Thursday, March 18, 2021
Saturday, March 13, 2021
Class Warfare Goes to the Stock Market
My column from the March 2021 issue of the Greater Sturbridge Town & Country Living Magazine
By Richard Morchoe
Occasionally, the Matrix opens up and there is a glimpse of the reality that has been hidden from sight and we see our place in the world.
Okay, it has been years since I've seen the movies and they are only imperfectly remembered, so I don't know if an analogy of the Matrix opening makes sense. A better example might be the Wizard of Oz when Toto pulls aside the curtain to reveal who the wizard really is.
We had a similar incident last month when something that was not supposed to happen did. In the financial world, some connected people had their slam dunk of a deal upended and the business news channels were caught wondering how to view the event.
It looked like the usual short play. A company whose raison d'être was not a money maker had caught the attention of some people who saw that the price of the company's stock should go down. They would be more than happy to assist in the decline and make a few bucks doing it.
Now in buying stocks, one hopes the price will increase to sell at a profit. How can one make money doing that with a stock that is a dog?
To do it with a loser issue, it is sold short. That is the stock is borrowed and the borrowed stock is sold. The short seller waits for the price to go down and then buys back the stock and returns it to the owner.
The difference between what it was sold for and what it is bought back for is the profit.
The hedge fund cool kids had every reason to believe this would work well, except it didn't.
The company that was to be the victim, GameStop (symbol GME), sold physical copies of computer games when gaming had gone mostly digital.
Some hedge funds saw the opportunity and piled on, selling short more shares than actually existed. Selling short shares of stock that do not exist is called "naked" short selling. One may ask how is this legal? Well, it isn't, and was outlawed during the Great Recession when the financial industry learned its lessons and bad things were never to happen again.
Naked shorting continues to happen, but the jails are not full of the connected practitioners. As George Orwell had it, some animals are more equal than others.
The GameStop play looked good for the raiders, but as Scots poet, Bobby Burns noted, “The best laid schemes o' mice an' men / Gang aft a-gley.”
The internet has changed the world. Whether it has been for the better is a matter for debate,
Back in the Dark Ages, brokerages, charged hefty fees to execute stock trades. For the average person to become knowledgeable about a company's shares demanded, at the least, a trip to the library and the information there was probably incomplete. Thus, the number of people who invested who were not employees of financial businesses, was limited to those with resources and sufficient time to gain some expertise.
Now, in these latter days, all knowledge is online. Couple that with enterprises such as Robinhood that will execute customers' stock trades sans commission and the democratization of the market seems complete.
A multitude of people who follow WallStreetBets on the discussion site, Reddit noticed the shorting of the stock and like a hive swarm started buying GameStop. When that happened, the short sellers faced having to buy back the stock.
A huge fly in the ointment is, if there are enough buyers, theoretically the stock could keep going up forever. The hedge funds would go bust long before that. As the financial lumpen proletariat grabbed their digital pitchforks to storm the castle, it looked like it was going to happen.
The peasant army bought enough shares such that Melvin Capital, one of the biggest short sellers had to be bailed out to the tune of three billion dollars. The Bastille had fallen, Vive la révolution.
It was at this point that the curtain was pulled aside and not by Toto, or if you must, Agent Smith of the Matrix.
The establishment was not amused. On business news channel, CNBC, host of the midday show Halftime Report, Scott Wapner, had as a guest Chamath Palihapitiya, CEO of the venture capital firm Social Capital.
Wapner had a problem with the young billionaire. Palihapitiya was standing up for the insurgents and Scott came off as a valiant defender of elite capital, but Scott kind of tried to do it in a roundabout way of seeming to sympathize with the poor little guys.
Wapner suggested that GameStop was primed to fall and the little guy would need to be protected by regulation. Chamath did not say Scott was crying crocodile tears but responded, “Don’t all of a sudden look at a short squeeze, where money is being made by retail, and say, ‘Hey. they could be and may be the bag holder in the future, so let’s make sure they can never participate in the future,” Palihapitiya said. “That’s crazy.”
Scott denied that was what he was saying and Chamath replied: “You are saying that!” ... “That’s the implication of what you’re saying.”
“I’m not saying they shouldn’t be able to participate,” Wapner countered.
“You’re saying they should participate on your terms—” Palihapitiya said.
“No!” Wapner shot back.
Palihapitiya countered, “On Wall Street’s terms, in a way where — when Wall Street can have the best of it, they can maybe participate on the side.”
Scott claimed all he was looking for was a "hazard sign." It was weak and not at all convincing.
Wapner was clearly annoyed as if his young billionaire guest didn't know the team he was supposed to be on.
CNBC was not done. They would have as an interview, Leon Cooperman, another member of the aggrieved rich. "People are sitting at home getting their checks from the government, okay, and this fair share is a ######## (see note at the end*) concept. It's just a way of attacking wealthy people. I think it's inappropriate. We all got to work together and pull together." Of course, the previous sentence is certainly a ######## concept as no one expects Leon to be down in the trenches with the plebs.
It was not just business TV; other respectable figures spoke out. Former SEC Commissioner Laura Unger was concerned. She compared the GameStop uprising to January 6th at the Capitol, "If you don’t have the police in there at the right time, things go a little crazy.” She did admit it was to a "lesser degree,” but was the same “platform-created frenzy that people are operating under,” and added Wall Street was living through “trying times.”
Of course, the "trying times" are hardly caused by the GameStop events. They are, at most, a symptom.
CNN's Chris Cillizza penned "How Trumpism explains the GameStop stock surge." At least he didn't blame Putin. His idea was that it was anti-elitism as the driver. Maybe so, but Chris' words could only be considered a defense of team elite.
Your columnist admits to cheering for the insurgency. He tends to be a Carlinist as he agrees with the late George Carlin's famous quote about the distribution of power in this country, "It's a big club, and you ain’t in it."
I am not proud of the feeling, it is a bit of a churlish sentiment, but there it is. Carlin's dictum may not be completely justified, but a heck of a lot of it is.
In the end, the revolt failed. Robinhood, the firm that executes most of the trades for the GameStop buys stopped any further trading in the stock.
Not unreasonably, there were thoughts that someone big had had a mafia style sitdown with Vlad Tenev (not to be confused with Vlad Tepes) head of Robinhood, who was told that something bad could happen.
Citadel Capital executes Robinhood's trades and thus receives information from the order flow. It also ended up bailing out Melvin Capital's short position. That could not have made them happy.
It turned out that was probably not the case and Robinhood had severe cash problems due to the huge volume of trades they had been called on to execute. Tenev testified to that before Congress.
So, the glorious putsch was over. Robinhood as a get rich quick avenue is as valuable as three card monte. Still, for the occasional investor, there are worse things than commission free trades. Just remember that the Citadel Capitals are harvesting your information and as they say, for social media, you are not the customer, you are the product.
Also, remember the sage investing advice of Mark Twain, who was probably the nation's greatest humorist: "OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February."
*As this is a family magazine, we on Long Hill wish to spare our readers any vulgarity. Thus ######## represents the end product of bovine digestion.
`
Monday, March 8, 2021
Book Review as posted in the Greater Sturbridge Town & Country Living Magazine: James Nestor's Breath is, in itself a breath of fresh air.
James Nestor wants you to shut up...in a nice way
Breath: The New Science of a Lost Art
By James Nestor
Riverhead Books, 2020
Hardcover, 304 Pages
ISBN-10: 0735213615
ISBN-13: 978-0735213616
List: $28.00 Amazon: $16.80
By Richard Murphy
An old joke has it that an elderly man was asked his secret to long life and replied, "First thing I did was inhale, second exhale, it has been inhale, exhale ever since. Nothing to it."
It turns out, it's not that simple, and odds are, we are all doing it wrong. A reaction might be ”what do you mean? I haven't suffocated." True enough, but our mouths and noses are a mess because we don't get it right.
James Nestor was going through a bad patch of subpar health. His doctor suggested a breathing class of a technique called Sudarshan Kriya might help his failing lungs and he duly showed up for his first session. It did not look promising. He was unimpressed by the decrepit house the lesson was taking place in. Fellow students seemed a motley lot and the instructor did not excite confidence.
The class did not start off with a bang. He was instructed by an odd voice from a cassette to breath in and out through the nose, slowly, focusing on the breath.
As the evening continued, he was less and less feeling it. Good manners and free admission kept him there.
His grudging tenacity paid off. Nestor did not notice a transformation or change but it happened, “I never felt myself relax or the swarm of nagging thoughts leave my head. But it was as if I'd been taken from one place and deposited somewhere else. It happened in an instant."
He noted some physical changes and had an even better feeling of well-being the next day. Wanting to learn more led to a quest that would last several years. The book Breath: The New Science of a Lost Art would be the result.
Breath is his hunt for what has happened to us over time such that as a species we are having trouble with breathing and maladies associated with it.
The author introduces us to a "rogue group" of explorers he calls "pulmonauts” who have had some of the same questions he had. Many early members of that tribe were not scientists, but tinkerers "who stumbled on the powers of breathing because nothing else could help them."
There were searchers among the ancients but, for us, it started in the Nineteenth Century. George Catlin, the most famous artist of the West, was one of the first. A lawyer, then a portraitist in failing health, he left it all to live among and paint the Lakota Sioux. That is what he is most famous for.
What he found was a people in excellent health who knew how to breathe. Without dentists, he reported their teeth "as regular as the keys of a piano." Mothers would train infants to grow up breathing through the nose.
Catlin would bind his own mouth shut so that he would sleep with it closed as did the indigenes. Restoring health, he lived to a more advanced age than average Americans of the time.
Another "pulmonaut" was Carl Stough, who, according to Nestor, was somewhat a man of mystery as he left little record. In his time, however, he had a big following. From Opera singers to dying emphysemics, thousands found him. His key to breathing well: "the transformative power of full exhalation." He figured out, for example, emphysema patients suffered not because they could not get air into the lungs, but because they could not get enough stale air out.
There are others who have led the way. Konstantin Buteyko was an advocate of breathing less to get more. Czech runner, Emil Zátopek won Olympic gold with a similar technique. Wim Hof seems more than a little eccentric, but no matter. All of Nestor's subjects are interesting and people to learn from.
The author himself was his own subject of exploration, taking up "freediving." Freediving does not take place at an Olympic pool where they don't charge admission, though it originated in Greece. It was there that he explored the "ancient practice of diving hundreds of feet below the water's surface on a single breath of air." This was also the subject of another book he wrote.
Being successful in going deep might make one think his troubles were over, but there was so much research to be done and nothing could stop him, no matter how much he had to suffer for science.
In the first chapter, James reveals the disaster area that was his nose (It was disgusting), and will embark on a project that seems destined to make it worse. He, with fellow pulmonaut Anders Olsson, will have their noses stopped up to spend 10 days mouth breathing for science.
Olsson seems even more of a monomaniac than the author. He feared his father's fate, wished to avoid it, and started his crusade.
A prosperous Swedish businessman, Olsson got a divorce, sold off his company and cars and large house, and moved to smaller digs. He read everything and talked to scientists, surgeons, and anyone worth talking to about breathing.
When the noses were opened, it must have seemed anticlimactic that just about every vital sign and metric had gotten worse. The second part of the test, naturally enough, was shutting off the mouth and only breathing through the nose. The improvement post-experiment was also not unexpected.
So, just don't breathe through the mouth. Well, yes, but it is not that simple, as habits of a lifetime and especially, their effects are not easily reversed. But, some can be cured and some ameliorated. It is not easy, and seems kind of weird, but there are methods.
One of the strangest is proposed by the dentist and pulmonaut, Mark Burhenne. Dr. Mark asserts that mouth breathing contributes to periodontal disease, bad breath and "was the number one cause of cavities, even more damaging than sugar consumption, bad diet, or poor hygiene." I feel less guilty about all those M&Ms I ate as a child.
What's his cure? Before you go to bed, you don't have to bind your mouth like Catlin. Instead, tape it shut. Not sensing a mass conversion among readers, but there are results.
A five-year-old was cured of ADHD. The vital gas Nitric Oxide is increased. The author claims it ended his sleep apnea and snoring.
There is another problem that modern man and woman suffer from, small mouths. It was noticed to happen in the mid 1800s, and leads to problems in eating, speaking and breathing as well as crooked teeth and overbite. The cure: expand the mouth.
This is done by putting a device that expands the mouth into the mouth. It is a plastic retainer and dowel screw that forces the upper palate to grow outward
Nestor submitted to wearing a similar contraption at night. Around a year later, his small mouth had grown appreciably in size. It works because the affected bones in the mouth, unlike others, can actually grow into one's seventies. The author, due to the year of suffering, is breathing better, but at the bottom of the page he tells us it's all unnecessary. One can get the same benefits by chewing gum a couple of hours a day.
Hard chewing is missing from the soft foods we eat and that contributes to diminutive mouths. Humans are supposed to chew. He doesn't recommend the bubble gum I got with baseball cards as a kid. Rather, he suggests a sugarless Turkish gum. No flavor, but not unpleasant. You too can improve the structure of your mouth and breathe better.
One aspect of breathing that was a surprise is that carbon dioxide is as important as oxygen. One would not think so, after all, scuba divers do not go under with carbon dioxide tanks. Nestor claims we always have enough oxygen, even when we are short of breath. It's the CO2 we need more of. That gas has many functions in the circulation of blood, and when we lose weight, it is mostly exhaling the end product of fat as Carbon Dioxide. Who knew?
Breath: The New Science of a Lost Art is a book that investigates many facets of the human respiratory system and few modern men and women are without problems. James Nestor looks at more issues than are covered in this review and prescribes solutions for many.
In the first chapter, one of his interviewees asks "Why would we evolve to make ourselves sick?" It is a flip answer, but fair enough to say, because we can. We like our soft and rich foods. Few would choose to live like the Sioux, maybe not even contemporary Sioux.
The book is an adventure and Nestor writes well. With no medical credentials, I cannot judge the science of Breath. Still, the author is persuasive and my recommendation is personal. Readers can evaluate Breath to their own judgement.