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Post details: Send in the Clowns

Send in the Clowns

On the unpolished dancing parquet of life, tragedy and comedy often find themselves entangled in awkward embrace. The recent samba that the stock market shimmies on the edge of a bottom less abyss certainly has its tragic overtones, but at the same time, it lures many an amusive clown out of his financial abusement park.

Exhibit 1:

Chairman Bernanke to Committee on Banking, Housing, and Urban Affairs, U.S. Senate, April 3rd, 2008: "Clearly, the U.S. economy is going through a very difficult period. But among the great strengths of our economy is its ability to adapt and to respond to diverse challenges. Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year."

So this is what our Supreme Monetary Leader and the Most Enlightened Prophet of Profit had to say in April 2008, roughly six months before all this anticipated "growth" turned into one of the deadliest stock market crashes on record. With the benefit of hindsight, it looks like the Central Bank pulled off its own production of Katrina.

To begin with - I am not entirely sure why the interest rates have to be set by a fraternity of bearded shamans, when the market - representing thousands of minds thinking day and night about both intended and unintended consequences - would have done the same job much better. But hey - all men need their toys. So if they want to tinker with the monetary policy in the Hallowed Halls of their Marble Shanty - sure - let them divine the lending rates from whatever combination of tea leaves and cow entrails they use. What truly puzzles me about our Chief Interest Rate Calculater is something more fundamental.

Why do we expect this myopic man to lead us out of the current crisis? There were legions of well informed economists who saw the train wreck coming years before it hit. Yet you don't hear them bearing on the pronouncements coming out of the Treasury Department. When it comes to pulling our economic cart out of the rut, we are relying on the harum scarum judgment of those who stubbornly pooh-poohed the implication of the subprime mess until it blew literally in their face. Short sighted people with blurred vision do not usually turn into excellent rescue workers. How about someone connected to reality? Someone willing to offer more than printing sky high stacks of money.

And why on Earth or any celestial body for that matter do we listen and fawn over economic predictions of the man with such disastrous foresight? Why is his every gargle during the Congressional Testimony being scrutinized as if it came straight from the throat of Nostradamus himself. Why are his statements still adorning front pages of financial sections of major newspapers. Why is CNBC not calling Adam Sandler or Paris Hilton about their recent musings on economy? They could get much more accurate predictions. And why not drag out that Pennsylvanian Groundhog out of its burrow while we are at it? It has a pretty darn good track record on weather. I am actually very curious what is Punxsutawney Phil's Phinancial Philosophy. Its final verdict would look great next to the horoscope section of the Wall Street Journal, which is where all economic prognostication belongs anyway.

Exhibit 2:

"If I'm working 70 to 80 hours a week, it's only fair - I'm not asking for charity," said Jose Felix, 30, a Wall Street securities trader who wouldn't name his firm, but was steamed over Obama's declaration on Thursday that the $18 billion in Wall Street bonuses was "shameful" amid the economic crisis.

Apparently, the harrowing experience of repeated haircuts hadn't quite opened the eyes of the Wall Street bozos. Their brash sense of entitlement and absolute lack of contrition would astound even the most contumelious of Leprechauns. How difficult is it to understand that if your firm loses billions of dollars in operations, then you do not deserve any bonuses, no matter how hard you work.

There used to be time when money was earned for creating something other people wanted, not by conjuring up financial pyramid schemes. Sure, the business model looks cute: as the market bubbles up, you reap fat profits, and when it crashes down, you put on your begging hat and come knocking at the taxpayer's door. But on a closer scrutiny, that sounds a lot like the business model of a common thief. In both cases money moves from person A to person B without the consent of the former.

But tell this to Mighty Traders. They live in a parallel Universe. In its Outer Space, they still fret over the tones of their Zanetti ties while they should really be concerned with the matching leg irons. And the argument for the retention bonuses as a way to keep "talent" in the house comes from an even more far fetched spiral of their convoluted little Galaxy. What talent?? Pray tell. These guys messed up. If they go elsewhere, good for us, let them go, maybe the AIG will regain its consciousness. In the meantime, go hire a school of twenty somethings straight from the college. They may still remember some basic economy, and they most likely haven't caught the deadly Master of the Universe virus yet. So if they make couple of mistakes, no big deal. Instead of losing billions we will ONLY lose millions.

But all this tomfoolery puts me in a thinking mode. Maybe I should start a company that will make mathematical models predicting the chances of afternoon showers in Ulanbatar. My sophisticated state-of-the-art models will be based on non-linear regression, differential topology, current American Idol standings, the probability of a nuclear conflict between Norway and Sweden, correlations of planetary positions, baseball scores, pork belly sales in Lower Saxony, and the number of shoes in Jennifer Aniston's closet. I know, I know - it doesn't make much sense. But you know what - I am going to work hard on it for 70-80 hours a week, so I surely deserve some remuneration for it. Never mind that my little scheme does not produce any value and my business will probably convulse far from a thriving or even self-sustained state. But I say, together with papa Descartes: I work hard, therefore I am (entitled to gazillions of dollars). And when the enterprise goes bankrupt, as it inevitably will, I am simply going to ask for a taxpayer bailout. I am sure that the esteemed members of the private sector will find it in their heart to mail me a hefty bonus check.

This brilliant idea should push some really wide smiles onto faces of Wall Street clowns.

clown

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