Friday, January 14, 2011

Sophomoric Opus

Sophomore: A person who is at the same time wise and foolish, perhaps because he lacks experience.  From the Greek sophos (wise) and moros (foolish).  

When it comes to markets, I am a confirmed contrarian.  That is, I constantly look for signs of excess and act accordingly.   What signs?  It could be anything, really, but I usually focus on human behavior and psychology, e.g. doom, gloom, exuberance and frivolity.  What matters is the contrast between reality and unsustainable expectations - positive or negative.  Like  radioactivity, the best type of contrarian evidence is cumulative, i.e. it appears in additive layers, from many sources and in many varieties.

Here's one such bit: The Imminent Crisis: Greek Debt and the Collapse of the European Monetary Union is a short book (140 pages) by Grant Wonders.  Who is he? A Harvard sophomore studying economics and archaeology.    It is published by GW Publishing, the initials obviously from Mr. Wonders name.

Here's another:Bust: Greece, the Euro and the Sovereign Debt Crisis.  On the face of it, this work must be a bit more serious since it weighs in at 288 pages and is written by Matthew Lynn, an occasional Bloomberg columnist.  At least he's not a sophomore.  But, writing as Matt Lynn, he also turns out a serial military action thrillers with titles such as Death Force, Shadow Force, Fire Force, etc.  The blurbs claim that "You can taste the dust and smell the blood" .  You get the type..

And yet another, this one in song form.

So, there you have it. And Greek long bonds are trading at around 55 cents on the euro.

I can taste the fear, smell the money and wouldn't short Greek securities, stocks or bonds, not even on a Sunday.


  1. Hell,

    I am having a dispute with a colleague about that utterly useless and totally without merit phrase 'No one saw this coming!

    Could you please remind me when you first started your warnings about CDOs and CDSs. Thanks.

    Came across this article:

    'Elimination of CDS as Necessary Prequiste for Recovery' Jan 2009 date: Boyarchenko and Levendorskii.

    Read about it here first I think!


  2. First mention of CDO and CDS in this blog: December 15, 2006. Seems like a century ago...

    Oh, many saw it coming. But thank you for thinking of me as one of the first.

  3. Your point seems well taken, Hell. The PIGS can sell new debt issues to either private investors, country pension funds, foreign central banks, or the ECB. I can't see why there is any need to default if the last two are willing (as it seems) to come to the rescue. If they're not going to default, then they are good buys at current prices.

    The best clue of all is that no one has been trying to sell this debt to retail--usually the last step before the thing blows up--ARPS anyone? Any ideas on how to buy PIGS sovereign debt in an ETF or otherwise?

  4. many saw it coming. But thank you for thinking of me as one of the first.

    Certainly remember your posts of that time with accurate precision. As well as your relative support to the dollar as a currency.

    I can say "thanks" again. You were as instrumental in getting my modest pension cash out of the markets.

    As much as Roubini and a couple of others. But you certainly evolved better than he did. I'm sorry to have to say so.

    Concerning the Eurozone, I certainly agree.

    This demise, by proxies (those talking down the currency are not buyers, never were, never will be, they are speculators actively managing their short-term CDS tool set and assorted media partners, including the FF).

    The Euro will go down the tube, just not as fast as the dollar.

    But I would be on its destruction now. The eurozone is mostly balanced externally and savings-wise.

    That been said, I have been full cash for 3 years. But this cash is 95% gold, 5% Euro. I would not touch a dollar or a pound with a pole.

    Concerning the 5% remaining in currency, it is making 0%. I do not care. We are getting into a situation where these interest rates just do no mean anything.

  5. Hell,

    Much obliged for info. Knew you had mentioned it early on. I wish I could remember how I stumbled into this site. Real education it was! Thanks again.


  6. Wikipedia etymology for sophomore:

    The term comes from Greek σόφισμα (sophisma), "acquired skill, clever device, method",[4] in turn from "σοφίζω" (sophizo), "to become wise, to instruct",[5] and the original English spelling was Sophumer.[6] Sophumer is similar to the present participle sophuming, which was formed upon sophum. Sophum is an obsolete variant of sophism, which eventually from the Greek σοφός (sophos), meaning "wise, skilled, clever"[7] (see Σοφία). Sophomore, as an English word, was established in the seventeenth century.[8] It was not until 1726 that the spelling was established in United States as sophomore.[citation needed] Another theory argues that the term sophomore is probably a compound of the Greek σοφός (sophos), "wise" + μωρός (moros), "foolish, dull".[9][10][11]

    Another theory? Sums up this blog.

  7. Hell:

    Did you have something to do with this story?

  8. I somehow doubt you or anyone knows anything about making predictable money legally in the markets. Unless you've acquired Delphic powers, the future is promised to no one.

    80-90% of a financial firm's revenue comes from fees. So if this is true, then it means that even the pros can't regularly make money in the markets ( yes, when QEII and other programs allow for 'perfect trading quarters', that is another matter).

    It's obvious when consistent revenue does flow it is from inside information or elaborately designed ponzi schemes and their CDS ilk.

    The whole financial industry is a sewer.