Faustian Weblog

Saw it last night

A lot like that movie “Under the Volcano”, perhaps its inspiration.

I highly recommend it. You may want to move to Mexico, chuck it all, and become a drunk.

When your wife shows up dead down the road from your house, appearance is everything. Grief is not conveyed by the following signs and signals.

1. Tight jeans that give off the impression of being a single bachelor.
2. Designer shirts that make you look groovy.
3. Undershirts that make you look concerned about your perspiration.
4. A trim body where the workout schedule was not affected by the death.

And nothing says “I’m guilty” like a hat in a courtroom.

There is a strange phenomena going on right now, specifically with financial stocks. The pattern is always the same. In the beginning the financial stock is trading around between $40 and $50 dollars a share, say its pre-crash price. Then the bad news starts trickling in, and the stock slides down between $20 and $30. The CFO always comes out to try to reassure the public that the bank has over XXX billion in reserves and that there really is nothing to worry about. Then comes the ‘coup de grâce‘ and management announces that the company has over YYY billions in ‘write downs’ either in the form of credit default swaps or collateralized debt obligations. The rest of us are left speechless as we have no idea what either of these two instruments are, but we do like the look of the new Obama appointee, whom we are told garnishes the total confidence of Wall Street.

Finally the stock slides all the way down to approximately $3 a share, and we are told that the institution is simply ‘too big to fail’. Next, the government pronounces that they are going to inject ZZZ billion into the business to prop it up. The stock immediately rebounds $4.75, up 58.2% on the day, and all of us feel better even if it is only for a few hours. Eventually, the shares drift back to a price in the pennies and the company is forgotten.

Over the last several months, Faustian institutions considered ‘too big to fail’ include:

• Bears Stearns
• Lehman Brothers
• Wachovia
• Fannie Mae
• Freddie Mac
• Morgan Stanley
• Citibank

People who still hold Wells Fargo and JP Morgan Chase (the last ones standing) would be well advised to see a pattern here, and issue a sell order in the not too distant future.

I do not believe in stock market technical analysis, or “la bizarrerie des nombres” as the French would refer to it. Just because something can be improperly quantified does not lend credence to the underlying theory. Markets are only driven by one component: human belief. There is no such thing as fair market value or market fundamentals. The superfluous notions of price earnings ratio, cash position, forward guidance, or corporate earnings should never figure into the equation, for they are only what the optimists who would buy the stock anyways care about. As for such antiquated fears such as fiscal shortfalls, insider selling, loss of market share, lack of government assistance, they should also be taken with a grain of salt. In fact, the best thing for the government to do is make the problem worse, they should try to raise rather than lower interest rates for starters.

There is no reason for example why Google should be worth $700 a share, $284 a share, or $1 dollar a share, because there is absolutely no correlation between Google the company, Google the search engine, Google the management, Google the employees, and a price of GOOG. The only thing that matters is whether people use Google for search, because if they do they will have to buy GOOG and drive up the price.

All stocks essentially have three types of owners; the optimist who buys it on the way up hoping to cash in on the momentum, the kamikaze who buys it at its peak but cannot get himself to realize the loss until the end, and the guy who really does not give a shit either way. Right now we still have to wait for the last kamikazes to hit the deck of the aircraft carrier. Unfortunately, the kamikaze carries with him the belief that the stock must go down. Once all equities are owned people who do not give a shit – people such as Warren Buffet – the market will go up again.

When is it time to buy stocks? The answer is when no one else wants to buy, because no one believes; when they are cheap. We are getting there slowly. The Faustian faith in greed is being gradually overtaken by the Christian faith of fear. I know that we almost there as even the pundits like Jim Cramer come out of the closet and professed a complete lack of faith in equities.

According to his daughter (who is also a in the family business) there is no reason to ‘own’ a stock. We can now all thank Mr. Cramer for being the anti-stock owner stock picker. When the self appointed experts, like Cramer who only focus on the first derivative, tell us to sell all, and to buy nothing, it is a sign that the bottom is near.

Abortion is one of those issues that I have to side on the pro-choice side of the fence. True, I think that it is sad that so many unborn children are extinguished before the fact, but given the choice between privacy and illegality, I must choose privacy. I cannot imagine that we would be better served by criminalizing one more facet of our mammalian existence; as we have done with our failed policy on drugs. Are we really going to start locking up women who refuse to participate in a forced incubation program, simply because they gave into the sexual advances of their male partners? What is next, honor killing?

What the abortion debate is really about is control, or loss of it, by self appointed ministries of morality such as the Catholic Church. It also provides a convenient way of demonizing the left, all while completely ignoring the real social justice issues that are at the heart of human misery. It is not surprising that abortion is the championed issue of the right, who is also the greatest supporter of social neglect and libertarian politics. The proof of this fact is in the historical record. When real human beings are suffering, rather than the imagined stigmata of some unborn fetus, e.g. six million Jews going off to the gas chambers, or twelve million slaves being sold off in the trans Atlantic trade, mum is the word as far as the Church is concerned. In fact, it is often men of the cloth who are the biggest cheerleaders of these horrendous crimes, and who most assuredly profit from the ensuing pillage.

America is the first Empire in the world founded on anti-imperialistic principles. It will soon be the first socialist country in the world based on an anti-socialist dialectic.

Software managers would do well to avoid conferences and not spout the latest bullshit on Agile Development; rather they should spend more time debugging with their programmers and actually understanding the real issues. This is easier said than done. Anything that takes away a team from itself is a bad thing. Usually that means anything that immediately detracts the engineers from the problem at hand. Far more often are managers willing to delegate and differ (out of laziness most of the time) than actually think, engage, and decide. When their project eventually becomes unglued for lack of cohesive and comprehensive thinking, these sorry human beings inevitably end out blaming their underlings.

According to the news report, GM is suppose to go bankrupt by next week. If all goes according to plan; 2.5 million people will get laid off and over 50% of all car dealerships in the US will close down, along with all parts suppliers, automobile repair shops, tire suppliers, and Jiffy Lubes.

All that is bad of course, but my real concern is this: who will maintain my secretary’s Chevy Tahoe?

In the news today:

“Fannie posts $29B 3Q loss, $100B may not be enough”

$100B – $29B = $71B (seems like more than enough)

What are we getting for all these $B?