Tuesday, July 17, 2007

The Wages of Sin...

... are pretty darn good, particularly if you are well connected.

Continuing from yesterday's post on manipulating markets, making very serious money in markets (measured in the 100's of millions) is neither for the faint, nor pure of heart. And don't let some paid mouthpiece fool you: every market is a zero sum game, in the short run. In the long run we are all dead and if I am to win you have to lose. Like I said of market adversaries a long time ago: "I want to make their children starve" (I beg forgiveness for such crassness, I was younger and much stupider once). Guess what? Turned out they also wanted to make my children to starve, so it all balanced out.

Playing by the rules is most certainly an admirable quality - if you are a man of the cloth. But if you want that cloth to come from Saville Row you better learn how to play dirty - or at the very least recognize that the dirtiest players are also the ones making up all the rules. Designed chiefly for their benefit, not yours. I have to laugh at the various regulations that exist in various exchanges around the world, designed solely to fleece the unaware: limit-up rules for stocks, shorting on a downtick, no position limits on futures, etc, etc. And how about closer to home? US authorities are fighting tooth and nail to limit hedge/private fund regulation and disclosure.

I have not met ONE person involved professionally in markets who has not bent the rules. Some do it a little, some do it a lot and some do not even recognize that rules apply to them at all. All everyone cares about is making as much money as possible, as quickly as possible. That's just the nature of the business... And those are the good guys. Because there are also some really, really good guys involved in markets. As in Goodfellas. At least the plain old "good" guys will not threaten to physically harm you - except if you are overly late with a margin call (just kidding).

Speaking of margin, there is an apocryphal story : a customer had a margin account and got hit with a margin call. He did not have the cash, but told the broker he would try to scrape it together. The first day he sent the broker $10.000 and the broker told him he had to try harder 'cause they would sell him out. The customer went about in a frenzy calling on every relative and acquaintance, raided the children's education fund and borrowed against his life policy. He got together another $10.000 and sent it on the second day. He had to come up with just another $1.000, but try as he might he could not get his hands on the money.

Despirited he finally called his broker on the third day: "That's it, you've had me. I can no longer meet the call - sell me out". You can imagine what the broker thought... Goes with: "one born every minute".

But since I mentioned "man of cloth", I also have a very true story to tell. Some years ago I baptised my daughter and met with the priest beforehand. We chit-chatted idly for a while as he obviously sized me up for possible donations to his church's needy fund. "What do you do for a living?", "oh, really?"... that sort of thing. He was one heck of a capable salesman and I found out later that while studying at the seminary he sold encyclopaedias door-to-door to make ends meet. He was top salesman in the whole region and when he left to become a priest his manager thought him a fool. (But the Divine had other plans, as it turned out many years later.)

Anyway, as soon as he found out I was professionally involved in markets he popped the usual question: "Where's the market going?"

"Father", I said, "why do you, a man of God, care where stocks are going?"

He smiled rather mischievously and revealed he had amassed over $1 million, starting with just $50.000, TWO YEARS ago. I was shocked, to say the least, and started thinking that I, too, should try prayer instead of analysis. He saw my amazement and fessed-up: two years before he had blessed the opening of a broker's new branch (can you imagine a temple to Mammon being blessed by the Church? This should tell you something...). The manager/owner of the firm (it was a small one) came to him after the ceremony and asked if he had any savings. He had truly taken a liking to him and wanted to help out. The priest trusted him blindly and - for once - it all worked out beautifully (this is where praying must have helped).

The broker was totally plugged in with the artificial rally I described yesterday and had the priest's account move in and out of every skanky deal, doubtlessly using it as a "front" account for various washes, etc. (what better front than a priest?). Bottom line is, the priest made a bundle out of other peoples' wages of sin. He must have eventually figured out that such riches were not normal and had the immense good sense to pull out just before it all went to pot.

So there he was, asking me if maybe he should push some money back into the game or just buy some real estate for his old age. I told him that he, of all people, should recognise a miracle when he sees one and not push expectations for divine intervention too far. He took my advice and bought a couple of apartments - I know because we stayed in touch through my annual donations to his church fund (I told you he was good!).


  1. Wow. Amazing story about the priest.

    So, there's nothing that can be done to clean up the system, right? Would outlawing trading on margin help protect those foolish enough to try it?

  2. i bet the priest is Orthodox ...