Mike’s Typo

Reading more and more about this “mad trader” from France’s Societe Generale bank, makes me think of the Abbott & Costello routine: Who’s On First. Really, this is an unbelievable story with the chief executive of the bank calling the culprit of these trades “a terrorist.” That should give you a bit of pause.

As the story goes, the fictitious trading started in 2005. Since then there were several instances where alarms went off, but the trader, Jerome Kerviel, was able to produce sufficient evidence to calm the auditors. What’s interesting is really what he was doing. In the world of finance, he played in a game difficult for most of us to understand. They call it arbitrage. So, arbitrageur, Kerviel, was responsible for buying one type of stock index futures while at the same time selling a similar mix of indexed futures with a slightly different value as a hedge against possible losses. The concept is telling. Betting that a set of futures will go up or down is considered so risky that it’s someone’s job to “hedge” by buying other similar futures that will hopefully act the opposite as markets move. Wow. Complicated. But, don’t worry your money is safe because if the bet is wrong there is an offsetting bet to protect you against a big loss.

So, the game of arbitrage, when played correctly, leads to small profits from very large trades. Ah, but if you’re sure that one set of futures will go up. I’m mean if you are totally, completely sure, then you can make so much more money by not making the “hedge” trade. (Because that position will for sure go down, right?) It’s not arbitrage anymore, but this is what Kerviel was doing. He started small making bets that he was right. And when he was, he made big money for the bank. Way bigger than he could make if he performed his job as defined. Visions of sugarplums were replaced by glory in the eyes of his fellow traders, his bosses, and huge bonuses to reward his brilliance.

Societe Generale’s head of asset management was quoted in this NY Times article as stating that Mr. Kerviel was “massive in money” by the end of December. But, then the European markets turned down in January and his losses mounted. Couldn’t we change the names and the description of the game and call this Las Vegas? Or, how about change the name to Citibank and the game sub-prime mortgages. Ah, where mortals should not dabble.

The money quote: “He bet on the return of the markets that were extremely low and he imagined that there would be a return of the markets just as large as the losses. There is an addiction. There is a dependency on this complicated game of betting on the markets, and there is a sort of spiral into which it is difficult to exit.” This from the french prosecutor.

Alas, my parting thoughts. When it’s over, the US will be blamed for this. Afterall, it was the US economic woes that sent the European markets into a tailspin earlier this month - just at the very moment bank management paniced and sold all of Mr. Kerviel’s positions. What a movie this will make. Or, has it already been made. Anyone remember the line, “Greed is good?” Or how about the book Bonfire of the Vanities.

A new issue of the Typo is in the works. Should hit your emailbox mid-week. This one will have some good editorial content to make up for the embarrassing amount of “sales” related articles that have graced the Typo since Jan. 1. So, stick with us.

But, this one is just too good to leave lay. Or, should that be lie? That’s why I called the publication the Typo. Here’s where I was headed.

One guy. A mid-level employee, has brought France’s second largest bank to its knees with $7 billion in trading losses. Holy Cow, Batman!

Let’s step back and look at this. One guy. $7.2 billion (sorry, this is the correct number; I was only off by $200 million). A bank. Not just any bank. The second largest bank in France. A bank - suppose to be a safe place to put your money. For more than a year, Senor Kerviel (sorry, can’t spell the french equivalent), evaded multiple layers of computer controls and audits. Oh, and this little fact. He didn’t take any of the money. The whole thing was to cover up his bad trades early in the game. Cover one bad trade with a bad trade. Cover those with more bad trades. Is this the way it worked? Las Vegas odds would have been better, right? Probably couldn’t beat the travel controls the bank has in place.

Here is the money quote from the head of the bank (pun intended): “Societe Generale has been the victim of a serious internal fraud committed by an imprudent employee.” Is that the understatement of the year. Ok, and really whose fault is this? Stay tuned. This should develop into an interesting and unbelievable story. Want to read more, link over to the NY Times article.

My friends tell me, “Don’t quit your day job.” They’re right. But, that doesn’t stop me from snapping pictures. When I’m not writing articles for the Typo, I can often be found out playing with my cameras. Many of you saw the Memorial Day exhibit in the Santa Cruz store. I heard a lot of “amazing shots, I had no idea…” So, hoping that this doesn’t come across as too much of the self-promotion that it is - my photo web site is up. I wish I could say the same for other things (like the stock market).

The site is a project that started in November 2002. It had a lot of stops/starts/stops/starts and so on. About six months ago, I finally decided it needed to happen. So, our designer, Richard Miller, has been working to finish the beast. He had a little help. Sasha, from Siberia (a tad north of Russia), did a lot of the behind-the-scenes coding. Sasha’s a freelance-programmer-by-night and a first rate (so I’m told), porn-star-actress-by day. I took the pictures, Richard designed the site, and she wrote the code. Let’s make sure we keep the roles straight. True story. Well, some of it anyway.

You can find the site at mikejamesphoto.com. Hope you enjoy it.

James Nachtwey cut his teeth as a correspondent photographer during the Vietnam War. For the past thirty plus years he has risked his life and sanity documenting wars, conflicts, and social issues throughout the world. He is considered by many to be the greatest war photographer of our time. Simply put, his photographs have moved the world to change. Really. This past March 2007, he was rewarded with the TED Prize (which itself is an interesting story), in Monterey, California. His speech was essentially — Nachtwey narrating a slideshow of photographs from selected projects. These are moving, and thought-provoking images. Many of these projects were self-funded. The magazines he shoots for wouldn’t buy the stories he wanted to expose.

This is 20 minutes you will be glad you spent. It’s the power of the internet at it’s best. It’s the power of photography at it’s best. It’s the power of James Nachtwey at his best. Check it out — you won’t be sorry

From our friends at Abate:

A billion is a difficult number to comprehend, but the following explanation may help put that figure in perspective: A billion seconds ago it was 1975, and the Vietnam War was grinding down. A billion minutes ago was nearly 2000 years, during the time of Christ. A billion hours ago was over 112 thousand years, and our ancestors were still living in the Stone Age. A billion days ago it was 2.7 million BC and hominids were learning to walk upright. A billion years ago earth’s ecosystem became fully formed, and the first multi-cellular organisms appeared. A billion dollars ago was only 3 hours and 53 minutes, at the rate Washington spends it.

Source: The Bailing Wire, ABATE of California, June 2007

My in-laws (and I do love them) have sent my family a Collins Street Bakery Fruit Cake every December for as long as I can remember. This year, it arrived before Thanksgiving. I snuck it into the outside fridge hoping no one would know it arrived. I got through three-quarters of it before anyone caught me. (Answer: a day-and-a-half.) This is the best dang fruit cake you ever tasted. Here is what they say:

World-Famous DeLuxe Fruitcake. A favorite since 1896, still baked faithfully to our original recipe. Each cake is the perfect balance of native pecans (27% by weight) and a delectable blend of the world finest ingredients. Golden sweet pineapple and lush papaya, hand picked on our own farms in Costa Rica. Ripe, red cherries from Oregon and Washington State. Pure clover honey, plump golden raisins and absolutely the finest, freshest pecans, which we shell ourselves right here in Corsicana, Texas…

You get the idea. Order one for a friend, or someone you don’t like — it makes a perfect gift. Order one for yourself — it’ll make a fruitcake-lover out of you!

Editorial comment: The 27% by weight has to be the secret. You know the address. If you don’t, it’s 1148 Soque….

The tears happen. Endure, grieve, and move on. The only person who is with us our entire life is ourselves.
Be ALIVE while you are alive.

Sent in by my dear friend, Mike Scully. How right George is — thanks, Mike!

Source: George Carlin’s How To Keep Young.

American Express and Partners in Preservation have teamed up to fund preservation of historic sites around the Bay Area and Northern California. The one that caught my eye—the Pigeon Point Lighthouse Station. There may be others that are of interest to you. There really are no strings attached; go to the site, sign up, and vote. You can vote once a day. Vote for a new site every day, or keep “stuffing the box” for your favorite site. Wouldn’t this be a great system for electing our politicians? “Hurry, while supplies last….” You can only vote up until 10/31/06.

A reader wrote,

“I’ve never written to you before, but I really need your advice on what could be a crucial decision. I’ve suspected for some time now that my wife has been cheating on me. The usual signs…phone rings, but if I answer, the caller hangs up. Another thing, my wife has been going out with the girls a lot recently. Although, when I ask their names she always says, “Just some friends from work, you don’t know them.”

I’ve taken to staying awake to look out for her taxi coming home, but she always walks around the corner and up the drive. I can hear a car driving off. It’s as if she has gotten out of the car around the corner. Why? Maybe she wasn’t in a taxi?

Once, I picked her cell phone up just to see what time it was, and she went berserk, and screamed that I should never touch her phone again, and why was I checking up on her.

Anyway, I have never broached the subject with my wife. I think deep down I just don’t want to know the truth. Last night she went out again, and I decided to really check on her. So, I parked my Harley-Davidson Heritage next to the garage. I hid behind it so I could get a good view of the whole street and driveway. While I was crouching beside the bike … it was at that moment that I noticed that the rocker box cover on my rear cylinder seemed to be leaking a little oil. Damn it.

Is this something I can fix myself, or should I take it back to the dealer?

Anxiously awaiting your advice,

– Bob

Parting Note — A sign in the window of Goldstein’s Funeral Home in Philadelphia reads, “We would rather do business with 1,000 terrorists than with a single Jew.” God bless America!