The OL "tribe" and the Tribal Mindset

[Michael Stuart Kelly]

Brant,

I have disagreed with Ruth on several occasions, but I have yet to see the demon you do.

Because of her post here, I was going to do a small analysis of how derivatives and collaterized securities work outside the USA from what I observed in Brazil (and consequently banking people who worked in Europe). Ruth is right if derivative trading (going all the way up to high yield investment programs, private placement programs or whatever jargon name is given) is what she is talking about. This produces nothing but gobs of theft in the same manner as a Ponzi scheme. High level Wall Street executives know all about this crap and they stay in bed with politicians to get cut in.

This does not run in the USA, which is why so many high level Wall Street executives are so interested in doing international banking. It also needs global insurance companies for "risk management" and involvement of "social projects" in poor countries. AIG anyone?

But in the climate of name-calling, it's kind of tough to elaborate on this. Can we lower the hostility a bit and focus on the ideas? I don't blame you for sounding off, especially with the world's finances in the shape they are in, but the style discourse here is on persuasion through ideas.

When something goes really south (like war-mongering most recently), it gets thrown into the garbage pile.

Back to Ruth, she does her own thinking. I believe she has even met me (and others) halfway at times when reason reigned in the discussion. She is open to discussion. So she disagrees at times. What's wrong with that if she makes people think?

Ruth said "going Galt nonsense." I would not call it nonsense, but I consider it a gesture that most likely harms the person doing it without making a dent in public policy. It's good for press and that's about it. I wrote about this recently: Going Galt.

As for SLOP often displaying rhetoric more fitting to Soviet Russia than rational thought, I can only agree with Ruth. Change the names from Capitalism to Communism (and other similar replacements) in some of those threads and look at what's left. It's identical.

Ruth and I probably still disagree on much, but Marxist?

I don't see Karl in her comments, so do you mean Groucho?

Michael

EDIT: I just saw a comment from Ruth over on SLOP (the quote is from a Rand work at the start of the thread):

"The basic issue in the world today is between two principles: Individualism and Collectivism."

Quite. I'm pleased someone other than Rand sees fit to publicise that.

It's not about economics to be sure.

The recovery is coming far faster than permanently gloomy Austrians hoped, and we will soon be viewing the corpse of Austrian economics.

Individualism vs Collectivism is what Objectivists should be promoting at this time, lest they end up looking like fools given that their thoughts are wildly inconsistent with market reality.

I disagree with her prediction of the demise of Austrian economics. I agree with her that a recovery is coming and it will be faster than the gloom and doom normally preached in Objecivist/libertarian circles. (This issue is complex since we are dealing with a mixed economy and different sets of laws throughout the world, but a recovery will happen.) I could not agree with her more about individualism versus collectivism.

I don't even see Groucho in any of that.

[Ruth]

Thank you Michael. I agree with everything you said - and yes - those who play derivatives and other financial products do not meet 'producer' criteria in my book.

Some people seem to object to the fact that I have been making money in the recession - especially in bank stock. So we have complaints about 'parasites' and so on, yet I make money and am a Communist because I take advantage of market conditions!

Some of these men have foul mouths, which is tiresome. I am unsure why they have to resort to profanity.

[Michael Stuart Kelly]

Ruth,

My edit in my last post and your post crossed. I am intrigued by the following:

Some people seem to object to the fact that I have been making money in the recession - especially in bank stock.

Dayaamm!

I'm impressed. Good on you.

Michael

[Ruth]

Thanks - it's not something I usually boast about - I mentioned it on SOLO and thought it was a good news story - silly me!

Really the abuse I copped about it is an elaborate philosophical justification for petty jealously.

I'm not going to stew in misery at home because Bush/Obama are not Austrian economists.

Good evening to you.

[merjet]

those who play derivatives and other financial products do not meet 'producer' criteria in my book.

Farmers, grain processors, food processors, airlines, trucking companies, utilities and oil refiners are a few of those who "play derivatives." Do they produce nothing?

[BaalChatzaf]

those who play derivatives and other financial products do not meet 'producer' criteria in my book.

Farmers, grain processors, food processors, airlines, trucking companies, utilities and oil refiners are a few of those who "play derivatives." Do they produce nothing?

The farms grow our food. The storage companies keep their produce until shipping. The shippers ship our food. The oil refiners make the oil from the ground usable, the utilities deliver the power to where it is needed.

What about the "suits" on Wall Street (and other purely financial centers) whose hands are never soiled by productive labor? They type on computers or push pencils. What do they make that we can use? Defend Shylock for us briefly.

Ba'al Chatzaf

[merjet]

What about the "suits" on Wall Street (and other purely financial centers) whose hands are never soiled by productive labor? They type on computers or push pencils. What do they make that we can use? Defend Shylock for us briefly.

Investment bankers raise funds for industrial companies via issuing stocks and bonds for such companies. Insurance companies provide insurance for consumers -- life, health, auto, homeowners. (AIG does that. It was the derivatives unit that ruined AIG.) They also provide commercial insurance. On the investment side, insurance companies are huge buyers of bonds, and stocks to a lesser extent. So they provide capital to industry. Banks make lots of loans to industry. Finance companies provide financing for all sorts of things, for example, mortgages, consumer loans, for college, and for buying industrial equipment.

[Michael Stuart Kelly]

Merlin,

You described how derivatives work in the USA. You are right about that (for many derivatives).

There's a different market out there, though, one akin to "mortgage-backed securities" (which in reality were physical-house-backed securities as the banks ended up discovering).

Very often, the original thing on deposit has very little actual value but high perceived value (like a Brady bond or historical government bond), although it could be diamonds or gold or something like that. It needs insurance, of course. Then the bank issues a debenture based on its "assets on deposit" (that thing) to get a loan. That needs insurance. The bank making a loan uses that loan contract to leverage another loan somewhere else, issuing a security with some highfalutin sounding name. That needs insurance. And so on. The original thing on deposit is "nested" to start a domino series of loan transactions (called "leveraging assets"). Euroclear, Clearstream, DTCC (International Services Division) and SWIFT gone wild.

If you set your ducks in a row, you can do hundreds of these trades in one day off the same original "nested thing," with loan values increasing with each loan. Even at a fraction of a percent per trade, if the original "thing" is valued at millions of dollars, that's some real interesting change at the end of a hard day's work fabricated out of thin air.

The dirty little secret (one of them, at least) is that no insurance company on earth has the resources to guarantee all that. People who work at the insurance company know that and demand to be cut in on the trade deals on the side in order to authorize the company taking on the liability. If you don't believe it, just look at what's happening today with a certain insurance company doing business in 135 countries and inexplicably receiving money piled on top of money from Uncle Sam.

And guess who at AIG is getting those bonuses everybody is ticked off about? Derivatives department, of course. I predict those dudes will get their bonuses, but even if they don't, they will still get them after a while. They know who got paid off and who didn't and where the offshore accounts are. I bet you there are some American politicians (and similar) who would prefer things to stay good and anonymous.

I doubt the derivatives dudes will stick around a big firm like AIG, though, if the public heat keeps up. They need the shadows. There's a new phrase that is becoming quite popular these days among the rich and powerful: boutique trader. There is no financial crisis for these dudes. Never will be.

Here in the States, people play by USA rules. They have no idea...

Michael

EDIT: Here in the States, idiots started playing a small variation of this game (from changes in legislation) called leveraging "mortgage-backed securities." They got greedy and even tried to eat the original "thing" (mortgages) with extra leveraging on mortgage clients (higher interest rates). That's chump change compared to the rest of the gravy train, but the idiots wanted to gobble that up, too. They killed the goose laying the golden eggs to eat it along with the eggs. They forgot that the original "thing" had to keep its perceived value for the house of cards to not fall down. Damn amateurs. I didn't think it was possible to be greedier than I have seen overseas, but here they managed to be so greedy they got totally blind to reality.

[Brant Gaede]

Michael,

Here's what set me off about Ruth (a short thread on SOLOP):

http://www.solopassion.com/node/5971#new

I regret calling her that name but will not apologize for it or take it back. The regret is that any time I name-call, rare, I hurt myself. I absolutely hate this person and what she really stands for. I don't give a hoot about any reasonable half-way conversation with a purveyor of absolute evil.

--Brant

[merjet]

There's a different market out there, though, one akin to "mortgage-backed securities" (which in reality were physical-house-backed securities as the banks ended up discovering).

I'm well aware of the "mortgage making machine" set in motion by Congress, mortgage writers and makers of mortgage-backed securities.

The dirty little secret (one of them, at least) is that no insurance company on earth has the resources to guarantee all that. There is no financial crisis for these dudes. Never will be.

Tell that to Congress, Fannie Mae and Freddie Mac. Their mortgage guarantees are, in essence, credit default swaps (CDS). There is a lot of talk about AIG's CDS. Did you know that many Lehman Brothers CDS and likely many of AIG's CDS were written on the basis of Fannie Mae and Freddie Mac debt?

[Dragonfly]

Here's what set me off about Ruth (a short thread on SOLOP):

http://www.solopassion.com/node/5971#new

Ruth made some pertinent points in that thread, which were only answered by predictable knee-jerk responses.

[Brant Gaede]

Here's what set me off about Ruth (a short thread on SOLOP):

http://www.solopassion.com/node/5971#new

Ruth made some pertinent points in that thread....

Not surprising as she's highly intelligent.

--Brant

[Michael Stuart Kelly]

Brant,

I read it, but I saw you guys talking about two different things.

I doubt Ruth would consider any of the people you cited as replaceable components of a world order or for mankind in general. These are special individuals—some of mankind's greatest—and, from what I have seen of her writing, she would agree that they were unique, admirable, mankind's greatest, etc.

However, even I would not agree that if one of those people disappeared, another person would never appear with a similar invention or achievement. There are lots of inventors and achievers all over the world. For instance, the Wright brothers got credit for inventing the airplane, but the Brazilian Santos Dumont has a very legitimate claim, also. The world is bubbling with productive people right now. Added to that, we are smack dab in the middle of the Information Revolution.

Then there is the issue if one of those individuals you cited had "gone Galt" before his/her achievement was presented to the world, who would have been aware of what we missed out on?

I got the impression that Ruth was saying if a CEO "goes Galt" in today's world, another talented person will appear to take his place. I agree with her. In a world of easy available education, especially with the Internet going full blast, that's a reality. If you want to see a whole bunch of talent salivating for a chance to work and make some money, go to Guru, Elance, Amazon Turk, Monster, Careerbuilder, Headhunters, etc. How about Craigslist where you can find talent from India or the Philippines, etc.? Or go to any reputable temp service.

If the job market gets really bad, you will see a lot of high-quality talent even cheaper than it is today on those sites. A person who "goes Galt" in this context is making a futile gesture if social change is his goal.

If Ruth had been disparaging greatness, I would agree with you. But I did not get that message from her posts.

Michael

[Dragonfly]

However, even I would not agree that if one of those people disappeared, another person would never appear with a similar invention or achievement. There are lots of inventors and achievers all over the world. For instance, the Wright brothers got credit for inventing the airplane, but the Brazilian Santos Dumont has a very legitimate claim, also. The world is bubbling with productive people right now. Added to that, we are smack dab in the middle of the Information Revolution.

Indeed. Even people like Newton or Einstein were replaceable, other people would sooner or later have come up with the same theories. The incandescent light bulb would also have been invented if Edison hadn't existed. Only great artists are in a sense not replaceable, while their contributions are uniquely individual.

I got the impression that Ruth was saying if a CEO "goes Galt" in today's world, another talented person will appear to take his place. I agree with her.

Exactly. That was what she said and she is right. But see what an emotional and irrelevant reactions such a simple observation generates...

[Brant Gaede]

Regardless, I'm not going to chase her around with a stick if she makes any more posts.

--Brant

[Brant Gaede]

Dragonfly,

I appreciate your European context but I'm an American. Americans smash Nazis, communists and totalitarians generally and we have an acute sense of smell. There is no such thing as a "replaceable" human being.

--Brant

[Dragonfly]

I appreciate your European context but I'm an American. Americans smash Nazis, communists and totalitarians generally and we have an acute sense of smell.

Well, perhaps those tough Americans want to smash Ruth, but I prefer to treat her as a decent human being with an independent mind.

There is no such thing as a "replaceable" human being.

Everyone is replaceable. After all everyone is replaced sooner or later.

[Brant Gaede]

I appreciate your European context but I'm an American. Americans smash Nazis, communists and totalitarians generally and we have an acute sense of smell.

Well, perhaps those tough Americans want to smash Ruth, but I prefer to treat her as a decent human being with an independent mind.

There is no such thing as a "replaceable" human being.

Everyone is replaceable. After all everyone is replaced sooner or later.

I don't want to literally smash Ruth. She'll get no more grief here from me. If I disagree in the future I'll just not say anything at all or post only, "I disagree."

There is a huge difference between "replaceable" and "replaced." There can be an overlap in the concepts, however, depending on context.

--Brant

[Rich Engle]

You're all a bunch of steenky POMOWANKERS!!!! KASS FOREVER!! <---shot out of me hotter and nastier than a Tijuana taco you're trying to spray into a dirty, gas station toilet.

Lordy, over there...sorting through their code is like eating leftover alphabet soup, out of a dumpster. But again, I go and digress.

I love when people try to mount replacement strategies. I love it when they try to replace ME (everything I write is always about me because I am deeply in love with myself).

Replacement strategies can work better than the original, on occasion, but mostly not so much. When a real baller steps off Atlas-style, or gets toppled in a haenky takeover coup, there's this moment, enjoyed by said takeover-er; a moment of falsely-earned nirvana.

Then, usually, the incompetence kicks in and everything goes to shit.

Fun to watch, as long as you aren't directly involved.

rde

Wondering, today, if Perigo's air conducting baton is sequestered in his dark region, where the sun shineth not. It would explain his smirkiness.

[Newberry]

Thanks - it's not something I usually boast about - I mentioned it on SOLO and thought it was a good news story - silly me!

Really the abuse I copped about it is an elaborate philosophical justification for petty jealously.

I'm not going to stew in misery at home because Bush/Obama are not Austrian economists.

Good evening to you.

Ruth,

Best wishes in your investments. I always feel uncomfortable posting in areas I know nothing about!!!

Cheers,

Michael

[Brant Gaede]

Mised the part about her investments.

--Brant

[Brant Gaede]

I found the thread about Ruth mentioning her success in buying US financials. She's up a lot more since. It's true they could easily double again. In any case, no one should own these after mid-summer, or maybe then short Citigroup as a hedge using put options

This isn't why I went off on Ruth. I couldn't quite figure at the time why at least two posters on that SOLOP thread were so quick to agree with me. I didn't know they had something going with her elsewhere. People should understand that when I hear about "replaceable" people I hear millions of Cambodians being murdered so they can be replaced. Or tens of millions of Russians being starved to death as a matter of Soviet State policy courtesy of Stalin or Jews being gassed and shot, etc. That's all I hear. There's no room left in my brain for anything else. Not even now, not even understanding Ruth's much more delimited context intellectually. My alligator brain is totally engaged even as I write these words. My attitude is neither rational nor irrational; it simply is. It's not something I can turn on or off. I once went to war and almost got killed because of this. Psychologically I'm still there. The anger is absolutely profound. I'd apologize to her--she probably deserves one--but the apology would be deeply hypocritical because that anger will always be part of me.

http://www.solopassion.com/node/5995

It's something I ordinarily wouldn't have missed, but with friends dying in the hospital my reading's been limited.

--Brant

Edited March 19, 2009 by Brant Gaede

[merjet]

I found the thread about Ruth mentioning her success in buying US financials. She's up a lot more since. It's true they could easily double again. In any case, no one should own these after mid-summer, or maybe then short Citigroup as a hedge using put options

--Brant

She (?) is banking on :-) no nationalization while she owns the stock. If she is wrong, say "bye-bye $."

[Brant Gaede]

I found the thread about Ruth mentioning her success in buying US financials. She's up a lot more since. It's true they could easily double again. In any case, no one should own these after mid-summer, or maybe then short Citigroup as a hedge using put options

--Brant

She (?) is banking on :-) no nationalization while she owns the stock. If she is wrong, say "bye-bye $."

She's not wrong. The Feds are choosing the fascist not the communist route. This doesn't mean her investments won't turn on her. If the banks need money going forward they'll need it nationalized or not. The Feds will just click their mouses and inject whatever liquidity is needed. That's why the dollar is getting weaker and gold is getting stronger. We may get an avalanche out of the dollar in a de facto devaluation. Even the horrible euro is up as well as stocks. Oil is up over three dollars today so far. There are a lot of dollars out there waiting to go--somewhere. If they are in Treasuries and leave, interest rates will go up or the Feds will buy them (the Treasuries) which may result in almost instant inflation. The Feds won't let interest rates go up for now. Eventually they will go up but until then the Feds are going to use inflation to amortize the huge public debt. We could see DOW 9-10,000 by mid-summer. Regardless, after that equity averages will seek out new lows. Now can be an excellent time to buy a home with a fixed rate mortgage. Inflation will pay for it. But watch out for those property taxes! Just pay no more than 2/3rds the appraisal using at least 20% down on a foreclosure.

--Brant

[edit] PS: Ayn Rand was never worried about a communist America. She warned about fascism. She was right.

PPS: It is dangerous to own stocks now for investment purposes. The DOW doesn't have to go up any further; one doesn't know what the Feds will do next aside from injecting liquidity. Bank stocks can easily go down from here, way back down.

Edited March 19, 2009 by Brant Gaede

[Ruth]

Agree with most of your previous post. There will be no nationalisation and gov will exit their bank position in due course.

I do believe austrian economics will end up rather discredited as the gov will take credit for the coming recovery. It's worth reminding people that mises org are permabears - everything is a catastrophy of biblical proportions be it High dollar, low dollar, deficits, surpluses - if you go back though the archives you will find they have a permanent forecasting position and nothing has ever turned out as bad as they predicted. In fact a friend of mine lost his house, boat, wife, and ended up in a trailer park about 6 years ago after investing on the basis of their forecasts. And if one had invested with Peter Schiff (who is being feted all over the place) over the past year they would have lost 75% of their money.

The market is always right, and as Buffett says no one ever made money in the long run by betting against America.

I disagree that it is a dangerous time to own stocks for investment - I am looking to the long term and average 150% return so far is serious money. It is not a strategy for the risk averse - maybe I should have made that clear, but there is nothing to fear as long as one has firm stops in place.

As I have said before, I most certainly do not feel guilty about making money on the market. George Cordero wrote once that under-achieving objectivists are fond of lecturing those of genuine achievement. Certainly the pit-bull like aggression of some has been disgraceful.

Go in peace.