Friday, April 23, 2010

Where is my mind?

Well shipmates, you are in for a little treat. Here is a hauntingly beautiful piece of music by Maxence Cyrin ingeniously matched to scenes from the film ‘The mysterious Lady’ (1928) with Greta Garbo. The music, I later discovered, is a cover of a 1980’s song ‘Where is my mind?’ by the Pixies. If you check out the original Pixies version you will be amazed at the genius of Cyrin in transforming it into this subtle and entirely new little masterpiece. The music is from Cyrin’s new album ‘Novo Piano’. Enjoy.

Friday, April 16, 2010

Dark clouds over America - the fabulous Fabrice of Goldman Sachs

The dark, dark, dark side of Wall Street brought into the bright, bright, bright sunlight of day for all to see (from the New York Times):

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail…
The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market…
As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars….
Goldman let Mr. [John] Paulson select mortgage bonds that he wanted to bet against [for Abacus 2007-AC1] — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.
But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.
Mr. Paulson is not being named in the lawsuit.

A 31 year old Goldman Sachs employee (vice-president) Fabrice Tourre is named in the suit for his key role in negociating the deal with reputable capital management firm ACA (from the suit):

(Fabrice) Tourre was principally responsible for ABACUS 2007-AC1. Tourre devised the transaction, prepared the marketing materials and communicated directly with investors. Tourre knew of Paulson’s undisclosed short interest and its role in the collateral selection process. Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-AC1 (a long position) and, accordingly, that Paulson’s interests in the collateral section process were aligned with ACA’s when in reality Paulson’s interests were sharply conflicting.

Felix Salmon sums it up well:

The scandal here is not that Goldman was short the subprime market at the same time as marketing the Abacus deal. The scandal is that Goldman sold the contents of Abacus as being handpicked by managers at ACA when in fact it was handpicked by Paulson; and that it told ACA that Paulson had a long position in the deal when in fact he was entirely short.
Goldman Sachs has lost more than $10 billion in market capitalization today, in the wake of these revelations. Good. It can go long markets and it can go short markets. But it can’t lie to its clients. That’s well beyond the pale.

Beyond the pale indeed. What a sordid tale. Goldman Sachs may have lost $10 billion in market cap, but they have lost something even more valuable: integrity.

I found this passage in the S.E.C. suit particularly damning:

At the same time, GS&Co (Goldman Sachs) recognized that market conditions were presenting challenges to the successful marketing of CDO (collateralized debt obligation) transactions backed by mortgage-related securities. For example, portions of an email in French and English sent by (Fabrice) Tourre to a friend on January 23, 2007 stated, in English translation where applicable: “More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab[rice Tourre]…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”

You can say that again Fab. What a great man you are.

Read more at Naked Capitalism and Felix Salmon. Read the suit here.

Complaint: Goldman, Sachs & Co. and Fabrice TourrePhoto of Goldman Sachs tower by Tattooed JJ

Monday, April 5, 2010

Henryk Sienkiewicz - in the midst of darkness, humour

As you may know, I have been revelling in my recent discovery of the second greatest historical novelist of all time , Henryk Sienkiewicz. He has many of the qualities I admire in my favourite author Patrick O’Brian: an easy, unforced poetic style, historical accuracy that is detailed without being tedious, deftly drawn characters that power a fast-paced story set in a backdrop of events bigger than themselves, and action that does not try to reinvent the wheel but imaginatively places us in the minds of the protagonists. But as I read, I began to feel that there was one thing missing: that warm, friendly humour - never cutting or cynical - that O’Brian uses to illustrate the goodness of his characters as their humanity places them between a rock and a hard place. I missed that humour in the first pages, but I didn’t miss it for long because the following passage had me in tears and is worthy of the best of O’Brian.
Let us set the stage so you can ‘get it’. We have our young, stubborn, brave and upright knightly hero, Zbyszko. We have his old uncle, Macko, the last lord of his great family who has no sons to carry on the family name. That name hangs by a thread in the form of his nephew Zbyszko who could be killed in the war at any moment thus snuffing out the great lineage of the Gradys in an instant. He therefore lives to see Zbyszko married so he can produce heirs. There exists the perfect match for Zbyszko in a local girl, Jagienka, a childhood sweetheart, a beautiful, brave and resourceful girl with a good dowry of neighbouring lands and who loves Zbyszko. And we have the abbot, a very powerful and masterful man, who loves Jagienka like a father and shares Macko’s earnest desire to see her married to his nephew. The only problem to this match made in heaven is that Zbyszko has sworn a knightly vow to serve and marry another girl called Danusia. The abbot knows of this and has taunted and manipulated Zbyszko (he thinks) into challenging and fighting two local suitors of Jagienka, Cztan and Wilk.
Macko and Zbyszko are with the abbot, who is speaking of the merits of Jagienka:

"The girl is perfectly right to be particular in her choice, because she is pretty, rich and of good family! Of what account are Cztan or Wilk, when the son of a ‘wojewoda’ (a prince or duke) would not be too good for her! But if somebody, as myself for instance, spoke in favor of any particular one, then she would marry him, because she loves me and knows that I will advise her well."
"The one whom you advise her to marry, will be very lucky," said Macko.
But the abbot turned to Zbyszko:
"What do you say to this?"
"Well, I think the same as my uncle does."
The face of the abbot became still more serene; he struck Zbyszko's shoulder with his hand so hard that the blow resounded in the chamber, and asked:
"Why did you not let Cztan or Wilk approach Jagienka at church?"
"Because I did not want them to think that I was afraid of them, and I did not want you to think so."
"But you gave the holy water to her."
"Yes, I did."
The abbot gave him another blow.
"Then, take her!"
"Take her!" exclaimed Macko, like an echo.
At this Zbyszko gathered up his hair, put it in the net, and answered quietly:
"How can I take her, when before the altar in Tyniec, I made a vow to Danusia Jurandowna?"
"You made a vow about the peacock's tufts, and you must get them, but take Jagienka immediately."
"No," answered Zbyszko; "afterward when Danusia covered me with her veil, I promised that I would marry her."
The blood began to rush to the abbot's face; his ears turned blue, and his eyes bulged; he approached Zbyszko and said, in a voice muffled with anger:
"Your vows are the chaff and I am the wind; understand! Ot!"
And he blew on Zbyszko's head so powerfully, that the net fell off and the hair was scattered on his shoulders. Then Zbyszko frowned, and looking into the abbot's eyes, he said:
"In my vows is my honor, and over my honor, I alone am the guardian!"
At this, the abbot not being accustomed to opposition, lost his breath to such a degree, that for a time he could not speak. There was an ill-omened silence, which finally was broken by Macko:
"Zbyszku!" exclaimed he, "come to your wits again! What is the matter with you?"
Meanwhile the abbot raised his hand and pointing toward the youth, began to shout:
"What is the matter with him? I know what is the matter; he has not the heart of a nobleman, nor of a knight, but of a hare! That is the matter with him; he is afraid of Cztan and Wilk!"
But Zbyszko, who had remained cool and calm, carelessly shrugged his shoulders and answered:
"Owa! I broke their heads when I was in Krzesnia."
"For heaven's sake!" exclaimed Macko.
The abbot stared for a while at Zbyszko. Anger was struggling with admiration in him, and his reason told him that from that fight, he might derive some benefit for his plans.
Therefore having become cooler, he shouted to Zbyszko:
"Why didn't you tell us that before?"
"Because I was ashamed. I thought they would challenge me, as it is customary for knights to do, to fight on horseback or on foot; but they are bandits, not knights. Wilk first took a board from the table, Cztan seized another and they both rushed against me! What could I do? I seized a bench; well--you know!"
"Are they still alive?" asked Macko.
"Yes, they are alive, but they were hurt. They breathed when I left."
The abbot, rubbing his forehead, listened; then he suddenly jumped from the chest, on which he had seated himself to be more comfortable and to think the matter over, and exclaimed:
"Wait! I want to tell you something!"
"What?" asked Zbyszko.
"If you fought for Jagienka and injured them for her sake, then you are really her knight, not Danusia's; and you must take Jagienka."
Having said this, he put his hands on his hips and looked at Zbyszko triumphantly; but Zbyszko smiled and said:
"Hej! I knew very well why you wanted me to fight with them; but you have not succeeded in your plans."
"Why? Speak!"
"Because I challenged them to deny that Danusia Jurandowna is the prettiest and the most virtuous girl in the world; they took Jagienka's part, and that is why there was a fight."
Having heard this, the abbot stood amazed, and only the frequent movement of his eyes indicated that he was still alive. Finally he turned, opened the door with his foot, and rushed into the other room; there he seized the curved stick from the pilgrim's hands and began to strike the ‘shpilmen’ with it, roaring like a wounded urus.
"To horse, you rascals! To horse, you dog-faiths! I will not put my foot in this house again! To horse, he who believes in God, to horse!"
Then he opened the outer door and went into the court-yard, followed by the frightened seminarists. They rushed to the stable and began to saddle the horses. In vain Macko followed the abbot, and entreated him to remain; swore that it was not his fault. The abbot cursed the house, the people and the fields; when they brought him a horse, he jumped in the saddle without touching the stirrups and galloped away looking, with his large sleeves filled by the wind, like an enormous red bird. The seminarists rushed after him, like a herd following its leader.
Macko stood looking after them for some time; but when they disappeared in the forest, he returned slowly to the room and said to Zbyszko, shaking his head sadly:
"See what you have done?"

Friday, April 2, 2010

Ship's log - April 2010

It has been a strange and wonderful week. Last week the price of one of my major stock holdings was plummeting. Not only did I not sell, I bought more, believing in the underlying value of the company. This week positive developments pushed the price of the stock to relatively new highs.
In another area of my life also, my personal stock seemed to be at bargain-basement level, but I did not sell either. And I have been blessed with a positive surprise there also.

I am reminded of this quote from Buffet:

The market is very efficient at transferring assets from the impatient investor to the patient investor.

The same principle applies to life in general, as we have seen in my posts on patience. But it is still wonderful when the principle bears fruit.

Patience is the companion of wisdom. Saint Augustine

Discover The Tale of Genji, the 11th Century classic of Japan (click image)

Discover The Tale of Genji, the 11th Century classic of Japan (click image)
Kiyomizudera Temple has a large veranda looking out over Kyoto and beyond