Trading Places

“The Tradeworx computers get price quotes from the exchanges, decide how to trade, complete a risk analysis and generate a buy or sell order—in 20 microseconds,” reported the Times in a piece about the new phenomenon of high speed trading (“Speedy New Traders Make Waves Far From Wall St,” NYT, May 16, 2010). Whether you follow Warren Buffett’s notion of the equity based trade or the Soros model based on reflexivity, everything is a little faster these days. It’s like running on a waxed kitchen floor. At some point you’re going to slip and fall. That’s what happened to the market on May 6, when it fell l000 points in a matter of minutes. Of course, everything’s relative in a multiverse where CERN’s Large Hadron Collider recreates Higgs Bosons and other particles that sprang to life a millionth of a second after the Big Bang. The whole structure of the financial world has changed. Blue-blood families, who might have held stocks in companies like Union Carbide, Exxon or IBM for generations, now pride themselves on holding portfolios for over five seconds. Whether you study a company’s spread sheet and involve yourself in a firm’s business, like Buffett did when he purchased his preferred position in Goldman Sachs, or you deal with currency fluctuations and market forces as Soros has done, in the brave new world of finance your relationship with management will be considered long term if you hold a stock for over thirty seconds. But as seasoned high-speed traders learn in their relatively short half-lives, much can happen in a short period of time, a premise that comes to high finance from pornography, where the short loop in which the beginning, middle and end of a sex act are condensed into a single action long ago replaced the more leisurely story lines of Debbie Does Dallas, Behind the Green Door and Deep Throat. Yes, the old Newtonian trading, where investors purchased stock and actually received certificates that they put in their vaults, is a vestige of an age when people read books like Lady Chatterley’s Lover, Tropic of Cancer and Ulysses.

Grease!

Ever since George Soros shorted England in ‘92, there has been a growing market for profiting on the misfortunes of countries. The latest turmoil relating to Goldman Sachs’s role in lending to countries they then bet against, with the infamous but still beloved credit default swap, is a good thumbnail of the problems of Greece. The Times reported that a value-free company in London innocuously named the Markit Group introduced something called the iTraxx SovX Western Europe index, which “let traders gamble on Greece shortly before the crisis.” Remember Santayana’s famous line, “those who cannot learn from history are doomed to repeat it?” Having achieved success with insurance companies like AIG, major investment banks like Goldman Sachs are applying the lesson to countries. The concept of short selling, the stock market’s way of allowing folks to profit on the problems of others, is the financial equivalent of the psychological concept of schadenfreude, the enjoyment of other people’s suffering.  It’s fun to see someone fail at a lifetime’s work— almost as much fun as seeing an acrobat fall from the high wire. But is it profitable? Savvy investment banks have their cake and eat it too. Before Greece there was Iceland, and there was a period in 2009 when Great Britain was called Iceland on the Thames. It’s like hunting season. You can almost hear the barking of the hounds and the blare of the horns as a bevy of financial experts from overdeveloped countries track down their undeveloped brethren, whose bounced checks reek of taramosalata. “It’s like buying fire insurance on your neighbor’s house,” says Philip Gisdakis, head of Unicredit in Munich, in the Times article, “you create an incentive to burn down the house.”  Profits being what they are, one begins to wonder about the turmoil in our world today. Ever hear of arson?  

Parallel Universe II

34 is the Parallel Universe that exists on Patchen Place in the 1940s. Djuna Barnes is the doyenne and the lingua franca is women who love women. However, it should be pointed out that in 34 it is perfectly acceptable to be a heterosexual male who has the sensibility of a woman who loves women. Beyond that, life goes on as normal, with the legendary Maxwell Perkins holding court uptown, and the downtown world of La Bohème remaining curiously immune to both the highs and lows, both the temptations and excitements of trade publishing. By the way, there goes John Dos Passos, who has become a total fascist, despite his wondrous U.S.A. Trilogy.

   

The parallel universe is really the land of opportunity.  There is one to fit every personality and sexual orientation, and naturally one to accommodate even the most eccentric schedules. For instance, there is a parallel universe fitted to the second after your birth and the tenth, hundredth and thousandth of a second before that. There is a parallel universe where you make a fortune shorting currency, like George Soros, and another one where you lose your shirt. Most importantly, there is the parallel universe where you drive down Maple Street and are blindsided by another driver, and another where you get into a fight with your wife, making you late for the potential accident. In that universe you go on to live a long and happy life.  Finite matter and infinite time—these are the two variables to think about when it comes to the question of parallel universes.