May 29, 2009

The Garden of Financial Delights

IN THE BEGINNING God created risk and return. And the risks were myriad and treacherous, and darkness was upon the face of the deep. And the spirit of God moved upon the face of the waters and said, “Let there be profit.” And God saw the profit, and saw that it was good; and He divided its sources into debt and equity. And the debt He called bonds, and the equity He called stocks. And the bonds and the stocks were the first instruments.

And the LORD God took the man, and did shew him the market, and put him into the market to dress and to keep it. And the LORD God commanded the man, saying, “Of every sector of the market thou mayest reap rewards. But of the Sector of Alternative Investments, thou shalt not reap from it; for in the day thou reapest thereof thou shalt surely die.”

Now the salesman was more subtle than any man which the LORD God had made. And he said to the man, “Behold, art thou earning but a pittance on thy savings accounts, and on thy muni bonds, and did not Business Week proclaim the death of equities?” And the man said, “Don’t remind me.” And the salesman said, “Thou should invest in the Sector of Alternative Investments, for thou canst reap great rewards many times that of the market, if only thou let me use the Fount of Leverage and draw from the River Forex and conjure Forces from the Pit of Shortselling.” And the man said, “Just what type of great rewards are we talking about?”

Verily the salesman looked at him and said, “Behold, I shall give thou the world and everything in it, and all for a mere two percent each year and twenty percent of the gains.” And the man said, “We’re good.” And lo, the salesman did go and produce great gains, and drew succor from all parts of the earth, and other men clamored to invest. And the salesman did create something from nothing, and all were in awe of his power; and the salesman went on to create funds of funds, which did the same thing but took even larger fees. Then men said to themselves, “Behold, the Sector of Alternative Investments is vast and powerful; and who can stand against it?” For those who controlled it had rode the bull and tamed the bear, and were portrayed in Fortune.

And the LORD God called to the man and said, “What is this thou hadst done? Didn’t I tell thou to stick with slow and steady growth?” And the man said, “Ooooooh, slow and steady growth. My fund’s alpha is through the roof and I’m partying at a mansion tonight with all these models from Eastern Europe.” And the LORD God looked at the man, and said, “Thou shalt reap what thou have sowed.” And the man looked at the LORD and wondered, but quickly dismissed the LORD’s chastisement, for the man didst score frequently with girls he met at nightclubs and partook of the Pool of Bollinger and Moet & Hennessy.

But the man had forgotten about the serpent, who stalked the fields and offered his money to those who dwelt in rental units and smallholdings, saying, “Come, thou can afford a dwelling of thine own, or I can refinance thou mortgage and bring thou vast wealth.” And the people said, “Really?” And the serpent said, “Yea, verily, for the housing market always goes up.” And the multitudes did rejoice and bought flat-screen televisions and went on cruises and traded up to sport-utility vehicles.

But the multitudes were overcome with fear when their mortgages reset, and hid in their dwellings from their creditors. And they cursed the serpent, and there was much wailing and gnashing of teeth, and they feared being cast into the outer darkness. And the storekeepers and the merchants and the industrialists all wondered at this, and said, “Oh, shit.” And the LORD opened the gate to the Pit, and a black smoke arose from it, and the man heard a voice crying, “One month LIBOR for 4.5 percent, and three month LIBOR for five percent, but oil will crash from $145 to $50 a barrel.”

Then it came to pass there was a great earthquake in the markets, and the sun turned black like sackcloth, and the moon was as if it was made of blood. The stars in the sky fell to earth, and the sky receded like a scroll, and every stock and mutual fund and hedge fund was removed from its place. Then the kings of the earth, the princes, the generals, the rich, the mighty, and every free man hid in caves and among the rocks of the mountains, and called to the Fed, “Hide us from the wrath of the Great Deleveraging, for the great day of its wrath has come, and who can stand against it?”

And the Fed did act, but it was too late for the man, who wept and beseeched the LORD for succor, saying, “LORD, forgive me, for I have sinned and didn’t really expect the whole risk thing while I was enjoying my returns.” And the LORD hid His face from the man, and cursed him, and sent him forth covered in sore boils and leprosy; and the man was ruined, and cursed his fate and the markets and the day of his birth. Thus the man left the presence of the LORD, and dwelt in the land of Nod, which is just outside Toledo, and became a vagabond, amidst the ravaged multitudes.

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(Details from Hieronymous Bosch, "The Garden of Earthly Delights," c. 1504)

Posted by Benjamin Kepple at May 29, 2009 07:19 PM | TrackBack
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