WE MADE CIVILIZATION TO IMPRESS OUR GIRLFRIENDS

There is a terrific post over at The Big Picture that concerns itself with a review of a new book called, A demon of our own Design. Written by a braniac with all the degrees from MIT and one of the guys who designed the derivatives systems now in place that collapsed, he blames himself and the complexities of the investment vehicles he designed.

However I don't think he is correct, keeping in mind that the only way I'd ever be allowed in a class at MIT is if I was inside a test tube, I think almost all markets move because of human response, and these responses are based in our most basic pasts.

Permit some observations from the perspective of a cellar dwelling broker in the business for the sole purpose of making a buck off of other people’s money. I do this by luring gamblers into “investments” or, more precisely, tapping the unconscious need for most investors to become gamblers so they can show off for the guys and to look great at parties in front of thrilled and fawning women.

It is my view, one that has been gleaned from twenty five years or so in the so-called “business,” that we miss a fundamental human element which dominates all that we do in the investing “game”. All men were formerly hunter gatherers. We were adventurous, foolhardy, brave, mean bastards who “brought home the bacon” so we could get laid by the inferior and weak women who stayed home and took care of the children and cooked our dinners. This was refined over a few thousand years into the effort to bring home the biggest haul of bacon in order to screw not only the most women, but the best looking ones. Life was good. The bigger the haul of bacon the better looking the babes at our beck and call. This is how it was. This was how it should be. This is a primeval condition of man.

As the world got better, more than one sage observed that “we made civilization to impress our girlfriends”. Same can be said for all fortunes, great and small, all bridges tall and narrow, and all skyscrapers daring to be the highest and grandest of them all.

We don’t accomplish the things it takes to impress the girls without risking our butts, or at least pretending that we are. We need to take risks. However most of us don’t really do it. We will go out of our way to bungee jump our way through life pretending to risk it all, when actually we have a little hedge fund called the length of the bungee cord that will almost always prevent us from getting so much as an “owie.” Deep deep down we know we are a bunch of chickenshits afraid to risk anything at all to accomplish the things we say we want.

Many of the rest of us look down at the phony bungee jumpers who actually risk nothing and prove it to the world by allowing themselves to be dominated by ugly girlfriends or fat wives. We hold Hollywood in contempt while idolizing football players, boxers, NASCAR drivers and others who engage in sports that can easily result in terrible and visible ends. We are the ones with the great looking mistresses we can trade in just before their warranties wear out while dangerously keeping our wives in the dark, an activity that is loaded with risk, and only risk. The “what if she finds out?” frame of mind, one that keeps an edge on each and every day; a football game of sex and deceit; a frame of mind that makes life worth living. A life in which we tell everyone, our secretaries, friends, and stock brokers that we have this "secret" that nobody should know about. There is nothing in the world as satisfying as having the specter of murder hanging over our copulations. Trust me, I know. One of my girlfriends once pulled a gun on me and the result was an instant erection; I just had to have her. It was glorious.

However, life dictates that there is always someone out there with a better looking mistress, a bigger house, more expensive cars, bigger yachts; a faster gun as it were. We must have more. And more. And more. We need to act this out. We have a primal need to bring home the most bacon. The only thing stopping most of us is fear of losing, of being wounded, or of death; fears that shame us to our souls.

Anything that offers the prospect of “biggest” profits appeals to us on the most primal level. It appeals even more when all the “smart guys” are in charge. If even some phony smart punk like a Nobel Prize winner has the balls to jump in, what does that make me if I don’t? I can't risk having people say, "Him? He's nothin'; he hasn't even won a Nobel." So I’m in. We literally are driven to take risks in a public way, to have people fawn over us at cocktail parties, to have the big media talk about us.

The so called “braniacs” simply filled a need. That there have been horrendous losses only validates the need to take outrageous risks. Trust me. I’ve talked to literally hundreds of “investors” who unconsciously brag about their losses. They almost never talk about their gains. Losing proves that “you’re a man.” Talk to any degenerate gambler. What do they talk about to “prove” themselves? Why losses of course: "I lost fifteen big ones on the fuckin' games last week," gets them admiration. If anyone should say they won fifteen big ones we think they are lying, demand that they prove it, and look at them like they had AIDS.

Our markets have become unstable largely because people with lots of money are looking for the larger casino. Period. You need to get that. Nobody ever believed that you could honestly get LTCM profits. Everyone knew that there was “something fishy” about it, something they could not understand, but what the hell? Let’s shoot.

As to all the howls about “getting real info” I say, “Get a life.” There ain’t no real info. All we morons can do is check the charts once we are in and have sell signals that will allow us to get out with minimal damage. Once the big institutions start to bail we have to be out instantly. The “real” information is buried in a black box of computer model gobledeegook that not even the fund managers understand. “Look at the charts, stupid,” is all you can do. Enron? Check the daily charts. There were sell signals for weeks before the stock collapsed including the penetration of the fifty day moving average. The buy and hold while shutting your eyes method is for saps. BTW, the main sell signal, one I never take because it “might go even higher,” is the gap or island top. You can always always get back in, something the gambler never considers.

Getting in requires only any orderly and rigorous method of checking out investments, something almost nobody wants to take the time to do. To sum it up: hedge funds is gambling. Only willing gamblers were in them.

The writer of the book seems to say that "The markets continue to develop new products to meet investors’ needs." No, they develop new products to satisfy the need people have to gamble while telling their gutless wives they are investing. The need for NASCAR moments is paramount.

To eliminate market breakdowns? Kill all the men.