Bleep Them!

'They're not willing to give me anything but appreciation. Bleep them,' close quote. And again, the bleep is a redaction. Patrick Fitzgerald, U.S. Attorney

Thus the wiretapped governor of Illinois, Rod Blagojevich (D), alluded to the Obama's team refusal to reward him for appointing their favorite candidate for the US Senate seat that the president elect vacated in late November. The seeming foolishness of a high official who, aware of being under surveillance, (allegedly) escalated his corrupt dealings can be easily explained with that age-old trait of human nature: hubris. The Greeks codified it in Tragedy and it's still raging with all its blinding fire. Obama's critic were predictably quick with the obvious smearing associations. They failed to noticed that if Barack had survived the much stickier association with Tony Rezko this new allegations were much less likely to stick. Obama's supporters, on the other hand, seem to have missed the silver lining. The inability of the Rezko's mud to stick was already a sign of Barack's integrity: how else can you survive when surrounded by a pack of ravenous wolves, no media infatuation can rescue, you are on your own! But Blago's debacle is also a powerful reminder that Barack politically grew up in one of the most corrupt milieux in the US, and the very fact that he hoped and inspired hoped while most were succumbing to the temptation of business as usual is another bight sign of what a solid job candidate we just hired for president!

When History Makes Sense

A week ago almost to the hour we experienced one of those rare moments when suddenly grand meaning descends on the turns of history.The election of Barak Obama marks the culmination of the Civil Rights struggle that was initiated with the emancipation proclamation of Abraham Lincoln. We reached the other end of the rainbow and found the pot of gold, the promise land. I stress we, that is, not only African American people, for this is an achievement for America as a whole, and Humanity at large.

The Great VIX Swoon

In the last few weeks, the VIX, aka the fear index, has been telling the story of equities's gyrations in the US as much as any other index. Of course, the epicenter of these seismic convulsions was elsewhere, in what, for brevity we could call Creditgeddon. As market pundits identified a bottom in the Friday, October 10's sell o, I, more modestly, saw a peak in the VIX intraday high of 76.94, attained on that day around 3 PM. [It turns out CBOE changed methodology for the computation of this index. You can still see charts with the old methodology's values, which thanks to CBOE's freely available data series (http://www.cboe.com/micro/vix/historical.aspx) can be seen attaining 103.41 last Friday.]

As the belated awareness that a deep consumer-driven recession stole center stage from the credit markets, the convulsion continued. On Thursday, October 16, my prediction was promptly taken out by a new record of 81.17. Keep in mind that previous record before we entered the current regime of panic was 45.74 in the wake of LTCM and the Asian financial crisis. You would hardly believe that vix in Latin means hardly. But consider this:

Vix socer Iphiclus, vix me grandaevus Acastus, Vix mater gelida maesta refecit aqua

a couplet from Ovid's Epistles which can be translated as

My father-in-law Iphiclus, the good old Acastus, and my sorrowful mother, hardly recovered me by sprinkling my face with cold water

Looks like the typical reaction to these days' VIX jaggedness. If this was the S&P's EKG, one would spot a heart attack or something to that effect in it: equities are swooning and falling fast.

A MetaIgnobel Prize for the Bush Administration

This week, the Bush administration sealed another dubious (what else would you expect of Dubya?) achievement. Paul Krugman joins an impressive sequence of Nobel laureates who may be considered critics of the last eight years of US executive power. To varying extent, many of the laureates in the non-natural sciences prizes since 2000 have found fault with this administration. In Economics Joseph E. Stiglitz comes to mind, Harold Pinter in Literature, and notably, two former exponents of the US executive in Peace, Jimmy Carter and Al Gore, who, ironically, emerged as Bush's preeminent nemesis. In Italian graffiti, the symbol for down with! is an upside-down W, [as W itself means long live!, apparently a repetition of V for viva! Flipping it is akin to turning your thumb down] like this one

Time for history to flip that most powerful of initials ...

The recent backlash against short sellers is only the latest wave of scapegoating of the minority of market participants who engage in this basic kind of transaction. Every practitioner and scholar of the financial markets know that short selling, far from destabilizing the functioning of the markets, it actually makes them more efficient. Let me be clear, I am not speaking of fraudulent practices nor of naked shorting. Restricting short selling only favors "irrational exuberance," for it is akin to tie one of the two hands of the forces that make a price reflect the market's assessment of the value of a corporation. You can find an articulate discussion as to why restricting short selling is deleterious for the financial markets in http://blogs.wsj.com/marketbeat/2008/09/19/five-reasons-why-the-short-selling-ban-stinks/ Furthermore, I would like to point out [the following appeared as a comment in the above referenced blog] that there is a growing body of research that posits restrictions on short sales are one of the causes of bubbles and excessive price volatility. In a recent presentation Michael Lipkin exemplified with the case of identical stocks traded both in Shanghai (no shorts) and Hong Kong (shorts allowed) how shorting decreases volatility(http://www.ieor.columbia.edu/pdf-files/Lipkin_M_09_08_08.pdf p. 34-5)

In a recent Wall Street Journal piece Deborah Solomon, David Enrich And Daniel Fitzpatrick (http://online.wsj.com/article/SB122238888884077341.html), wrote "BB&T Corp. Chief Executive Officer John Allison said a pay ceiling would constitute 'a massive subsidy for incompetence.' In a Sept. 23 letter to some members of Congress, Mr. Allison wrote: 'How will companies attract the leadership talent to manage their business effectively with irrational compensation limits?'" Mr. Allison's qualification of compensation limits as "irrational" seems disingenuous and, well, irrational at best. I would like to remind Mr.Allison that demand for such limits has arisen from the very performance of the CEOs and leading executives who have led the US into the current financial crisis. The pay scale of American CEOs has been growing to multiples of their European and Japanese peers. Has their performance been proportionally superior? The financial markets are answering with a resounding "no!" I submit it to Mr. Allison that it is precisely the current compensation structure of many financial institutions' executives that has contributed to the current crisis. Geared toward quarterly earnings performance, such incentives often neglected fundamental issues of long term growth including the very validity of the business model and even the survival of the corporation. Is that a rational way to pursue shareholders best interest and maximize their investment?

The downfall of Bear Stearns and Co. shares the tropes of a Greek Tragedy (following the pattern of http://antigonejournal.wordpress.com/2007/04/10/what-is-greek-tragedy/):

• Olbos: the initial prosperity, quite apparent from Bear's track record
• Hubris: Bear's reputation is not one of courtesy (http://www.iht.com/articles/ap/2008/03/18/business/NA-FIN-US-Bear-Stearns-Employees.php)
• Phthonis: the gods' jealousy and the ensuing warnings. Chatter of one Wall St. major's demise could be heard as early as last August. The prime candidate was Bear, the first to be hit with the forced liquidation of two hedge funds it controlled.
• Ate: persistence in reckless behavior. This was in the eyes of the historian beholder as far as the "long term hubris'' is concerned. Since August, and until the beginning of last week, it seemed it was business as usual at Bear's.
• Nemesis: the eventual ruin that the gods's retribution brings to bear.

"Facebook Fatigue'' was one of the least spectacular of the 10predictions that Business Week put out for 2008 (http://www.msnbc.msn.com/id/22475182/). Others, such as oil breaking the $100 ceiling, have already come true. But judging from the anecdotal evidence of my dwindling Facebook e-mail notifications, I would say that many are already about-facebooking. I was one of the early weary Facebookees, tired almost as soon as I began. Already burdened with the plethora of communication we receive everywaking minute, the cuteness of a shared hand-drawn heart on your FunWall struck me at first, but after a few more such niceties I just could notmake myself care. Sharing your intimate acts of mundanity, such as baking cookies or cramming for your next job interview used to be the purview of phone calls to your friends or (better?) casual or not so casual conversation with friends and neighbors. Modern life exacts its toll: time. We often no longer have the luxury of face-to-face conversation. Social networking sites enter the scene, and there you go, our everyday exploits find another stage, one that potentially (depending on your privacy settings) includes the entire web community. (Incidentally, I find it intriguing that while many more or less consciously erect daunting barriers to friendship at the same time casually expose the minutia of life that only intimate relations are privy to---it's like fearing thevoyeur while living in a glass house ...) I have not read the mission statement of Facebook or myspace, but it stands to reason that they intend to amplify our ability to relate to our circle of friends and acquaintances and possibly extend it via new channels and content---a telephone (or e-mail) on steroids. Yet, it seems that instead of enriching and empowering our inner socialite, such sites de facto replace our social Self. Well, short of a Matrix-likeglobal simulation, the ultimate ersatz social interplay is a virtuallife, such as the one offered by http://secondlife.com/. This remark prompts my twist on the Business Week prediction. Those of us---probably (still!) a minority---who are really set on living vicariously through an avatar will gradually migrate to secondlife (or yet to be born similar virtual worlds---will there ever be a thirdlife.com, or an nthlife.com and how will these parallel universes interact?). The rest will slowly forsake their facebook profile to return to good ole face-to-face interaction, with telephone conversation and e-mail on theside. But every rule has its exceptions. On February 4th millions took to thestreets of 27 Colombian cities as well as 104 other cities around the world (http://www.iht.com/articles/2008/02/08/business/protest11.php).This protest against the FARC kidnappings was the largest in the country's history. It was organized mainly through Facebook. In this case, the site helped create a new social network of individuals sharing a common cause. It stands to reason that most did not know each other. Yet, their degree of separation was likely very small. Facebook provided the organizational vehicle for the social epidemic to take fire. This is active social engagement not passive surrogation of existing relationships. And perhaps this is one way in which social networking sites will find their raison d'être after all.

It was a pleasure to hear Sen Clinton's emotional comeback, which is arguably one of the factors in her electoral comeback. Only the revelation that she had been coached by Actors Studio professionals could possibly be the nuke in the suitcase for this new dimension of her campaign... Conspiracy fancies apart, I felt some of the Obama's charisma in her victory speech. Particularly masterful was her transfiguration of Ralph Ellison's Invisible Man into "Invisible Americans." What a sweeping reappropriation of Edwards's leitmotiv while subtly (and literarily) alluding to Obama.