BusterStronghart@Gmail.com
As a man who revels when discovering the moral failings and hypocrisy in others, especially in our political leaders, I was struck by this:
"It may be gratifying to watch one's moral superiors fall on their faces, but it is also a good idea to look around and see whether there is anyone left to lean upon."
Louis Auchincloss, Honorable Men
Monday, February 01, 2010
Sunday, January 31, 2010
BusterStronghart@Gmail.com
YES, write, if you want to, there's nothing like trying;
Who knows what a treasure your casket may hold?
Oliver Wendel Holmes
YES, write, if you want to, there's nothing like trying;
Who knows what a treasure your casket may hold?
Oliver Wendel Holmes
Monday, January 25, 2010
BusterStronghart@Gmail.com
The grandfather clock is the reflection of its historical period when time was orderly and slow. Tick-tock. Tick-tock. Tick-tock. It stood there in the front hall, its great carven case, with a pendulum like the sun or the moon. There was something monumental and solid about time. By the nineteen-thirties and forties wristwatches were neurotic and talked very fast, tick-tick-tick-tick -- with a sweep secondhand going around. Today we have liquid-crystal watches that don't show any time at all until you press a button. Then the numbers show up. And when you take your finger off, time disappears.
---------------------------------------------------------------------------------------
And from a long time ago: Wednesday, November 21, 2007
"There comes a time when time passing becomes time remaining."
I had no idea what I said. Here's St Eve's first reply.
This is a complicated statement and requires some thought to unravel. The passage of time is a perception that depends upon cause and effect occurrence in the physical world and the apprehension of those causes followed by their associated effects. The batter hits the pitched ball. Then there is the memory of those relations and their order of occurrence. Sight of the ball and sound of the bat hitting the ball this becomes the sensed passage of time. So when the time remaining to our lives becomes the sensed moment of times' passage; it is the last moment-end time. Now some might accuse me of being philosophically narrow and bending the meaning to my own ends but if you think about what time perception is really all about then my conclusion seems unavoidable. If this is not clear I will gladly restate it.
Ss
Gross asked for a restatement. So here's St Eve's second reply or re-statement.
Inherent within the above statement, there is a structure to time. There is past, present and future time.
Time coming is its emergence out of the future to become the present moment. No matter how brief that moment is, it lapses and becomes the next moment. As it passes it becomes past time. Historical time and future time are infinites with present time sandwiched in between. Time passing from future to present to past is the accepted linear configuration in western society.
In the second part of the statement, “time remaining” has to be assumed to be a personal subset of future moments that constitutes the finite period of the person’s life that they have left to live.
So when that packet of future time, the remainder of one’s life’s moments becomes passing time, and entering the past then one's life is over the next instant. When the time remaining to one's life passes it is all over.
To restate the notions related to the perception of time embedded in the above statement is less . This perception is complex and comes from our senses which record in memory happenings sequentially with antecedent and subsequent events. They may be cause and effect but as Katz has pointed out may just be sequential.
The order of occurrence and their recording on RNA and reading that order may be how we know that events are past time and we are able to place them in their temporal order by their physical placement in the RNA molecule.
There are many exceptions to time perception which are intriguing.
Time passing fast, passing slowly: time standing still, athletes in “the zone “with altered time perception and increased performance abilities.
When my understanding improves with research I will pass it on.
ss
The grandfather clock is the reflection of its historical period when time was orderly and slow. Tick-tock. Tick-tock. Tick-tock. It stood there in the front hall, its great carven case, with a pendulum like the sun or the moon. There was something monumental and solid about time. By the nineteen-thirties and forties wristwatches were neurotic and talked very fast, tick-tick-tick-tick -- with a sweep secondhand going around. Today we have liquid-crystal watches that don't show any time at all until you press a button. Then the numbers show up. And when you take your finger off, time disappears.
---------------------------------------------------------------------------------------
And from a long time ago: Wednesday, November 21, 2007
"There comes a time when time passing becomes time remaining."
I had no idea what I said. Here's St Eve's first reply.
This is a complicated statement and requires some thought to unravel. The passage of time is a perception that depends upon cause and effect occurrence in the physical world and the apprehension of those causes followed by their associated effects. The batter hits the pitched ball. Then there is the memory of those relations and their order of occurrence. Sight of the ball and sound of the bat hitting the ball this becomes the sensed passage of time. So when the time remaining to our lives becomes the sensed moment of times' passage; it is the last moment-end time. Now some might accuse me of being philosophically narrow and bending the meaning to my own ends but if you think about what time perception is really all about then my conclusion seems unavoidable. If this is not clear I will gladly restate it.
Ss
Gross asked for a restatement. So here's St Eve's second reply or re-statement.
Inherent within the above statement, there is a structure to time. There is past, present and future time.
Time coming is its emergence out of the future to become the present moment. No matter how brief that moment is, it lapses and becomes the next moment. As it passes it becomes past time. Historical time and future time are infinites with present time sandwiched in between. Time passing from future to present to past is the accepted linear configuration in western society.
In the second part of the statement, “time remaining” has to be assumed to be a personal subset of future moments that constitutes the finite period of the person’s life that they have left to live.
So when that packet of future time, the remainder of one’s life’s moments becomes passing time, and entering the past then one's life is over the next instant. When the time remaining to one's life passes it is all over.
To restate the notions related to the perception of time embedded in the above statement is less . This perception is complex and comes from our senses which record in memory happenings sequentially with antecedent and subsequent events. They may be cause and effect but as Katz has pointed out may just be sequential.
The order of occurrence and their recording on RNA and reading that order may be how we know that events are past time and we are able to place them in their temporal order by their physical placement in the RNA molecule.
There are many exceptions to time perception which are intriguing.
Time passing fast, passing slowly: time standing still, athletes in “the zone “with altered time perception and increased performance abilities.
When my understanding improves with research I will pass it on.
ss
Saturday, January 23, 2010
Friday, January 22, 2010
BusterStronghart@Gmail.com
This is true Liberty when free born men
Having to advise the public may speak free,
Which he who can, and will, deserv's high praise,
Who neither can nor will, may hold his peace;
What can be juster in a State then this?
Eurip. Hicetid.
This is true Liberty when free born men
Having to advise the public may speak free,
Which he who can, and will, deserv's high praise,
Who neither can nor will, may hold his peace;
What can be juster in a State then this?
Eurip. Hicetid.
Saturday, January 16, 2010
BusterStronghart@Gmail.com
Things are seldom what they seem,
Skim milk masquerades as cream.
Externals don't portray insides,
Jekylls may be masking Hydes.
Things are seldom what they seem,
Skim milk masquerades as cream.
Externals don't portray insides,
Jekylls may be masking Hydes.
Tuesday, January 12, 2010
BusterStronghart@Gmail.com
RSVP from a friend.
I seem to represent the lone hold out. Yes Wed is the date and I consulted my calendar
and there are no prior appointments for that day. Before I assent to the meeting
I feel it appropriate to share with you my dark mood which might taint the upcoming
evening if it persists.
Upon my return from my brief trip abroad I noted in my Staatsburg kitchen an excess of
mouse turds in several corners. The weather has been bitterly cold for the last few weeks and in my absence the brown mice have found their way into the house from outside and made their way up to the kitchen in search for food.
For a man who is trying each day to live in greater harmony with his whole environment
the presence of mouse turds in his kitchen posed a disturbing contradiction. Let them be they are living creatures perhaps with little souls with a need for life and participation in the great karmic wheel.
On the other hand, they spread filth with their indiscriminate urination and defecation and will multiply endlessly to meet the limits of the food supply and beyond. I,without much hesitation, chose the killing. With standard mouse traps and peanut butter, I executed 10+ furry creatures mostly by crushing their skulls. Yes, me first; human over animals when the choice comes. But then where does it stop?
The entire protein-for-humans industry adopts this tenet in spades. We not only kill them. We eat the animals too. I have just returned from France where eating animals has been raised to high art. There are unintended consequences. It is a disaster for the planet.
So as soon as I finish the bouef in the frig I will try once again my hand and mouth at
being a vegetarian. So here is the bottom line by next Wednesday, my new regime will be in full swing. So I would prefer, if I am to eat with you all and not just watch, that the restaurant choice be one where a vegetarian can get a reasonable meal without feeling like a freak. Indian food would be nice.
ss
RSVP from a friend.
I seem to represent the lone hold out. Yes Wed is the date and I consulted my calendar
and there are no prior appointments for that day. Before I assent to the meeting
I feel it appropriate to share with you my dark mood which might taint the upcoming
evening if it persists.
Upon my return from my brief trip abroad I noted in my Staatsburg kitchen an excess of
mouse turds in several corners. The weather has been bitterly cold for the last few weeks and in my absence the brown mice have found their way into the house from outside and made their way up to the kitchen in search for food.
For a man who is trying each day to live in greater harmony with his whole environment
the presence of mouse turds in his kitchen posed a disturbing contradiction. Let them be they are living creatures perhaps with little souls with a need for life and participation in the great karmic wheel.
On the other hand, they spread filth with their indiscriminate urination and defecation and will multiply endlessly to meet the limits of the food supply and beyond. I,without much hesitation, chose the killing. With standard mouse traps and peanut butter, I executed 10+ furry creatures mostly by crushing their skulls. Yes, me first; human over animals when the choice comes. But then where does it stop?
The entire protein-for-humans industry adopts this tenet in spades. We not only kill them. We eat the animals too. I have just returned from France where eating animals has been raised to high art. There are unintended consequences. It is a disaster for the planet.
So as soon as I finish the bouef in the frig I will try once again my hand and mouth at
being a vegetarian. So here is the bottom line by next Wednesday, my new regime will be in full swing. So I would prefer, if I am to eat with you all and not just watch, that the restaurant choice be one where a vegetarian can get a reasonable meal without feeling like a freak. Indian food would be nice.
ss
Saturday, January 09, 2010
BusterStronghart@Gmail.com
From "To The Finland Station", Edmund Wilson
(From Hegel came the idea that)"...the great revolutionary figures of history were not simply remarkable individuals, who moved mountains by their single wills, but the agents through which the forces of the societies behind them accomplished their unconscious purposes. Julius Caesar, says Hegel, for example, did of course fight and conquer his rivals, and destroy the constitution of Rome in order to win his own position of supremacy, but what gave him his importance for the world was the fact that he was performing the necessary feat--only possible through autocratic control--of unifying the Roman Empire."
"'It was not then merely his private gain, but an unconscious impulse,' writes Hegel, 'that occasioned the accomplishment for which the time was ripe. Such are all great historical men--whose own particular aims involve those large issues which are the will of the World-Spirit."'
"They may be called Heroes, inasmuch as they have derived their purposes and their vocation, not from the calm course of things, sanctioned by the existing order; but from a concealed fount -- one which has not obtained to a phenomenal, present existence. -- From that inner Spirit, still hidden which, impinging on the outer world as on a shell, bursts it in pieces, because it is another kernel than that which belonged to the shell in question. They present themselves, therefore, as men who appear to draw the impulse of their life from themselves; and whose deeds have produced a condition of things and a complex of historical relations which appear to be only their interest,, and their work."
"Such individuals have had no consciousness of the general Idea they were unfolding, while prosecuting those aims of theirs; on the contrary, they were practical, political men. But at the same time they were thinking men,
"This was the very Truth for their age, for their world; the species next in order, so to speak, and which was already formed in the womb of the time. It was theirs to know this nascent principle; the necessary, directly sequent step in progress, which their world was to take; to make this their aim, and to expend their energy in promoting it."
"...For that Spirit which had taken this fresh step in history is the inmost soul of all individuals; but abides in a state of unconsciousness from which the great men in question aroused it."
"Their fellows, therefore, follow these soul-leaders; for they feel the irrestible power of their own inner spirit thus embodied.
From "To The Finland Station", Edmund Wilson
(From Hegel came the idea that)"...the great revolutionary figures of history were not simply remarkable individuals, who moved mountains by their single wills, but the agents through which the forces of the societies behind them accomplished their unconscious purposes. Julius Caesar, says Hegel, for example, did of course fight and conquer his rivals, and destroy the constitution of Rome in order to win his own position of supremacy, but what gave him his importance for the world was the fact that he was performing the necessary feat--only possible through autocratic control--of unifying the Roman Empire."
"'It was not then merely his private gain, but an unconscious impulse,' writes Hegel, 'that occasioned the accomplishment for which the time was ripe. Such are all great historical men--whose own particular aims involve those large issues which are the will of the World-Spirit."'
"They may be called Heroes, inasmuch as they have derived their purposes and their vocation, not from the calm course of things, sanctioned by the existing order; but from a concealed fount -- one which has not obtained to a phenomenal, present existence. -- From that inner Spirit, still hidden which, impinging on the outer world as on a shell, bursts it in pieces, because it is another kernel than that which belonged to the shell in question. They present themselves, therefore, as men who appear to draw the impulse of their life from themselves; and whose deeds have produced a condition of things and a complex of historical relations which appear to be only their interest,, and their work."
"Such individuals have had no consciousness of the general Idea they were unfolding, while prosecuting those aims of theirs; on the contrary, they were practical, political men. But at the same time they were thinking men,
"This was the very Truth for their age, for their world; the species next in order, so to speak, and which was already formed in the womb of the time. It was theirs to know this nascent principle; the necessary, directly sequent step in progress, which their world was to take; to make this their aim, and to expend their energy in promoting it."
"...For that Spirit which had taken this fresh step in history is the inmost soul of all individuals; but abides in a state of unconsciousness from which the great men in question aroused it."
"Their fellows, therefore, follow these soul-leaders; for they feel the irrestible power of their own inner spirit thus embodied.
BusterStronghart@Gmail.com
"Lying here, during all this time after my own small fall, it has become my conviction that things mean pretty much what we want them to mean. We'll pluck significance from the least consequential happenstance if it suits us and happily ignore the most flagrantly obvious symmetry between separate aspects of our lives if it threatens some cherished prejudice or cosily comforting belief; we are blindest to precisely whatever might be most illuminating."
-- from Transition, by Iain M. Banks
Still a man hears what he wants to hear
And disregards the rest
-- The Boxer, by Paul Simon
"Lying here, during all this time after my own small fall, it has become my conviction that things mean pretty much what we want them to mean. We'll pluck significance from the least consequential happenstance if it suits us and happily ignore the most flagrantly obvious symmetry between separate aspects of our lives if it threatens some cherished prejudice or cosily comforting belief; we are blindest to precisely whatever might be most illuminating."
-- from Transition, by Iain M. Banks
Still a man hears what he wants to hear
And disregards the rest
-- The Boxer, by Paul Simon
Thursday, January 07, 2010
BusterStronghart@Gmail.com
I could always live in my art, but never in life.
Ingmar Bergman, Autumn Sonata.
I could always live in my art, but never in life.
Ingmar Bergman, Autumn Sonata.
Wednesday, December 30, 2009
BusterStronghart@Gmail.com
"Nobody reads a mystery to get to the middle. They read it to get to the end. If it's a letdown, they won't buy anymore. The first page sells that book. The last page sells your next book."
Mickey Spillane (quoted in Jon Winokur, W.O.W.: Writers on Writing)
"Nobody reads a mystery to get to the middle. They read it to get to the end. If it's a letdown, they won't buy anymore. The first page sells that book. The last page sells your next book."
Mickey Spillane (quoted in Jon Winokur, W.O.W.: Writers on Writing)
Sunday, December 27, 2009
BusterStronghart@Gmail.com
He was one of those not born for death--unlike the rest of us born between the poles.
"What are a hundred years, a thousand years, when a single instant effaces all of them."
Alan Badiou
When the cage opens after thirty years you can't fly anywhere.
He who follows another will never overtake him.
When I die I'll discover that I really hadn't lived or as Thoreau put it, "that one has lived what was not life."
Enslaved to work and to the attempt to make money my soul has been crushed--we all create our own jails, (Gary Watson, Salmagundi, nos 164-165)
And of course, my favorite, Cavafy, "the Walls"
Walls
Without regard, compassion or shame,
they built around me great high walls.
And I sit here now, and despair.
No other thought: My fate eats me.
Because I had so many things to do outside.
Alas, when they were building the walls
How could I not pay attention?
But I never heard noise from the builders, not a
sound.
Without my notice the closed me in from the world
outside.
C. P. Cavafy, 1896 - '97
translator: Alan A. Boegehold
+++++++++++++++++++++++++++++++++++++++
Walls
Without pity, without shame, without consideration
They've built around me enormous, towering walls.
And I sit here now in growing desperation.
This fate consumes my mind, I think of nothing else:
Because I had so many things to do out there.
O while they built the walls, why did I not look out?
But no noise, no sound from the builders did I hear.
Imperceptively they shut me off from the world without.
C.P. Cavafy, 1896-'97
Translator, Daniel Mendelson.
++++++++++++++++++++++++++++++++++++++++++++++++++++
Here's a weaker translation:
Walls
With no consideration, no pity, no shame,
they have built walls around me, thick and high.
And now I sit here feeling hopeless.
I can't think of anything else: this fate gnaws my mind -
because I had so much to do outside.
When they were building the walls, how could I not have noticed!
But I never heard the builders, not a sound.
Imperceptibly they have closed me off from the outside world.
Constantine P. Cavafy
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
"who built these walls? -- me," for starters.
He was one of those not born for death--unlike the rest of us born between the poles.
"What are a hundred years, a thousand years, when a single instant effaces all of them."
Alan Badiou
When the cage opens after thirty years you can't fly anywhere.
He who follows another will never overtake him.
When I die I'll discover that I really hadn't lived or as Thoreau put it, "that one has lived what was not life."
Enslaved to work and to the attempt to make money my soul has been crushed--we all create our own jails, (Gary Watson, Salmagundi, nos 164-165)
And of course, my favorite, Cavafy, "the Walls"
Walls
Without regard, compassion or shame,
they built around me great high walls.
And I sit here now, and despair.
No other thought: My fate eats me.
Because I had so many things to do outside.
Alas, when they were building the walls
How could I not pay attention?
But I never heard noise from the builders, not a
sound.
Without my notice the closed me in from the world
outside.
C. P. Cavafy, 1896 - '97
translator: Alan A. Boegehold
+++++++++++++++++++++++++++++++++++++++
Walls
Without pity, without shame, without consideration
They've built around me enormous, towering walls.
And I sit here now in growing desperation.
This fate consumes my mind, I think of nothing else:
Because I had so many things to do out there.
O while they built the walls, why did I not look out?
But no noise, no sound from the builders did I hear.
Imperceptively they shut me off from the world without.
C.P. Cavafy, 1896-'97
Translator, Daniel Mendelson.
++++++++++++++++++++++++++++++++++++++++++++++++++++
Here's a weaker translation:
Walls
With no consideration, no pity, no shame,
they have built walls around me, thick and high.
And now I sit here feeling hopeless.
I can't think of anything else: this fate gnaws my mind -
because I had so much to do outside.
When they were building the walls, how could I not have noticed!
But I never heard the builders, not a sound.
Imperceptibly they have closed me off from the outside world.
Constantine P. Cavafy
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
"who built these walls? -- me," for starters.
Thursday, December 24, 2009
BusterStronghart@Gmail.com
Self-Description--Christmas day, 2009:
Avid reader, adroit non-believer, practiced forgetter, un-remorseful sinner.
Notes: the left is caught in a web of miserabilism, and most of us basically have a tragic sense of life.
Self-Description--Christmas day, 2009:
Avid reader, adroit non-believer, practiced forgetter, un-remorseful sinner.
Notes: the left is caught in a web of miserabilism, and most of us basically have a tragic sense of life.
Monday, December 21, 2009
BusterStronghart@Gmail.com
Growing old teaches me that being matters more than knowing.
Harold Bloom
Growing old teaches me that being matters more than knowing.
Harold Bloom
Sunday, December 20, 2009
BusterStronghart@Gmail.com
Compassion. Karen Armstrong.
Compassion. Karen Armstrong.
"Compassion means putting yourself in the position of the other, learning about the other."
Monday, December 14, 2009
BusterStronghart@Gmail.com
What ever you say, say nothing. Seamus Heany
Welcome, O life! I go to encounter for the millionth time the reality of experience and to forge in the smithy of my soul the uncreated conscience of my soul. James Joyce, A Portrait.
What ever you say, say nothing. Seamus Heany
Welcome, O life! I go to encounter for the millionth time the reality of experience and to forge in the smithy of my soul the uncreated conscience of my soul. James Joyce, A Portrait.
BusterStronghart@Gmail.com
...................Important aporia, aporetic.
a·po·ri·a (-pôr-, -pr-)
n.
1. A figure of speech in which the speaker expresses or purports to be in doubt about a question.
2. An insoluble contradiction or paradox in a text's meanings.
[Greek, difficulty of passing, from aporos, impassable : a-, without; see a-1 + poros, passage; see per-2 in Indo-European roots.]
The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.
aporia [əˈpɔːrɪə]
n
1. (Literature / Rhetoric) Rhetoric a doubt, real or professed, about what to do or say
2. (Philosophy) Philosophy puzzlement occasioned by the raising of philosophical objections without any proffered solutions, esp in the works of Socrates
[from Greek, literally: a state of being at a loss]
aporetic [ˌæpəˈrɛtɪk] adj
...................Important aporia, aporetic.
a·po·ri·a (-pôr-, -pr-)
n.
1. A figure of speech in which the speaker expresses or purports to be in doubt about a question.
2. An insoluble contradiction or paradox in a text's meanings.
[Greek, difficulty of passing, from aporos, impassable : a-, without; see a-1 + poros, passage; see per-2 in Indo-European roots.]
The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved.
aporia [əˈpɔːrɪə]
n
1. (Literature / Rhetoric) Rhetoric a doubt, real or professed, about what to do or say
2. (Philosophy) Philosophy puzzlement occasioned by the raising of philosophical objections without any proffered solutions, esp in the works of Socrates
[from Greek, literally: a state of being at a loss]
aporetic [ˌæpəˈrɛtɪk] adj
Thursday, December 10, 2009
BusterStronghart@Gmail.com
..................Truth, Beauty, Goodness
Dear Jason,
When your Dad and I were at Horace Mann we had a wonderful art teacher named Ion Theodore. He lived in the dormitory and was a sculptor. He chipped away at wood and granite through the night and taught in the daytime. As my room was next to his room(s) I was kept awake by his steady, rhythmic chipping.
He liked to expound his ideas to us, when he wasn’t pounding his mallet.
Ion was a wonderful man, soft, compassionate, and patient. He made time to speak to each of us individually. He liked to emphasize that he believed that we should lead our lives seeking “Truth, Beauty, and Goodness."
I am not absolutely sure that these were the three icons that he urged on us. I googled “truth and beauty” hoping to find the three correct words. Google took me to the Steiner book, “Truth, Beauty, and Goodness.” Do you know whether there is a different set of ideals that Mr. Theodore may have said to me?
If Truth, Beauty, and Goodness, are the correct ideals, do you know where originated? It sounds Greek, but I would like to know.
mike
---------------------------------------------------------------------------------------
Dear Mike,
The Good was the highest archetype for Plato and the neo-platonists. From the Good, Truth and Beauty emanated (I think in this order). From this trinity of archetypes, lesser archetypes emanated until finally the material world - a shadowy reflection of the world of archetypes - distilled out.
Try Plato or Plotinus as sources.
Steiner felt that all education should kindle the natural feelings for Truth, Beauty and Goodness that all young people have inherently. The natural idealism of teenagers in particular must be cultivated. This idealism is in danger from the dark sides of modern life and human history. He felt students must have outlet to exercise activity to counter these dark "forces."
Your teacher was a natural pedagogue. How wonderful to have a student who remembers and ponders these ideas long after hearing them.
I hope this was helpful and that all is well with you and your family,
Jason
________________________________________
..................Truth, Beauty, Goodness
Dear Jason,
When your Dad and I were at Horace Mann we had a wonderful art teacher named Ion Theodore. He lived in the dormitory and was a sculptor. He chipped away at wood and granite through the night and taught in the daytime. As my room was next to his room(s) I was kept awake by his steady, rhythmic chipping.
He liked to expound his ideas to us, when he wasn’t pounding his mallet.
Ion was a wonderful man, soft, compassionate, and patient. He made time to speak to each of us individually. He liked to emphasize that he believed that we should lead our lives seeking “Truth, Beauty, and Goodness."
I am not absolutely sure that these were the three icons that he urged on us. I googled “truth and beauty” hoping to find the three correct words. Google took me to the Steiner book, “Truth, Beauty, and Goodness.” Do you know whether there is a different set of ideals that Mr. Theodore may have said to me?
If Truth, Beauty, and Goodness, are the correct ideals, do you know where originated? It sounds Greek, but I would like to know.
mike
---------------------------------------------------------------------------------------
Dear Mike,
The Good was the highest archetype for Plato and the neo-platonists. From the Good, Truth and Beauty emanated (I think in this order). From this trinity of archetypes, lesser archetypes emanated until finally the material world - a shadowy reflection of the world of archetypes - distilled out.
Try Plato or Plotinus as sources.
Steiner felt that all education should kindle the natural feelings for Truth, Beauty and Goodness that all young people have inherently. The natural idealism of teenagers in particular must be cultivated. This idealism is in danger from the dark sides of modern life and human history. He felt students must have outlet to exercise activity to counter these dark "forces."
Your teacher was a natural pedagogue. How wonderful to have a student who remembers and ponders these ideas long after hearing them.
I hope this was helpful and that all is well with you and your family,
Jason
________________________________________
Wednesday, December 09, 2009
BusterStronghart@Gmail.com
“Los elefantes son contagiosos.”
Paul Eluard.
“Él estaba poseído del más sagrado berretín cósmico: El hombre quería vivir todas las vidas y estaba condenado a transitar solamente por una. Aprendan a soñar los que se contentan con sacar la lotería.”
Alejandro Dolina.
Crónicas del Ángel Gris.
“Casi nunca nos damos cuenta de que podemos suprimir cualquier cosa de nuestras vidas en cualquier momento y en un abrir y cerrar de ojos.”
Don Juan / Castaneda.
“Los elefantes son contagiosos.”
Paul Eluard.
“Él estaba poseído del más sagrado berretín cósmico: El hombre quería vivir todas las vidas y estaba condenado a transitar solamente por una. Aprendan a soñar los que se contentan con sacar la lotería.”
Alejandro Dolina.
Crónicas del Ángel Gris.
“Casi nunca nos damos cuenta de que podemos suprimir cualquier cosa de nuestras vidas en cualquier momento y en un abrir y cerrar de ojos.”
Don Juan / Castaneda.
Tuesday, December 08, 2009
BusterStronghart@Gmail.com
Katatonia: Lyrics from Black Session
Katatonia Black Session Lyrics:
I sense infliction in the air
it's only me
I'm fucking up old times
it's a remembrance
O this
black session in my mind
O the black
I was too weak to fight the black
once more I let go
it is a black session
an invitation of sorts
I keep on living in
this my only wish
that life will be good someday
I keep on losing my
sleep because of this
seems so hard just to stay
so if you come by just
this last time
I'll be here
and I will talk to you like
if this had never been
O this
black session in my mind
O the black
Katatonia: Lyrics from Black Session
Katatonia Black Session Lyrics:
I sense infliction in the air
it's only me
I'm fucking up old times
it's a remembrance
O this
black session in my mind
O the black
I was too weak to fight the black
once more I let go
it is a black session
an invitation of sorts
I keep on living in
this my only wish
that life will be good someday
I keep on losing my
sleep because of this
seems so hard just to stay
so if you come by just
this last time
I'll be here
and I will talk to you like
if this had never been
O this
black session in my mind
O the black
BusterStronghart@Gmail.com
This is strange:
CNC says that "the Very Very Rich could do a bit more." What about the very rich? No? Or the Rich? Or the rest of us, who are living the middle class life?
-
You mean that there isn't anything that we could/should do for others? Did you know that the poorest are percentage-wise the most generous with their money?
I spent $120 for dinner for two the other night. Shouldn't I have helped the poor with that money? Or a part of it? According to the World Health Organization there are one billion undernourished people in the world. There are millions who are worse than undernourished--they are starving to death.
-
Are you saying that: "I work for my money, and I don't think that I should have to pay taxes that help someone else.?"
This is strange:
CNC says that "the Very Very Rich could do a bit more." What about the very rich? No? Or the Rich? Or the rest of us, who are living the middle class life?
-
You mean that there isn't anything that we could/should do for others? Did you know that the poorest are percentage-wise the most generous with their money?
I spent $120 for dinner for two the other night. Shouldn't I have helped the poor with that money? Or a part of it? According to the World Health Organization there are one billion undernourished people in the world. There are millions who are worse than undernourished--they are starving to death.
-
Are you saying that: "I work for my money, and I don't think that I should have to pay taxes that help someone else.?"
Friday, December 04, 2009
BusterStronghart@Gmail.com
Lamenting Argentina's deteriorating polital situation Borges says it was the same as when he went slowly blind: "It is like watching slow sunset."
Quoted by Michael Greenberg, who was quoted in turn by Jay Neugeboren in the New York Review Dec 17, 2009
Lamenting Argentina's deteriorating polital situation Borges says it was the same as when he went slowly blind: "It is like watching slow sunset."
Quoted by Michael Greenberg, who was quoted in turn by Jay Neugeboren in the New York Review Dec 17, 2009
BusterStronghart@Gmail.com
What difference is it whether we spend our days reading the newspaper, playing cards with the boys, creating art works, writing books, reading poetry or William James, or Paul Auster, having dinner with friends, studying, going to schul or church, golfing, doing Law, Business, or Medicine, reading philosophy, handicapping the horses, going to the theater, or watching television?
Is there any difference?
mek
What difference is it whether we spend our days reading the newspaper, playing cards with the boys, creating art works, writing books, reading poetry or William James, or Paul Auster, having dinner with friends, studying, going to schul or church, golfing, doing Law, Business, or Medicine, reading philosophy, handicapping the horses, going to the theater, or watching television?
Is there any difference?
mek
Tuesday, December 01, 2009
BusterStronghart@Gmail.com
Living on a hook takes away your appetite.
...................Orson Wells, "Woman from Shanghai."
Living on a hook takes away your appetite.
...................Orson Wells, "Woman from Shanghai."
Friday, November 20, 2009
BusterStronghart@Gmail.com
***
Chapter One
I discover Ralph Blakelock and Paul Auster
Dear Edgar:
Perhaps one of these days we shall meet. I came upon the Questroyal Fine Art Gallery when I read of a mad artist, called Ralph Albert Blakelock. He is mentioned in one of Paul Auster's early novels, where it is also mentioned that some his work is in the Brooklyn Museum. I was, and am, interested in Auster and as I was working on Remsen Street at the time, I thought I would go over and see the mad painter's work.
Blakelock was an American Painter of the Catskill School and during his lifetime was very popular. His specialty was blazing sunsets behind dour landscapes, sometimes with Indian encampments in the distance. He was in and out of straight-jackets and died near Schroon Lake in the Adirondacks, after two years at Middletown, an asylum of the day. His body was brought to NYC, where his funeral service was at Grace Church on Broadway. I believe that he is buried in Greenwood Cemetery.
I arrived at the Museum on a Wednesday, having told my boss that I needed an afternoon of aesthetic retreat. I was eager to discover this new painter, as I was a little mad too, and I thought there might be some fraternal cognizance.
When I arrived at the museum, I was told that Blakelock was not presently hung, his works were in the basement, one or two being cleaned, the others just resting, I guess. I knew a curator, a classmate, who was at the Metropolitan, a curator of Colonial American Furniture, and a few weeks later, through his good offices, another curator at the Brooklyn met me on the front steps, and I was taken down to the inner sanctum where I was shown three Blakelock works, two small, and very dark. Instead of the famous sunsets, two had a moonlit scene, one a lake, the moon obscured by clouds, the second, an Indian campsite , pressed up against a hill in the back ground, the moon again obscured, this time by smoke from the Indians’ campfires. The third painting was a watercolor of Blakelock’s wife, Cora, a serious woman, about thirty or so, mostly in gray, if I recall correctly.
These 19th century paintings added little to my understanding of Paul Auster, a postmodernist writer whom I still read and enjoy. I suppose, that for him, mentioning Blakelock was a little stage business in the novel, neither symbolic, nor an arrow pointing to a murderer. (Auster’s latest novel, “Invisible,” has just been published.)
At the time I was separated from my darling wife, to whom I have since returned, as I am a man who knows a good thing only when he puts it aside for a while. Perhaps like coming back to Moby Dick or swimming in the Atlantic. In a moment of weakness she accepted my return and a happy fate has been sealed ever since.
I was graduated close to the bottom of my class of 106, in June of 1956. Eleanor Roosevelt spoke at our graduation, whearing a hat, veil and heavy Cuban heeled shoes. I see her with a fox wrapped around her shoulders, but it was June, and that is not likely. She shook my hand and wished me well, and shortly thereafter, my advisor managed to find a place for me at a distant school, a college that no one who had been graduated from my school had attended before; and so, unsuspecting, the admissions office, decided to take a chance on me.
I found the first two years of college so easy that I rarely, if ever, studied, (similar to my habit in high school) instead I lived in the stacks of the library, where I read mostly the dustiest volumes in the bottom rows of the stacks in the cellar. It was my thought that I was duty bound to rescue them from lack of readership.
It was in those stacks that I first became knowledgeable about the holocaust. I also read the most obscure, though readable, poets, and delved into some history. Ohio Wesleyan had an important geology department, and many specimens were kept in heavy mahogany showcases in the halls of the library. I became interested enough to take a course in Geology, and had I really understood what life would be like I might have become a geologist, as it had an intellectual aspect, and was done outdoors.
But, I wasn't that smart at the time. High School, had prepared me well for those first two years and at college I found myself to be a four point student; though I did not get into the Advanced English course for which a test was given. I was to write an essay on Delmore Schwartz, but having never heard of him, I assumed that Delmore Schwartz was a name fabricated by the examiners in order to ascertain which of the aspiring writers taking the examination would detect the game. I criticized the poetry crudely, ignoring the fact that in Mr. Clausen’s first form class I had never grasped the concepts of either rhyme or meter, I pointed out with glee what I believed to be Schwartz’s many flagrant errors in rhyme and meter. It turns out that Delmore Schwartz was a Pulitzer Prize winning poet. But, tell me, who could have such a name?
The examiners understood my ignorance immediately and relegated me to steerage with the other illiterates. I found, however, that many of the other illiterates were, actually literate, and a few of us began to write for the College Quarterly, The OWL. I wrote mostly pseudo-abstract poetry and pulled the wool over the eyes of my readers. A few female fans of pseudo-ism elected me Editor at the beginning of my sophomore year. Studying was still unnecessary and I became a dishwasher in Monet Hall, the girls' dormitory.
A few years later, at an alumni function on Park Avenue in New York City, I introduced myself to the new president of the college as Michael Morris Monet III, allowing him to make his own assumptions. This was not first time that I assumed a name, nor was it the last.
It was at Ohio Wesleyan that I met Joel. I arrived at the dormitory on a promising September day, in 1956. I was eager to meet my future roommate and so I rushed to our room. Joel’s luggage was there: three or four suitcases each tied with clothes line to protect it from the possibility of a train wreck or of an accidental opening by the Rail Road Express Agency. There was also a steamer truck, and one suitcase marked “First Aid.” This was going to be interesting, as the last time I had seen a steamer trunk was in Queen Christina, the Greta Garbo film that had been shown at school in a “modern arts” class. There was also one in our attic that my parents had stored for their New Years’ trips to Cuba or Rio.
When Joel arrived to claim his place in our room, I had already taken the bed closest to the window, as well as half of the built in Formica covered desk. I kept all of my things on the widow side of the room, thus dividing the room, fairly, I thought, into two equal shares. November 2009
Chapter Two
Getting to Know, Really Know, Joel
Chapter Three
My Unfortunate Discovery that Studying was Necessary
Chapter Four
My Egregious Exit from College
***
Chapter One
I discover Ralph Blakelock and Paul Auster
Dear Edgar:
Perhaps one of these days we shall meet. I came upon the Questroyal Fine Art Gallery when I read of a mad artist, called Ralph Albert Blakelock. He is mentioned in one of Paul Auster's early novels, where it is also mentioned that some his work is in the Brooklyn Museum. I was, and am, interested in Auster and as I was working on Remsen Street at the time, I thought I would go over and see the mad painter's work.
Blakelock was an American Painter of the Catskill School and during his lifetime was very popular. His specialty was blazing sunsets behind dour landscapes, sometimes with Indian encampments in the distance. He was in and out of straight-jackets and died near Schroon Lake in the Adirondacks, after two years at Middletown, an asylum of the day. His body was brought to NYC, where his funeral service was at Grace Church on Broadway. I believe that he is buried in Greenwood Cemetery.
I arrived at the Museum on a Wednesday, having told my boss that I needed an afternoon of aesthetic retreat. I was eager to discover this new painter, as I was a little mad too, and I thought there might be some fraternal cognizance.
When I arrived at the museum, I was told that Blakelock was not presently hung, his works were in the basement, one or two being cleaned, the others just resting, I guess. I knew a curator, a classmate, who was at the Metropolitan, a curator of Colonial American Furniture, and a few weeks later, through his good offices, another curator at the Brooklyn met me on the front steps, and I was taken down to the inner sanctum where I was shown three Blakelock works, two small, and very dark. Instead of the famous sunsets, two had a moonlit scene, one a lake, the moon obscured by clouds, the second, an Indian campsite , pressed up against a hill in the back ground, the moon again obscured, this time by smoke from the Indians’ campfires. The third painting was a watercolor of Blakelock’s wife, Cora, a serious woman, about thirty or so, mostly in gray, if I recall correctly.
These 19th century paintings added little to my understanding of Paul Auster, a postmodernist writer whom I still read and enjoy. I suppose, that for him, mentioning Blakelock was a little stage business in the novel, neither symbolic, nor an arrow pointing to a murderer. (Auster’s latest novel, “Invisible,” has just been published.)
At the time I was separated from my darling wife, to whom I have since returned, as I am a man who knows a good thing only when he puts it aside for a while. Perhaps like coming back to Moby Dick or swimming in the Atlantic. In a moment of weakness she accepted my return and a happy fate has been sealed ever since.
I was graduated close to the bottom of my class of 106, in June of 1956. Eleanor Roosevelt spoke at our graduation, whearing a hat, veil and heavy Cuban heeled shoes. I see her with a fox wrapped around her shoulders, but it was June, and that is not likely. She shook my hand and wished me well, and shortly thereafter, my advisor managed to find a place for me at a distant school, a college that no one who had been graduated from my school had attended before; and so, unsuspecting, the admissions office, decided to take a chance on me.
I found the first two years of college so easy that I rarely, if ever, studied, (similar to my habit in high school) instead I lived in the stacks of the library, where I read mostly the dustiest volumes in the bottom rows of the stacks in the cellar. It was my thought that I was duty bound to rescue them from lack of readership.
It was in those stacks that I first became knowledgeable about the holocaust. I also read the most obscure, though readable, poets, and delved into some history. Ohio Wesleyan had an important geology department, and many specimens were kept in heavy mahogany showcases in the halls of the library. I became interested enough to take a course in Geology, and had I really understood what life would be like I might have become a geologist, as it had an intellectual aspect, and was done outdoors.
But, I wasn't that smart at the time. High School, had prepared me well for those first two years and at college I found myself to be a four point student; though I did not get into the Advanced English course for which a test was given. I was to write an essay on Delmore Schwartz, but having never heard of him, I assumed that Delmore Schwartz was a name fabricated by the examiners in order to ascertain which of the aspiring writers taking the examination would detect the game. I criticized the poetry crudely, ignoring the fact that in Mr. Clausen’s first form class I had never grasped the concepts of either rhyme or meter, I pointed out with glee what I believed to be Schwartz’s many flagrant errors in rhyme and meter. It turns out that Delmore Schwartz was a Pulitzer Prize winning poet. But, tell me, who could have such a name?
The examiners understood my ignorance immediately and relegated me to steerage with the other illiterates. I found, however, that many of the other illiterates were, actually literate, and a few of us began to write for the College Quarterly, The OWL. I wrote mostly pseudo-abstract poetry and pulled the wool over the eyes of my readers. A few female fans of pseudo-ism elected me Editor at the beginning of my sophomore year. Studying was still unnecessary and I became a dishwasher in Monet Hall, the girls' dormitory.
A few years later, at an alumni function on Park Avenue in New York City, I introduced myself to the new president of the college as Michael Morris Monet III, allowing him to make his own assumptions. This was not first time that I assumed a name, nor was it the last.
It was at Ohio Wesleyan that I met Joel. I arrived at the dormitory on a promising September day, in 1956. I was eager to meet my future roommate and so I rushed to our room. Joel’s luggage was there: three or four suitcases each tied with clothes line to protect it from the possibility of a train wreck or of an accidental opening by the Rail Road Express Agency. There was also a steamer truck, and one suitcase marked “First Aid.” This was going to be interesting, as the last time I had seen a steamer trunk was in Queen Christina, the Greta Garbo film that had been shown at school in a “modern arts” class. There was also one in our attic that my parents had stored for their New Years’ trips to Cuba or Rio.
When Joel arrived to claim his place in our room, I had already taken the bed closest to the window, as well as half of the built in Formica covered desk. I kept all of my things on the widow side of the room, thus dividing the room, fairly, I thought, into two equal shares. November 2009
Chapter Two
Getting to Know, Really Know, Joel
Chapter Three
My Unfortunate Discovery that Studying was Necessary
Chapter Four
My Egregious Exit from College
Monday, November 16, 2009
Monday, November 02, 2009
BusterStronghart@Gmail.com
I must think on this; and hold it aside for a while.
I must put the draft of my thoughts aside
But in a safe place. I must remember
It's my purpose in life,
The names, the friends, and even
those I knew,
Left at the side of the road,
I must not forget even one. It's my job.
But after me,
There's no one to pass on each
Memory.
mek Nov 2009
I must think on this; and hold it aside for a while.
I must put the draft of my thoughts aside
But in a safe place. I must remember
It's my purpose in life,
The names, the friends, and even
those I knew,
Left at the side of the road,
I must not forget even one. It's my job.
But after me,
There's no one to pass on each
Memory.
mek Nov 2009
BusterStronghart@Gmail.com
"If your sweetheart sends you a letter of goodbye
It's no secret, you'll feel better if you cry..."
Remember sunshine can be found behind the
cloudy sky,so let your head down and go on and cry
"If your sweetheart sends you a letter of goodbye
It's no secret, you'll feel better if you cry..."
Remember sunshine can be found behind the
cloudy sky,so let your head down and go on and cry
Sunday, November 01, 2009
BusterStronghart@Gmail.com
A Poem by Harold Norse
ready-made
I transport from the canvas unsteady dissonance in the blue!
I heard in a dream about Marcel Duchamp.
Was he speaking from the other side of the Great Glass heavenly Dada
windows?
Marcel agreed to bring “a little intelligence into painting…this
turpentine intoxication,” he scoffed.
On Sundays friends gathered in the garden at Puteaux
Leger, Picabia, Metzinger, Appollinaire, Reverdy,
“with almost juvenile good humor. One almost forgets that
at that time nobody was anybody,” recollected Duchamp.
“Fascinating frivolity and beautiful illusions!”
chortled Ribemont-Dessaignes. They behaved like schoolboys on
holiday,
playing pranks, games, enjoying slapstick. Fame and public image had
not yet arrived. Marcel could not stand them when they did.
Like Picabia he demanded unlimited freedom
hated groups and schools, repetition of style.
“Art is useless, impossible to justify!” declared Picabia.
A wild ungovernable infant
riding its hobbyhorse
around the world, trampling
the pompous beneath its hooves
DADA was just arriving.
Marcel drew logical conclusions:
he painted a moustache on the Mona Lisa,
an act as pointless as suicide
to which he was utterly indifferent.
His heart belonged to Dada.
He painted all values into a corner:
the urinal is the good, the beautiful, the true.
Marcel was in love with bad taste:
he invented a way of being absent
that Rimbaud never suspected.
“Duchamp is destined to reconcile art and the people,”
said the unknown Apollinaire.
But were the people ready for ready-mades?
Marcel arrived in New York with a glass ball full of Paris air.
It was a gift for a friend. His “explosions in a shingle factory,”
as one critic dubbed Nude Descending A Staircase in 1913,
shocked everyone. Marcel was famous. With ironic humor
he detached himself on his condescending staircase
where with lofty vanity he observed,
“Without vanity we should all kill ourselves.”
He had no other deadly sin.
In 1915 he exhibited a bicycle wheel mounted on a stool.
a bottle rack and a urinal titled Fountain.
The ready-mades became works of art, he said, as soon as he declared
them so: looking at an object made it art.
He signed the urinal R. Mutt (the name of a firm of sanitary engineers).
The urinal achieved immortality.
Meanwhile Gertrude Stein
as busy in her own studio
inventing Hemingway
and Virgil Thomson;
when she created Ezra Pound
she frowned, screamed
and threw the rough draft away.
“Remarks,” said Miss Stein, “are not literature.”
Stein and Duchamp took the 20th Century for a ride
on the merry-go-round of painted horses and calliope tunes
of childhood where they play in our memory still
The song of Rrose Selavy.
The love song of R. Mutt.
The pigeons on the grass song.
Song of unsteady dissonance.
Chanson of the urinal.
The pissoir melody.
Marcel Duchamp in drag
as Rrose Selavy
camps through the studios
of friends and foes.
Marcel and Man Ray play a game of chess lasting forty years.
Harold Norse. (1916 – 2009)
A Poem by Harold Norse
ready-made
I transport from the canvas unsteady dissonance in the blue!
I heard in a dream about Marcel Duchamp.
Was he speaking from the other side of the Great Glass heavenly Dada
windows?
Marcel agreed to bring “a little intelligence into painting…this
turpentine intoxication,” he scoffed.
On Sundays friends gathered in the garden at Puteaux
Leger, Picabia, Metzinger, Appollinaire, Reverdy,
“with almost juvenile good humor. One almost forgets that
at that time nobody was anybody,” recollected Duchamp.
“Fascinating frivolity and beautiful illusions!”
chortled Ribemont-Dessaignes. They behaved like schoolboys on
holiday,
playing pranks, games, enjoying slapstick. Fame and public image had
not yet arrived. Marcel could not stand them when they did.
Like Picabia he demanded unlimited freedom
hated groups and schools, repetition of style.
“Art is useless, impossible to justify!” declared Picabia.
A wild ungovernable infant
riding its hobbyhorse
around the world, trampling
the pompous beneath its hooves
DADA was just arriving.
Marcel drew logical conclusions:
he painted a moustache on the Mona Lisa,
an act as pointless as suicide
to which he was utterly indifferent.
His heart belonged to Dada.
He painted all values into a corner:
the urinal is the good, the beautiful, the true.
Marcel was in love with bad taste:
he invented a way of being absent
that Rimbaud never suspected.
“Duchamp is destined to reconcile art and the people,”
said the unknown Apollinaire.
But were the people ready for ready-mades?
Marcel arrived in New York with a glass ball full of Paris air.
It was a gift for a friend. His “explosions in a shingle factory,”
as one critic dubbed Nude Descending A Staircase in 1913,
shocked everyone. Marcel was famous. With ironic humor
he detached himself on his condescending staircase
where with lofty vanity he observed,
“Without vanity we should all kill ourselves.”
He had no other deadly sin.
In 1915 he exhibited a bicycle wheel mounted on a stool.
a bottle rack and a urinal titled Fountain.
The ready-mades became works of art, he said, as soon as he declared
them so: looking at an object made it art.
He signed the urinal R. Mutt (the name of a firm of sanitary engineers).
The urinal achieved immortality.
Meanwhile Gertrude Stein
as busy in her own studio
inventing Hemingway
and Virgil Thomson;
when she created Ezra Pound
she frowned, screamed
and threw the rough draft away.
“Remarks,” said Miss Stein, “are not literature.”
Stein and Duchamp took the 20th Century for a ride
on the merry-go-round of painted horses and calliope tunes
of childhood where they play in our memory still
The song of Rrose Selavy.
The love song of R. Mutt.
The pigeons on the grass song.
Song of unsteady dissonance.
Chanson of the urinal.
The pissoir melody.
Marcel Duchamp in drag
as Rrose Selavy
camps through the studios
of friends and foes.
Marcel and Man Ray play a game of chess lasting forty years.
Harold Norse. (1916 – 2009)
Saturday, October 31, 2009
BusterStronghart@Gmail.com
Harold Norse
"The fiery force is nothing more than the life force as we know it. It is the flame of desire and love, of sex and beauty, of pleasure and joy as we consume and are consumed, as we burn with pleasure and burn out in time."
— Harold Norse
In the Hub of the Fiery Force: Collected Poems of Harold Norse 1934-2003)
Harold Norse
"The fiery force is nothing more than the life force as we know it. It is the flame of desire and love, of sex and beauty, of pleasure and joy as we consume and are consumed, as we burn with pleasure and burn out in time."
— Harold Norse
In the Hub of the Fiery Force: Collected Poems of Harold Norse 1934-2003)
Saturday, October 17, 2009
BusterStronghart@Gmail.com
By Michael Panzer Note Date
THE COMING DISASTER IN THE DERIVATIVES MARKET
by Michael J. Panzner
Author of Stock Market Jungle
November 9, 2005
"The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear....[They] are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
-- Warren Buffett, Chairman and Chief Executive, from his Letter to Shareholders, 2002 Berkshire Hathaway annual report
For years, experts had warned about the near certainty of disaster. With its unique geography and hurricane-track locale, New Orleans was a city at risk, and it was only a matter of when, not if, a powerful hurricane would eventually roar ashore and overwhelm the Big Easy.
To be sure, steps were taken beforehand to try and minimize suffering and disruption in the wake of such a catastrophe. Levees were built up and secured. Arrangements were made to cope with the mass evacuation of hundreds of thousands. Federal, state and local emergency preparedness officials drew up myriad plans to mobilize people and supplies.
Nonetheless, when the event many feared finally came to pass in late August 2005, much of those efforts seemed for naught. Instead of organization there was chaos. Instead of action, incompetence. Instead of lives saved, the focus was on what was needlessly lost.
For all the awareness, advance planning, and available resources, the reality was that there was little to show for it when the terrible moment of truth arrived. As a result, it will take a long time for the people of that Gulf Coast region, and for the country as a whole, to fully recover from the disaster known as Hurricane Katrina.
Still, if there was one silver lining to the tragedy, it was the lesson that, as a nation, we needed to be better prepared. Ready, in other words, for the inevitable worst. Indeed, in a September 19, 2005, cover story, “The Next Big One,” Business Week noted as much, describing a litany of potential disasters, from earthquakes to pandemics to “dirty-bomb” terrorist attacks, lurking on the horizon.
Curiously though, one threat, a brewing economic hurricane, was not mentioned. That was odd given the magazine’s audience and purview. Nonetheless, it was not a complete surprise, because the disaster that already seems to be unfolding is one few people understand or are even aware of, let alone are prepared for. Once full-blown, however, it is likely to wreak havoc not only in the U.S., but around the world.
No doubt this sounds alarmist, but there are experts who would suggest otherwise. Indeed, such estimable giants of the financial world as Warren Buffett, legendary investor and chairman of Berkshire Hathaway, and Bill Gross, founder and principal of Pimco, one of the world’s largest fixed-income managers, have raised serious concerns about this growing menace.
In truth, while no one can say for certain when the day of reckoning will arrive, it seems a good bet that if some of those who are in a position to know are worried about the derivatives market and the associated systemic risks, you should be, too.
One of the difficulties people have with understanding this particular disaster-in-the making is its complexity and seeming irrelevance to their day-to-day lives. Unlike an earthquake or a car bomb, a derivatives-inspired financial meltdown won’t to lead to leveled buildings or bloodshed, at least initially. Yet, the toxic fallout will likely be as painful, long-lasting, and difficult to overcome as any of the more widely discussed scenarios.
What makes the coming debacle even more difficult to comprehend is that it stems from a long chain of seemingly benign interactions and financial relationships. Indeed, despite the fact that the modern derivatives market has flourished because of big money, complex technology, and highly-paid talent, the culprit when it all goes wrong is likely to be simple: human emotions -- fear and greed -- run amok.
For most people, the term “derivative” has little meaning. In many cases, the mere mention of the word is enough to cause eyes to glaze over. That is partly because these financial instruments are somewhat ethereal. They are, in other words, largely created out of thin air. Practically speaking, they have no value in and of themselves.
They are also hard to understand because, like many intangible concepts that occasionally involve a great deal of theory and calculation, academics have done wonders transforming the complex into the incomprehensible. As is often the case, though, if you break them down into smaller, more digestible parts, they are easier to grasp. That is also true with respect to the derivatives market.
Look closely at how the world works, how people function and otherwise go about their daily business. It is not hard to see that our modern existence is, and is increasingly, about interdependence. We survive because of our ties to each other, whether spiritual, emotional, organizational, geographical, or genetic. We also rely on an extensive network of financial relationships with people and institutions we know, as well as many we don’t.
Moreover, all of us operate within a framework of uncertainty. Life is about risks -- taking them, mostly -- and acting on imperfect information. Some may claim to see the future and perhaps one day that may be proved true. For now, most of us can only guess what will happen tomorrow, or next week, or in a year’s time.
Because we can never know for sure, we make calculations and compromises. Like deciding whether it is better to have a bird in the hand or two in the bush.
This usually involves agreements of one kind or another. Contracts, obligations, promises, and responsibilities -- whether written or oral, implicit or explicit, they are a means by which we work together with others. To secure what we want or need, now or in the future.
And, hopefully, to protect ourselves in ways that suit us best. Buying insurance, for example, is one way we try to alleviate some of the harmful effects of life’s inevitable misfortunes.
Derivatives are, generally speaking, contractual agreements that offer a means for individuals or businesses to restructure or rearrange the risks they may face in future. In many respects, they function like insurance, though with some critical differences, as will be noted later on.
Although they are usually in written form, like most financial commitments, that is not necessarily a prerequisite. Unless, of course, either party wants to be able to trade, exchange, or sell these contracts. In that case, they usually take shape as securities.
In their simplest form, derivatives provide for certain rights or obligations between two parties, or “counterparties.” Most important, the way in which these instruments are evaluated almost always takes into account that they are linked to some other security, commodity, event, or any of a wide variety of agreed-upon conditions. In essence, they derive their value -- hence, “derivative” -- from something else.
In some ways, a marriage proposal has elements in common with a derivative. In that case, a couple decides in advance to come together on a certain day and exchange vows. They promise to live together as man and wife and assume a host of obligations and responsibilities. Essentially, they agree now to make a deal later.
Similarly, the purchase of an airplane ticket, or a ticket for a rock concert, could also be viewed as a crude form of a derivative. Money is handed over today in exchange for enabling a service to take place at some future date.
The most appropriate examples, of course, are those securities that have evolved to form the cornerstones of the global derivatives market: futures, forwards, options and swaps. In simple terms, they are contracts where two counterparties agree to undertake, or to possibly undertake, a transaction or transactions at some point in the future, based on conditions established at the outset.
In practical terms, futures and forwards are alike: both create obligations between two parties. The main difference is that the former tend to have standardized terms and trade on recognized exchanges. Typically, there is a designated middleman, or “clearinghouse,” which acts as the official counterparty to every transaction. That makes it easier to transfer -- by buying and selling -- commitments between the various market participants.
Probably the most widely known derivatives of this type are the futures contracts that trade at places like the Chicago Board of Trade. The CBOT was originally founded in 1848 as a centralized marketplace to help growers and others protect against the risks and often wild price fluctuations inherent to the agriculture industry.
The classic example of why these contacts exist describes a farmer wishing to lock-in a price for his wheat before the actual harvest. To do this, he might strike a deal with a baker, also keen to fix his costs. Both sides could then take comfort in knowing that no matter what happened to prices in the interim, they would be protected and wouldn’t have to worry. Then, on the agreed date, they would make the exchange: crops for cash.
In this arrangement, both sides end up hedging their exposure to the vagaries of the marketplace -- which could be affected by unexpectedly high or low yields, unusual weather, plant diseases, etc. They gain security today at the expense of uncertainty tomorrow. In theory, they have shed at least some of the risks they do not want in exchange for those they do. Net-net, a positive.
The real world, of course, is not so simple, and though the farmer might want to reduce his exposure today, the baker may not have reached that same conclusion yet. What happens then, and what markets and exchanges facilitate, is that other parties -- speculators -- jump into the fray. Often, they are individuals who don’t have any inherent interest in agriculture or the products being traded, other than how they can profit from fluctuations in their prices.
So, in this case, the farmer might end up fixing a price for his wheat in, perhaps, three months time, by selling a futures contract on the CBOT, typically through a broker. By doing so, he commits to deliver a set amount of grain, of sufficient quality, to a location determined by the exchange. He receives today’s price in return.
In contrast, the buyer of the futures contract, who could be a trader on the exchange floor, makes a different decision. He operates on the premise that, at least temporarily, the farmer is wrong. If the speculator turns out to have bet correctly, he can sell the obligation for a profit later on. Maybe even to the baker, or to another trader, though it doesn’t really matter who.
Typically, both sides put up a good faith deposit, or “margin,” which represents a small fraction of the face, or “notional” value of the contract. In theory, this is meant to serve as protection against default. However, it also allows both sides to assume a large commitment without having the full value of the contract immediately on hand.
The ebb-and-flow of prices tends to be driven by the interplay between the two groups: those who have a direct involvement in what happens -- the hedgers -- and those who are merely betting on which way prices are headed -- the speculators. As long as the two camps remain somewhat in balance, it serves as a useful mechanism for divvying up risk in an efficient manner.
However, once out of whack, as appears to be the case in the derivatives market, the potential for instability expands dramatically. History suggests the value and relevance of a market ultimately depends on those who actually need it, not those who only seek to profit from it.
Another other popular form of derivative is an option. Options are different from futures and forwards in that one party has a right, rather than a firm commitment, to initiate a transaction at some future date based on the established terms. Typically, the option is granted by the “writer,” the one who is obligated if called upon, in exchange for a payment up front.
In a sense, these types of contracts resemble traditional insurance products. The writer of the option is like Allstate, Prudential, GEICO or any other company issuing a life or homeowner’s policy, where the holder ends up receiving a predetermined amount if an event takes place (e.g., a fire ravages the property) in exchange for paying a premium or premiums beforehand.
But the terms can vary widely. So can the triggering event and the action that may be taken. A simple example of an option might involve the owner of a parcel of land offering a prospective buyer the right to acquire the property at a fixed price in six months time, for a relatively small payment at the time the deal is struck. This is usually referred to as a “call” option.
In this case, the owner, who is writing the option, is acknowledging that he is willing to sell the property and accept the risk that the market value might rise above the contract or “strike” price and that he can do nothing about it. He also faces the prospect that he may still own the property after the agreement ends. In other words, he might find himself in the same position as when he started, though with some extra income for his troubles.
The option buyer, on the other hand, is essentially locking-in the cost of acquiring the property by making the initial premium payment, thereby reducing the risk resulting from market gyrations while the agreement is in effect. There are many reasons why he might want to make that decision. Perhaps he is hopeful, but unsure, whether he will be able to line up financing to make the purchase.
Or maybe he believes market prices are headed higher, and wishes to have temporary control of the property with a relatively small outlay. In this way, options represent a form of leverage, similar in some respects to the margin on a futures contract, where the holder can potentially receive the upside benefit without having to pay the full cost up front.
Whatever the reason, it is up to the option holder whether he goes ahead and “exercises” the option. Once the premium payment is made, he is generally under no further obligation other than to come up with the money necessary to cover the specified contract price if he wishes to acquire full ownership of the property.
Instead of the underlying asset changing hands, some agreements allow for a payment of the difference between the strike price and the market value, depending on whether it is higher or lower and what rights the holder has. This “cash settlement” feature is also seen in many modern derivatives contracts, especially those involving indexes or “events.” Stock index futures are a well known example.
Swaps are another key feature of the derivatives market. In essence, they involve contracts where two sides agree to exchange one or more payments during an established period based on conditions determined at the outset. Widely used in the credit and currency markets, they enable counterparties to transform undesirable risks or comparative advantages in one market into obligations that, theoretically at least, better suit the needs of both.
One example of this type of agreement is an interest-rate swap. That is where, for instance, a company with an existing loan whose rate fluctuates every six months might arrange with, say, a bank, to eliminate that uncertainty. What happens next is that the financial institution, for diversification or other purpose, assumes responsibility for the varying, or floating-rate, payments, while the borrower agrees to cover the amounts tied to a predetermined or fixed rate of interest.
These four categories of derivatives are by no means the end of it. Indeed, it is safe to say that there are myriad variations, a fact which has likely laid the groundwork for the coming unraveling. Regardless, it is worth noting that instruments such as futures, forwards, options and swaps have played an important role in commerce and finance. In fact, individuals and businesses have used a wide variety of risk-transfer methods for hundreds, perhaps thousands, of years, and no doubt society as a whole has benefited.
Without having some way of gauging or laying off their exposure, people might find it impossible, for example, to provide for their loved ones upon death or to protect their homes and businesses from calamities such as fire. It would also be very difficult for companies to evaluate or make sizeable investments in large-scale or long-term ventures. Derivatives can give decision-makers the flexibility to decide which risks to keep -- and which to try and pass on or trade to others.
In this respect, they have proved exceptionally useful. Arguably, they have become integral to the financial lives of almost everyone, though most people are probably unaware of this fact. Apart from their straightforward use by investors looking to reduce risk or profit from potential trading opportunities, various forms of synthetically-created securities have enabled millions to enhance their economic wellbeing and tap into the American dream.
From educating our children to buying a place to live, from the way we manage our credit and finances, from greasing the wheels of global trade to overcoming the dizzying array of risks and uncertainties faced by businesses large and small, derivatives have played a major role.
One way in particular these instruments have helped is by facilitating a process known as “securitization,” whereby loans, financial instruments, and other assets are bundled together and sold to investors as a package. This has created tremendous economy-of-scale benefits. It has allowed individuals seeking financing say, for the purchase of a home, to tap into a plethora of funding sources in the U.S. and around the world, helping to lower their interest costs. It has also enabled people to obtain products and services personalized to their needs and risk requirements.
Many have recognized the value of synthetically-created financial instruments. Alan Greenspan, long-time Chairman of the Federal Reserve, noted in 2003 that "The benefits…have far exceeded their costs." He also said that the “growing array of derivatives and the related application of more-sophisticated methods for measuring and managing risks had been key factors underlying the remarkable resilience of the banking system.”
Nonetheless, there is a dark side. It is impossible, for instance, to discuss derivatives without noting that these instruments, indirectly or by virtue of their structure (e.g., options), almost invariably employ some element of leverage (i.e., “other people’s money”). Indeed, that has likely been a spur to their increased usage among amateur and professional investors (and speculators) alike, especially in recent years.
With difficult conditions in the wake of the post-1990s stock market bubble, historically low interest rates, and intense competition, money managers have increasingly sought to garner more bang for their buck by using high-octane financial instruments such as futures, options and swaps.
This includes hedge funds, a group of operators that has come virtually out of nowhere in the mid-1990s to aggressively oversee more than $1 trillion in capital, often geared up with borrowed funds. With inbuilt incentives to place riskier bets than traditional old-line managers, this crowd has discovered that derivatives have considerable appeal. Rather than shedding risk, they have been adding to it. Indeed, many have taken to these instruments like ducks to water, though not always with eyes wide open.
Aside from that, because modern financial engineering involving synthetically-created securities has, in many respects, made it easy for even the least creditworthy individuals to borrow money for all sorts of purposes, derivatives have undoubtedly contributed to the breathtaking, but ultimately very risky, expansion of credit that has occurred during the past few decades.
Taken together, the combination of increased leverage and heightened risk-taking has served to stir up a potentially volatile miasma around derivatives, especially the newer, more complex varieties. That makes them exceptionally dangerous if not handled properly.
Conceptually, it is not hard to grasp the basic economics of a garden-variety derivative such as a futures contract. If the market price of wheat goes up between the time a deal is struck and the expiration of the agreement, the buyer wins and the seller loses. That is what is known as a zero-sum game. Nonetheless, whatever a farmer, to use the earlier example, might give up as a result of hedging his output is offset by the reduced uncertainty.
But it is an altogether different story when it comes to analyzing options, or a portfolio of derivatives, especially those with lots of complicated bells and whistles. In most cases, valuation and risk assessment depend on mathematical formulas and computerized models, with many inputs derived from estimates and past data. That is all well and good if the tools are perfect and the history is complete.
Unfortunately, there is little evidence that this is the case. In truth, many experts believe the derivatives market rests on a number of very precarious assumptions that have yet to be tested.
And even then, the history of the derivatives market is replete with high-profile disasters. These include the 1994 bankruptcy of Orange County, one of California’s richest, due to naïve investments in exotic derivatives; the 1995 failure of the 200-year old Barings Bank as a result of unauthorized futures and options trading by a rogue employee; the 1998 collapse of hedge fund Long Term Capital Management on the heels of ultra-leveraged bets gone wrong; and, the ongoing implosion at Fannie Mae, the nation’s largest mortgage lender, because of derivative, accounting and other irregularities.
Up until now, none of these derivative-related hurricanes has breached the high-water levees of the U.S. and global financial systems. But as was the case with earlier, less destructive storms in the American Gulf Coast region, rather than decreasing the odds of a disaster, the relative calm of the past seemed to have inspired a false sense of security.
Indeed, the fact that New Orleans had long been spared despite the inevitable and persistent threat made for considerable complacency. As did the availability of government-sponsored flood insurance and a belief that authorities would step in and save the day if need be. Instead of getting prepared for the worst, people did virtually the opposite: they boosted development in flood-prone areas without thinking twice about it.
Likewise, many view the lack of widespread economic upheaval following earlier derivative blow-ups as a reason to be unconcerned about the current state of the financial system. The seemingly unprecedented intervention of the Federal Reserve Bank of New York in the wake of the LTCM collapse, as well as central bank “accommodation” after the 1987 stock market crash, have also inspired confidence that authorities will not let things get too far out of hand if and when disaster strikes.
Unfortunately, this sense of moral hazard has almost certainly increased the risk and destructive potential of a catastrophic meltdown in the derivatives market.
The reality is, when people erect a raft of new buildings in vulnerable locales, it generally doesn’t increase the odds that a hurricane will strike. That is not the case with respect to risky behavior in the synthetic securities market, however.
When big operators take on a lot more risk than they otherwise might -- they drive faster, perhaps, because they know their car has anti-lock brakes -- it tends to raise the danger stakes for the system as a whole. Millions of dollars of losses can break the bank at a few unlucky firms. Billion -- or even trillion -- dollar failures can bring down the whole house of cards, especially given the dense network of dependent relationships that exists in the global financial arena. As well as the key role that finance-related activities now play in today’s service-oriented economy.
In addition, while an earthquake in a major city would likely cause severe damage and untold loss of lives, it would not necessarily lead to aftershocks 3,000 miles away. In the modern world, however, the “counterparty risk” factor seems to be zooming off the charts. What that means is that a potentially unstoppable domino effect, a “cascade of ruin,” could be set in motion if a global bank or “bulge bracket” Wall Street firm ends up with the derivative short straw.
That potential ripple effect has as much to do with the concentration of exposure at large players such as banks and Wall Street derivatives powerhouses as it has to do with the abundance of overlapping ties to specific developments or changes in asset prices. Many credit-related derivatives, for example, either shadow or are directly linked to indexes that include the debt of certain large borrowers. The fact that the scale of the exposure is obscured by the market’s lack of transparency adds to the potential for a sudden and unexpectedly sharp turn for the worse.
Another point the disaster in New Orleans made clear was that having plans in place to deal with a long-predicted event doesn’t necessarily mean success is assured. One of the biggest holes in the emergency response effort following Hurricane Katrina was the chaos that resulted from poor communications and overlapping jurisdictional responsibilities. Essentially, one hand -- of government -- did not know what the other was doing, and no one was fully in charge, at least in the beginning.
In the modern global financial system, where many participants are either unregulated or are monitored by a patchwork of country or sector-specific regulatory overseers, chances are that a derivatives-related catastrophe will see a similar lack of coordination that will produce a far more devastating outcome than if it was a purely domestic affair.
It is one thing for a central banker to summon the heads of various financial firms into a room to sort out the mess at hedge fund LTCM, as the New York Federal Reserve chief reportedly did in 1998. Despite the fact that the Fed had limited statutory authority in the matter, it is not hard to see why none of those who were asked to attend turned down the “invitation.”
However, if a derivatives time-bomb is set off by the failure of a large London-based hedge fund, will a banker in the Cayman Islands, an investor in Japan, an insurer in Germany, and a regulator in France feel similarly inclined to respond, or even to take the lead? That is assuming, of course, that those affected even understand what is going on or why it may be relevant to their own interests. Overall, there appears to be little, if any strategy in place for dealing with cross-border financial upheaval.
What will likely make matters worse is the fact that the derivatives market has become mind-numbingly complex and remains extremely opaque. Few individuals, let alone regulators, have a solid handle on the aggregate picture, especially globally. And while there is a great deal of activity that is transparent, such as the trading that takes place on recognized venues like the CBOT or Chicago Mercantile Exchange, the vast majority of deals are private, “over-the-counter” transactions that go unreported.
Adding further fuel to the fire has been the liberalization and globalization of financial markets. Because of competitive pressures and the ease with which capital flows between firms, markets and countries, activities that used to be limited to large firms in highly regulated sectors (e.g., banks) are being taken on board by all and sundry. Often in locations where standards are low or oversight is lax.
Hedge funds, insurers, corporate treasuries, the finance arms of industrial companies, and other non-traditional players are increasingly involved in the derivatives market. For the most part, they have less stringent capital requirements and less of a history managing complicated financial risks and broad credit exposure through several cycles of economic activity than banks do.
In sum, there are more inexperienced players taking part, more firms with diverse -- and occasionally inadequate -- capabilities linked to each other, and a maze of overlapping and often competing jurisdictions. This suggests that a simple solution, or even a consensus, will be almost impossible to find if and when the worst-case scenario does come to pass.
Scarier still, it is likely the disease that typically goes hand-in-hand with disasters of the money kind will be transmitted around the world at light speed because of modern technology and advanced communications networks. The far-reaching epidemic that people don’t usually like to discuss in mixed company, let alone acknowledge, when the worst unexpectedly happens: panic and contagion. Throughout history, they have been a recurring feature of convulsing markets and dramatic financial crises.
When people are calm and otherwise thinking clearly, they tend, more often than not, to act rationally. However, when problems arise and even the most sophisticated players become terrified of losing their jobs or their shirts, or they are overwhelmed by the sheer scale of potential risks they are confronted with, they frequently experience a primal fight-or-flight response. Or even temporary paralysis -- like the proverbial deer in the headlights.
During many of history’s broad-scale financial upheavals, such as the period surrounding the 1987 stock market crash and the collapse of Long Term Capital Management, markets became momentarily transformed. Traders stopped buying and selling and even answering phones. Money managers froze or reacted in knee-jerk fashion. Bankers called in loans. And regulators, for the most part, stood back and watched. All the while, many of those who were most heavily exposed were forced to liquidate positions at fire-sale prices.
At those points, fear had taken over -- the kind that says “run” when someone shouts “fire” in a crowded theater.
And, perhaps, the kind that had people shooting and looting, or wandering aimlessly, or cowering in stifling attics above flooded rooms, when essential services failed and the lights went out in New Orleans in the aftermath of Hurricane Katrina.
Once troops and emergency responders moved in, and people in the surrounding regions and elsewhere rallied round, rationality and order returned to that Gulf Coast city. And in the weeks that followed, many of those affected did figure out at least some way to start picking up the pieces and start living again.
We weathered earlier storms in our financial system, too, though no doubt the cost has often been considerable. The risk this time, however, is that conditions are, and will be, more complicated and dangerous than before. While New Orleans was a relatively self-contained locale, whose citizens and government officials could potentially reach outside the area for assistance, a firestorm set in motion by a derivatives debacle is unlikely to leave many parts of the global financial system unscathed.
It doesn’t help that there are unsustainable imbalances in the global economy, either. America faces record trade and budget deficits. Many economically advanced countries around the world have aging populations and underfunded pension systems. Real estate seems to have taken the bubble baton from the stock market, though there are signs that the top is already in. And the world is awash in debt and a vast sea of open-ended obligations and contingent liabilities.
Moreover, if history is any guide, the period of monetary tightening that began in June 2004 will likely blow the cover off at least some shaky operations that had been kept alive by cheap money in the wake of the post-1990s new-era collapse. Odds are, in fact, that one of those will be the match that lights the fuse that ultimately triggers widespread financial turmoil.
Already there are rumbling in the financial world, akin to the small tremors that shake the ground ahead of a massive earthquake. In the spring of 2005, several large hedge funds reportedly lost billions of dollars on complicated credit bets gone wrong. One firm even admitted that it had made a substantial “miscalculation” -- which they only realized, of course, after the fact. Given the increasingly complex nature of the derivatives market, that refrain is likely to be heard over and over again in future.
Certainly, the U.S. and global economies have been remarkably resilient, especially in recent years, and it may be a mistake to bet on the downside. What’s more, there are those who would argue that the financial markets have attracted the best and the brightest, and a gut-wrenching, blood-letting debacle is in no one’s interest. Unfortunately, the odds seem stacked against a happy ending, and the cyclical nature of financial crises suggests it is definitely the wrong time to be thinking like a Pollyanna.
Unfortunately, the reality is, if it all goes horribly wrong, it will not only be Wall Street that suffers. Main Street will, too. In the worst case, brokerage firms and banks will shut their doors. Markets will plunge and many investors will lose everything, Interest rates will shoot sharply higher, taxes will rise, and parts of the economy will grind to a halt, at least temporarily. Those seeking a mortgage, a college education, a job, or even day-to-day sustenance may find themselves left wanting.
At a time when many have abandoned prudence in search of profits, and where those who are knowledgeable about the disaster-to-come in the derivatives market are seeking to protect themselves, it is the timeless wisdom that remains true: forewarned is forearmed.
© 2005 Michael J. Panzner
Michael Panzner is author of The New Laws of the Stock Market Jungle: An Insider’s Guide to Successful Investing in a Changing World and a 20-year veteran of the stock, bond and currency markets. He is currently at work on a book about global financial risks.
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Michael J. Panzner
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By Michael Panzer Note Date
THE COMING DISASTER IN THE DERIVATIVES MARKET
by Michael J. Panzner
Author of Stock Market Jungle
November 9, 2005
"The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear....[They] are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
-- Warren Buffett, Chairman and Chief Executive, from his Letter to Shareholders, 2002 Berkshire Hathaway annual report
For years, experts had warned about the near certainty of disaster. With its unique geography and hurricane-track locale, New Orleans was a city at risk, and it was only a matter of when, not if, a powerful hurricane would eventually roar ashore and overwhelm the Big Easy.
To be sure, steps were taken beforehand to try and minimize suffering and disruption in the wake of such a catastrophe. Levees were built up and secured. Arrangements were made to cope with the mass evacuation of hundreds of thousands. Federal, state and local emergency preparedness officials drew up myriad plans to mobilize people and supplies.
Nonetheless, when the event many feared finally came to pass in late August 2005, much of those efforts seemed for naught. Instead of organization there was chaos. Instead of action, incompetence. Instead of lives saved, the focus was on what was needlessly lost.
For all the awareness, advance planning, and available resources, the reality was that there was little to show for it when the terrible moment of truth arrived. As a result, it will take a long time for the people of that Gulf Coast region, and for the country as a whole, to fully recover from the disaster known as Hurricane Katrina.
Still, if there was one silver lining to the tragedy, it was the lesson that, as a nation, we needed to be better prepared. Ready, in other words, for the inevitable worst. Indeed, in a September 19, 2005, cover story, “The Next Big One,” Business Week noted as much, describing a litany of potential disasters, from earthquakes to pandemics to “dirty-bomb” terrorist attacks, lurking on the horizon.
Curiously though, one threat, a brewing economic hurricane, was not mentioned. That was odd given the magazine’s audience and purview. Nonetheless, it was not a complete surprise, because the disaster that already seems to be unfolding is one few people understand or are even aware of, let alone are prepared for. Once full-blown, however, it is likely to wreak havoc not only in the U.S., but around the world.
No doubt this sounds alarmist, but there are experts who would suggest otherwise. Indeed, such estimable giants of the financial world as Warren Buffett, legendary investor and chairman of Berkshire Hathaway, and Bill Gross, founder and principal of Pimco, one of the world’s largest fixed-income managers, have raised serious concerns about this growing menace.
In truth, while no one can say for certain when the day of reckoning will arrive, it seems a good bet that if some of those who are in a position to know are worried about the derivatives market and the associated systemic risks, you should be, too.
One of the difficulties people have with understanding this particular disaster-in-the making is its complexity and seeming irrelevance to their day-to-day lives. Unlike an earthquake or a car bomb, a derivatives-inspired financial meltdown won’t to lead to leveled buildings or bloodshed, at least initially. Yet, the toxic fallout will likely be as painful, long-lasting, and difficult to overcome as any of the more widely discussed scenarios.
What makes the coming debacle even more difficult to comprehend is that it stems from a long chain of seemingly benign interactions and financial relationships. Indeed, despite the fact that the modern derivatives market has flourished because of big money, complex technology, and highly-paid talent, the culprit when it all goes wrong is likely to be simple: human emotions -- fear and greed -- run amok.
For most people, the term “derivative” has little meaning. In many cases, the mere mention of the word is enough to cause eyes to glaze over. That is partly because these financial instruments are somewhat ethereal. They are, in other words, largely created out of thin air. Practically speaking, they have no value in and of themselves.
They are also hard to understand because, like many intangible concepts that occasionally involve a great deal of theory and calculation, academics have done wonders transforming the complex into the incomprehensible. As is often the case, though, if you break them down into smaller, more digestible parts, they are easier to grasp. That is also true with respect to the derivatives market.
Look closely at how the world works, how people function and otherwise go about their daily business. It is not hard to see that our modern existence is, and is increasingly, about interdependence. We survive because of our ties to each other, whether spiritual, emotional, organizational, geographical, or genetic. We also rely on an extensive network of financial relationships with people and institutions we know, as well as many we don’t.
Moreover, all of us operate within a framework of uncertainty. Life is about risks -- taking them, mostly -- and acting on imperfect information. Some may claim to see the future and perhaps one day that may be proved true. For now, most of us can only guess what will happen tomorrow, or next week, or in a year’s time.
Because we can never know for sure, we make calculations and compromises. Like deciding whether it is better to have a bird in the hand or two in the bush.
This usually involves agreements of one kind or another. Contracts, obligations, promises, and responsibilities -- whether written or oral, implicit or explicit, they are a means by which we work together with others. To secure what we want or need, now or in the future.
And, hopefully, to protect ourselves in ways that suit us best. Buying insurance, for example, is one way we try to alleviate some of the harmful effects of life’s inevitable misfortunes.
Derivatives are, generally speaking, contractual agreements that offer a means for individuals or businesses to restructure or rearrange the risks they may face in future. In many respects, they function like insurance, though with some critical differences, as will be noted later on.
Although they are usually in written form, like most financial commitments, that is not necessarily a prerequisite. Unless, of course, either party wants to be able to trade, exchange, or sell these contracts. In that case, they usually take shape as securities.
In their simplest form, derivatives provide for certain rights or obligations between two parties, or “counterparties.” Most important, the way in which these instruments are evaluated almost always takes into account that they are linked to some other security, commodity, event, or any of a wide variety of agreed-upon conditions. In essence, they derive their value -- hence, “derivative” -- from something else.
In some ways, a marriage proposal has elements in common with a derivative. In that case, a couple decides in advance to come together on a certain day and exchange vows. They promise to live together as man and wife and assume a host of obligations and responsibilities. Essentially, they agree now to make a deal later.
Similarly, the purchase of an airplane ticket, or a ticket for a rock concert, could also be viewed as a crude form of a derivative. Money is handed over today in exchange for enabling a service to take place at some future date.
The most appropriate examples, of course, are those securities that have evolved to form the cornerstones of the global derivatives market: futures, forwards, options and swaps. In simple terms, they are contracts where two counterparties agree to undertake, or to possibly undertake, a transaction or transactions at some point in the future, based on conditions established at the outset.
In practical terms, futures and forwards are alike: both create obligations between two parties. The main difference is that the former tend to have standardized terms and trade on recognized exchanges. Typically, there is a designated middleman, or “clearinghouse,” which acts as the official counterparty to every transaction. That makes it easier to transfer -- by buying and selling -- commitments between the various market participants.
Probably the most widely known derivatives of this type are the futures contracts that trade at places like the Chicago Board of Trade. The CBOT was originally founded in 1848 as a centralized marketplace to help growers and others protect against the risks and often wild price fluctuations inherent to the agriculture industry.
The classic example of why these contacts exist describes a farmer wishing to lock-in a price for his wheat before the actual harvest. To do this, he might strike a deal with a baker, also keen to fix his costs. Both sides could then take comfort in knowing that no matter what happened to prices in the interim, they would be protected and wouldn’t have to worry. Then, on the agreed date, they would make the exchange: crops for cash.
In this arrangement, both sides end up hedging their exposure to the vagaries of the marketplace -- which could be affected by unexpectedly high or low yields, unusual weather, plant diseases, etc. They gain security today at the expense of uncertainty tomorrow. In theory, they have shed at least some of the risks they do not want in exchange for those they do. Net-net, a positive.
The real world, of course, is not so simple, and though the farmer might want to reduce his exposure today, the baker may not have reached that same conclusion yet. What happens then, and what markets and exchanges facilitate, is that other parties -- speculators -- jump into the fray. Often, they are individuals who don’t have any inherent interest in agriculture or the products being traded, other than how they can profit from fluctuations in their prices.
So, in this case, the farmer might end up fixing a price for his wheat in, perhaps, three months time, by selling a futures contract on the CBOT, typically through a broker. By doing so, he commits to deliver a set amount of grain, of sufficient quality, to a location determined by the exchange. He receives today’s price in return.
In contrast, the buyer of the futures contract, who could be a trader on the exchange floor, makes a different decision. He operates on the premise that, at least temporarily, the farmer is wrong. If the speculator turns out to have bet correctly, he can sell the obligation for a profit later on. Maybe even to the baker, or to another trader, though it doesn’t really matter who.
Typically, both sides put up a good faith deposit, or “margin,” which represents a small fraction of the face, or “notional” value of the contract. In theory, this is meant to serve as protection against default. However, it also allows both sides to assume a large commitment without having the full value of the contract immediately on hand.
The ebb-and-flow of prices tends to be driven by the interplay between the two groups: those who have a direct involvement in what happens -- the hedgers -- and those who are merely betting on which way prices are headed -- the speculators. As long as the two camps remain somewhat in balance, it serves as a useful mechanism for divvying up risk in an efficient manner.
However, once out of whack, as appears to be the case in the derivatives market, the potential for instability expands dramatically. History suggests the value and relevance of a market ultimately depends on those who actually need it, not those who only seek to profit from it.
Another other popular form of derivative is an option. Options are different from futures and forwards in that one party has a right, rather than a firm commitment, to initiate a transaction at some future date based on the established terms. Typically, the option is granted by the “writer,” the one who is obligated if called upon, in exchange for a payment up front.
In a sense, these types of contracts resemble traditional insurance products. The writer of the option is like Allstate, Prudential, GEICO or any other company issuing a life or homeowner’s policy, where the holder ends up receiving a predetermined amount if an event takes place (e.g., a fire ravages the property) in exchange for paying a premium or premiums beforehand.
But the terms can vary widely. So can the triggering event and the action that may be taken. A simple example of an option might involve the owner of a parcel of land offering a prospective buyer the right to acquire the property at a fixed price in six months time, for a relatively small payment at the time the deal is struck. This is usually referred to as a “call” option.
In this case, the owner, who is writing the option, is acknowledging that he is willing to sell the property and accept the risk that the market value might rise above the contract or “strike” price and that he can do nothing about it. He also faces the prospect that he may still own the property after the agreement ends. In other words, he might find himself in the same position as when he started, though with some extra income for his troubles.
The option buyer, on the other hand, is essentially locking-in the cost of acquiring the property by making the initial premium payment, thereby reducing the risk resulting from market gyrations while the agreement is in effect. There are many reasons why he might want to make that decision. Perhaps he is hopeful, but unsure, whether he will be able to line up financing to make the purchase.
Or maybe he believes market prices are headed higher, and wishes to have temporary control of the property with a relatively small outlay. In this way, options represent a form of leverage, similar in some respects to the margin on a futures contract, where the holder can potentially receive the upside benefit without having to pay the full cost up front.
Whatever the reason, it is up to the option holder whether he goes ahead and “exercises” the option. Once the premium payment is made, he is generally under no further obligation other than to come up with the money necessary to cover the specified contract price if he wishes to acquire full ownership of the property.
Instead of the underlying asset changing hands, some agreements allow for a payment of the difference between the strike price and the market value, depending on whether it is higher or lower and what rights the holder has. This “cash settlement” feature is also seen in many modern derivatives contracts, especially those involving indexes or “events.” Stock index futures are a well known example.
Swaps are another key feature of the derivatives market. In essence, they involve contracts where two sides agree to exchange one or more payments during an established period based on conditions determined at the outset. Widely used in the credit and currency markets, they enable counterparties to transform undesirable risks or comparative advantages in one market into obligations that, theoretically at least, better suit the needs of both.
One example of this type of agreement is an interest-rate swap. That is where, for instance, a company with an existing loan whose rate fluctuates every six months might arrange with, say, a bank, to eliminate that uncertainty. What happens next is that the financial institution, for diversification or other purpose, assumes responsibility for the varying, or floating-rate, payments, while the borrower agrees to cover the amounts tied to a predetermined or fixed rate of interest.
These four categories of derivatives are by no means the end of it. Indeed, it is safe to say that there are myriad variations, a fact which has likely laid the groundwork for the coming unraveling. Regardless, it is worth noting that instruments such as futures, forwards, options and swaps have played an important role in commerce and finance. In fact, individuals and businesses have used a wide variety of risk-transfer methods for hundreds, perhaps thousands, of years, and no doubt society as a whole has benefited.
Without having some way of gauging or laying off their exposure, people might find it impossible, for example, to provide for their loved ones upon death or to protect their homes and businesses from calamities such as fire. It would also be very difficult for companies to evaluate or make sizeable investments in large-scale or long-term ventures. Derivatives can give decision-makers the flexibility to decide which risks to keep -- and which to try and pass on or trade to others.
In this respect, they have proved exceptionally useful. Arguably, they have become integral to the financial lives of almost everyone, though most people are probably unaware of this fact. Apart from their straightforward use by investors looking to reduce risk or profit from potential trading opportunities, various forms of synthetically-created securities have enabled millions to enhance their economic wellbeing and tap into the American dream.
From educating our children to buying a place to live, from the way we manage our credit and finances, from greasing the wheels of global trade to overcoming the dizzying array of risks and uncertainties faced by businesses large and small, derivatives have played a major role.
One way in particular these instruments have helped is by facilitating a process known as “securitization,” whereby loans, financial instruments, and other assets are bundled together and sold to investors as a package. This has created tremendous economy-of-scale benefits. It has allowed individuals seeking financing say, for the purchase of a home, to tap into a plethora of funding sources in the U.S. and around the world, helping to lower their interest costs. It has also enabled people to obtain products and services personalized to their needs and risk requirements.
Many have recognized the value of synthetically-created financial instruments. Alan Greenspan, long-time Chairman of the Federal Reserve, noted in 2003 that "The benefits…have far exceeded their costs." He also said that the “growing array of derivatives and the related application of more-sophisticated methods for measuring and managing risks had been key factors underlying the remarkable resilience of the banking system.”
Nonetheless, there is a dark side. It is impossible, for instance, to discuss derivatives without noting that these instruments, indirectly or by virtue of their structure (e.g., options), almost invariably employ some element of leverage (i.e., “other people’s money”). Indeed, that has likely been a spur to their increased usage among amateur and professional investors (and speculators) alike, especially in recent years.
With difficult conditions in the wake of the post-1990s stock market bubble, historically low interest rates, and intense competition, money managers have increasingly sought to garner more bang for their buck by using high-octane financial instruments such as futures, options and swaps.
This includes hedge funds, a group of operators that has come virtually out of nowhere in the mid-1990s to aggressively oversee more than $1 trillion in capital, often geared up with borrowed funds. With inbuilt incentives to place riskier bets than traditional old-line managers, this crowd has discovered that derivatives have considerable appeal. Rather than shedding risk, they have been adding to it. Indeed, many have taken to these instruments like ducks to water, though not always with eyes wide open.
Aside from that, because modern financial engineering involving synthetically-created securities has, in many respects, made it easy for even the least creditworthy individuals to borrow money for all sorts of purposes, derivatives have undoubtedly contributed to the breathtaking, but ultimately very risky, expansion of credit that has occurred during the past few decades.
Taken together, the combination of increased leverage and heightened risk-taking has served to stir up a potentially volatile miasma around derivatives, especially the newer, more complex varieties. That makes them exceptionally dangerous if not handled properly.
Conceptually, it is not hard to grasp the basic economics of a garden-variety derivative such as a futures contract. If the market price of wheat goes up between the time a deal is struck and the expiration of the agreement, the buyer wins and the seller loses. That is what is known as a zero-sum game. Nonetheless, whatever a farmer, to use the earlier example, might give up as a result of hedging his output is offset by the reduced uncertainty.
But it is an altogether different story when it comes to analyzing options, or a portfolio of derivatives, especially those with lots of complicated bells and whistles. In most cases, valuation and risk assessment depend on mathematical formulas and computerized models, with many inputs derived from estimates and past data. That is all well and good if the tools are perfect and the history is complete.
Unfortunately, there is little evidence that this is the case. In truth, many experts believe the derivatives market rests on a number of very precarious assumptions that have yet to be tested.
And even then, the history of the derivatives market is replete with high-profile disasters. These include the 1994 bankruptcy of Orange County, one of California’s richest, due to naïve investments in exotic derivatives; the 1995 failure of the 200-year old Barings Bank as a result of unauthorized futures and options trading by a rogue employee; the 1998 collapse of hedge fund Long Term Capital Management on the heels of ultra-leveraged bets gone wrong; and, the ongoing implosion at Fannie Mae, the nation’s largest mortgage lender, because of derivative, accounting and other irregularities.
Up until now, none of these derivative-related hurricanes has breached the high-water levees of the U.S. and global financial systems. But as was the case with earlier, less destructive storms in the American Gulf Coast region, rather than decreasing the odds of a disaster, the relative calm of the past seemed to have inspired a false sense of security.
Indeed, the fact that New Orleans had long been spared despite the inevitable and persistent threat made for considerable complacency. As did the availability of government-sponsored flood insurance and a belief that authorities would step in and save the day if need be. Instead of getting prepared for the worst, people did virtually the opposite: they boosted development in flood-prone areas without thinking twice about it.
Likewise, many view the lack of widespread economic upheaval following earlier derivative blow-ups as a reason to be unconcerned about the current state of the financial system. The seemingly unprecedented intervention of the Federal Reserve Bank of New York in the wake of the LTCM collapse, as well as central bank “accommodation” after the 1987 stock market crash, have also inspired confidence that authorities will not let things get too far out of hand if and when disaster strikes.
Unfortunately, this sense of moral hazard has almost certainly increased the risk and destructive potential of a catastrophic meltdown in the derivatives market.
The reality is, when people erect a raft of new buildings in vulnerable locales, it generally doesn’t increase the odds that a hurricane will strike. That is not the case with respect to risky behavior in the synthetic securities market, however.
When big operators take on a lot more risk than they otherwise might -- they drive faster, perhaps, because they know their car has anti-lock brakes -- it tends to raise the danger stakes for the system as a whole. Millions of dollars of losses can break the bank at a few unlucky firms. Billion -- or even trillion -- dollar failures can bring down the whole house of cards, especially given the dense network of dependent relationships that exists in the global financial arena. As well as the key role that finance-related activities now play in today’s service-oriented economy.
In addition, while an earthquake in a major city would likely cause severe damage and untold loss of lives, it would not necessarily lead to aftershocks 3,000 miles away. In the modern world, however, the “counterparty risk” factor seems to be zooming off the charts. What that means is that a potentially unstoppable domino effect, a “cascade of ruin,” could be set in motion if a global bank or “bulge bracket” Wall Street firm ends up with the derivative short straw.
That potential ripple effect has as much to do with the concentration of exposure at large players such as banks and Wall Street derivatives powerhouses as it has to do with the abundance of overlapping ties to specific developments or changes in asset prices. Many credit-related derivatives, for example, either shadow or are directly linked to indexes that include the debt of certain large borrowers. The fact that the scale of the exposure is obscured by the market’s lack of transparency adds to the potential for a sudden and unexpectedly sharp turn for the worse.
Another point the disaster in New Orleans made clear was that having plans in place to deal with a long-predicted event doesn’t necessarily mean success is assured. One of the biggest holes in the emergency response effort following Hurricane Katrina was the chaos that resulted from poor communications and overlapping jurisdictional responsibilities. Essentially, one hand -- of government -- did not know what the other was doing, and no one was fully in charge, at least in the beginning.
In the modern global financial system, where many participants are either unregulated or are monitored by a patchwork of country or sector-specific regulatory overseers, chances are that a derivatives-related catastrophe will see a similar lack of coordination that will produce a far more devastating outcome than if it was a purely domestic affair.
It is one thing for a central banker to summon the heads of various financial firms into a room to sort out the mess at hedge fund LTCM, as the New York Federal Reserve chief reportedly did in 1998. Despite the fact that the Fed had limited statutory authority in the matter, it is not hard to see why none of those who were asked to attend turned down the “invitation.”
However, if a derivatives time-bomb is set off by the failure of a large London-based hedge fund, will a banker in the Cayman Islands, an investor in Japan, an insurer in Germany, and a regulator in France feel similarly inclined to respond, or even to take the lead? That is assuming, of course, that those affected even understand what is going on or why it may be relevant to their own interests. Overall, there appears to be little, if any strategy in place for dealing with cross-border financial upheaval.
What will likely make matters worse is the fact that the derivatives market has become mind-numbingly complex and remains extremely opaque. Few individuals, let alone regulators, have a solid handle on the aggregate picture, especially globally. And while there is a great deal of activity that is transparent, such as the trading that takes place on recognized venues like the CBOT or Chicago Mercantile Exchange, the vast majority of deals are private, “over-the-counter” transactions that go unreported.
Adding further fuel to the fire has been the liberalization and globalization of financial markets. Because of competitive pressures and the ease with which capital flows between firms, markets and countries, activities that used to be limited to large firms in highly regulated sectors (e.g., banks) are being taken on board by all and sundry. Often in locations where standards are low or oversight is lax.
Hedge funds, insurers, corporate treasuries, the finance arms of industrial companies, and other non-traditional players are increasingly involved in the derivatives market. For the most part, they have less stringent capital requirements and less of a history managing complicated financial risks and broad credit exposure through several cycles of economic activity than banks do.
In sum, there are more inexperienced players taking part, more firms with diverse -- and occasionally inadequate -- capabilities linked to each other, and a maze of overlapping and often competing jurisdictions. This suggests that a simple solution, or even a consensus, will be almost impossible to find if and when the worst-case scenario does come to pass.
Scarier still, it is likely the disease that typically goes hand-in-hand with disasters of the money kind will be transmitted around the world at light speed because of modern technology and advanced communications networks. The far-reaching epidemic that people don’t usually like to discuss in mixed company, let alone acknowledge, when the worst unexpectedly happens: panic and contagion. Throughout history, they have been a recurring feature of convulsing markets and dramatic financial crises.
When people are calm and otherwise thinking clearly, they tend, more often than not, to act rationally. However, when problems arise and even the most sophisticated players become terrified of losing their jobs or their shirts, or they are overwhelmed by the sheer scale of potential risks they are confronted with, they frequently experience a primal fight-or-flight response. Or even temporary paralysis -- like the proverbial deer in the headlights.
During many of history’s broad-scale financial upheavals, such as the period surrounding the 1987 stock market crash and the collapse of Long Term Capital Management, markets became momentarily transformed. Traders stopped buying and selling and even answering phones. Money managers froze or reacted in knee-jerk fashion. Bankers called in loans. And regulators, for the most part, stood back and watched. All the while, many of those who were most heavily exposed were forced to liquidate positions at fire-sale prices.
At those points, fear had taken over -- the kind that says “run” when someone shouts “fire” in a crowded theater.
And, perhaps, the kind that had people shooting and looting, or wandering aimlessly, or cowering in stifling attics above flooded rooms, when essential services failed and the lights went out in New Orleans in the aftermath of Hurricane Katrina.
Once troops and emergency responders moved in, and people in the surrounding regions and elsewhere rallied round, rationality and order returned to that Gulf Coast city. And in the weeks that followed, many of those affected did figure out at least some way to start picking up the pieces and start living again.
We weathered earlier storms in our financial system, too, though no doubt the cost has often been considerable. The risk this time, however, is that conditions are, and will be, more complicated and dangerous than before. While New Orleans was a relatively self-contained locale, whose citizens and government officials could potentially reach outside the area for assistance, a firestorm set in motion by a derivatives debacle is unlikely to leave many parts of the global financial system unscathed.
It doesn’t help that there are unsustainable imbalances in the global economy, either. America faces record trade and budget deficits. Many economically advanced countries around the world have aging populations and underfunded pension systems. Real estate seems to have taken the bubble baton from the stock market, though there are signs that the top is already in. And the world is awash in debt and a vast sea of open-ended obligations and contingent liabilities.
Moreover, if history is any guide, the period of monetary tightening that began in June 2004 will likely blow the cover off at least some shaky operations that had been kept alive by cheap money in the wake of the post-1990s new-era collapse. Odds are, in fact, that one of those will be the match that lights the fuse that ultimately triggers widespread financial turmoil.
Already there are rumbling in the financial world, akin to the small tremors that shake the ground ahead of a massive earthquake. In the spring of 2005, several large hedge funds reportedly lost billions of dollars on complicated credit bets gone wrong. One firm even admitted that it had made a substantial “miscalculation” -- which they only realized, of course, after the fact. Given the increasingly complex nature of the derivatives market, that refrain is likely to be heard over and over again in future.
Certainly, the U.S. and global economies have been remarkably resilient, especially in recent years, and it may be a mistake to bet on the downside. What’s more, there are those who would argue that the financial markets have attracted the best and the brightest, and a gut-wrenching, blood-letting debacle is in no one’s interest. Unfortunately, the odds seem stacked against a happy ending, and the cyclical nature of financial crises suggests it is definitely the wrong time to be thinking like a Pollyanna.
Unfortunately, the reality is, if it all goes horribly wrong, it will not only be Wall Street that suffers. Main Street will, too. In the worst case, brokerage firms and banks will shut their doors. Markets will plunge and many investors will lose everything, Interest rates will shoot sharply higher, taxes will rise, and parts of the economy will grind to a halt, at least temporarily. Those seeking a mortgage, a college education, a job, or even day-to-day sustenance may find themselves left wanting.
At a time when many have abandoned prudence in search of profits, and where those who are knowledgeable about the disaster-to-come in the derivatives market are seeking to protect themselves, it is the timeless wisdom that remains true: forewarned is forearmed.
© 2005 Michael J. Panzner
Michael Panzner is author of The New Laws of the Stock Market Jungle: An Insider’s Guide to Successful Investing in a Changing World and a 20-year veteran of the stock, bond and currency markets. He is currently at work on a book about global financial risks.
Contact Information
Michael J. Panzner
P.O. Box 115
Manhasset, NY 11030
BusterStronghart@Gmail.com
More Harbingers of the Decline and Fall of the US
Just over a year ago the Russians successfully launched and fired a multiple-warhead road mobile ICBM, a type of weapon that the US doesn’t have and which is presently impossible to track.
A month earlier the Chinese slipped a “cloaked” nuclear submarine undetected into firing range of a US aircraft carrier during war games. The carrier was accompanied by dozens of US warships. One NATO figure said that the shock was similar to that experienced when the Russians launched Sputnik.
In August the Chinese successfully hacked in the Pentagon computer demonstrating the ability to disable our entire US defense system.
The Chinese and Russians, erstwhile enemies, have conducted joint war games in the Pacific.
The Russians have established an agreement with the Syrians to use a Syrian port as a home port for what has now, in effect become its Mediterranean Fleet. For the first time, the Russians will have a permanent presence on the Mediterranean.
The Saudis have made a billion dollar purchase of Russian military equipment.
The Russians have been making port visits of many South American countries--in addition to Venezuela and Cuba.
Many countries are in the process of finding other ways than the dollar to settle accounts. this is especially important to us in regard to oil imports and our relationship with China.
More Harbingers of the Decline and Fall of the US
Just over a year ago the Russians successfully launched and fired a multiple-warhead road mobile ICBM, a type of weapon that the US doesn’t have and which is presently impossible to track.
A month earlier the Chinese slipped a “cloaked” nuclear submarine undetected into firing range of a US aircraft carrier during war games. The carrier was accompanied by dozens of US warships. One NATO figure said that the shock was similar to that experienced when the Russians launched Sputnik.
In August the Chinese successfully hacked in the Pentagon computer demonstrating the ability to disable our entire US defense system.
The Chinese and Russians, erstwhile enemies, have conducted joint war games in the Pacific.
The Russians have established an agreement with the Syrians to use a Syrian port as a home port for what has now, in effect become its Mediterranean Fleet. For the first time, the Russians will have a permanent presence on the Mediterranean.
The Saudis have made a billion dollar purchase of Russian military equipment.
The Russians have been making port visits of many South American countries--in addition to Venezuela and Cuba.
Many countries are in the process of finding other ways than the dollar to settle accounts. this is especially important to us in regard to oil imports and our relationship with China.
BusterStronghart@Gmail.com
People are saying that Joe Biden should resign as a statement of his position on Aphganistan.
If Vice-President Biden resigns he'll go out in a blaze of glory and be forgotten quick time. It's better that he make his voice heard at national security meetings, and in the White House where people are capable and willing listeners.
This isn't the Cheney administration where argument was kicked under the table and left unheard. In the Obama administration there are willing, open minded listeners who can change their positions and who aren't afraid to do so. Mr.Biden belongs in the meetings. .
And who would become next in line for the Presidency? Nancy Pelosi? And after her? Robert Byrd.
No, Joe, stay where you belong.
mek
People are saying that Joe Biden should resign as a statement of his position on Aphganistan.
If Vice-President Biden resigns he'll go out in a blaze of glory and be forgotten quick time. It's better that he make his voice heard at national security meetings, and in the White House where people are capable and willing listeners.
This isn't the Cheney administration where argument was kicked under the table and left unheard. In the Obama administration there are willing, open minded listeners who can change their positions and who aren't afraid to do so. Mr.Biden belongs in the meetings. .
And who would become next in line for the Presidency? Nancy Pelosi? And after her? Robert Byrd.
No, Joe, stay where you belong.
mek
Tuesday, October 13, 2009
BusterStronghart@Gmail.com
We shall not cease from exploration. And the end of all our exploring will be to arrive where we started and know the place for the first time.
T. S. Eliot, Little Gidding
The Inscription of John Fowles' "The Magus."
Also quoted by ROBERT S. McNAMARA during a post Viet-Nam interview.
We shall not cease from exploration. And the end of all our exploring will be to arrive where we started and know the place for the first time.
T. S. Eliot, Little Gidding
The Inscription of John Fowles' "The Magus."
Also quoted by ROBERT S. McNAMARA during a post Viet-Nam interview.
Tuesday, October 06, 2009
BusterStronghart@Gmail.com
Is Walmart good for the economy of the US?
Isn't it obvious? We've lost more than a million manufacturing jobs even before the recent debacle starting in 2000. Before that the manufacturing industries in the US, like apparel, tools, audio and visual equipment, pens, eye wear, foot wear, and so forth were already decimated.
Besides the loss of jobs there is also the loss of manufacturing capacity to consider. In addition, hundreds of thousands small shop and supermarket retail jobs have been lost.
Small towns lost their main streets and experienced an extreme loss of tax revenue when Walmarts would be located just out town boundaries.
Add in the fact that many of Walmart sites would tax abated for twenty and even forty years by the counties and states in which they were located. -- This while the stores that would be eventually driven out of business were paying their full real estate taxes on main street.
-
In many cases Walmart got the counties to construct highway exits leading to their sites.
-
Sewers were built. Talk about corporate welfare!
Is Walmart good for the economy of the US?
Isn't it obvious? We've lost more than a million manufacturing jobs even before the recent debacle starting in 2000. Before that the manufacturing industries in the US, like apparel, tools, audio and visual equipment, pens, eye wear, foot wear, and so forth were already decimated.
Besides the loss of jobs there is also the loss of manufacturing capacity to consider. In addition, hundreds of thousands small shop and supermarket retail jobs have been lost.
Small towns lost their main streets and experienced an extreme loss of tax revenue when Walmarts would be located just out town boundaries.
Add in the fact that many of Walmart sites would tax abated for twenty and even forty years by the counties and states in which they were located. -- This while the stores that would be eventually driven out of business were paying their full real estate taxes on main street.
-
In many cases Walmart got the counties to construct highway exits leading to their sites.
-
Sewers were built. Talk about corporate welfare!
Sunday, October 04, 2009
BusterStronghart@Gmail.com
Portrait
He finished up the portrait~~~~ yesterday at noon. Now
he studies it in detail. ~~~~ He did him in a gray
jacket, all unbuttoned, ~~~~ a deep gray. Without
any vest or tie. ~~~~ In a shirt of rose;
so a little of ~~~~ the beauty of the chest,
the beauty of the throat, ~~~~ might show through a bit.
The right side of his brow ~~~~ is almost totally
covered by his hair,~~~~ by his beautiful hair
(which is combed the way ~~~~ he fancies it this year).
The note is utterly ~~~~ the voluptuous one
that he wanted to strike ~~~~ when he did the eyes,
when he did the lips... ~~~~ That mouth of his, the lips
made for the fulfillment ~~~~~ of a choice eroticism.
C.P. Cavafy
note: Cavafy used space.
Blogspot wouldn't recognize the spaces so I inserted ~s.
The poem looks better with the spaces.
Portrait
He finished up the portrait~~~~ yesterday at noon. Now
he studies it in detail. ~~~~ He did him in a gray
jacket, all unbuttoned, ~~~~ a deep gray. Without
any vest or tie. ~~~~ In a shirt of rose;
so a little of ~~~~ the beauty of the chest,
the beauty of the throat, ~~~~ might show through a bit.
The right side of his brow ~~~~ is almost totally
covered by his hair,~~~~ by his beautiful hair
(which is combed the way ~~~~ he fancies it this year).
The note is utterly ~~~~ the voluptuous one
that he wanted to strike ~~~~ when he did the eyes,
when he did the lips... ~~~~ That mouth of his, the lips
made for the fulfillment ~~~~~ of a choice eroticism.
C.P. Cavafy
note: Cavafy used space.
Blogspot wouldn't recognize the spaces so I inserted ~s.
The poem looks better with the spaces.
Saturday, October 03, 2009
BusterStronghart@Gmail.com
................
Sometimes, on waking, she would close her eyes
For a last look at the white house she knew
In sleep alone, and held no title to,
And had not entered yet, for all her sighs.
What did she tell me of that house of hers?
White gatepost; terrace; fanlight of the door;
A widow's walk above the bouldered shore;
Salt winds that ruffle the surrounding firs.
Is she now there, wherever there may be?
Only a foolish man would hope to find
That haven fashioned by her dreaming mind.
Night after night, my love, I put to sea.
Richard Wilbur
................
Sometimes, on waking, she would close her eyes
For a last look at the white house she knew
In sleep alone, and held no title to,
And had not entered yet, for all her sighs.
What did she tell me of that house of hers?
White gatepost; terrace; fanlight of the door;
A widow's walk above the bouldered shore;
Salt winds that ruffle the surrounding firs.
Is she now there, wherever there may be?
Only a foolish man would hope to find
That haven fashioned by her dreaming mind.
Night after night, my love, I put to sea.
Richard Wilbur
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