Strategy's Business Thread

[LongLiveYorke 38]

Here's my question: were there any people who were remotely sane and looked at this graph in, say, 2000 - 2004. Of those people, did any of them continue to invest in housing or derivatives that include housing investments?Basically, my point is this: the housing bubble was extremely obvious, no? What the heck were people doing?

[brvheart 1,752]

Here's my question: were there any people who were remotely sane and looked at this graph in, say, 2000 - 2004. Of those people, did any of them continue to invest in housing or derivatives that include housing investments?Basically, my point is this: the housing bubble was extremely obvious, no? What the heck were people doing?

That's what that young hedge fund manager that was doing nothing but betting against the housing market was saying. He's retired now, and left a nice rant note about the whole situation when he retired at like 35. Strat, you know the guy I'm talking about, right?

[WordsOfTheProphet 0]

What the heck were people doing?

Being people?

[LongLiveYorke 38]

That's what that young hedge fund manager that was doing nothing but betting against the housing market was saying. He's retired now, and left a nice rant note about the whole situation when he retired at like 35. Strat, you know the guy I'm talking about, right?

Yeah, I want to be that guy when I grow up.

[brvheart 1,752]

Yeah, I want to be that guy when I grow up.

This dude.Financial Times17-Oct-2008By Andrew LahdeOctober 17, 2008Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, "What I have learned about the hedge fund business is that I hate it." I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list of those deserving thanks know who they are.I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they lookforward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don't worry about my employees, they were always employed by Mr. Springer's company and only one (who has been well-rewarded) will lose his job.I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life - where I had to compete for spaces in universities and graduate schools, jobs and assets under management - with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man's interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft's near monopoly. I believe there is an answer, but for now the system is clearly broken.Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won't see it included in BP's, "Feel good. We are working on sustainable solutions," television commercials, nor is it mentioned in ADM's similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant - marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other addictive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let's stop the rhetoric and start thinking about how we can truly become self-sufficient.With that I say goodbye and good luck.All the best,Andrew Lahde

[strategy 4]

Here's my question: were there any people who were remotely sane and looked at this graph in, say, 2000 - 2004. Of those people, did any of them continue to invest in housing or derivatives that include housing investments?Basically, my point is this: the housing bubble was extremely obvious, no? What the heck were people doing?

PM's blogger discussed it here.

What you see, basically, is that house prices usually keep up with inflation, and not much more. In other words, the real price of a house stays constant over time. Then, in the past decade or so, there was this crazy bubble. Kwak lays out a few of the reasons that, even before the bubble, people thought of home ownership as a way to build wealth.One important reason is the price illusion — people watch the dollar value of their house rise, but forget to account for inflation. Over 20 or 30 years, the nominal value of a house may rise sharply, even as the real (inflation-adjusted) value remains flat.Another is leverage. If you borrow most of the money to buy a house (as most people do), you'll benefit disproportionately from any rise in price. Of course, you'll also suffer disproportionately from any fall in price, as we're learning now.

one of my blog-friends had predicted this massive fall back in 2007. it was obvious that prices were going down, but few were expecting this kind of a drop. he was looking for a place to live in California and looked at rents vs. mortgage payments in similar houses, found that lots of people were already getting squeezed at that point. he made the conscious decision to rent rather than buy. it doesn't make him a genius or anything, but it is an example of how the little guy can dodge these bullets.

That's what that young hedge fund manager that was doing nothing but betting against the housing market was saying. He's retired now, and left a nice rant note about the whole situation when he retired at like 35. Strat, you know the guy I'm talking about, right?

yeah, I linked it in one of the anti-ivy league discussions a while back. greatest rant ever. he's probably not as smart as he thinks he is. right place, right time, etc. it must be nice.

[strategy 4]

oh yeah, forgot to mention, the new home sales numbers came out today. that big scary down-trending graph says it all.I shudder to think about how these numbers would look if we didn't have uncle sam propping up the market.

[CaneBrain 95]

oh yeah, forgot to mention, the new home sales numbers came out today. that big scary down-trending graph says it all.I shudder to think about how these numbers would look if we didn't have uncle sam propping up the market.

If the government would have just gotten out of the way, everything would have fixed itself by now, DUMMY.

[strategy 4]

If the government would have just gotten out of the way, everything would have fixed itself by now, DUMMY.

at this point, it is looking like things are headed where they would have ended up anyway, aka we guaranteed a bunch of mortgages and propped up a bunch of losers for the sake of reducing volatility.

[CaneBrain 95]

at this point, it is looking like things are headed where they would have ended up anyway, aka we guaranteed a bunch of mortgages and propped up a bunch of losers for the sake of reducing volatility.

It's really ridiculous that you cannot find a job in finance. I will re-double my efforts.

[strategy 4]

It's really ridiculous that you cannot find a job in finance. I will re-double my efforts.

I think that takes me to 4xCB efforts, which sounds pretty good.I forget if I ever told this story on FCP, but the closest I came to getting a job in trading was: not very close. my parents have a connection to this high up manager at this firm called tradebot in KC. I exchanged a few e-mails with him not long before graduation. he wanted a formal resume/cover letter + transcript. I sent all of that, then the guy asks for my ACT scores. that was all on my transcript, but okay, I guess it was a chance to preemptively defend my 26 with the fact that I needed like a 20 to get a full-ride at my community college.he informed me that he wanted a 3.8 GPA and/or a 32 on the ACT. so basically, I blew this one in my junior year of high school and after my first two semesters at KU. said he had to pass on me out of consideration for other people he'd rejected with better scores/GPAs. I mean, whatever. they're not a real trading firm--their 'traders' interact with a system that can be used precisely nowhere else--but it was still a huge shot to my confidence that I never really recovered from: personal contact with knowledge of my situation rejects me over a few highly noisy performance/aptitude numbers.it wouldn't be accurate to say that this anecdote is the sole reason for these stretches of discouragement, but it's a big part of it.

[JoeyJoJo 18]

It's really ridiculous that you cannot find a job in finance.

Or teaching?

[leftygolfer 7]

Or teaching?

He who can, does. He who cannot, teaches

[JoeyJoJo 18]

So yes then? Teaching?

[strategy 4]

So yes then? Teaching?

what a great idea. I could work in career services: teach people how to write resumes/cover letters, apply for jobs!

[SBriand 4]

Just go back to school and work on another degree. School is awesome. I still want to go to Law School but we need the money for the Korean.

[leftygolfer 7]

Just go back to school and work on another degree. School is awesome. I still want to go to Law School but we need the money for the Korean.

car or baby?

[SBriand 4]

car or baby?

Both? Those new Kia Forte Koops are pretty snazzy.

[strategy 4]

this guy knows how to run his software business:http://i.imgur.com/0359H.pngI'm being serious, his sales today are probably 48096287% above average because this image is making the social news website rounds.

[mk 11]

MK is not as crazy as he pretends to be.

HEY

[El Guapo 8]

Strat, you could do this:He failed as a day-trader and barely survived in New York on a beer budget, but Marcos Esparza Bofill has been hit with a $172 million tax bill by the IRS."Who's the IRS?" Esparza Bofill, a twentysomething Spanish émigré, asked a friend who alerted him to his astronomical back taxes.Esparza Bofill moved to New York from his native Spain in 2006 to try his hand at day-trading. When he nearly went bust after a year, he moved back home."He lost money while he was here. He couldn't afford rent," said friend Adam Baruchowitz of Brooklyn.Esparza Bofill didn't file an income tax return for the year he was here swapping stocks - and that's leading to big problems with Uncle Sam.The feds tracked his every trade. But because Esparza Bofill never accounted for his losses or expenses in tax filings, the IRS presumed he made a pure profit - a staggering $500 million in income."He definitely wasn't a $500 million-a- year earner," another friend, who asked not to be identified, told the Daily News Tuesday."He lives a very modest life," the friend said of Esparza Bofill, whose tastes lean more toward garage music than the symphony. "So just to think that all of a sudden he owes $172million is pretty ridiculous."A tax-lien notice the IRS sent to Esparza Bofill's old walkup apartment in Alphabet City was posted Tuesday on thesmokinggun.com website.Esparza Bofill declined to comment Tuesday."He doesn't know what's going on, ya know. Like, he's not an American native," said the friend. "So, all of a sudden, the IRS is looking for him, and the first thing he says to me is, 'Who's the IRS?'"He thought I was joking when I first started talking to him about it," the friend added. "I said, 'No, it's not a joke, man. This is for real.' I'm like, 'Try to Google yourself,' and all of a sudden three blogs popped up."Manhattan CPA Marc Albaum said Esparza Bofill's problems with the IRS are not unusual. "If you don't file, the IRS assumes that you have 100% profit, that basically it's as if you bought the stock at no cost," Albaum said. "Now, the remedy for this is simply to file. He could wipe out anything he owes," said Albaum.Read more: http://www.nydailynews.com/ny_local/2010/0...l#ixzz0xerV3kUS

[LongLiveYorke 38]

excellent interview with nassim taleb from yesterday. he wrote a new section for his book (black swan) earlier this year that talks about debt's influence on certainty in predictions/models. anti-keynsians and anti-obamas will love it.

Actually, I disagree with a lot of what he said. It's hard to say that if he's being just too general and talking to a layman audience, but he seems to throw a lot of concepts and blame around without making any actual arguments or connections between cause and effect. Especially toward the end, at around the 16 minute mark, he seems to imply that the financial crisis came about as a result of government debt and blames Geithner, comparing him to an airline pilot who crashed and is allowed to fly again. This, of course, makes little sense since the financial crisis happened well before Geithner came to power.Anyway, in general, I disagree with this call for austerity. I've always found it a weak argument to compare the debt of a country to the debt of a individual or a family, yet that weak analogy seems to be his only attempt to argue against debt (other than repeating "debt is bad"). Maybe he's purposely being superficial, but a stronger argument would be one that actually illustrated why high government debt as a function of GDP, even when we can borrow at low interest rates, is worse than, say, letting current unemployment rise higher than it already is. He alludes to inflation at one point (or rather, the interviewer does), but does't make any firm connection (and I think fear of inflation should be one of the last things on our mind right now).I started reading his book a few years ago. I don't think I got all the way through it. I found that he just repeated himself too many times and didn't dive into his arguments well enough. I was surprised that it got so much attention since it essentially talks about financial models at a level where those who understand them will be bored and those who don't understand them will either won't learn anything or will get lost in jargon.Meh.

[strategy 4]

Actually, I disagree with a lot of what he said. It's hard to say that if he's being just too general and talking to a layman audience, but he seems to throw a lot of concepts and blame around without making any actual arguments or connections between cause and effect. Especially toward the end, at around the 16 minute mark, he seems to imply that the financial crisis came about as a result of government debt and blames Geithner, comparing him to an airline pilot who crashed and is allowed to fly again. This, of course, makes little sense since the financial crisis happened well before Geithner came to power.Anyway, in general, I disagree with this call for austerity. I've always found it a weak argument to compare the debt of a country to the debt of a individual or a family, yet that weak analogy seems to be his only attempt to argue against debt (other than repeating "debt is bad"). Maybe he's purposely being superficial, but a stronger argument would be one that actually illustrated why high government debt as a function of GDP, even when we can borrow at low interest rates, is worse than, say, letting current unemployment rise higher than it already is. He alludes to inflation at one point (or rather, the interviewer does), but does't make any firm connection (and I think fear of inflation should be one of the last things on our mind right now).I started reading his book a few years ago. I don't think I got all the way through it. I found that he just repeated himself too many times and didn't dive into his arguments well enough. I was surprised that it got so much attention since it essentially talks about financial models at a level where those who understand them will be bored and those who don't understand them will either won't learn anything or will get lost in jargon.Meh.

he's basically saying that our reliance on borrowing power could lead to some wildly unpredictable outcomes as we continue to lever. in the last decade, we've basically proved that we're willing to let our government overspend regardless of good or bad times. eventually, as with greece and other countries, people will stop believing in our ability to repay debt. at that point, what do you do? essentially, you are forced to pick the victim. print money or drastically cut benefits, destroy retirees? raise taxes, wreck the economy? there really is no good option in that scenario. as buffett said in IOUSA, these are the conditions under which demagogues (weimar republic?) seize power.there's room to disagree on where we are in the scheme of things, whether we're at risk of running out of lenders. there is no question, though, we'd be instantly fucked if the bond markets stopped functioning today. I disagree with the idea that geithner, bernanke, obama et al are out of touch. they're playing the game according to our constraints. as I have said repeatedly, to get re-elected, obama has to get some kind of recovery in motion. it is not in his best interests politically to enact a bunch of austerity measures. this is kind of in the same category as the nuclear power plant manager who cuts corners to look better on paper. I have been thinking about what I personally want to see. I don't see a catastrophic situation (capital markets cease to function) on the horizon. china's buying treasuries with increasingly shorter duration, and that's definitely a concern, but with all the 10 and 30 year notes floating around out there, I don't think lenders are in any position to squeeze us. so for me personally, the question seems to be: unemployed for a longer period of time now, or a higher tax burden later in life? I'd probably pick the latter.

[LongLiveYorke 38]

he's basically saying that our reliance on borrowing power could lead to some wildly unpredictable outcomes as we continue to lever. in the last decade, we've basically proved that we're willing to let our government overspend regardless of good or bad times. eventually, as with greece and other countries, people will stop believing in our ability to repay debt. at that point, what do you do? essentially, you are forced to pick the victim. print money or drastically cut benefits, destroy retirees? raise taxes, wreck the economy? there really is no good option in that scenario. as buffett said in IOUSA, these are the conditions under which demagogues (weimar republic?) seize power.

But, to me, comparing the US to Greece is more than a stretch. Aside from the vast difference in population, industry, and financial prowace, they don't even pay taxes in Greece. That's their main problem; that's the reason they buried in debt. They have no income. We at least pay taxes here (unless certain people get in charge who don't understand that at some pointa country needs taxes to survive). There is no indication that people think we'll be unable to repay our debts any time in the near future.I agree with your statement about demagogues.

[strategy 4]

But, to me, comparing the US to Greece is more than a stretch. Aside from the vast difference in population, industry, and financial prowace, they don't even pay taxes in Greece. That's their main problem; that's the reason they buried in debt. They have no income. We at least pay taxes here (unless certain people get in charge who don't understand that at some pointa country needs taxes to survive). There is no indication that people think we'll be unable to repay our debts any time in the near future.I agree with your statement about demagogues.

"they don't pay taxes, we do" is not looking at the whole picture. one can have a rock solid tax structure with 100% collection and still fail due to overspending. you're right though, greece's failure was a lot less awful than ours will be.yeah, like I said in the paragraph you cut out, I don't see any indication of that belief.