Harry Cipriani Says “Don’t Panic!”
Posted by Charles Mackay | Filed under Subtle Signs of Seismic Impact
At Downtown Cipriani, the residue of the bull market dollars is still morphing into $20 Bellinis and $30 tomato and mozzarella appetizers. High above the above the bar, overlooking a sea of men wearing three year old Daytona watches and women wearing three year old restylyne, is a canvas that says it all.
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Seven Asparagus with Butter for $26 Should Make you Panic.
Seven Asparagus with Butter for $26 Should Make you Panic.
Who shouldn’t panic? Us or the Ciprianis’? The family’s Luxembourg based leisure company practically invented the “extortionate menu prices as theater” business model for the ultra-high-end restaurant industry. Low ceilings and dining chairs with the legs cut by half made every dwarf billionaire feel much less vertically challenged. With fewer billionaires to go around and a new found reluctance to submit $400 lunch expense vouchers to TARP financed banks, one wonders what is really going on in their outposts today. The young scion is purportedly on an extended vacation in South America.
…..
One thing I am sure of is that the 21 Club’s decision to longer require ties may be one of those strange (but important) micro-signs of the econolypse that only a true killjoy could dream of. After surviving the Great Depression and five recessions, 21 finds itself running on fumes unable to stay afloat. Is it the aging clientele or an economic environment none of us has ever seen? Regardless, it is probably a helpful barometer of where this “thing of ours” ranks amongst prior prior global seizures.
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A striking manifestation of public sentiment (or a fabulous example of the practice of using juicy anecdote as the cultural bedrock of policy) is Obama’s reference to the $1 million redecoration of John Thain’s office at Merrill Lynch late last year. It is tough to fathom what it would have really felt like to wake up this morning and be taken to task by the President of the United States. Can’t feel good.
CLICK here for a Video of Obama’s Weekly Address
I am sure if we dug deep there was a missing part of the story: The furniture was already on order by Chuck Prince, he paid for the trash can and it was $900, not $1,600 or perhaps the rug was his and was borrowed from his home office in Greenwich. It doesn’t matter. It is always about the soundbite. Always about the hint of impropriety. Always about that Wall Street Journal test they used to explain to every first year banker years ago. The dusty and tired adage, until recently, seemed like a pair of bell bottomed jeans. While numerous iterations exist. It went like this:
“When making a decision, think about whether are not you would feel comfortable with your choice being on page A1 of The Wall Street Journal.”
We are now reading about bankers’ decisions, large and small, every single day.
What Does Google Know That we Don’t?
Posted by Charles Mackay | Filed under History Repeats Itself
More to come? Google would make you think so.
We don’t call this a depression; it is something different. The variety of markets, financial instruments, and the speed of the flow of information and capital are all too great to draw comparisons beyond the simple “excess and pop” soundbite echoed throughout the mainstream media. The pain, cure and timeline will all be different for “this thing of ours”. Our econolypse.
During the Great Depression suicide rates increased about 25%. While our new economic reality is still filtering through the plumbing of global economies, there already have been a number of notable and unfortunate self-inflicted deaths. The German financier Adolf Merckle and Thierry Magon de La Villehuchet come to mind. And then more local Wall Street denizen like Barry Fox of Bear, Stearns or Eric Von der Porten, a hedgie with a small firm in Northern California. All awful stories. All answering the same question for some of us as to whether we “work to live” or “live to work”.
Back during the Great Depression, information was sparse and doled out on a daily basis via radio and Newspapers. Capturing the particular state of the emotions of our citizenry at any moment in time was nearly impossible.
But not today.
Since this fall, the number of people all over the world, and particularly in the United States, who have searched for “suicide methods” on Google has nearly doubled. The ‘A’ and ‘B’ in the graph below signify the dates of news stories that could be a cause for a spike (at those particular moments in time). The increase in this trend over the past few months is truly terrifying.
CLICK HERE to see the Current Google Trend for suicide methods for as of right now.
Economic Neuroses of the Rich Impact the Working Class (a/k/a Why Suits Should Avoid Worshipping False Gods)
Posted by Charles Mackay | Filed under Subtle Signs of Seismic Impact
Stiffing The Doormen Will Not Make Your Portfolio Returns Improve Next Year
As Year One of the Econolypse Closes….
When something you have largely controlled your entire life stops being under your control, strange neurotic patterns emerge.
For years most successful New Yorkers took for granted their ability to maintain a job, grow their investments, and even enjoy the annual appreciation of their homes. The psyche of the city was rooted in the arrogance that confused the ability to play on the periphery of the longest bull market in history with raw intelligence. No longer.
The impact of that lack of control over one’s economic wealth and the vibrations of the tectonic shifts in our economy is now expressing itself in peculiar ways. Here are some not so subtle examples:
Hedgies who have delayed (or have stopped) paying bills from their landscapers in the Hamptons.
Real estate developers who are tipping the doormen to their homes less this Christmas.
Centimillionaires shifting their Christmas vacations from two weeks at an exotic resort via private jet to one week at a Hilton in Florida via Jet Blue.
What is so strange is that each of the examples above are not rooted in cash flow issues or even frugality. These are examples of rich people making ritualistic sacrifices to Mammon. And what is completely pathetic about it is that is that in the first two examples given, less economically fortunate people are on the receiving end of that neurotic, economic asphyxiation. Their lifestyles would not change one bit if they just stuck with the plan.
The third example may seem like a “nice look” these days since obscene vacations are about as eyebrow raising as Swarovski diamond encrusted bell bottoms. However, I will argue that this has been a pretty rough year for many. To those of you who can afford it, feel free to (quietly) vacation wherever you please. And stop shafting the working man with your nervous tics.
Manhattan Goes Mad Max During our Econolypse
Posted by Charles Mackay | Filed under Subtle Signs of Seismic Impact
Back to the 70's we go.
Spotted in Midtown….
A Maybach 57, with more dings than Edward J Olmos’ face and a minature
spare on a rear wheel, was parked on a side street. A sign handwritten
on the backside of a company letterhead was taped to the inside of the
driver’s window…
FOR SALE 2006 MAYBACH
917-329-XXXX
We would give you the complete phone number but we know some of you
would be bidding him $35k with a full tank of gas. Why ruin the
owner’s Thanksgiving.
Welcome to Thunderdome.
How do you Mark a Maybach to Market?
Punish Ye Redeemer!
Posted by Charles Mackay | Filed under Accounting 101
The not-so new accounting rules of FASB 157 force hedge funds to mark
their investments to market. While most investors are nervous that
hedge funds are being overly optimistic about their “marks”, something
else funny is going on. It seems that many funds are trying to get low
“marks” so when the redemptions pile in, less of their fund is
returned to the non-believers. It will also serve to raise the returns
in the coming months.
So here is a sample conversation between a hedge fund manager and a broker.
“What would you bid me for $50 million of CrapCo?”
“Well, I could probably move $1 million for $0.50 on the dollar”
“What if I needed to puke out $5o million right now? Today. Before
I sit down for lunch at San Pietro with my gnocchi!”
“Gee, that’s a lot of bonds Greg. I don’t know. Fifteen cents on the
dollar? If we could get it done!”
So there is your new mark. And the value the redeemers would get for
their share of CrapCo. $0.15 on the dollar.
Serves the Redeemers Right!
You Want Scary?
Posted by Charles Mackay | Filed under Subtle Signs of Seismic Impact
It is 10:00PM on Halloween and something strange is happening in the streets:
There are cabs available. Everywhere.
Long the domain of the livery opportunist itching to squeeze the rich man, Halloween, along with New Year’s Eve and any major snow storm, was the time when the off duty light went On, the meter went Off, and the negotiations began.
During Halloween 2007, if you could hail a cab it would be $50 for 10 blocks, 30 blocks, it didn’t matter. Not this year. Black cars, normally found idling outside a Chelsea nightclub waiting for a Lehman Brothers structured products trader to vomit in the backseat, came out last night as Gypsies for Halloween in order to make some much needed cash. That phenomenon was enough to tilt the supply/demand curve to the point where cabs of all colors were plentiful.
Driver Concern. “Are they late or did this bank go under too?”
If all of this wasn’t enough of a “Sign ‘o the Times”, the New York City MTA reported that subway usage during the evening was at all time holiday high. Too bad Blackberries don’t work on subways.
What Some men Will do to Avoid Commitment
Posted by Charles Mackay | Filed under Uncategorized
Rumor has it that a recent in-contract buyer of a grand $17 million Park Avenue apartment (Great space, good light, no views!) put on a little show at his co-op interview.
Evidently, the buyer explained to the board that his wife was not attending the interview because he was leaving her for another man.
After the interview, the board met and decided that while they doubted the story, they certainly did not doubt the financial stress that this man must have been under to be willing to attempt such a humiliating charade in front of (some) of his peers.
Job well done. The faux-uncloseter is now off the hook and the apartment is back on the market. No price reduction—yet.
How to CTRL-ALT-DEL a pre D/08 Contract Signing
Dead Cat Bounce: The Next Day (or so)
Posted by Charles Mackay | Filed under History Repeats Itself
So the S&P 500 sank 9% or about 90 points. The Dow’s swan dive ended with the index down 733 points. The hedgies continue to puke out (that’s a technical term) whatever paper they have. Citadel is rumored to be on the brink… This is the VPS: The Vortex of Pain & Suffering.
Recession is a foregone conclusion. Now people are using the D-word. It is about time someone named this situation. And it’s not The Credit Crunch or the Financial Crisis.
It is:
D/08
You read it here first.
Hedgies Need Not Apply
Dead Cat Bounce
Posted by Charles Mackay | Filed under History Repeats Itself
At 4:34 PM… Dow at 9387.61 up 936.42 or 11.08%, S&P 500 at 1003.35 up 104.13 or 11.58%. The Dow posted the largest in one day gain in 75 years and the largest point gain in history…
If this isn’t a Dead Cat Bounce, we don’t know what is. The bounce will continue tomorrow AM when the Fed annouces which banks get the force fed preferred investments. Tokyo is already up 12% in morning trading.
So for those of you who are not old enough to remember when phones had dials, here is a definition from our friends at Wiki…
A dead cat bounce is a term used by traders in the finance industry to describe a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that “even a dead cat will bounce if it falls from a great height”.
The phrase has been used on the trading floors for many years. However the earliest recorded use of the phrase dates from 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year. Journalist Christopher Sherwell of the Financial Times reported a stock broker as saying the market rise was a “dead cat bounce”.
The reasons for such a bounce can be technical, as investors may have standing orders to buy shortedoption positions. Once those limits are reached, the buy orders are activated and the sudden rise in demand causes the price of the stock to rise as well. The bounce may also be the result of speculation. Since bounces often occur, traders buy into what they hope is the bottom of the market, expecting a bounce and thereby reaping a quick profit. Thus, the very act of anticipating a bounce can create and magnify it.
A market rise after a sharp fall can only really be seen to be a “dead cat bounce” with the benefit of hindsight. If the stock starts to fall again in the following days and weeks, then it is a true dead cat bounce. If the market starts to climb again after the first short bounce, then the continued rise in price action would be considered a trend reversal and not a dead cat bounce ie. a short lived bounce before a further decline. This distinction only becomes obvious in hindsight and the evaluation may vary depending upon the initial and final points of reference.
Where is the Kindleberger when we need him?
Posted by Charles Mackay | Filed under History Repeats Itself
In “Manias, Panics and Crashes”, Charles Kindleberger provided a fascinating history of financial crises. He died at 92 in 2003 right after the dot bomb bubble. He reportedly was not an investor in TheGlobe.com.
After every bubble whether it be tech, real estate, or credit, everyone who can read a good book without moving their lips, blows the dust off a Kindleberger paper. Every heard of a musician’s musician? Kindleberger was an economist’s economist.
K-berg was a self-proclaimed literary economist who provided a great deal of the circuitry for modern day behavioral economics. He remains eerily relevant.
Back in 2003, The Economist opined:
Mr Kindleberger believed that “markets work well on the whole”, but occasionally “will be overwhelmed and need help” from a lender of last resort. He understood both the danger of inaction by such a lender and the “moral hazard” that its mere existence can create, by encouraging investors to be reckless in the belief that they will be bailed out if all goes wrong. Thus, he argued, a “lender of last resort should exist, but its presence should be doubted.” It should always come to the rescue, but “always leave it uncertain whether the rescue will arrive in time or at all, so as to instil caution.” Pulling this off is, he noted, a “neat trick”.
It sure seems like the Fed should have browsed their biz school Monarch Notes on Manias, Panics the weekend of September 12th when they decided to let Lehman go Jello.
In case you would like to read what the Fed missed:
I must Redeem!, I must Redeem! Only three more months until my lock-ups expire!