods. Hedgie Hero is shocked to learn that some among this crowd do not think highly of him just because he is a modern-day King Croesus, and even view him with disdain and suspicion because he made his money not from some socially redeeming activity such as professional basketball or movie acting, but via a hedge fund. The In Crowd sneers at the money grubbing world of Wall Street and high finance. This makes Hedgie Hero all the more determined to get on the "inside" and gain their love.

It goes without saying that the politics of the In Crowd is liberal. Our hedge fund guy is willing to throw overboard whatever political convictions he had before in order to get on the Good Ship Cool and Hip. He sees how George Soros managed to go from Financial Swashbuckler to Hollywood Hobnobber and sets out to chart his course.

And so the Hedgie Hero sets up his foundation, gives to various environmental and liberal causes, and becomes know among the In Crowd as a real mensch. Giving money rather than his time is cheaper since his time is the most expensive thing he has. And of course, this foundation protects him from the increase in taxes that his new-found politics surely entails.

I don't begrudge Hedgie Hero his right to buy into whatever political orbit that he wants. What I do mind is the politics that he supports, namely higher taxes, ensnaring and constricting regulations, class warfare income redistribution, in short all those dragons that Reagan slayed in the eighties so that guys like Hedgie Hero could become unimaginably rich. The most selfish thing the uber rich can do is support policies that will keep the rest of us from ever getting to where they are.

Saturday, September 30, 2006


And the Dumb and Dumber award for this month goes to---drum roll, please--investors in the hedge funds, Amaranth and Pirate! Leaves weren't the only thing falling the past couple weeks. Two headline hedge fund meltdowns in one month--how much more fun can we stand!

Let's start with Amaranth. We all know that there in usually no hedge in most hedge funds, but Amaranth takes the cake for tight rope walking buck naked and with no net. Amaranth had over half its $9.6 billion in assets on one bet, namely that natural gas prices would be much higher as winter season approached. Amaranth went "all in", betting that the price differences on gas futures for the summer and winter months would get larger over time. Afterall, it happened in 04 and 05, so why not bet the house, the furnishings, the college funds and the kids that it would happen again this year. WRONG! The fund ended September with 70% of its assets transferred to all those making the opposite and correct bet. Amaranth supposedly means "never fading" in Greek. I guess it's better to flame out than fade away, to paraphrase Neil Young.

But stop and think about it...Amaranth laid almost $5 billion US dollars into the hands of a 32 year old guy working 2500 miles away from Amaranth's Green Witch headquarters in an oversized closet in Calgary, Alberta, jammed with computers and empy cans of Red Bull. And the jockey was going to bet it all in what is probably the most volatile market there is, natural gas. What the fuck were they thinking? Where was the adult supervision? Sure, the guy had made over $2 bil year to date, but the way he made it was two giant steps forward, one giant step backward, up double digits 2 months, down double digits the third month. So much for the Sharpe ratio.

Last week, the founder of Amaranth, Nick Maonis, set the financial world a'chuckling when he told investors on a conference call that he had "every intention" of staying in biz. Yeah, right. Like his posse of traders were going to hang around when the ship was 20,000 leagues under its high water mark and whatever investment they had in the firm was basically zilch. Traders know when to close a loser position.

And speaking of ships, what about Pirate Capital? The firm is being investigated by the SEC on suspicions that the fund failed to alert the commission when it was selling stock. Pirate has already had pretty much a puke ass year, being up less than 3%, or just a little more than what my money market fund has delivered. And this is what all the blood, sweat and tears of "activist investing" gets you?

The fund was founded by a Mr. Tom Hudson. Before starting his hedge fund in 2002, Hudson was a distressed debt trader at Goldman Sachs. He was fired by the firm for some hanky panky with a co-worker. In this day and age, doesn't even the dimmest dim wit know that you don't dip your pen in the company ink? Doesn't that incident suggest that the guy might have an issue about following rules, that he ain't the poster boy for discretion? But that didn't keep him from ramping his fund up from $2mm in 2002 to $1.2 bil today. You would think that a fund-of-funds guy would say to himself, "I can put a few million with this kid, who evidently has trouble keeping his rocket in his pocket, or I could pass and keep looking at the hundred other hedgie wannabes lined up outside my door, begging for some change...maybe I should take a pass on the guy. Something about him naming his fund 'Pirate' gives me the willies." Evidently, a lot of FOF guys, advisors and consultants thought differently, being suckers for the Goldman Sachs stamp, besmirched or not.

I use to work with a woman who covered Pirate. More than once I saw her blushing after talking to Hudson on the phone. "Can you believe this guy is coming on to me," she said once. "He said I have a sexy voice and asked me what I looked like." What does it tell you about the guy that after the sex affair at Goldman, he adopts as his company logo, "Surrender the booty!" A bit mocking, don't you think. Why should it suprise anyone that he gets in trouble with the SEC?

Pirate, as it name indicates, take pride in pillage and plunder tactics when it takes an activist role investing in a company. A magazine aricle reported that a 27 year old analyst for the firm, Zachery George, told the CEO of a company that the fund was investing in that "You work for us now." He went on to add that Mr. George and Pirate wanted the company sold and the CEO sacked. "Next year we're going to be here, and you won't," he said. Isn't that the kind of snotty-nosed hedge fund punk that you'd like to back hand bitch slap?

Hudson likes to use cutesy terms like "shipwrecks" and "treasures" in his investor letters. I wonder why he didn't use the word "mutiny" in his last letter when he described how half his staff walked out on him or was fired last week. Among those fired was the above-mentioned young Master George.

I'm sure Mr. Manois and Mr. Hudson have above-average IQ's. They won't be the first smart guys that ego and hubris turned into dummies. But the real nincompoops are the investors and their advisors who seem to be blind when it comes to their hedge fund investments. They allow these funds to keep them in the dark about their strategies and tactics. They don't raise questions when they see extreme volatility in their returns or question the extra risk that stupendous monthly gains, like those that Amaranth posted, must certainly entail. I have a hard time feeling sorry for the San Diego Retirement Fund, which lost over half the $175 million that it had invested in Amaranth. I can imagine the CEO of that fund made up for his middling government pay by bragging to his friends and neighbors about all his cool hedge fund investments. Guys like that can prove they have a couple of ounces of brain matter by doing two things: First, wake up to the scam that hedge funds are perpetrating on them; and second shoot the consultant/advisor/FOF parasites who failed to protect them from jokers like those discussed above.

Monday, September 04, 2006


Alas, this is not a great time to be a high yield bond salesperson. If you work at one of the big shops, you have suffered new issue spreads compressing steadily over the years. Newbies listen in awe and envy as old-timers talk about the days of 3% and 4% underwriting spreads. And since each deal now seems to have at least 2 bookrunners and 5 co-managers, your slice of the pie has gotten much smaller. And the Man Upstairs is clamoring for a bigger return on the huge amount of resources that he has poured into this stinkin' business over the past 10 years, and so your ultimate payout rate has shrunk to the single digit percentages.

Matters are even worse at the commission shops. The days of the non-risk, high payout commission bucket shops are numbered. 2003 was the last hurrah. The model is broken, defunct. Trace has crushed the margins and credit default swaps have clipped the volumes. Panic has given way to mass depression. Among the smokers puffing outside office buildings, you can occasionally spot one or two high yield salespeople, hyperventalating and sweating, filled with dread and anxiety. Time to say goodbye to the au pair....Omigod!!! So long Mercedes and hello Maxima.

The old joke that once made the rounds was, "If I die and can be re-incarnated, I want to come back as the wife of a high yield bond salesman." Those were the days, my friend, we thought they'd never end. Now such a wife greets her hubby every evening clutching unpaid bills and shrieking about her beloved credit card being maxed out.

The Great Shakeout has started and is on-going. Classical economics are at work as excess capacity is being drastically reduced. There were way too many shops and bodies in this business 3 years ago. At one time, there was close to 50 outfits involved one way or another in selling high yield, or about 1 for every 6 accounts. The time has come for people to leave the business. The Exodus is here.

But what's a poor bond salesman to do? Send his resume to the post office? Afterall, what outstanding qualities can the typical salesman claim? A great phone voice? An intimate knowledge of Manhattan's best restaurants that rivals Zagats? The more daring and ambitious sellside individuals are thinking bigger than that. The real dreamers are looking to go buyside.

Any sellsider who has spent much time around buysiders knows that to cross the street really doesn't take such a great leap of faith. When you get down to it, buysiders aren't any smarter than the sellsiders. Maybe they work their way around EXCEL better and usually have a higher geek factor, but that's about it. They got onto the buyside years ago when the money was on the sellside. The opportunities for nerds with accounting majors were somewhat limited at the time. So guys like that became analysts. And after years of keeping their heads down and avoiding mistakes, the natural river flow landed them in a PM position. And now the tide and tables have turned, and the little nerd thinks he's a master of the universe.

Okay, say you are a sellsider and want to get to the buyside. Where do you start? First of all, you angle for the hedge funds. Forget mutual funds or insurance companies, since there's no money there. Okay, hedge what? If you work for one of the bulge bracket, new issue shops, you might consider marketing. Let's face it, a new issue salesman is not much more than a glorified travel agent whose main function is to make sure accounts know what the road show schedule is. Second to that, his talent skills most match that of a maitre'd.

But maybe you think of yourself as a "research salesman." A guy with a brain who can read a 10K as well as any analyst or PM. You actually know that EBITDA stands for Earnings Before Interest Taxes Depreciation Amortization. Ta Da! Welcome to the buyside.

So let's speed things up and say that after keeping your ears to the track and your eyes on the horizon, that old college buddy/drinking partner/wing man starts up a hedge fund and you bamboozle him into thinking you know something about high yield and how to manage money. And for kicks and giggles, he hires you. Now what? First, what's your goal? That's easy. Your goal is the same as everyone else who works at a hedge fund, ie, make as much money as quick as you can. Rake it all in with both arms. We all know that the market is stretched, that spreads are as tight as they are going to get, that the top is in place. The only question is, when will the real dizzying descent begin? Next year, 08? Safe money says that sometimes over the next 2 or 3 years the market is going to crack and tank, maybe even crash. After that, the jig is up. The 20% incentive fee, profit sharing bonus, or whatever else you want to call highway robbery, will be a moot point because no one will ever be able to get back to that "high water mark" reached in Febuary of 07. Here's to living on a 1% management fee...and that can be a pretty good living but it ain't master of universe pay. In summary, get it while the gettin' is good.

Now that you have fixed your goal, what should your strategy be? To have a strategy, you first have to understand your client who has invested in the hedge fund. Your strategy has to fit the investment parameters of your investors, who are typically endowment and pension funds, or high net worth individuals. As different as they are in many respects, these investors share one common trait: They are dumb money. Think about it. How smart can you be to hand millions upon millions over to some guy who asks that he be paid 1% for doing nothing, as a management fee, to cover his office expenses? (The truly audacious ask for 2%.) And then on top of that, he wants 20% of the gain. All this for a track record of generating mid single digit returns. My money market accounts gives me 5% and I'm not giving up 21% of the juice to get that! I'm willing to bet a lot of money that Warren Buffet has no money in a hedge fund that asks him to pay 1% for the honor and then give up 20% of the take. That is plain stupid.

And of all the dumb money, high yield money is the dumbest. Well, maybe it's not so much dumb as "forced." Some investors, like pension funds, have to have some dough in fixed income, by statute or by-laws. So how are they going to allocate their fixed income money? In 10 year TSY notes yielding 4.75% or investment grade bonds 100ps over that? Such investors have no choice but to put some money in high yield bonds. And the beauty of it is that they expect so little. All they ask of you is that you make the coupon. That's it. You don't have to give them a big return...just give them a damn coupon. Hell, that's not much of a hurdle to jump over. About as easy as jumping over a crack in the sidewalk.

But the sad, sorry little fact is that so few high yield managers are able to do even that. It's one of the mysteries of the business that year after year high yield can't manage to make the coupon, and yet money keeps pouring into the sector. I saw hedgies giving high fives at the end of last year because they generated a mid single digit return, before the 20% take. And the average high yield coupon was over 7% and they think they are geniuses for making that.

Okay, so now your have your goal. The next question is, what is your strategy? You first have to determine how much risk you should take. The answer is that you take a lot of risk with investments that are very illiquid and hard to mark and very little risk with investments that are very liquid and easy to mark. And so you are willing to make that sexy private equity investment in some outfit that delivers hot lunches to crews on off-shore drilling rigs because you know that no one will ever have a clue how to value it; and there is a 1 in 4 chance that it could be a home run, even a grand slam. And what if it isn't, what if it goes bust? Well, that'll be at least 3 years down the road and by then you will have pocketed enough dough from your dumb money investors that you won't have to worry about it. You can leave them holding the shit bag. That's what "side pockets" are for, a place to hold the the investments that could either be turds or bricks of gold.

As far as investments that are easy to mark, the rule is to keep it simple and safe. Remember, your investors just want you to make the coupon. You can swing for the fences on private equity investments, but when it comes to tradeable bonds you just cover your ass, cover the coupon. And how do you do that? You play the new issue game, that's how.

Playing the new issue game means that you try to get in as many new issue deals as you can and you flip them once the price reaches somewhere between 100 1/2 and 101 after the break. Almost all deals trade up to at least that level after the break because the underwriter is willing to spend a little capital to make the deal appear like a success. Usually that capital runs out around 100 1/2 to 101, no matter how crappy the deal. So forget about spending a lot of time and effort on due dilly. Just close your eyes and throw darts at the new issue calendar. Sure, there's a chance the dart will land on one of Jeffries stinkers, but more than likely your random action will pay off.

The main risk that you run is that you become labeled as a "flipper" and your allocations become de minimus. You can avoid that by using the plethora of commish shops that are dying for biz and, like sucker fish sticking to a shark, look to the new issue flipping as one of their main sources of revenue, as pathetic as that is. If you are clever, the underwriters will never know that you sold your bonds to Miller Tabak.

And so you keep the wheel spinning, playing new issues and flipping out of them. That strategy enables you to maintain a return at least equal to whatever the market coupon is and gives you some vig when you flip at 101. Easy as apple pie.

And so after a few years, you have kept pace with the market and one or two of those private equity deals have paid off so that the 20% performance fee actually means something. And what do you do when the shit finally hits the fan and the markets fall out of bed? You go back to the sellside, of course, and trade distressed. Trading those triple hook deals that came with a single digit coupon will be a blast.

Sunday, August 06, 2006


I like Mel Gibson. I mean, as much as I can like someone I have never met but just observed acting on-screen. But it doesn't surprise me that he was caught doing something stupid. How bright can a guy be who's pounding drinks back for several hours and then hops in his Maserati (or whatever Mel drives)and cruises a leisurely 87 mph home? How smart can Mel be when he launches into some inane anti-Semitic tirade in public after he went through such scrutiny over his THE PASSION OF CHRIST movie, which some Jews found offensive?

It doesn't surprise me that he did something stupid for the simple reason that he is an actor; and actors are inherently stupid people. Alfred Hitchcock called them cattle and Otto Preminger said that the dumber they are the better.

I remember when Truman Capote was on the Tonight Show (hard to believe that Johnny Carson had people like Truman Capote, Gore Vidal, Orson Welles on his show compared to the clap trap crap Leno serves up). And Capote made the statement that all actors are stupid.

"Oh c'mon, you can't mean all actors are stupid," Carson said with his usual Cornhusker naivete.

"Yes, I mean all actors are stupid," Truman said with his famous lisp.

"Well, what about Jill St. John?" Carson countered. "She supposedly has an IQ of 140."

"That's easy," Capote responded. "She's a terrible actress."

Think about what actors do. They do what children do, i.e. make believe, pretend, play act. A developed intellect hinders the smooth functioning of that child-like ability. Intelligence is the ability to make sense of reality, the Here and Now that one finds oneself in. But the greater one's comprehension of reality, the less one is able to imagine being someone else or in another place or time. The less developed the mind, the easier to pull off pretending to be, say, a pirate in the Caribbean. Reasoning and imagining are two different, even opposing, cognitive acts. Marlon Brando was such a dimwit that he could never remember his lines. During the filming of STREETCAR NAMED DESIRE they had to write his lines on the back of lampshades or hold cue cards up off camera. The great Lawrence Olivier was such a lame brain that he couldn't balance a checkbook.

Oh sure, actors like to think there is some "method" to what they do. Lee Strasberg made his name and fortune on the revolutionary but specious notion that actors had to think about acting in order to act, which is like saying a thoroughbred has to think about running before it runs. But all Mr. Strasberg really did was provide a fraudulent pretext for organizations like Circle In The Square to rip off some rich daddy in Kansas who is convinced that his daughter is the next Marilyn Monroe. So he shells out a small fortune to send his baby girl to New York to practice being a tree and in general publicly make a fool of herself in these acting classes. Some perennial young actor always comes out of nowhere, untrained, and is proclaimed a "natural in front of the camera." All that means is such an actor doesn't think enough about acting to act like he is acting. Such a lack of self-consciousness may be a gift but doesn't require a big IQ. Like Otto said, the dumber the better.

Naturally, actors resent being thought of as stupid. We are, after all, talking about the vainest group of people on the planet. And so they try to dispel the notion that they are dumb by acting like they are smart. Once actors have reached a certain level of fame, they feel like they are entitled to make pronouncements. Such pronouncements tend to be about politics because one doesn't need to know anything to make a political pronouncement, as opposed to, say, a scientific one. And so politics is famous actors' favorite thing to do when not acting or engaging in one of their usual narcissistic, hedonistic, conspicuously consuming activities. And when Hollywood actors make their grand statements, they usually make sure that they are wearing glasses, even if they don't need them, because they think that makes them look smart.

A host of organizations exist that encourage actors to make political statements because they find actors to be useful tools for whatever their particular cause might be. Politicians love having actors around for their "aura." The old saw is that politicians are nothing more than actors without the looks. And so we have ridiculous scenes of actors testifying on Capitol Hill about some issue that they are "championing." One such case that comes to mind is when Meryl Streep warned Congress about the dangers of Alar to children who ate apples, a concern that was later thoroughly debunked. In the meantime, all Meryl managed to do was cause a lot of apple farmers to go out of business and keep a lot of kids from eating one of the most nourishing things they could eat.

And the politics that Hollywood actors espouse are almost invariably liberal and Democratic. Funny how a group that so prides itself on its "artistic individuality" marches in such lockstep when it comes to politics. Is there a more egregious example of group think than Hollywood politics? Oh sure, Hollywood always points to Arnold, Bruce, Charleton and yes, Mel, as actors who have attained success even though they are not liberal Democrats. But that's it, that's the list! A handful of exceptions to the rule in an industry that employs thousands upon thousands.

Of course there are others in the biz who are not liberal but closet Republican; God help them if they ever speak out. Take the aspiring actress from Kansas. Imagine her at some party in the Hills and some jerk producer is doing the usual over-the-top Bush rant and rave. Like ninety per cent of twenty-somethings, she has no developed politic opinions or predilections. But being from Kansas she is probably accustomed to hearing the Republican view of things. But dare she say something along the lines of, "You know I don't think Bush is such a bad guy," "I think some good has come from the invasion of Iraq?" Sure she could say something like that, that is if she wanted to kill her career right there on the spot. Being a producer in Hollywood, the guy is more likely than Jewish. And since Jews along with blacks and unions are the bulwark of the liberal wing of the Democratic party, the guy is probably a liberal Democrat. And so our girl from Kansas might not be overly smart but she is smart enough to do like everyone else and nod her head as if the guy's blabber is fresh and insightful. She will learn to tow the line. Ten years from now, if she is unlucky enough to become famous, not only will she still be towing the line but the line will be hers, something she can pronounce to the world. The liberal line is all she has ever known. She has become indoctrinated, brainwashed, and washing her brain is easy since she is an actor and has only half a one to begin with. Such is how monolithic mind-lock has developed in Hollywood over the generations.

At some point, our Kansas starlet will decide that she wants to be taken seriously, wants to be thought of something other than that dumb Marilyn Monroe wannabe. And so she will don glasses and take every opportunity to expound upon current events, foreign affairs, economics, in short things which she knows little about. And some congressman from somewhere will decide that he'd like to cozy up to this starlet and will invite her to DC to give testimony on whatever the cause is which she has latched onto. Next she will hire a political advisor/consultant who will help her form her opinions about various matters of import. If Richard Dreyfus can do it, why can't she? Being dumb, she is incapable of forming her opinions all by herself. And before you know it, she will be invading our collective consciousness, not to act, but to spout off her opinions.

Why do we let these actors get away with it? We know that they aren't experts on anything, typically have less than a college education, aren't well read, and, to repeat, are dumb as dirt. We allow them onto our TV and movie theater screens, into our consciousness because we want them to entertain us. Not educate or edify us but entertain us. Their entertainment value is the only reason we suffer their existence. Coming home from work, after slaving away in the real world all day, who can stomach turning on the TV, expecting to be entertained, and instead see some pompous, condescending bonehead actor lecturing us, a la George Clooney. So smug and morally righteous! "Oh, shut up!" we yell at the TV screen. Actors take advantage of our generosity, our charity, our willingness to let them into our mind when they use the opportunity to pontificate about something that has nothing to do with why we granted them entry in the first place. They are abusing a privlege that we, their patrons, have granted them. Self-indulgence to an obscene extreme.

I don't gainsay an actor's right to political opinions, however uninformed those opinons might be, I just don't want to hear them, anymore than I want my cleaning lady telling me her opinion on Iraq. I remember when a reporter once asked Jimmy Stewart how he felt about the Vietnam War. He responded by saying that he was not a politician but an actor and he doubted that anyone would really care what his opinion was, so why waste the airtime. How classy, gracious, refreshing...and smart. Yep, they might be as rare as an albino crocodile, but a not-so-dumb actor is not a complete impossibility. Miracles do happen.

Saturday, July 22, 2006


Ok, this bit is not about money but the second most important thing in life, which is sex, of course. My dad visited me last week. He's a 70 year old widower. Somehow and with great reluctance on my part, our conversation turned to sex. My dad proceeded to enlighten me as to how hard-on drugs like Viagra and Cialis have totally altered the sexual landscape for guys in their sixties and seventies. "It's hilarious how they warn that a side effect of Levitra is an erection that might last over 4 hours," my dad said with a chuckle. "Great marketing! Every old goat in his laz-e-boy sat up and said, 'Damn, I got to get me some of that.'" Suddenly it's sex, drugs and, if not rock n' roll, then at least Frank Sinatra for these geezers.

My father regaled me with details about his recent visit to a titty bar/flesh den known as Pure Platinum. He went there with a couple of other old-timers. "I checked into the VIP Champagne Room," he related to me. "Man, were my buddies jealous when I told them what happened."

"What happened?" I asked with some trepidation.

"Well, I'm getting a lap dance and next thing I know, the girl has my pants unzipped and she's yanking on my pecker."


"Yeah, and after looking around to make sure nobody was watching, she's blowing me." He added a globbing/gagging sound for extra effect. Remember, we're talking about a 70 year old guy who is about 60 pounds overweight.

"She finished me off with a hand job," he added. "My buddies were all waiting for me when I came out. They didn't believe me when I told them I got a hand-job, a blow job and even a little penetration. They all thought I was lying. I showed them her phone number that she gave me. Said to call her sometime."

He went on to tell me how one of his pals, Van, also 70 years old and good looking enough to merit the nickname "The Troll," was even dating one of the dancers. "Van, a sugar daddy," I said, incredulous.

"The Troll was telling me the other day about how he discovered what they call a woman's G-Spot," he continued. "You know what the G-spot is?"

I answered that I remember reading about it 20 some years ago in my girlfriend's Cosmopolitan Magazine. In fact, back in the day it seemed like Cosmo devoted about 2 or 3 articles to the subject every issue, as if finding the G-Spot was as mysterious and monumental as The Search for the Holy Grail.

"He said his girlfriend showed him where find it. Right under the pelvic bone. The Troll said he got his finger up in there and man, did he work that thing. Got his girlfriend to come a half dozen times. Said after it was all over, it looked like she had wetted the bed."

More info than I needed to know.

"And Claude, you know Claude, right?" (Another dude in his seventies on a Viagra fuck rampage). "Well, Claude is driving his wife nuts. She's such a sweet woman, devout Catholic. She told Claude that she really didn't enjoy sex so much anymore, being that she's 68 years old. And Claude said to hell with that and that he planned on screwing her at least 4 times a week. He told me I should have a pre-nup if I ever get engaged that stipulates that my fiance's got to give it to me at least 4 times a week. I said, shit, I might have a hard time living up to my side of that agreement!"

Pity the poor woman in the twilight of her years whose husband has discovered Levitra.

Finally, Dad noticed that I was getting a little uncomfortable hearing the tawdry details about his and his pals' sex escapades. "Hey, it's not like all we do is go to Pure Platinum and think about sex," he said defensively. I have to admit that I was perturbed by my father's lust. I had never seen that side of him until now. Of course, he had never displayed it when Mom was still alive. And I have to admit that I found it disconcerting that my old man was getting more action than I was.

But really, deeper down I was sorry to hear that guys that age are still so horny because I had hoped that by then sex would not be the second most important thing in life. Think about the huge amount of time and effort we males expend on something as ephemeral and base as getting our rocks off. The benefit of those efforts is a one shot gratification, not cumulative the way, say, learning is. The few moments of feel good are no more lasting and tangible than a used condom. You would think 70 years would be enough time to realize this.

I had always thought that as a septuagenarian my mind would be engaged in the "higher things," such as art and learning, how to make the world a better place, etc. By then, I assumed that the cravings would have died down, enabling my spirit to have attained a steady state of equanimity. I looked forward to moments of peaceful contemplation, not distracted by the sensory, sexual overload that our present culture dumps on us. A wizened old man, comforted by a philosophical resignation to the fact that I would soon be casting off these mortal that such a bad way to go out?

Instead, Dad and his fellow Sybarites still talk about who would be the best lay, Angelina or Brittany. With the end of the journey still in sight, the heavenly light visible at the end of the tunnel, do you really want to still be stopping at magazine racks and surreptitiously taking peeks inside mags like Jugs and Swank? Won't you look even more ridiculous swiveling your head and ogling a nice piece of ass that just walked by you on Madison Avenue when you're 75 years old, your prick as hard as your walking cane? Before Viagra, Levitra, Cialis, guys didn't have any choice but to pursue interests of the mind and soul because there was nothing they could do about the lust in their hearts, to paraphrase prissy Jimmy Carter. There was no lead in the pencil, no crank in the crane. To avoid going insane with frustration, the old dogs had to learn new tricks, direct their attention upwards from their crotch. In short, they became wise.

I don't think that we have fully comprehended the seismic effects that these dick drugs will have as to how we view the life cycle, what it means to age, how we address the end of our days. In that sense, these drugs may have uplifted our elders' limp pricks but left our culture low.

Monday, May 01, 2006


So Barclays has decided to get back into the US high yield market after exiting it a few years ago. Isn't that special. And rumors are afloat that two or three other European banks are looking to get back into the game after walking away during the last high yield bear market. Perfect timing, wouldn't you say. Is there a surer sign of a top in the market? Afterall, these are the same guys who closed shop just at the bottom. So it figures that they have decided to re-enter just when high yield spreads are as tight as they've ever been, as tight as they've been since, well since the last time Euro banks marched headlong into our market.

Barclays went through at least two iterations in its last high yield effort. So what makes these guys think they are going to get it right this time? These banks suffer from the delusion that just because they do some leveraged lending in Europe then bookrunning high yield deals in the US is a slam dunk. Numerous failures by several Euro banks to break into US high yield underwriting has not disabused them of this notion. The only Euro bank to have really penetrated and gained market share is Deutsche Bank. Notwithstanding this "success," many suspect that DB has never really netted much money in US high yield over the past ten years. UBS has also had some measure of success in high yield but has never been able to get over the hump into the big leagues.

What Barclays and these are other Euro banks are good at it is throwing money around. They pay stupid "guarantee" money to fill their capital markets and sales/trading ranks. They have to grossly overpay because everyone suspects that they don't have the legs or stomach to go the distance. If you are a swinging dick at one of the top ten high yield shops, why would you leave your cushy roost and go to Barclays when you suspect that within two or three years Barclays will either once again punt or else be bought? The next downturn in the market and the accompanying big losses and these banks pack up and head back over the pond, licking their wounds. But what chance does any venture have for true success when it grossly overpays? Or when it makes markets that are "loss leaders" just so it can accomodate accounts and prove it is a player? Or when it tries to buy deals at spreads that don't make economic sense? Such an enterprise is doomed from the start.

And what do these Euro wannabe's leave in their wake? Srewed-up pay scales, trading losses, dumb underwriting spreads and a horde of blokes srambling to get back into the game.

Saturday, March 18, 2006


I try to stick to writing about the absurdities that high finance offers, but sometimes something so tragic-comic outside that realm occurs that I can't ignore it. The Dubai debacle is one such occurence. Actually, the issue is not really outside the purview of The Wall Street Urinal, since so many petro-dollars from places like Dubai have been flowing into the US, supporting our economy. Every time I read about this story, I hear that song, "Send In The Clowns."

Start with W. Look, I don't think there is anything wrong with the Emir of Dubai buying the company that manages six US ports. But somebody somewhere along the line of decision making within the Bush administration should have heard some extra loud beeps as this regulatory action made its way across the political radar screen. Afterall, this is George the Vanquisher of Terrorists, who has been telling the nation for five years how vigilant we have to be against another homeland attack. On the surface, this deal looks like we are allowing the enemy entry into our very ports; and nowadays, within the present political climate, the surface is all that matters. Higher level Bushies should have known about this before it hit the fan. Of course, nobody higher up than pay grade three claims to have known about it. Yeah, right. Once they knew about it, they could have prepped Congress about it and gauged just how much resistance there might be. If Bush had quietly vetted this through Congress, then there probably would not have been such a public hue and cry. And if the administration had sensed that opposition would be as intense as it turned out being, it could have sub rosa talked the Emir into changing the deal in exactly the way he ended up changing it, minus all the controversy.

And what about Congress? Has there ever been an issue more demogogued than this one (excepting Social Security)? Dubai has been a staunch and strategic ally of the US. It offers the US one of the largest ports in the world for the US Navy. (Why are none of the people so worked up about our ports not also worked up about Arabs servicing our navy?) Dubai signed an agreement with the US that offers strict oversight of shipping in and out the country, an agreement that most countries would regard as an affront to their national sovereignty. Dubai offers a model to the rest of the Arab world of a relatively open, progressive, capitalist society, one of the few economic success stories in the Muslim world.

And how do we offer our thanks and appreciation to the Emir for his support? We metaphorically spit in his face, make him a laughing stock to the rest of the Arab world. So what exactly is the train of thought running through the minds of people opposed to this deal? The Emir is making a multi-billion dollar investment in the British company that manages ports around the world, including six in the US. Nothing about the company, its operations or its personnel, is changing except the ownership. Does Chuck Schumer think the Emir, a true friend of the US, is going to allow Al Queda the ability to infiltrate this company that he bought for X billions of dollars so that it can harm his ally, the US? Why would the Senator and all the others who voted with him to nix this deal think such a preposterous scenario would happen?

Schumer, Clinton and most of the others aren't as stupid as Senator Barbara Boxer, who after launching a public tirade against this deal because it allows a foreign country to run our ports, was informed that most of the ports in this country are run by foreign companies, including several in California that are managed by the Peoples Republic of China. What an airhead.

I doubt that Schumer et al really believe this deal was such a threat, that the Emir would allow terrorists to take over his company. They know that security is not in the hands of those who manage the flow in and out of ports but is entrusted to the Coast Guard and the Customs Office. Democrats like Chuck and Hillary just wanted to score political points, wanted for once to be on the side of strong national defense. And Republicans' motivation for attacking this transaction was not so ulterior; they simply behaved as all cowards do. They saw the polls on this issue as well as the poll numbers on Bush and ran scared.

What's particularly ironic about the whole affair is that people who normally are so meticulously politically correct and ethnic sensitive, i.e., liberal Democrats, have in this case engaged in blatant bigotry and racism. Let's face it, the "multicultural/people of color" crowd think some groups deserve protection, such as blacks and homosexuals, while it's always open season on other groups. One has to tread on tiptoes whenever speaking about say, blacks or latinos, but one can get away with saying anything--and I mean anything-- about other less favored groups, such as evangelical Christians, Southerners, Catholics, and most of all, Arabs. Look how Hollywood typically treats Arabs in the few movies in which Arabs or Muslims ever play a significant role. Suffice it to say that they are rarely the good guys. And so Hillary Clinton has no problem with the British running our ports but an Arab, even if a true friend of the US? Forget about it...for no other reason than the Emir is an Arab. The hypocrisy is almost breath-taking.

And what about the media? The media abandoned all responsibility to educate the populace about this issue. They jumped on the story as just another chance to bash Bush, whom most of the media despises. Only after the deal was called off, did the media discuss the negative reprecussions, such as how foreign investors might not be so eager to put money in the US, how moderate Arabs and Muslims around the world will view this as an insult and be more cautious about supporting the US. Why didn't the talking heads discuss these possibilites while the debate raged? They had their cake and ate it too, they got to report the negative fireworks for Bush while the debate was on and the negative ramifications after the debate was over. Wherever there is a fire, you can count on the media showing up. But don't count on it for a balanced analysis of an issue such as this.

Last and certainly not least, blame has to be laid on moderate Arabs such as the Emir. Sure many Americans are uneasy about handing port management to Arabs. Yes, the Emir is a friend, but has he ever spoken out publicly against Al Queda? Has he ever decried the carnage taking place in neighboring Iraq? No, he hasn't. And it doesn't help that his country has boycotted trade with Israel. Why hasn't some prominent Iman somewhere in the Muslim world issued a fatwa against killing innocent civilians in the name of Islam. Maybe such a fatwa has been issued, but it certainly hasn't been very well promulgated. So the cowardly silence of the so-called moderate Arabs in the face of terrorism creates the impression among Americans that all Arabs think the same. This contretemp presented the perfect opportunity for the Emir to make crystal clear his position on Al Queda, on Iraq, on the killing of innocent Christians, Jews, Hindus, and yes Muslims by Muslim fanatics the world over. But the Emir remained silent within his palace. Until Arabs speak out, they will continue to have an image problems in the rest of the world.

And so blame goes all around. Do we laugh at the clowns or cry when the economic ramifications of all this folly become clear? The Emir of Dubai needs our protection. But the sad fact is that maybe the US needs him more than he needs us.

Sunday, February 26, 2006


The trading floor has often been compared to a fraternity house. Practical jokes, scatological humor, camaraderie, a decadent sort of joie de vivre are among the aspects both milieu share. More women on the trading floor has changed that comparison to some extent--nowadays a guy has to be careful lest even a glance might be misconstrued as an ogle--but the trading floor in still a man's world, or should I say a boy's world.

Fraternities have gotten a bad rap over the past few years. The perennial news story of a pledge dying from the forced drinking of a quart of Thunderbird has tarnished the frat image, which reached its zenith of coolness after the release of the movie Animal House in the late 70's.

I got to thinking about fraternities at a recent dinner party with six other couples. Opting to be naturally right instead of politically correct, we decided that the boys would sit at one end of the table and the girls at the other. The women launched into their Chatty Cathy chorale. Given that four of us gents had attended the University of Virginia and had been members of the same fraternity, we didn't waste any time before recounting the familiar animal house lore.

By the time the creme brulee had arrived, my sides had split and tears were trickling down my face, which I imagine was baby butt red from laughter. God, I hadn't laughed like that since, well since I was a college punk hanging around the SAE house. I had forgotten how madcap my college years had been. Puffed-up pretensions about one's university degree--an affliction pandemic to the New York metro area--does funny things to the memory over the years.

Stories flowed as freely as the wine. There was the one about Marvin, the biology major from Alabama, who had a fetish for women's purses. More specifically, Marvin had a thing about placing unusual items into the handbags of visiting "imports" from Hollins, Sweetbriar, Randolph Macon. At one Thursday night mixer, he was inspired to deposit elephant stool specimens absconded from the university lab into a few randomly selected purses. And then there was the one about Chester, the polo player from Memphis, hijacking during a football game the horse from under the Cavalier, our mascot whose function was to canter up and down the sidelines, exhorting the crowd to cheer. Waving a bottle of Jack Daniels in the air, Chester was chased up and down the field by referees and security personnel for a good fifteen minutes. He finally came to a halt under the goal post, reached up and grabbed the cross bar and performed a gymnastic feat made possible only by his state of thorough inebriation. Meanwhile, the horse took the opportunity to relieve his bowels directly over the letter "V" of VIRGINIA spray-painted across the end zone.

I chimed in with the story about how I and five other fraternity brothers decided one night after an Isley Brothers concert in Roanoke to make an impromptu excursion to New Orleans. Afterall, Roanoke was one-tenth the way from Charlottesville to New Orleans, so why the hell not. Off we went, six of us crammed into a Cutlass Supreme, nothing on our collective personages except a gas card, twenty dollars cash, my checkbook and big ole bag of pot. Twenty hours later on a lovely Monday afternoon, we had stationed ourselves on the patio at Pat O'Briens. After six rounds of Hurricanes and after being presented the tab, we informed the waiter that he would have to accept a check without supporting identification as I had left my wallet in my dorm room twelve hundred miles away. Needless to say, the establishment summoned the cops but we luckily escaped before they arrived. Five days later, we made the drive back to Charlottesville, just in time for Homecoming weekend festivities.

In the midst of this story-telling, someone at our merry little table had the genius to shout, "It takes a fraternity, not a damn village," referring to Hillary Clinton's book, which one of the women at the table had told everyone she had just read. And so we had found the rallying credo for the evening.

I'm not looking to pick on Hillary Clinton. Who knows, but she might be the next president. That a family needs the support from others outside the nucleus goes without saying. However, my suspicion is that the village HRC has in mind is not the small and close-knit village typical of sub-Sahara Africa, whence the proverb "It takes a village to raise a child" supposedly originated. Her village is the one located along the swamps of the Potomac River and inhabited by all kinds of pygmies, cannibals, witch doctors. Who would argue with her that much of our development occurs during the first two years of life and needs all the nourishment that it can get? But personality continues to develop and be shaped long after that. College is usually the last frontier before we enter the daunting expanse of adulthood. We have attained mental, physical and sexual maturity by the time we pack off for college, but what might be called "character" is still a work-in-progress.

The main difference between this last lurch toward maturity and prior ones is that we are now out of the house, away from our parents, who up to this point had been the main influence in our lives, the sculptors of the little masterpieces that we think we are. And even though the university is a village of sorts, we at first find it strange, chaotic, lonely. But help is everywhere. New arrivals run a gauntlet of helping hands. It isn't long, though, before we find that village within a village where we are comfortable and feel accepted. That sub-village for me was the Sigma Alpha Epsilon house. Call it a village of idiots but a village nonetheless.

An anthropologist would have a field day with the SAE house, a place with its own caste structure, value system, rituals, in short its own culture. And what are these values--okay, I'll go out on a limb and call them virtues--that the SAE house inculcated within me? One word comes to mind to sum up my fraternity experiences, namely WILDNESS. We were boys three-quarters of the way to being men and none of us liked that one bit. Getting wild was a statement, an act of rebellion against growing up, one last desperate affirmation of adolescence. College was the one time we could get away with anything short of murder. We knew that luxurious freedom wouldn't last long, that all too soon we would be toting briefcases and wearing suits and saying "Yes, dear" to our wives fifty thousand times a week. And so getting wild, doing crazy and stupid things became a rite of passage. And the more insane and bizarre the act or stunt, the higher the value placed on it.

A case in point....imagine a beautiful mid-May Saturday afternoon in a picture perfect meadow. The boys of SAE are celebrating the near end of the school year with a picnic and softball game. Okay so far...idyllic, pastoral, wholesome. But then the trash can of grain alcohol is carted onto the field. Grain alcohol mixed with green food dye and into which a jock strap had been thrown for extra seasoning. We gather around the trash can with plastic cups in hand and liberally partake. It doesn't take long for the high octane crap to kick in. The first tell-tale sign might be that the softball game is degenerating into a rugby match. Maybe the turning point is when Harlan Decker decides to dump a large wooden bowl of potato salad onto his head. Anyway, the door comes unhinged. A few guys are hanging around a stack of split fence rails. They are laying the rails across two saw horses. They are leaping high into the air and landing on the split rails, splitting them in two. They are laughing maniacally as they do so.

A 1969 Ford Fairlane mysteriously appears at the top of a knoll. We all stop and gaze expectantly toward it. It then comes bounding over the sun-lacquered meadow toward us. The auto's owner, Peter Grantling, smiles blithely as he cruises about the meadow, everybody hooting and hollering at him, splashing the car with beer and grain alcohol as it passes by.

Suddenly...something comes over me. I watch the car as it turns to make another pass toward us. Something sets me off. As the car comes at us, I inexplicably charge toward it. Peter is going about twenty-five miles per hour and doesn't slow down even though I am now standing directly before him, daring him to run me over. But at just the right moment I jump flat-footed into the air. I land on the hood and my forward momentum causes me to spring off the hood and into the air. I somehow manage to execute an almost perfect half-gainer with a twist in mid-air above the roving automobile. Looking up, I see the car roof three feet below me. I seem to hang suspended upside-down over the car for an eternity. I land hard on the trunk and roll onto the ground.

For the first time that afternoon, the crowd is dead silent. Green-ringed mouths are hanging wide open. The president of the fraternity is wondering how he is going to tell my parents that their beloved son is dead.

But then like Lazarus, like a jack-in-the-box, I spring back to life, jump to my feet and shaking my fist in the air, pursue the automobile beast. The mob has been whipped into a frenzy by my act. Thirty-three guys junping up and down, their mouths green from the grain alcohol, many half-naked, one guy wearing nothing but a trash bag like an oversized diaper, some holding in their hands pieces of fence rail like savages holding spears. Everyone gives me a high five as I prance by. Someone stops me to wipe the blood from my mouth caused by my landing on the trunk. I am a hero.

Was such a crazy and dangerous stunt heroic? According to the culture of wildness it was. All my brothers that afternoon judged what I had done as greatness. I strutted around that pasture like manic King David dancing into Jerusalem. I could have been forgiven for thinking I had done something courageous instead of reckless, stupid. But courage requires the sacrifice toward a greater cause, whereas getting wild is done for its own sake.

Nonetheless, twenty-six years later I still admire the daring-do of the stunt. In the process of becoming a stodgy, stolid, solid citizen, I feel nostalgic for that devil-may-care attitude. In a sense, flipping over that car was courageous. The act was not so much death defying as just plain defiant. I do have to admit, however, that I hope my ten and eight year old boys will be a bit more cowardly when they are in a college.

Another aspect of college wildness that I fondly remember is the absurdity of it all. A sense of the absurd as finely developed as Samuel Beckett's is higly valued by the cult of wildness. A case in point...imagine a pleasant cocktail party is taking place. Men are wearing ties and blazers and women party dresses. The SAE house is looking its best, the pledges having scrubbed it down all afernoon. Low-key R&B wafts throughout the house. I turn from a conversation I am having with a cute co-ed about some nonsense, like the differences between the Athenian and Spartan societies, and see something so startling that I almost spill my drink. In the middle of the room stands Evan Stone. (The fact that Evan is the only Jewish member in a house dominated by Southern preps has enhanced his finely developed sense of the absurd.) Evan is buck naked. Next to him is a toilet. Evan has lugged the toilet from outside the back of the house where it had been dumped after a new one had been installed in the downstairs bathroom. Everyone stops what they are doing and stares, too shocked to laugh. Evan then sits on the toilet. His face strains and he grunts out loud as Phoebe Snow's "Poetry Man" sounds from the stereo. The room fills with howls.

The best minds of my generation howling...with laughter. And, believe it or not, we did to some degree represent the best minds of our generation. In my pledge class of ten or so guys, two went on to Wharton, one to Yale Divinity, one to Yale Architecture, one to UVA's law school, a couple to UVA's business school, one to Georgetown's School of Foreign Affairs. We were not just a bunch of ne'er-do-well, layabout lunkheads.

But despite, or maybe because of, the respectability and success we had attained to varying degrees, we relish rehashing these old fraternity stories. The telling enables us to remember what it was like to be irreverent and outrageous, when we were untouchable, unfamiliar with nagging wives, arrogant bosses, demanding clients, when we didn't have to worry about the care of kids, the year-end bonus, kissing ass for a club membership, or the fact that others might be moving faster and farther than we. We could drink green tinted grain alcohol, jump over cars, drag a toilet into the middle of a party, get naked and march around with cabbage leaves adorning our heads, burn our underwear in public, dress like Klingons for Star-Trek parties, play tackle football in the front yard at 2:00 AM, go beserk just from hearing a song.

Certain values instilled in me then and there are still with me here and now. Those values are less pronounced, more subliminal than consciously asserted because they are for the most part anti-establishment and naive and I am, alas, now seeking to become established and in the process have become more cynical. But they are still in the back of my persona, like that butt bone that evolutionist claim is the vestige of a monkey tail. I can no longer afford to be reckless but I still love to take a chance. I can't say that I am irreverent as I was then but I do have a nose for phoniness. I can't flaunt rules and regulations like I once did, but I know questioning them can be a lot of fun. The unexpectant, unconventional, uncalled for still tickle me. My spontaniety surprises my wife sometimes, like when I took her on an unannounced trip to New Orleans. I am better able to handle life's vicissitudes as long as I have Earth, Wind, Fire and all that other great music that we partied to. And I know that my sense of humor owes a lot to those zany days.

Maybe such wildness is common to every college kid no longer under his parent's roof and rules. It's probably not even limited to college kids but hits kids in their late teens and early twenties, girls as well as boys. But for me to fully know and appreciate what it meant to be a wild boy, it took a fraternity.

Wednesday, February 08, 2006


(WSU Rome Bureau) Representatives of the SEC, NASDAQ, NYSE and AMEX arrived at the Vatican today and met for over two hours with various papal officials. The twenty person US delegation hopes to arrange an audience with the Pope. The US regulators are seeking from the Pope a blanket absolution for the act of lying that would cover all individuals directly involved in the origination, sales and trading of securities within the United States.

"Let's face it," said Martin Stark, SEC representative, "lying is a bedrock principle of the securities business. If everyone told the truth, business would come to a halt."

The Vatican visit raises the question, Why now? If lying has always been a staple of high finance, then why this sudden feeling of crisis that necessitates an act of the Pope?

An in-house psychologist at a large investment bank told the WSU that the number of individuals seeking counseling for the effects of constant lying has dramatically increased the past three years. "I know it's hard to believe," the psychologist said, "but some people on Wall Street do have a conscience. The bad news is that workers in the securities biz are lying to such an extent that feelings of guilt are affecting their job performance The good news is that more of them are seeking counseling to address the problem instead of indulging in the typical Wall Street escapist behavior of excessive drinking, drug-taking and whore-mongering."

The lying has increased, according to this psychologist, in proportion to the need to succeed and compete. The bull market the past three years has intensified that drive with a concomitant increase in lying.

She cited the case of an M&A banker who sought her help a couple of months ago. "The banker was morally exhausted from prodding clients to raise their bids by telling the same lie over and over, namely that Carl Ichan was 'sniffing' the target company and preparing a bid substantially higher than the client's. The only thing that surprised him more than how easily he lied was how easily his clients continually swallowed the lie, hook, line, sinker."

Of course, lying goes with the territory when it comes to sales and trading. One high yield bond salesman told WSU that he never thinks much about the lies that he tells on a daily basis to his clients. "So I tell all my guys that our new issue deal is two times oversubscribed when we're not even halfway to a book," he said with a shrug. "If I didn't lie to them, the deal would never get done. I lie to them, they buy the deal, and usually it does end up being oversubscribed and trades up after the break. Lies are the oil that greases the wheels, baby." The salesman added the over-used cliche, "I'm here to sell bonds, not the truth."

But not everyone is so nonchalant about lying. A portfolio manager of a large bond fund described how he suffered pangs of conscience confessing to his priest. "I'm dyed-in-the-wool Catholic. I go to confession almost daily. And almost daily, I confess the lies. You know, basic stuff, like how I tell a salesman that I bought a bond at such a price when the truth is that I bought it much higher. Or when I tell the pricing service to use a certain broker for pricing when I know that broker is giving me a too-high price for that bond just to ingratiate himself to me. Finally after months of confessing this daily, the priest said to me, 'Hey, Rich, I think it's time you get some real help and talk to a shrink.'"

SEC's Stark said that the Vatican visit was prompted by the large number of Catholics in the securities business. "We have a lot of workers of Italian and Irish ancestory in this industry and the psychological cracks from lying have been more overt in this group than others. Thus the need to get an absolution from Big Pappa. We need these workers to go about their business and continue lying with a clear conscience. If they mope around worrying that their jobs will consign them to the inner-most fiery circles of Hell, then their productivity drops and the markets don't function as well as they should."

Stark said that the regulatory bodies plan to make similar requests to the appropriate authorities in other denominations and religions. "Even the Dalai Lama is on the list," he said. "We want all morally upstanding, God-fearing, religious people everywhere to acknowledge that, hey, sometimes the truth really doesn't set you free but only makes you poorer."

When a Vatican official was asked if the delegation would be granted an audience with the Pope, he answered archly, "If they do, they better be prepared to have their knuckles smacked with a wooden ruler."

Monday, January 16, 2006


I'm nevous. I went to a few holiday parties. I never drank so much overpriced wine and gnoshed such fancy finger food in my life. And at those parties I sensed that everybody is doing not just well but swell. Too many people are making more money than they ever dreamed about. Guys who a few years ago were sweating the monthly maintenance payment on their off-the-beaten-track co-op are now looking to buy one of Trump's latest auto-fellatio luxury tower units. Bonuses on Wall Street reached a record in 2005. Everybody is just a little too fat and happy. Hogs are fat and happy because Farmer Green Jeans has been feeding them an extra allotment of corn so he can get the best price for them at the slaughter house. Farmer Green Jeans in this case is none other than Alan Greenspan. Farmer Greenspan had been feeding us an extra allotment of historically low interest rates and easy money. The contrarian in me senses danger when everyone is just a little too fat and happy, almost giddy. That reminds me of the real estate market in 1989. That reminds me of the Nasdaq in 1999. The same roaring party hardy attitude prevailed just before October 1929. (What is it about years that end in 9?) The pendulum swings between greed and fear, and right now the pendulum is at the extreme limit of greed and ready to swing the other way. I think 2006 will be the Year of Fear. I'm sorry to say this, my friends, but I am filled with foreboding about 2006. Mae West may have said that too much of a good thing is wonderful. But when it comes to prosperity, too much of a good thing foretells its own undoing. When people are too happy, they get careless, complacent. Kind of like a buck when he's rutting and is too much in priapic bliss to realize that a hunter a hundred years away has him in his cross hairs. I don't know what untoward event (s) might happen and don't care to guess. All I can say is be careful and maybe even take a few chips off the table. I predict the stock market will be lower this time next year, maybe by alot. Happy trading, Nick