TheAcsMan.com no longer publishes original content material. Reprints of previously published "Daily Market Updates" available to subscribers of OptionToProfit.com appear for informational purposes only and links are de-activated.
November 7, 2011
No matter how selfless any one of us may make ourselves out to be, there is no escaping the fact that we all have an ego. In fact, the mere act of thinking one's self to be selfless is feeding into that ego.
You don't have to be Sigmund Freud to know that ego is indispensable and the source of many of our problems. Those problems can be self-inflicted, but more likely are those that we inflict upon others in pursuit of satisfying an ego.
An example of a self-inflicted problem related to ego is when you believe that sometimes a cigar is not a cigar. The inevitable comparison is ego deflating and may lead to ED.
Ego dysfunction, which in turn to can lead to another kind of ED.
To become everything that you believe that you were destined to be typically requires that some collateral damage be done along the way.
Sometimes that collateral damage may be in the form of a missing $600 million of client funds, sometimes it may take the form of diminishing shareholder value.
Sometimes it means making you and your nation look like babbling idiots.
The delicate balance between instincts, moralistic oversight and pragmatic approach to life is what distinguishes us from one another every bit as much as DNA aids forensic scientists and our scent alerts a dog.
In the name of ego we do great things, but also terrible things.
There's no doubt that ego has been front and center this past week.
Jon Corzine comes to mind. Jerry Yang? Yeah, him too, but for much more than a single week.
By all accounts, Corzine believed that he was not only the smartest of the smart, but also charmed. He ventured into an area of great risk and reward, but without the requisite knowledge, as his ego blinded him to the reality of the situation.
Thrown out by Goldman Sachs, nearly thrown out of a speeding car, losing a Gubernatorial election, Corzine needed a big win to satisfy a big ego.
They never deflate, you know. They constantly need to be fed and the stakes just get higher.
Yang's ego took the form of a paternalistic attitude toward investors that blinded him to the reality of the situation. What he still hasn't realized, being somewhat stuck in the pre-1500's world, is that Yahoo! does not revolve around him, but rather around its universe of shareholders.
Even Pope Clement VII was able to understand that God's law is not inviolate. Copernicus was not burned at the stake.
Copernicus, who proved that the earth was not the center of the universe, interestingly was also the first voice to proclaim what 75 years later became known as "Gresham's Law" and formed the basis for monetary policy 600 years ago.
Copernicus was the first to address the phenomenon that debasing currency would drive undebased currency out of circulation. "Sovereigns" debase currency at the expense of the citizenry.
Yang? Center of universe. Yang? Debased currency?
He is the anti-Copernicus.
Corzine dealt with his stunning descent into reality by leaving his ego behind, especially as ego is often measured in terms of money. He declined to accept any contractually due payments, although it's not terribly likely that a bankruptcy court would have made that gesture necessary.
Yang, on the other hand, continues to be blinded to the reality.
That sometimes is the paradox of ego. Freud described it as the pragmatic component of the troika, further composed of id and super-ego. But for all of its pragmatic qualities, ego sometimes makes us do some really stupid things, most of all, neglecting to understand events on the ground.
Every investor has an ego, as well. In it's most simple form it's measured by portfolio performance.
Sometimes, a well trained ego will consider performance relative to some standard and will keep himself in check if his performance doesn't meet the standard.
Other times, an investor will focus solely on the one great trade. The one that made lots of money, while forgetting the big picture and the fact that the rest of the portfolio may have woefully underperformed.
Celebrating that victory, though, and pointing it out to others, serves to embolden for the next battle. Without being emboldened, who would ever take risks?
I don't know what Jon Corzine's recent victories have been, but he sure was emboldened, although maybe it's easier to be so when using other people's money.
It's still not clear what role ego played in this past week's doings in Greece.
When both your father and grandfather served as Prime Minister before you, there's no doubt that there has to be an incredible clash of egos at whatever the Greek equivalent of Thanksgiving Day dinners are, in the Papandreou household.
In that kind of household probably the only way to have a chance of survival is to see to it that your own ego can withstand the obvious comparisons and intellectual debates. No doubt that American born and educated PM Papandreou the Third, still has to prove his Greek "bona fides."
So what do we make of the political events in Greece last week?
Where was Papandreou's paternalistic streak? Third generation Prime Minister, you'd think that he would have a patrician air, and as best as possible in the nation that gave us democracy, rule by fiat.
No doubt that his ego and that of all of Greece was stoked by the thought that they could possibly unravel the European Union by following their collective id and ignoring their national super-ego.
But as a politician, did Papandreou put his ego on hold by putting the decision to accept the 50% haircut to a referendum or was he, as the former deputy finance minister said, an emotional wreck, incapable of leading?
Or maybe he was crazy. Crazy like a fox.
Instead, you have to marvel at an ego that played second fiddle to politics and political strategy.
As news came on Friday that a new coalition government was about to be formed in Greece, but not being led by Papandreou, the markets rallied.
What does that do to your ego?
Ask any CEO who after a dismissal or retirement sees their stock price rally. Was anyone more pilloried than Leo Apotheker recently? How's that ego doing, Leo?
That must not be the best of feelings. Luckily, since money, even from severance, serves to inflate ego, the net result is elevated ego.
Was the past week of high drama and what appeared to be dysfunction all carefully coordinated plans to promote personal and national ego?
Did Greece get everything it wanted and needs without really having given up much in return? In fact, what seems like an selfless act by its leader may be anything but, as he gives the appearance of putting state before self, while being available to return and "save" his nation from themselves and the EU when the coalition fails.
In the meantime, it's off to Italy, where the next ego has a sense of buffoonery.
After the last couple of months, my ego is doing reasonably well.
I really only need to fool two people. Myself and Sugar Momma and don't have much need or chance to inflict collateral damage, unless you believe that everything done in the market is part of a zero sum game.
In that case, I hope to litter the streets with undeserving citizenry and will occasionally leave some cigar ashes on the carcasses.
That would make anyone feel good.
And besides, it's time to give that super-ego a rest.