From My Work-in-Progress Basket

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My Take on the GameStop/Reddit Fiasco

 “A scam is a scam. A fraud is a fraud.” – Emily Thornberry

 

Last week, I predicted that, despite the hype and bravado of those behind this fiasco, the share price of GameStop would eventually come back down to where it should be and tens of thousands of small fry investors would lose most (up to 90%) of the money they put into it.

Sadly, this is happening.

Here’s the way I saw it: 

I’m not a studied investment analyst, but you don’t have to be one to understand what was going on here. Some very bright people on Reddit, posing as anti-Wall Street rebels, devised a very clever scheme to pump and dump a number of overly leveraged shorts in order to make a ton of money. And they did. The story they sold – taking down the hedge funds – was just a story. There was never any real possibility that the billions those hedge funds lost would put them out of business. But there was a very good chance that the early promoters would be able to get rich at the expense of the people that bought the story.

 

The takeaways:

There is a huge distinction between speculating and investing. If you don’t know the difference, you shouldn’t speculate. You should invest your stock money in a no-load index fund.

Hedge funds are allowed to manipulate the market. For years, they have been putting their gurus on TV to badmouth companies in which they have short positions, waiting for the prices to fall, and then returning their “borrowed” stock and cashing in on the difference.

When mom-and-pop investors play the same game and win (but just temporarily), you get to see all the sleazebags that are profiting from their unethical but legal hustles. And it’s not just the funds themselves, but the gurus they put on TV and the TV executives that allow them to play their dirty game at the expense of their listeners.

And let’s not forget the politicians and investment officials that came out calling for regulations to “protect” the little guys. People like Janet Yellen, who got paid $800,000 in speaking fees by the hedge fund Citadel last year for… well… for being the likely candidate for Treasury Secretary this year.

On a positive note, this fiasco may have a good result. Hedge funds will likely be a bit more careful on how far they go short. Retail investors will be reluctant to fall for the same scam twice. And when gurus go on TV to bring down share prices for personal gain, they will do so with more caution because they’ll know that millions of investors now understand the game. (And, by the way, that’s how a free market is supposed to work.)

If you’d like to understand more of the details of what happened, here are three links that do a good job of explaining it. (Most of the media explanations I’ve seen on the subject are confusing or just plain wrong.)

https://www.visualcapitalist.com/the-crazy-world-of-stonks-explained/

https://seekingalpha.com/article/4402481-why-gamestops-stock-price-go-up-explaining-squeeze

https://www.polygon.com/2021/1/27/22252600/gamestop-stock-gme-why-whats-happening-explain

Worth Reading

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Nick Cave Prevails 

On December 7, I commented about this: a fight between an art museum that allowed some “artist” (Nick Cave) to paint the words TRUTH BE TOLD on one of their walls, and the local community that objected to it.

The good news is that the artist and the museum won in court based on first amendment rights. The bad news is that some people consider this sort of crap worthy of being called art. The other good news is that Cave’s “piece” will be there for a limited time. The other bad news is that the museum could come up with something worse next time!

You can read the full story here.

Postscript

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One of the lesser-recognized illnesses in America is finally getting the attention it deserves…

Notes From My Journal

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Happy Talk Is Here Again!

Contrary to what The New York Times has been saying for 9 months, they are now maintaining that the number of infections is not so important after all. What’s important is… well, here are some excerpts from a recent opinion piece (titled “Good morning. The vaccine news continues to be better than many people realize.”):

* “News about the vaccines continues to be excellent – and the public discussion of it continues to be more negative than the facts warrant. Here’s the key fact: All five vaccines with public results have eliminated COVID-19 deaths.”

* “Of the roughly 75,000 people who have received one of the five [vaccines] in a research trial, no single person has died from COVID, and only a few people appear to have been hospitalized.”

* Quoting Dr. Aaron Richterman, an infectious-disease specialist at the University of Pennsylvania: “In terms of the severe outcomes, which is what we really care about, the news is fantastic.”

* “Fortunately, there is no evidence yet that [the highly contagious South African variant of the virus] increases deaths among vaccinated people. Two of the five vaccines… have reported some results from South Africa, and none of the people there who received a vaccine died of COVID.”

* “The biggest caveat is the possibility that future data will be less heartening…. But don’t confuse uncertainty with bad news. The available vaccine evidence is nearly as positive as it could conceivably be.”

Lest you think they are merely reporting positive new facts, know this: Every bit of this good news was in play before the election. The Biden administration will likely do something new and different with respect to the COVID crisis, but so far, the only thing new about what’s happening is the perspective of the mainstream media.

Worth Considering

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And here’s another flip-flop…

The Washington Post, staunch supporter of a federally mandated lockdown, has lately changed its tune:

“Vaccines plus masks minus lockdowns. That’s the approach public health specialists are advising to curb the spread of contagious variants in the United States. Without firmer data showing widespread variants here, strict stay-at-home orders, as seen in Europe, will be hard to justify.”

Postscript

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While we’re pricking at this juicy topic of loony media bias, here’s a breaking story from the Jeff Bezos Post:  an alarming report that the White House ASL interpreter might be signing right-wing conspiracies to the hearing impaired!

Saturday, February 6, 2021, Delray Beach, Florida


Notes From My Journal

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Purposeful Reading

I’ve long made it a practice to read at least 50 books a year – half fiction, half non-fiction. I read fiction for the experience of the story and the pleasure of the writing. Consequently, I read every paragraph and every word, sometimes more than once. I read non-fiction with an entirely different approach. I call it purposeful reading. I read to understand and judge the thesis, and to collect details that might be useful later on. Since that’s my goal, I almost never read non-fiction books word-for-word. I developed a system for consuming them quickly that suits my purpose very well. (You can read about it here.)

I’m telling you this to let you know two things: When I review a non-fiction book,  I’m not necessarily recommending that you read it. In fact, unless I say otherwise, my review is meant to give you the gist of what I got from the book, along with some key details, so that you can choose not to read it if you wish.

Worth Watching

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Goodfellas (1990)

Directed by Martin Scorsese

Starring Ray Liotta, Robert DeNiro, and Joe Pesci

I watched Goodfellas last night. I wasn’t sure if I was going to like it. I saw it first when it came out in 1990. It had left a strong impression on me. That was 30 years ago.

It’s left a similarly strong impression on me this time. I’m trying to figure out what that was.

It’s not a big or especially compelling story, the way, for example, The Godfather is. Goodfellas lacks the grandiosity and its plot is thinner. One cannot sympathize with the protagonist (Henry Hill, played wonderfully by Ray Liotta), the way one could with Michael Corleone (played equally masterfully by Al Pacino). The former is neither willed into action by fate or changed (as Michael is), but instead is carried along passively with the events, which are mostly out of his control. Nor is Goodfellas a depiction of the American underworld at large. Rather, it’s a film version of the life of Henry Hill, the real-life gangster on whom Wiseguys, the book by Nicholas Pileggi, and the movie were based.

The Godfather adhered to the core elements of the epic tragedy (hubris, anagnorisis, and peripeteia, to name three). Goodfellas is less ambitious and in some ways less important. It’s a docudrama, which is, by nature, a lesser form.

Nevertheless, it is a very good movie. Among gangster film enthusiasts and even discriminating critics, it’s often considered one of the best American movies made in its time.

I think what makes Goodfellas so good, and worth watching a second time, is that it accurately depicts the quotidian lives of its characters – the good times and the bad times – as ultimately mundane, and presents their crimes as they actually were. Not justified by some alternative morality, but mostly selfish, petty, and ruthless. It is, therefore, a useful emotional antidote to films like The Godfather, which, however good or great, romanticize the reality of crime.

 

Critical Reviews 

* “Cold-eyed, breathless, brilliant.” (Vincent Canby in The New York Times)

* “What Scorsese does above all else is share his enthusiasm for the material. The film has the headlong momentum of a storyteller who knows he has a good one to share.” (Roger Ebert)

* “Is it a great movie? I don’t think so. But it’s a triumphant piece of filmmaking-journalism presented with the brio of drama.” (Pauline Kael in The New Yorker)

 

Interesting Facts 

* Some of the dialog is brilliantly real. You feel that it must have been tape recorded from an actual conversation. Turns out, it sort of was. According to Joe Pesci, improvisation and ad-libbing came out of rehearsals where Scorsese gave the actors freedom to do whatever they wanted. He made transcripts of these sessions, took the lines he liked most, and put them into a revised script.

* Edward McDonald, who plays the prosecutor in the film that negotiates witness protection for Henry and Karen Hill, is playing himself. In real life, McDonald had this discussion with the Hills when they were considering the consequences for turning state’s evidence.

* Both of director Scorsese’s parents are in the film. His mother Catherine plays Tommy’s (Pesci’s) mother. His father Charles plays Vinnie, the prison inmate who may or may not put too many onions in the sauce.

Worth Reading

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The Price of Privilege

By Madeline Levine

224 pages

Published in 2006 by Harper Collins

The Price of Privilege is two books in one. It’s a critique of how some affluent parents in America today handicap their children’s chances of living good and healthy lives by consciously or unconsciously transmitting the wrong values. It’s also a primer for new parents that want to improve their children’s chances of living happy and fulfilled lives through love and discipline.

The first several chapters are devoted to arguing that the problem with spoiled little rich kids isn’t trivial. These are children that are likely to develop low self-esteem; suffer anxiety and depression; are less likely to become accomplished, autonomous adults; and are, in some cases, prone to drug addiction, self-abuse, and even suicide.

This may be true, but I found myself thinking, “Yes, but why should I care?”

The rest of the book is more pragmatic. Levine delves into the common mistakes that affluent parents make and how they can be avoided by substituting actions that will have more positive effects.

For example, she talks about what she calls “maladaptive perfectionism,” which she defines as an intense need to avoid failure and appear flawless. This, she says, comes from parents that want the outside world to see them, and their family, as flawless.

She does not suggest that parents refrain from setting standards. “High expectations are found to promote achievement and competency in children,” she says. “[But] it is when a parent’s love is experienced as conditional on achievement that children are at risk for serious emotional problems.”

Levine on Materialism: She sees an emphasis on materialism as a major issue in terms of the development of bad ideas, habits, and behaviors. She makes the point that although affluence provides some significant benefits, such as good private schools, tutors, extra-curricular coaching, and family trips abroad, the abundance of such benefits can have the adverse effect of limiting the educational and developmental experiences that the child would otherwise have on his own.

Levine on Permissive Parenting: Parents should not feel guilty about monitoring the behavior of their children. They should set clear but fair rules and then be consistent in applying them.

Levine on Educational Success: Parents should encourage curiosity, creativity, individual thinking, and intellectual courage, rather than simply grades.

Levine on Solving Problems: Parents should resist the urge to rush in and solve their children’s problems, whether they be at home, at school, or on the playground. Instead, they should talk about possible solutions, and from there teach their children the skills they need to put those solutions into action.

Levine on Behavior Management: Self-control, including anger management, frustration tolerance, and the ability to delay gratification, are learnable skills, not immutable traits. Parents should work on teaching their children these skills at a very young age.

The Price of Privilege is not a book that felt important to me, like The Coddling of the American Mind. But I would recommend it to new parents – or new grandparents, for that matter.

 

Critical Reviews 

* “[Madeline Levine] offers solid, proactive strategies for becoming a more connected, relaxed parent.” (Chicago Tribune)

* “This book has resonated in affluent communities all over the country. [Levine is] clearly on to something.” (Atlanta Journal-Constitution)

* “Alas, [Levine] may be preaching to the choir. Those who need her most may be too busy shopping to pick up such a dire-looking volume. Still, school guidance counselors should be happy to have this clear, sensitive volume on their bookshelves.” (Publishers Weekly)

Postscript

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In this video, Larry Elders does a good job of pointing out and poking fun at the hypocrisy of the political rhetoric over the Capitol riots…

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