CONTEXT

July 13, 2014

Playing in the street

Charles Ponzi

Carlo Ponzi

At the end of his life, Carlo Ponzi reportedly said that “Even if they never got anything for it, it was cheap at that price…It was easily worth fifteen million bucks to watch me put the thing over…”

I’m working my way backwards through Michael Lewis’s books and just finished The Big Short (2010), which reminded me of Ponzi on every page. I suspect a number of mortgage bond traders secretly felt exactly the same way.

In fact, the mortgage bond market, credit default swaps. CDOs. tranches and so on, were the stuff of a Ponzi dream. All imaginary. all made-up to confuse the investor, professional as well as amateur. (Don’t feel bad if you don’t actually understand what a credit default swap is – neither did most of the guys who were selling them.)

Lewis has an eerily good grasp of all this stuff – I am in awe of his talent for making it both comprehensible and interesting. He really is the Boswell of Wall Street, not that its denizens ever wanted one. What carries the plot is the good guys and he always finds some.

It isn’t a case of black hats and white hats, exactly, more a case of pale gray hats and dark gray hats. The real theme of The Big Short is – much like Flash Boys – who put the inmates in charge of the asylum?

It’s not an exaggeration to say that Wall Street is apparently delusional. They just make shit up over there, really, and they all go along with it.  Not only does the Emperor have no clothes, but everybody else is naked too and they refuse to admit it until the weather gets very, very bad.

Which doesn’t matter to me and shouldn’t to you, as long as we all steer well clear of Crazy Street.

Oh wait – there is one thing that should matter: Our government decided to give these loonies $700 billion of our money when their little game got out of hand. That hurts.

And more to the point, it only encourages them, because they seem to be at it again.

 

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4 Comments »

  1. What an amazing game they play… Great post! 🙂

    Comment by ninachat — July 13, 2014 @ 12:12 pm | Reply

  2. Love the gray hat idea , nice Web blog

    Comment by avery zia — July 14, 2014 @ 6:34 am | Reply

  3. And we refuse to learn from past mistakes and misdeeds! Lewis makes the whole Wall Street ‘Quant’ phenomenon comprehensible. Let’s not forget: The nature of a bubble is that it bursts….

    Comment by Celia Carroll — July 19, 2014 @ 2:39 pm | Reply


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