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A Religiously Monetary Parable For "Efficient" Market Sanity

Tyler Durden's picture





 

Compliments of reader Chindit13, we present to you this religiously monetary parable on how to keep your sanity under the modern version of "efficient" markets. For full effect, we also recommend a CDS-unhedged shot of ouzo, a triple rereading of Seth Klarman's lessons promptly forgotten, and two pills of 50 mg Amoralhazardine, followed by a visit to your central banker in the morning (just to be safe).

 

 


As QE1 passes below the horizon, most assuredly QE2 is undergoing the last polishing of the brass and will be setting sail as soon as Mrs. Bernanke cracks the champagne across the bow.  Abby Joseph Cohen, your prince has come!

Actually, Ben is far more than a prince.  He is more than a king.  He is a savior!  He himself believes this, as in one of his gospels, which someday will be held in the same esteem as the Bible, Koran, Bhagavad Gita or Book of Moroni, Ben stated:  "We saved the world".  (Gods are known to refer to themselves in the plural.)

An old god told a man to build an ark to save the world.  Ben knows a helicopter does the job much faster, and if need be one can always use it to escape the infidels and apostates.

Another bearded one from long ago, a piker some people call savior, merely made a few fish and loaves appear out of nowhere.  So what's that worth?  Even with inflation probably no more than a few hundred dollars.

Ben has made at least two trillion dollars of his own, not to mention the trillions he has added to the equity market, the quadrillions he has added to Hamptons' real estate values, and the quintillions he has added to the accounts of the partners at Goldman Sachs.

Who wants smelly old fish in the desert when one can have Beluga caviar on Nantucket?

And the best various and sundry other false gods can do is make lots of footprints or drop more teeth than a great white shark, make milk drip from a statue, or father way too many kids.  Parlor tricks!

One savior forgives sins.  Ben forgives debts. We all know which one carries more value.

One savior says those who err must atone and repent.  Ben says those who err should be rewarded and are welcome to do it again.

One savior tossed the gamblers out of the house of worship.  Ben has restored the gamblers to their rightful place, at the center of the Universe.

One magic man turned straw into gold.  Ben turned gold into tungsten.

One savior says we should face Mecca five times a day.  Ben calls 85 Broad twenty times a day.  Who gets more done?

One savior asks us to take Sunday off.  Ben says Sunday night is sacred worktime, especially in the S&P futures.

One book says it is easier to pass a camel through the eye of a needle than for a rich man to get into the Kingdom of heaven.  The Beige Book says it is easier for Ron Paul to get into the Fed's archives than for a bear to get into the Hamptons.

Even the Greeks have given up their false gods of Zeus and Apollo and accepted the sacramental healing power of supplemental debt.  The faithful cheered 3x (oversubscribed) and partook of the body.

Ben, when our spirits were deflated you inflated us!  When our cups were empty you filled them to overflowing.  When we were on the verge of being contrite, you led us back unto temptation!  Show us the way to Dow 36000!

Assets to ashes or debts to dust?  Ben has chosen.


"let he who is without sin....pay for everyone else's"

 

 


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Fri, 03/05/2010 - 18:45 | Link to Comment faustian bargain
faustian bargain's picture

Hallelujah.

Sat, 03/06/2010 - 00:25 | Link to Comment Anonymous
Fri, 03/05/2010 - 18:45 | Link to Comment Shameful
Shameful's picture

Thank you for this!  Had me cracking up :)

Dr. Bernanke or How I stop Worring and Learned to Love the Federal Reserve

Fri, 03/05/2010 - 18:46 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

It has become a Socialized Market.  Just like FRE, FNM, AIG. The FED Ownes it all.

Fri, 03/05/2010 - 18:48 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Forgot they own GM too. And what about all of thoes Bank Warrents.

Fri, 03/05/2010 - 18:55 | Link to Comment Anonymous
Fri, 03/05/2010 - 19:20 | Link to Comment Gimp
Gimp's picture

Volumes still low, only people trading are the bots between themselves. They don't need retail investors anymore.

401K money quarterly  keeps the ponzi going for a while longer.

Fri, 03/05/2010 - 19:22 | Link to Comment percolator
percolator's picture

Amen, brother!

Fri, 03/05/2010 - 20:21 | Link to Comment Clampit
Clampit's picture

Based on 20 years as a professional device engineer I can declare with absolute certainty that COHR's performance today is that of a !@#$ing op-amp, not a human:

http://finance.yahoo.com/echarts?s=COHR#symbol=COHR;range=1d

BTW perco, did you copy me or did I copy you?

Fri, 03/05/2010 - 19:29 | Link to Comment BlackBeard
BlackBeard's picture

Big ups.  Funny shit.

Fri, 03/05/2010 - 20:28 | Link to Comment Selah
Selah's picture

 

Is this a normal bank failure Friday type thingy?:

http://www.fdic.gov/news/news/press/2010/pr10045.html

 

Fri, 03/05/2010 - 20:53 | Link to Comment faustian bargain
faustian bargain's picture

I had the same question...I haven't seen that before, but then I've only been paying attention a few months.

Sat, 03/06/2010 - 00:11 | Link to Comment Benthamite
Benthamite's picture

Yes, one press release per failure.  The most interesting part is usually the cost to the DIF:

 

Ogden, UT:  $96.3M

Germantown, MD:  $51.0M

Normal, IL: $53.7M

Boca Raton, FL: $103.8M

 

Another $304.8M in losses to the already heavily negative DIF.  

Sat, 03/06/2010 - 05:10 | Link to Comment faustian bargain
faustian bargain's picture

No, the issue with this particular failure (Germantown) is that rather than doing a loss-share with another existing bank, the FDIC created a temporary institution to handle disbursing the deposits of the failed bank.

PR-46-2010 FDIC Approves the Payout of the Insured Deposits of Centennial Bank, Ogden, Utah

It looks like a similar thing is happening with the bank in Ogden. I haven't been watching long enough to know if this is very unusual or not, but it looks like for two of the failures today the FDIC was unable to find banks to take over operations of the failed banks.

If it is an unusual occurence, I would think that means things are deteriorating.

Sat, 03/06/2010 - 19:50 | Link to Comment Benthamite
Benthamite's picture

Yep, you're right.  Must've been the right mix of prescription drugs.

Mon, 03/08/2010 - 13:55 | Link to Comment Anonymous
Sat, 03/06/2010 - 11:20 | Link to Comment fromthebleachers
fromthebleachers's picture

When our bank (Imperial Capital Bank) failed, my wife (we're both retired) stumbled on it via Drudge. Only "officially" notified by letter three weeks later! The IBC folks assured me when I initially opened two accounts with them that both deposit accounts (one HY checking, one MMA), with combined value of $430k, were FDIC insured. I found out later that only a portion above $250k was. We lucked out insomuch that another bank (CNBT La Jolla) assumed all deposit accounts. Only thusly was I saved from a $100k+ (actually uninsured) loss. Not long after I became a ZH reader. Should be required reading (+M. Taibbi) for every living American. The pond is polluted, the scum rule. Know the scum!

Fri, 03/05/2010 - 20:31 | Link to Comment Problem Is
Problem Is's picture

Pulitzer Prize for Journalism:

#4. "For a distinguished example of explanatory reporting that:

A) illuminates(ati) a significant complex subject...
(<cough> Wall Street Financial Fraud<cough>),
B) demonstrating mastery of the subject...
(means explain it without pontificating or condescension),
C) lucid writing...
(means sane yet sarcastic) 
D) clear presentation, in print or online...
(means even dickeweed bloggers).

Prize: $10k.

Requirement for any ZH Pulitzer Prize winners:

"$10k in GOLD, Pulitzer bitches."

Fri, 03/05/2010 - 20:36 | Link to Comment Anonymous
Fri, 03/05/2010 - 21:58 | Link to Comment Anonymous
Fri, 03/05/2010 - 23:30 | Link to Comment Anonymous
Sat, 03/06/2010 - 01:24 | Link to Comment Anonymous
Sat, 03/06/2010 - 08:48 | Link to Comment blindfaith
blindfaith's picture

Funny???? I didn't think it was funny, I am still wiping the tears from my eyes. Blindfaith no longer works.

Sat, 03/06/2010 - 09:48 | Link to Comment chindit13
chindit13's picture

Oh my, this was a quick off the cuff rant in response to the post on the Fed's ever burgeoning balance sheet.  I find that humor treats my aggrieved psyche better than a bottle of Barbaresco, though I'm more than willing to give the latter a shot, regularly.  Had I known Tyler would repeat this here, I would have taken some time to tighten it up.

Sat, 03/06/2010 - 11:18 | Link to Comment macfly
macfly's picture

Simply wonderful, thank you for starting my day out with a good laugh!!

Sat, 03/06/2010 - 10:04 | Link to Comment Racer
Racer's picture

This is so true it isn't funny.....

But very well put

 

Sat, 03/06/2010 - 11:09 | Link to Comment Anonymous
Sat, 03/06/2010 - 12:14 | Link to Comment kevinearick
kevinearick's picture

So everyone is betting on a dying horse, in a vegetative state, on life support, while government reports manufactured vital signs to the rigged lottery economy, while the “smart” computers suck every last drop of blood out of the old mare, to feed the AMA, and maintain the old cartel contracts. Is that about right?

 

For the ZHeads that like the short conclusion, and want to skip the rest:

 

Markets are made at the receding edge of the nexus, in the crisis communities where return to unprotected labor (increasing) / asset prices (decreasing) is rising.

 

For the those who like the nuances (or for easy deletion):

 

Symbiotic Economic System Articulation

 

OK, so we need to hook up to those electrons, which have a voltage potential proportional to the global cartel protons, but we cannot “know” where they are, because the cartels constantly hunt them down. 

We start with what we cannot do, but what the passive investment markets are doing, through the misdirection of government promises: 

arbitrarily assigning debt to others, and holding their future hostage as collateral to ensure collection, for the purpose of claiming their assets as a basis for issuing debt; obtaining unearned, compounding returns, which is, in a word, extortion, and such an economy is not going to attract the required talent to provide necessary circulation. 

What it attracts is people who want something for nothing, in a self-reinforcing algorithm that Greenspan called irrational exuberance, as he fueled the fire with increasing leverage. He gave everyone involved what they wanted, a scapegoat, in the high school, get-along-to-go-along algorithm. 

Most of the financial pyramid will dissolve. It always does. That’s the “secret” of long-term investment, watching pyramid assembly followed by disassembly. Secondary markets require independent investigation for the price mechanism to function. Replication and multiplication attracts the sharks, the sharks are perfectly attuned to watch as the medium fish eat the small fish, and on up the line, before attacking, and finally cannibalizing each other. 

(not to worry if you are willing to get your hands dirty; the process of induction is already well under way, which is why the market is starting to produce all kinds of independent market analysis tools – where you want to be developing for immediate return on investment.) 

next, we take a look at mature, efficient operations to be recycled, the economic activity cash cows, producing large economic losses, with low-orbiting electrons: 

organization A decides it’s not satisfied with its returns, so it modifies its output portfolio 1,2, & 3, by reorganizing its internal processes a,b, & c. B receives A’s output as input, which no longer meets its requirements for d,e, & f. Organization B reorganizes, but incurs heavy losses in its 4,5, & 6 portfolio, delivering only 50%, through e & f to organization C. C cannot process g,h, or i to completion, incurs a complete loss on its portfolio, which provides input back to A, in a vertically controlled company, crashing it. 

In the old economy, this scenario is avoided by limiting change to small, incremental improvements, over long time periods, and by seeking greater and greater hidden subsidies from the rest of society, through government control of markets, to avoid more nimble replacements. 

We’ll skip our way up to the small, entrepreneurial companies, with high orbital electrons, that the nexus is currently preventing from backfilling the market pipeline. We have a simple system with four workers & their productivity: 

A + B + J = 5 + 6 + 8 = 19

B + J + S = 6 + 8 + 4 = 18

A + J + S = 5 + 8 + 4 = 17

A + B + S = 6 + 7 + 5 = 18 

As a manager, I need 22 for profit-sharing. Do I promote Johnny and ask him to find some friends to replace the other 3 (8 + 8 + 8 = 24)? In an efficient organization, the answer would be yes, but we are not running an efficient organization at this level.

Sue is creating multiplier effects, and Johnny is stealing productivity from his fellows. I promote Sue, fire Johnny, and production quickly rises to the required rate of return. To the extent Sue(s) are paid to lever production in the aggregate, and remain hidden from the nucleus, economic profit develops. 

(Sue has such a large multiplier effect because she sees the entire system, not only at work, but in her community as well, eliminating layers of management everywhere she goes. From the perspective of a rigid State, Sue is the enemy, and its attempt to target her collapses the system) 

Finally, we tie the system together with very high orbital electrons, customers who can accurately calculate real price of goods and services: 

What all new economy, viral growth products have in common is the effect of increasing mobility – physical, psychological, and virtual, of customers in a manner that increases their intrinsic value. As they become ever more mobile, and gain access to an increasing diversity of options, they re-invest in and promote the same learning in others to take over the market, partnering with the new franchises and cutting off the old franchises from their margins. 

In a stable, equilibrium system, the functional secondary market, full of independent price discovery, determines the rate of circulation, not promises from the nexus, which is monopolizing price discovery.

As you can see, Apple is becoming a mature enterprise, due to self-fulfilling prophesy investment in the secondary market. It’s becoming like Burton Boards, a high priced name that the leading edge kids, the highest orbital electrons, are migrating away from. 

We do not need to “know” where the electrons are to induce circulation. We need a healthy secondary market, a transformer, with independent price discovery.

Sat, 03/06/2010 - 15:11 | Link to Comment Anonymous
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mark456's picture

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