On Market Manipulation, and plastic surgery versus angioplasty

Hello Dear Reader,

And by that I mean, "Hello to the four of you who follow me, and who will know that I've posted."

So I often find myself posting things on the Book of Faces that I probably should write about here. But my distribution is so much bigger on FB, and it's so much easier to link an article to FB than to link it to the blog, and with Mercury in retrograde it's really not a very good time to be trying this stuff anyway...but I digress.

First, here's an article for you.

I was recently asked by a couple of friends to defend the free market, and also to justify the bank "bailouts" (I hate that term; it's reductive and simplistic, like calling the United States a "democracy"). I will address the latter, first.

First of all, a "bailout" is like GM or Fannie/Freddie--it's an unlimited and undefined government intervention/takeover of a business, usually for political ends ("job retention" or some such). Crucially, there is no repayment in a bailout, since the business would have theoretically died without government intervention and so it is unlikely to receive one's capital back, or to realize any gain. I wholeheartedly oppose bailouts. They create and enable market inefficiencies, and I'm not one for inefficiency (don't get me started on farming subsidies).

In contrast, the capital injections into the major banks at the peak of the crisis had a couple of things keeping them from being bailouts. Primarily, they were deliberately designed to be paid back. Most of the major banks HAVE paid them bank. JP Morgan, Wells Fargo, Goldman Sachs, etc. Citi and BofA have not, I believe. Second, they were compulsory, even for the healthy banks that would have survived without government action (like JP Morgan and Wells).

You can hardly call something a bailout when you don't need the money. If my parents came to me and forced me to take a bunch of cash because they were bailing out my brother, that hardly constitutes a bailout of ME. And that's exactly what occurred when the Treasury insisted that ALL banks be painted with the same foul brush as the bad actors.

As a philosophical ethic, I do not believe in government intervention in the market. Let me restate: I believe it is a moral hazard of the first order to interfere with the market, as the consequences of such action are routinely miscalculated, causing unintended consequences, and rewarding unjustly the people who caused the mess in the first place. Sometimes (often?) these consequences are worse than the original problem. This was Greenspan's problem coming out of the dot-com bubble, where he dropped rates so low that it created a private debt bubble--the consequences of which we are living with today, as we shift a private debt bubble into a public debt bubble.

Now let me make a distinction for those of my Readers who like absolutes better than nuances. I disliked the capital injections on philosophical terms. In the same manner, and to a greater degree, I dislike the ongoing manipulation (so called Quantitative Easing) that the Fed is engaged in to force rates lower. However, one of them is best likened to angioplasty, while the other is more like plastic surgery. One is life saving, the other is elective.

The Treasury's decision to make capital injections in the banking system was akin to angioplasty on a heart attack patient (I'm stretching my metaphors here, doctors, since I am a lowly investment manager, not a doctor). It was done in a surgical manner (specific amounts and with set terms of repayment). It was probably life-saving. Like all heart-attack patients, I'm sure we would love not to have eaten all those high-cholesterol foods. But that's done, and is a whole 'nuther post.

Again, most of the majors have repaid these mandatory funds, and those who have not (Citi? BofA?) probably should have failed. I have no problem with that. They would have been absorbed by other banks, creating even bigger banking behemoths of the survivors, but that would have been fine with me. I think it's something like 188 banks that HAVE failed during this crisis (another six or so were shut down just this last Friday) so let's not suggest that banks aren't getting shuttered--it's just not the top 5.

Quantitative easing, on the other hand, is plastic surgery. It's not necessary--it allows government to interfere with normal market behavior, disenfranchising authentic market participants (who would otherwise transact except for the market distortions). Here's my beef: rates should be higher, and prices lower, to reflect the actual conditions we're experiencing in the marketplace. Instead, the Fed is actively engaged in trying to get people to borrow (by manipulating rates) to spend more.

With consumer debt levels at 122% of incomes, that's like making alcohol cheaper for an alcoholic.

The corollary (screw the spelling if it's wrong) is that prices on debt-supported assets (some companies and most houses) are woefully (and willfully!) inflated. Since this effect is knowable, this has the effect of shutting down the market, as seen with the housing numbers today (inventory now stands at 12.5 months, where 6 months is a balanced market). No buyers, because sellers have unreasonable expectations of sales price. Why? Because the value of homes is being distorted by Fed action on interest rates. Why? For political ends because foreclosure is unpopular to elected politicians, and it turns out the Fed isn't so "independent" after all.

Here's the kicker, dear Reader: the market always wins against the government. That's just the way it goes.

It's late dear Reader, and I usually save you from reading my economic rants. But I had a commenter try to draw a connection between the bank bailouts and rate-manipulation and I needed to respond since I like him very much.

And since I'm defending capitalism...

Sticking one's head in the sand (socialism) is not a viable solution. Capitalism has brought us the greatest advances of mankind. And I'm not just referring to transportation, medical advances, standards of living, and networks of information. Capitalism and republican democracy go hand in hand. Why? Only because they're the two systems we have that respect the individual. The what? The individual, that Enlightenment age realization that each of us has intrinsic value beyond our use to the greater community. Socialism does not share such a belief. It is fundamentally anti-individual, and relies on the belief that each of us is entitled to the possessions of the other. Such thinking, as it might be called, goes something like this: "I'm entitled to your X because I deserve Y. My need is equal to your efforts." From such a bitter tree springs all the fruits of anti-individualism: unjust power (centralized or otherwise), "majority rule", stagnation and decline.

If capitalism has failed (itself an absurd assertion), then what of socialism? Let's ask the Soviets. What? The USSR collapsed? Then let's ask the Chinese people. What? They're censored by their centralized socialist government? Oh.

The naive fantasy of enlighted socialism is just that--a naive fantasy. No system is enlightened. We are human beings. We are dirty, mean, and short-sighted. How do you balance that? Well, I would start by admitting that I'd much rather have a neighbor who is intent on creating his own success than one who is intent on robbing me of the fruits of mine.

Ok! Whew! That's intense. Since it's so late, I will blame fatigue for the many lapses in logic that I've allowed in this piece. I've done my best, and I'm happy to keep plugging away to clarify things (or defend myself) as they come up. Now I'm going to bed, where I'll no doubt count sheep (or their market value) to settle myself to sleep.

Goodnight dear Reader.

Sable Crow

On Travel

So it's time for a little vacation. And on the way to the airport I remembered I had a blog.

LA at 5am is a wonderland. It's quiet, and cool. The streets are empty of our famous traffic. The hills that crown our city seem higher, while the promise of their mansions is less remote.

So I'm off to the East Coast and a week of adventure! Maybe even a little writing. On this new little iPhone 4, which is so beautiful and blindingly fast that I feel like I have to dress up for it and ask it to take me dinner first.




- Posted using BlogPress from my iPhone4

For the color Gray

I think perhaps Los Angeles has been my most significant relationship.

Wait, says my Dear Reader. You take months to write and THAT'S your opening line?

Yes, say Sable Crow. Hear me out.

So I was thinking today. (Picture it: top down in the car, headed west into a sunset on Sunset Boulevard, headed to a random party. Mercury is retrograde, and if I've learned anything from Mercury retrogrades, it's to go with the chaos--accept random invitations to house-parties held by record producers where their artists will sing a-cappella in a cavernous mansion. Go with it; let the world unfold.)

I've been in this city for 15 years. When I was young(er?), I used to have such a sense of possibility in this city. I looked at the hills above me and wondered what they contained. I imagined the different parts of the city, the apartments I would live in, the people I would meet, the things I would see and be asked to see. My imagination came to life in this city, filling its streets and alleys with possible futures and wonders and terrors. The city was magnificent in those days.

But as time has gone on, the possibilities I once saw have narrowed. Fantasy has been replaced with reality. And I wouldn't trade it for the world! I love the reality I've found, and the reality of this great city has woven itself into my heart. We are one.

And so I think this experience is analagous to falling in love: that in the beginning we fall in love with the potential--with the way our love object reflects our own desires back at us in pleasing form. But as time wears on--if we're lucky--we learn to love the reality behind that projection. Be it city or lover, we see beyond our fantasy, and we learn to love.

At the party I mentioned, I said this to a handsome photographer I met (his equally handsome boyfriend stood nearby). He loved it.

"You should write it," he said. "Do you have a blog?"

My Dear Readers will know...they always say that. "I did once," I replied with a smile. Busted! "It's been a while since I wrote anything."

"Well then, that's your next entry."

Later, I was standing with an angel in a long white dress and gold sandals, and the singer/songwriter who performed. His voice was ferociously good, and soulful. He sang about Los Angeles.

We were talking about cities with souls. We were talking about New York.

"New York," said the beautiful angel, "now that's a city with soul." The three of us stood huddled around a metal table, they smoking and I talking.

"What if," I asked, "What if that's the key to loving LA? That New York is a city with a soul and Los Angeles is a city always looking for its soul?"

"I love that!" exclaimed the angel. "Soul-searching is the soul of LA. It's perfect."

And so I think, more and more, that my most significant love has been LA. That it has taught me the most about loving authentically: without judgement; celebrating the good while working on the bad; seeing beyond the projections and fantasies. I may not be so good at that with guys, but I'm very good at it with my great city. My great Los Angeles. My home.

This morning, I was awakened from my sleep when all of the people in my dreams stopped what they were doing and began to sing. I was talking to my lover in the dream at that moment. He was making eye contact and I remember he had brown eyes in the dream. His face surprised me, but I knew in that dream-way that I loved him, and that he loved me back. And when everyone stopped suddenly, imagine my surprise when they began singing, in a great and loud chorus. It was a very strange way to wake: Have you ever, Dear Reader, been awakened because the singing in your dreams was so loud?

What did they sing? Well, I wouldn't let you miss it.

Hindsight, and 20/20

Dear Reader,

If you missed the last post, check it out. I've fixed the link. It's my Valentine's Day present to you, my Reader. If you wish something for this ragged crow, wish for me a vampire like the one in the video--handsome, smirking, dangerous.

I had LASIK on Friday afternoon. It's Sunday now. I thought about writing on Thursday, dear Reader, but the truth was that I was too scared, and if I've learned anything in these long years it's that I don't write when I'm scared.

The discloure one signs before the procedure is the most frightening thing I've ever signed (with the ready admission that I did not sign for a mortgage during the bubble, which also would have counted). It includes gems like:

"I understand that, in using the microkeratome, instead of making a flap, an entire portion of the central cornea could be cut off, and very rarely could be lost."

"I understand that it is possible a perforation of the cornea could occur, causing devastating complications, including loss of some or all of my vision. This could be caused by internal or external eye infection that could not be controlled with antibiotics or other means."

The risks do not end when the surgery is over. Infection could take my sight. I am, for a year, more susceptible to eye injury, and should avoid things like snowboarding, or base-jumping, or car crashes.

Taken this morning. Here's looking at you, kid.

So here's the bright side. My vision is now 20/15 with both eyes, and 20/20 in each eye individually. A client once called me perspicacious--the highest compliment I ever received from a client (other than being hired away by one, natch). For those Readers who are not walking dictionaries, perspicacious is defined here. I have now completed that prophecy, nearly a decade later.

Because, as many of you know, I've wanted to get LASIK for about a decade. I've waited patiently, and not so patiently, for my prescription to settle down (it is dangerous to do it too soon--its effects can wear off quickly if your eyes are still changing). And in the last few years, as the axis of my astigmatism slowly rotated to a stop, I became increasingly eager.

Besides, I thought, wouldn't it be nice to abandon these glasses I've worn for 20 years? Wouldn't it be nice to part of the pretty crowd at those pool parties, without needing to squint, or put floppy contacts the size of dimes in my eyes? Wouldn't it, I thought, be easier to find that vampire above, if I weren't saddled with these ugly glasses, a kind of boy Ugly Betty in better clothes?

Glasses have become a part of my identity as an adult. Indeed, I've worn them since childhood everyday, from the moment I awake to the moment I sleep. There were only a few times, when I was wearing contacts, that I have ever seen myself clearly in the shower. I couldn't wear sunglasses because it meant having to put contacts in; contacts were difficult because my astigmatism meant that contacts only corrected about 2/3 of the time, and the other 1/3 they were uncomfortable, blurry, and irritating.

A deeper part of me believed, and believes still, that perhaps I'm single on this Valentine's Day because I wear glasses, and guys don't make passes at those who wear glasses. This is a dangerous rabbit hole, Reader. I know. And it's why I didn't want to write about it. This sorry crow wanted to keep his fears to himself, and disguise his aching heart with petty vanity.

The surgery was the most terrifying thing I have ever done, other than coming out. I have a phobia about eyes, and for a week before my surgery, my dreams were stalked by knife-wielding black-shrouded shapes, cutting at my eyes. Once I woke gasping for air, the quiet of my bedroom shaken as if I had just screamed.

I was so stressed, in fact, that I got a cold on Friday, and was sniffling and sneezing. I assure you, dear Reader, that I was abjectly terrified that I would sneeze during the procedure, and cause the laser to remove cornea, as previously disclosed. But let me not shirk from my terror. I will go through the maelstrom, and show you all.

There are two parts of the surgery: the cutting of the corneal flap, and the actual lasering of the prescription onto the surface of the lens. I would like the say that one is worse than the other, but I will say that each carries its own terror. (Actually, as I recount this, my hands are sweaty and cold. I really was genuinely frightened, and even the retelling is facing a fear.)

The scariest part of the flap cutting is the part where you go blind. It's not for long, for but for a terrible moment the lights of that laser go out, and the world is blackness. Every part of me cried out: WHAT ARE YOU DOING TO YOURSELF, SABLE?! Then the world comes back, blurry and hazy, and you think: "Well, if this is all I can ever see again, that's better than the blackness."

Then the actual lens shaping is a bit better, except for the CRACK CRACK POP POP of the laser (no elegant phaser sounds, no James-Bond-esque blue lasers, this thing is like a lightning maker, as big as a grocery checkout lane). The smell of burning hair is unnerving. The process lasts about 10 seconds, which feel like an eternity. At one point, as I focused on the light above my head, it kept moving around and dancing like mad. "I'm moving your eye," said my Doctor. "Doctor," I replied, "I DON'T WANT TO KNOW."

Now, I had three allies in my journey through blindness and back. First, my good friend Editor In Chief, who held the aforementioned title in High School when we worked on the newspaper together (I was News Editor, and controlled the front page--a mini Rupert Murdoch). She watched the process outside the glass-walled room, on a plasma tv. "Intense," she said. "I could only watch one eye."

I was also given--at my insistence--a stuffed animal. This bear was quite large, and not furry, but rather made of smooth cotton (no fuzz in those open corneal flaps!!). He was pink, and his name was Seymour. Get it? The staff thought that it was hilarious that a grown man was asking for a stuffed animal. And let me tell you, I clutched that little animal like he was the last thing I would ever see.

Lastly, I was comforted by Our Lady Valium of Diazepam. She is kind, and even-tempered, and really quite level-headed. I would not mind encountering her again--she is good company in times of stress.

For those of you interested (or still reading), I was given a DVD of the procedure. I have filed it away, and will consider watching it a year from now. It is, as I often mock, too soon.

So the trauma of this story is done now for you, dear Reader.

But the fallout for me remains, and it is mostly psycho-emotional. I have willingly consented to the rape of my eyes. Through violence and cutting, I have sheared off a part of my identity, and will no longer wear glasses--such a big part of how I've seen myself for two decades. I am deeply wounded by this in a way that I didn't expect. I feel hurt, exposed, and naked. I feel unguarded, as I'm used to seeing the world through windshields. What part of me did those lasers remove? Who am I without my glasses? Who is this terrified, sometimes handsome boy who believes that he can only find love if he lasers away parts of himself? What does this mean for the future? What's next? A nose? A hairline? Where does the boundary between vanity and health lie?

So many of my friends were a little aghast at the idea of LASIK. "You look sexy in glasses," I heard, more often than I'd imagined. I wanted to shake these people (mostly men, some of whom I've loved and been loved by). WHERE WERE YOU? I wanted to ask, when the Valium of the compliment had worn off. And in fact, I ask the question now: WHERE ARE YOU?

For the saddest part of this recovery, dear Reader, is that what Sable Crow wants most right now is a hug. Not a perfunctory, "hello" hug, but a loving, caring hug. One that you stand and breathe into. I want the hug of a lover, or a partner, someone to tell me that it'll be okay. That these crazy bloodshot, cyber eyes of mine are still me, and that I'm still loveable and good. That I was before, and that I am now. Sex is so easy to find in this culture. So easy. There's an app for that, too. But there is no quarter for a loving a hug.

So this is my Valentines Day wish, dear Reader, and my tribute to this godforsaken holiday. If you have a lover, or a partner, or a spouse, then give him or her a hug, and really put your heart into it. That doesn't mean hug harder. That means stand, and be still, and feel that person, and match your breath with theirs. For God's sake don't change your Facebook profile pic to an image of the two of you and advertise how long you've been together. Have some sensitivity, and some class.

I wish I could end this post in a more elegant way. I wish that I could offer you, dear Reader, some hopeful reward for your work at having read this far. You deserve it. Perhaps this is a kind of post-surgery depression. I've heard of that kind of thing.

The good news...I have one extra Valium.

Squawk.

Mostrimi i vostri denti

Mortgage Market Murder, My Dear Reader

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/24/AR2010012402996.html

I've discovered a way to post blogs from my iPhone, dear Reader! So I can now address you collectively from time to time with my economic and political observations, the first of which is linked above.

Did you know a flock of crows is a murder? When I think of you collectively, dear Readers, I think it's fair to call you a murder, although stylistically I prefer the more intimiate "dear Reader" which better conveys my sentiment and regard for your time.

At any rate, observe the link and here are my thoughts:
We've been headed this way for a while, and at some point the training wheels will need to come of the bicycle of the mortgage markets. One can look at this as calamitous--yields are likely to rise, along with them rates, and with no new money in the system prices will have to fall further.

But here's what the pundits miss: with rates higher and prices lower, the following people will be the only ones able to transact--strong income, high down payment buyers who waited. That's exactly the profile of the buyers one wants to have to stabilize the market.

So while there will be pain, the only way to move past it, as I've heard once or twice, will be to breathe through it, relax, and let the market fall (and rates rise) to a level that is sustainable by new buyers who aren't flush with government cash.

For a long time I imagined this blog would be place for me to comment on economics. It's a subject I love as much as Armani. I invite you, dear Reader, to query me at your leisure. I'm happy to have a subject on which to expostulate.

Yours,
Sable Crow

The Terrible Truth

You know, I really don't like to write. Actually, I loathe it. The honesty it requires, the effort. It's not easy, not clean. It's mostly not happy work, and it's mostly alone.

Dear Reader,
I haven't shown you the rest of my trip to Edinburgh because I don't want you to see. Or rather, because I don't want to have to do all the work for you. Go do it yourself if it's that important to you.

I watched a movie tonight called "Paris, Je'taime". Filled with Hollywood celebrities, it's entirely in French. I love watching movies in foreign languages. I love their cadence, and the rhythm of speech which transcends language. It reminds me of why I like to travel; because it's nice not to understand sometimes.

I watched wrapped in a cashmere blanket, with all the windows open--cold night air pouring in, the smell of rain, and most of all the sound of water dripping outside, like a Paris fountain. It's how I'm writing now, to those of you who appreciate the visuals. The blanket is gray. I'm sitting on a hard leather chair, in a color described as "oyster" by the commonplace store that sells them. My feet are bare, and my toes are cold, so I have them folded into each other, like they are praying.

One of the short films was about a woman who goes to Paris alone. She narrates her sad story in godawful broken French like she's writing a book report, and looks for all the world like an American housewife--fanny pack, white tennis shoes. She eats terrible food, and misses her dogs. Then, in the final scene of the short, she sits on a park bench, and feels the dreadful combo of joy and sadness. In that moment, she falls in love with Paris, and Paris falls in love with her.

That, dear Reader, is what it means to me to travel alone. It's a little like falling in love. It's a little like getting to know yourself, and then realizing that you're really not so bad, and that you like what you're seeing, and that--hell--it doesn't matter if you're seeing yet another Eurpoean dream-spot alone. At least alone isn't so bad.

This week I counseled a friend--been doing a lot of that lately, which is ironic, really--that she should be kinder to herself. She was making dinner, alone, and saying that no one would be there to eat it, that this fabulous dinner would be wasted on herself. In as kind a tone as I could muster, I said: "We single people, we are not on an easy road. No, we're forced to learn to love ourselves. To make room for ourselves. We are dating ourselves; and that's not so bad. We have moods, like any lover, and sometimes they can't be soothed. That's okay. It'll be better in the morning. And the terrible truth of it, after so many years alone, is that the secret to the bad days is making it to morning, when we will forget how much the lonely night hurt."

A porous memory is the secret to happiness.

So now that this new year already doesn't feel so new, I sit here writing to you that I don't want to tell you about Edinburgh. It's mine. So is the castle, and all its secrets and joys.

Which makes me think that the terror of narrative is that we tell, we give away, only what we're willing to give away. The optimist gives away only the good parts, the pessimist only the bad; both are lying.

This movie made me miss Paris, and brought back memories of solitary travel. Pere lachaise, and the tomb of Oscar Wilde. I kissed that tomb, with Prada lip balm, and added the outline of my lips to the hundreds (thousands!?) of kisses before, like farewell kisses beyond the grave, waving at a great granite ship as it sets sail on those gray seas. And that made me think of Rome, and the Vatican, also seen alone. And the Parthenon and Coliseum, where a crow kept me company--in fact where a crow first made itself known to me, and where I began to watch them--and Florence, much of which was spent alone. And London, trying to lose myself in galleries (it's very hard to lose yourself in neoclassical architecture, by the way--it's all a grid), and Macchu Picchu at dawn, at the Temple of the Sun, in quiet solitary meditation.

I have kept myself good company, dear Reader, for much longer than I imagined.

So there are times--more and more frequent--when it is harder to open up. I forget what to say. Sometimes I want to disappear. I know that the world would go on just fine--none of us are irreplacible. The world marches on, and we are forgotten. In such a world, does it matter that I don't write? Does anyone really notice? Ignoring my blog then becomes a metaphor for death.

I'm no fool: my dear Readers' lives march on, and that wily crow is easily forgotten--the space he once inhabited taken up by Tivo, or The Onion, or NPR, or a longer chat with a friend, or an extra long bowel movement.

I said to one of my friends the other day that when I die, I should very much like not to be buried. I should very much like to be feasted on by crows, and carried in their little bellies far afield. I should like to fly, not moulder in the earth. I suppose the last laugh is that even in death its more about other people than it is about ourselves. I am unlikely to get my wish, and will probably end up in some detested box, forgotten in a long row of forgotten boxes. The living need a place to visit, or whatever.

In "The Fountain", Izzi describes a Mayan guide whose father dies. "No, no. Listen, listen," says Izzi. "He said that if they dug his father's body up, it would be gone. They planted a seed over his grave. The seed became a tree. Moses said his father became a part of that tree. He grew into the wood, into the bloom. And when a sparrow ate the tree's fruit, his father flew with the birds. He said... death was his father's road to awe. That's what he called it. The road to awe.:

Solitary travel is, like death, a road to awe. But I don't just mean solitary vacations. I mean the solitary journey through life is a road to awe.

Diabolina believes that we are all connected, that we are all one. Quantum physics, particularly string theory, might agree with her. But we are having solitary bodily experiences, and there must be some purpose to that.

I'm rambling tonight, and not even sure I'll post this blog. Most of my Dear Readers might wonder if I've gone mad, or if I'm suicidal. I assure you, I am not either. I intend to commit suicide by old age, and that takes time.

Until then, I'm on a journey, and the last few months--mind the gap!--have been a good part of that journey. I am glad to have the holidays done with. I am frustrated in the few goals I have for myself, so I am living in a kind of limbo. I get up, I do the same thing I did the day before, and I go to bed.

Well Reader, what started out as an intended inspirational musing on the nature of solitary travel--and by extension solitary evenings--has ended rather badly. Take solace however! Your part ends here, and perhaps after this you'll go to Amazon, or another blog, or off to work. I, however, am still trapped in my thoughts, wrapped in melancholy as surely as a cashmere blanket, and headed to bed.

But don't worry. I have a very porous memory.