Tuesday, 28 September 2010

Confused on Wall Street

According to the Wall Street Journal, “macro forces” in the market are confounding stock pickers. “Big-picture market movers like the economy, politics and regulation” frustrate the efforts of the best and brightest of the stock picture, the Journal informed its readers this past Friday. It said:
More and more investors aren’t bothering to pore through corporate reports searching for gems and duds, but trading big buckets of stocks, bonds and commodities based mainly on macro concerns. As a result, all kinds of stocks — good as well as bad — are moving more in lock step.
As proof, the paper interviewed several traders and fund managers, who said more or less the same thing.

David Pedowitz of Neuberger Beeman said that his efforts at stock picking felt “like an exercise in futility.”

James Bianco of Bianco Research said: “stock picking is a dead art [and] macro themes dominate the market now more than ever.”

Cindy Sweeting of Templeton said: “All stocks are moving in the same direction. I’ve spend three decades in this market, and it’s the most macro-obsessed I’ve seen in a long time.”

Hedge fund manager David Einhorn said: “The lesson that I have learned is that it isn’t reasonable to be agnostic about the big picture.”

Lou Gerken, a “veteran fund manager” who became so downbeat about stock picking that he decided to shut down his two stock funds, concurred, said that he “now is focusing on a global bond fund and spends his days reading macro-oriented publications.”

David, Jim, Cindy, Lou, the Other David, listen up now! What you have noticed is real: stocks do move in tandem. But there is more to the story. And it has nothing to do with the people’s “obsession”. It involves the dynamics of speculative capital. You’d need to read Vol. 1 of Speculative Capital. It is an easy book to read but it is not an airport novel; you have to pay attention to what you read.

Here are a few excerpts, to convince you that it has your answers:
Speculative capital is not bound to any one market or place. Rather, it is constantly on the lookout for profitable opportunities wherever it can find them. Upon finding such opportunities, it enters into these markets and, through arbitrage, “links” them together.

Arbitrage is buying relatively undervalued A and selling relatively overvalued B. This buying and selling will tend to increase the price of A and decrease the price of B. If A and B happen to be in two different markets, and if the arbitrage is systematic, sustained and occurs on a large scale, the linkage goes beyond the individual products and encompasses the markets themselves. Movements in one market are then transferred to other markets.

The linkage knows no limits in terms of markets. It can target two similar or approximately similar markets in the same country, two separate markets within the same country, two similar markets in two different countries or different markets in different countries.
The book then goes to examine the “linkage of the various segments of the national markets” such as bonds and stocks, and the linkage of international markets, with real-life examples.

As for “poring through corporate reports searching for gems and duds” being passé? It, too, was made passé by speculative capital a long time ago. Speculative Capital quotes the Wall Street Journal of December 16, 1997:
At BNP/Cooper Neff, stocks aren’t companies in the industry sector. They are “mathematical objects.” … [The company’s president] thinks studying news and financial reports … is a waste of time … And the only way to beat the market … is to trade thousands of stocks, by the millions of shares, in search of tiny inefficiencies … he sees the world as 7,000 stocks to trade against one another in one gigantic hedge fund.
Sound familiar?

But all this was the good news! David, Jim, Cindy, Lou and the Other David, wait for high frequency trading to become the only way of trading. You will look back at these years fondly, as perhaps the best years of your life.

Self destructiveness of speculative capital is not a potentiality, something that might or might not be realized. It is the logical, i.e., necessary, consequence of its form of its existence. Now I know that sounds confusing. But that is how speculative capital is, which is why attention must be paid whenever it is the subject of discussion.

Sunday, 26 September 2010

One or Two Things You Should Know About Larry Summers

That The Brilliant Larry Summers Will Leave the Obama Administration to Return to His Tenured Teaching Job at Harvard was the main economic/political news of the week.

The first thing you should know about Larry Summers is that he is brilliant. The New York Times uses the adjective brilliant before his name the way it uses president before Obama’s name: as a factual designation. Larry Summers is brilliant as Barack Obama is president. Through constant repetition, the brilliance of Larry Summers then becomes a matter of record; there is a double entendre in the New York Times being the “newspaper of the record”. The record thus having been established, it is passed to others to spread, reinforce and better it. Hence, Edward Luce of the Financial Times:
There is barely an economist in the world who would deny that Mr Summers has a bigger brain than they do.
Even Larry Summers’ critics must start by allowing for his brilliance: Although he is a brilliant economist ...

The second thing you should know about Larry Summers is that he is a tad abrupt, a bit difficult, and may, on occasion, even come across rude. To the New York Times, these are understandable reactions of a brilliant man who surely finds working with dummies frustrating, a genius with little patience with anyone bearing an IQ under 250.

Yet, what and where is the evidence of his brilliance? If you research Larry Summers’ contribution to economics, you'd come up empty handed. There is nothing the man has said, done or written that a dull mind could not produce. He looks more like a fool.

When he was the chief economist of the World Bank in 1991, he wrote an internal memo in which he argued for transferring the air-polluting industries to poor countries because life there was cheap and the pollution related death, therefore, would be more “economical”. He wrote:
The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
At the end, he summarized his thoughts as only the writer of the memo could:
I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted [CAPS in original], their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City.
In 1998, as the assistant secretary of Treasury to Bob Rubin, he testified – triumphantly and with satisfaction – on the destruction of the industrial policy programs in Japan and other Asian countries as a result of the financial crisis.
“There has been more progress in scaling back the industrial policy programs in these countries in the last several months than there has been in a decade or more of negotiations.”
The quote is from the Wall Street Journal of February 13, 1998, p. A2, under the heading “U.S. Presses Japan to Stimulate Economy”.

These two episodes tell you everything you need to know about Larry Summers. He is an intellectual thug, “intellectual” in the sense that he pulls words instead of knife. In his line of work, a reputation for brilliance helps; it is the intellectual equivalent of being known for carrying a sharper and longer knife. But all is a sham, and there is no there there.

Perhaps the aggressive, in-your-face way of belittling others and pushing his opinions – however wrong-headed and idiotic – runs in the family. Perhaps it is psychosis, this willingness to say and do anything to advance the narrow interest one is serving without any consideration for the “collateral damage” or the larger interest of the society. Whatever it is, Larry Summers is off to Harvard, where he will be educating the nation’s best and brightest for years to come.

Tuesday, 21 September 2010

The Fed, Idle Ships and Interest Rates

Today, the yield on the 2-year Treasury note hit the all time low of 46 basis points, or less than .5%

Traders talk about the bond bubble (it has a nice ring to it), quantitative easing (QE) or QE2 (the second round of QE. Got it?) They opine how bonds have become attractive in the absence of other investment alternatives, which is why their price is higher and their yield lower. (Never mind the contradiction in bonds becoming attractive while their yields are pushed lower.)

All that talk comes from the illusion that interest rate is a “thing” that the Federal Reserve sets – and everyone follows.

Nothing could be further from the truth.

Interest is the claim of finance capital on the industrial capital. It is a deduction from the profit, set through negotiation and supply and demand.

When profit opportunities are destroyed and capital cannot be profitably employed, it must sit idle, either in the form of unusable cash on corporate balance sheets or, more symbolically, in the form of idle ships.

Idle industrial capital cannot pay interest. In fact, it would have no reason to borrow. Hence the fall in the demand for loan capital and the subsequent fall in interest rates.

The Fed does not “set” interest rates. Rather, it takes note of, and acknowledges the prevailing market winds and adjusts the sails of the state ship accordingly.

Sunday, 19 September 2010

The Opinions That Men Hold

Two years ago Lehman imploded. I was in Alaska on that fateful week of September 15. It took a trip to Alaska for me to see What’s the Matter with Kansas.

That, as you may know, is the title of Tom Frank's 2005 book, in which he argues that through “push button” issues such as gay marriage and abortion, blue collar Kansans are systematically fooled into voting for rich Republicans and against their own interests.

That sort of manipulation is not new. European writers and historians have traced its wholesale adaptation to the outbreak of WWI which saw young men forced to march to the slaughter fields of Europe. John Berger argues that the abrupt end of Cubism had to do with the end of the optimism that the new century had generated but which WWI crushed.

Frank’s general thesis is not incorrect. Propaganda does play a role in shaping men's opinions even against their interests. But what happened to the observation that people in general vote with their pocketbooks? I doubt that the poor cannot see their own interests, no matter how incessant the brainwashing. I think something else, something more material, is at work there that I noticed during my Alaska trip.

Alaska is a desolate place. Living conditions are hard. Except for a few transplanted New Yorkers with “liberal” views, the native Alaskan generally believes that if “it” cannot be hunted, drilled or mined, it is not worth having around. Concern for the environment, wild life protection and the like take a back seat to the daily challenges of survival. Self preservation trumps such concerns, as it perhaps should.

The immediate concern for survival is the instinct of primitive species and savages. As man learns to exploit nature and his material conditions improve, day-to-day survival ceases to be of immediate concern. He then has the luxury of turning his attention to broader issues and longer horizons. That luxury is a defining characteristic of civilization, what separates the civilized man from the savage.

In the U.S., tens of millions of people live under such “primitive” conditions. In places like Alaska, the extreme weather exacerbates the situation. But the commonality of distress in all 50 states that transcends the natural conditions alerts us that the root cause is economic. The daily struggle for survival is not less intense in Kansas and Virginia than in Alaska.

The existence of these “pockets” of poverty in rich, industrial countries is the evidence of the failure of the social system, plain and simple. It is the failure to raise the living standards and therefore, the concerns, of citizenry beyond those of the savages.

In Anchorage, Alaska, Wichita, Kansas or Olympia, Washington, everybody is strongly pro business — unbridled, no strings attached, any kind of business – because it offers the promise of a meal ticket. Hence, the poor’s support for the pro-business, millionaires’ agenda. The “push button” issues are generally a side show, never more than of secondary importance. The relatively affluent bi-coastal states, meanwhile, can afford to be environmentally and socially conscious. That’s the story behind “Two America” and “red” and “blue” America.

But the poor are not the only victims of their own self-defeating actions. The rich are in that trap too, only in their case, the estimated time to destruction is longer; it takes relatively longer time for them to be hit with the consequences of their own actions. Let me explain this through three recent news stories.

The first one pertains to one Sydney Morris, an up and coming young teacher as covered by The Wall Street Journal, Monday, September 13, page 1 of the Greater New York Section. The story’s heading is Teachers Break Union Rank:
As a teacher, Sydney Morris wants to be rewarded if she can show she helps students make progress in her classroom. She also wants to make job protections such as tenure more difficult to get, and in the event that layoffs have to happen she wants the worst teacher to be let go first, no matter how long they've been teaching.

Those are radically different positions than those espoused by the union that represents her.
A self-centered, selfish brat, you say, caring only about herself?

Then, listen to a business captain in the person of Paul Otellini, the CEO of Intel. He was being interviewed the other day on CNN:
The way Otellini sees it, Washington must decide what the industries of the future are. “We still subsidize trains and agriculture – industries of the 19th century. We should decide what’s important to us going forward and make sure we’ve got the education system in place and the capital incentive system in place to do the investment here.”
The man who runs the crown jewel of the world’s technological infrastructure has this view on the U.S. infra-structure: he thinks trains are passé and the government is spending too much money on the embarrassment that is Amtrak.

Has he not traveled at all, one wonders? Is he not aware of modern trains and their role in the economies of Europe, Japan and increasingly, China? It is difficult to say. Throw in his bizarre comment about agriculture being a “19th century industry” and one begins to wonder if he is insane.

He is not, strictly speaking. The “madness” that comes across is made of the same stuff that makes a poor Kansan voting Republican seem mad. It is the pressure of the immediate for which the future is being sacrificed against common sense. Our protagonists, however, are not aware of that, having been forced into a particular “angle of vision to reality” which dictates a certain way of thinking and, from there, a certain conduct.

Look at this excerpt from Mortimer Zuckerman to see what I mean. The man had written an opinion piece in the Wall Street Journal to explain the country’s current problems and offer a solution:
The most obvious source of distress right now is lack of payroll growth, and it’s likely to get worse.
Look at his description of unemployment. He calls it a “lack of payroll growth”. He is not trying to tone down a negative word with a bland and neutered expression, like collateral damage for killing bystanders or energetic disassembly for explosion. He is in earnest. For him, unemployment is lack of payroll growth. That is the only way he sees the problem.

I have written about this phenomenon of humans assuming the point of view of speculative capital. See, for example here and here

To prove that the point of view of this cutting edge low life is the point of view of speculative capital, let me quote his “solution” to the “lack of payroll growth” problem from the same article:
To improve our performance will involve massive increase in scholarship support for higher education, and an increase in H-1B visas for foreign students who get M.B.As and Ph.D.s in the hard sciences.
To fight unemployment, he wants more foreign programmers in the country so they could push down the wages of skilled, technical workers even further.

If you do not know Mortimer Zuckerman, you will be happy to know that his views play a critical role in shaping U.S. economic and foreign policy, especially in the Middle East.

Speculative capital is self-destructive. As it expands to permeate the different aspects of social life, it imparts its traits onto its human agents. They, too, become self-destructive. A few mountaineers showed this phenomenon better than I could ever explain.

Thursday, 16 September 2010

What I Don't Get About the Opposition to Elizabeth Warren

Okay, so Obama just appointed Elizabeth Warren to set up the new Consumer Financial Protection Bureau, which makes her the interim head of the agency, or something ... it's all still kind of confusing. She really deserves to be named to the job outright. What's the hold up? King Richard III had a lame leg and didn't do this much foot-dragging.

Ah, she may not be confirmable by the Senate, says Chris Dodd, head of the Senate Banking Committee. Why not? This too is a bit hazy; Senators can be maddeningly elusive when they don't want to discuss something. But the case against Warren seems to boil down to:

1. Lack of experience/qualifications.

This line of argument quickly falls apart though. She hasn't been knitting doilies in Dubuque and teaching night classes in creative writing for the last decade. She is (1) a bankruptcy law professor at Harvard who has "written several books over the years focusing on how debt, predatory lending and bankruptcy affect average middle-class Americans" (Bloomberg News) (2) the head of the TARP oversight committee, who in that position became intimately familiar with the mechanics of the massive bailout of the financial sector and the shenanigans that led to the financial crisis (3) (and here's the kicker) the person who argued in a 2007 article for the creation of an agency just like the Consumer Financial Protection Bureau.

2. Lack of objectiveness/not friendly enough to banks

This seems to be the real line of argument. Just listen to Senator Shelby of Alabama, from the Bloomberg story quoted above:
Shelby said he “would like to see a more objective person in that job. Elizabeth Warren, obviously, is not an objective person when it comes to the consumer issues.”
So Warren is perceived as too aggressive an advocate for consumers. She's not "bank-friendly" enough. (The banking sector has vigorously lobbied against her.)

Now think hard about this second point. Because it's the main reason the Senate would shoot down her candidacy, it's the point the Republicans are preparing to rally around, it's what has Dodd quaking with fear apparently ... and it's COMPLETE BULLSHIT. I'll show you why:

Say we're going to create a Dog Protection Bureau. Because, it so happens, there's a class of people who aren't always nice to dogs. These are rich, powerful people. They can afford to hire high-priced lobbyists to represent their interests in Congress (unlike the dogs). Sometimes, they abuse dogs in some reprehensible fashion and get away with it.

Now I'm not saying all these people are always horribly bad to dogs. Some of them may just steal a few milk bones here and there, or maybe they're making dog toys out of substances that aren't carcinogenic exactly, but that still cause mouth sores and runny eyes and nuisance stuff.

So we need to appoint someone to head the Dog Protection Bureau. We find a person who's an excellent, unquestioned advocate for dogs, float her candidacy, and the U.S. Senate says, "Eh, I don't think she's confirmable. She's not objective enough. She's too pro-dog."

To which a sane, logical person might respond: So what the hell are you creating the Dog Protection Bureau for? To be an impartial judicial arbiter on all matters dog, trying to see both viewpoints: the need to protect dogs and the need to abuse them/kick them around a little, for whatever reason? And if so, why are you calling it the Dog Protection Bureau? Why not call it the Dog Issues Administrative Court or something?

But if you are trying to protect dogs, you should welcome a strong advocate for dogs.

And if you are trying to protect consumers, you should welcome a strong advocate for consumers.

What am I missing here? Senate Republicans and Democrats, can you fill me in?

Monday, 13 September 2010

September Resolution

The elephant-in-the-room of my to-do list is Vol. 4 of Speculative Capital that of late has been demanding the attention it deserves.

The manuscript is complete. That is the good news. The bad news is that the time of one page commentaries and “notes to myself” is over. I must now sit down and pull the manuscript together into a coherent whole. That requires large blocks of uninterrupted time.

All this is to say that I will be writing shorter posts; long pieces such as the Goldman case take up too much time.

This, needless to say, is only a pronouncement of the intent. We shall see how it works out in practice. If it works as intended, look for shorter, more frequent pieces here until Vol. 4 is submitted to the publisher.

Sunday, 12 September 2010

Epilogue: The Conspiracy Theory – True Destruction

Physical destruction could be an end in itself. You destroy a farm, a building or a city and let the ruin stand. End of story. Mission accomplished.

Social destruction is different. A social system cannot be destroyed by force or laws and edicts. The only way to destroy it is to replace it. This latter kind is the province of speculative capital, which even the blissfully ignorant perceive. Writing more than a decade ago in the New York Times, a Clinton administration official opined:
In July 1945, a group of scientists huddled in the new Mexico dawn to witness the first nuclear explosion. They had created a terrible power, but one that nations have successfully controlled for more than 50 years. Now we have unleashed a very different but similarly awesome force, one capable of overthrowing governments and their policies almost overnight. And there are no systems in place for controlling it. This force is the global financial marketplace.
“Global financial marketplace” is the effect, which the writer confuses with the cause, speculative capital, which he does not know. And he cannot differentiate between physical and social destruction, which is why his language comes across as hyperbole. But on the severity and extent of destruction, he is right on the money.

The destructiveness of speculative capital is the logical consequence of its tendency to expand in constant search for arbitrage opportunities; expansion is a condition for its preservation. In the early stages, such expansion took place within speculative capital’s birthplace, in the realm of finance. As those opportunities were arbitraged away, speculative capital must look beyond financial markets. “Beyond” soon becomes everywhere. Speculative capital intrudes into every corner of social life, replacing, i.e. destroying, the old order.

That is the common thread linking the momentous events taking place all around us and about which – the common thread – you hear nary a word. Through the conspiracy of ignorance or malice, the destruction proceeds at full speed.

Saturday, 11 September 2010

Is Diversification Really a Free Lunch?

Scooting around the Net today, I found myself checking out what Greg Mankiw has been up to (besides relentlessly plugging the half dozen textbooks he's written). I drop by his blog from time to time, even though he doesn't allow comments on his posts, which I find a bit strange. Dropping by feels like the equivalent of paying a visit to someone but only being allowed to peer in the house windows: You can watch what they're doing, and eavesdrop to your heart's content, but no talking please.

So I came across this New York Times column by the good Harvard professor, brimming with advice for the college bound. I nodded enthusiastically at his scold that high schools spend too much time on Euclidean geometry and trigonometry (when was the last time someone stopped you in the street and asked if you knew the cosine of the angle of the shadow being thrown by the lamp post on the corner?) and not enough on probability and statistics.

Amen, brother!

In fact, I found myself pretty much onboard with the whole piece -- until I reached this paragraph and started scratching my noggin a little:
The evidence of financial naïveté shows up every time some company goes belly up. Whether it is Enron or Lehman Brothers, many company employees are often caught with a large fraction of their wealth in a single stock. They fail to heed the most basic lesson of finance — that diversification provides a free lunch. It reduces risk without lowering expected return.
Okay, let's think about this. Note that, first of all, the good professor has provided a lopsided universe of examples. Yes, Enron and Lehman Brothers flamed out, spectacularly, and punched a saucer-plate sized hole through plenty of their employees' 401(k)'s. Very true. But how many Microsoft and Google millionaires have we also heard about, ordinary secretaries or maybe even guys who changed the water in the fish tank on weekends and scrubbed the toilets, who got a glory ride to early retirement on their company stock? Had they properly diversified, they might have made only enough to buy a used Vespa.

So am I anti-diversification? A heretic in the investing community? Diversification, after all, is one of the ten commandments of smart investing.

Nope. Not at all. I believe in a diversified portfolio (I personally own a mix of U.S. stocks, bonds, emerging market equities, Japanese shares -- ugh, cash-like instruments and cash itself).

The problem is, I think Mankiw's only half-right in his last two sentences.

I agree with: Diversification reduces risk without lowering (or increasing -- he neglects the corollary on the upside) expected return.

Simplification: You work at an S&P 500 company. Let's say the average yearly gain on the S&P is 8 percent. You invest in only your company's stock. For any given year, it may rise 8 percent -- or it may surge 22 percent, or conversely, fall 15 percent. Lesson: an individual stock can be quite volatile. But say you buy shares in 30 S&P companies instead. Some may go up, negating the declines of others, and at the end of the day, you'll probably have a smoother ride -- less volatility.

I strongly disagree with: Diversification provides a free lunch.

What you just witnessed in the example above isn't a free lunch. It's a smoother ride (to mix metaphors). To wit: there's a greater chance, in any year, your company's stock will soar 40 percent or plunge 40 percent than a basket of 30 stocks will do the same. By diversifying, you tamp down volatility. But for the basket, while the losses may be bounded at say 25 percent, the gains won't be as high either (let's say 25 percent to keep it simple).

So by diversifying, you lose your chance to become a Google millionaire, but you also won't have to eat cat food and sleep under the freeway overpass during your golden years.

Ah, but if only "diversification provides a free lunch" were only wrong ... no, it's worse than that. It's very dangerous, as the financial crisis attests to.

Consider that a collateralized debt obligation, or CDO, is the poster child of diversification. It's stuffed with mortgages from all across the country, and once you get into the strange beast known as the CDO squared, it's more bewilderingly complex (and more diversified). Investors obviously thought that, through diversification, they were getting a free lunch by buying up CDO tranches.

Why do I say that? Somehow they came to accept that a CDO could be worth more than the sum of its parts. They must have by definition, because the assembler of the CDO must be paid to put together and market the thing (and extract a profit). So if the mortgages contained within it collectively yield say 6.4 percent on average, the CDO genie will do his magic and transform them into tranches that collectively pay 6.1 percent on average (or whatever the typical spread is for these products).

So where did the 0.3 percent go, which was being paid for assuming a certain amount of extra risk? That's your diversification "free lunch" (arrived at by manipulating correlation numbers foolishly, as it turned out, through the Gaussian copula). Actually it gets even better: investors thought they were getting free dessert too! Because, remember, through the copula wizardy, the slices of the CDO earned high ratings while paying more than similar-rated debt! (A free eclair with that sandwich, sir?)

The "free lunch" was later revealed to be a "fraud lunch" when CDO prices cratered and the ratings turned out to be ridiculously inflated. However, here's what the illusion of the free lunch did: it spawned a long line of hungry investors, who couldn't get enough of these amazing CDOs, which created further demand for dicey mortgages, which got sausaged into more CDOs, until finally the whole sham famously exploded.

So beware of savants, even Harvard professors, touting "free lunches" in the investment world.

Wednesday, 1 September 2010

Dick Fuld: Crazy Like a Fox?

Dick Fuld appeared before the Financial Crisis Inquiry Commission today and, some would say, showed himself as completely untethered from reality. The former Lehman Brothers CEO wasn't about to mince words; at the outset of his prepared remarks he asserted:
Lehman’s demise was caused by uncontrollable market forces and the incorrect perception and accompanying rumors that Lehman did not have sufficient capital to support its investments.
"Say WHAT?" was more or less the reaction over at naked capitalism. For how could any man be in such denial?

For my part, I think Fuld may be playing a role on a stage. Consider that a large Wall Street investment bank doesn't just go gently into the night. Lehman wiped out a lot of wealth on its way down. And note that phrase that keeps recurring in Anton Valukas' very, very thorough report on Lehman's demise: "colorable" claims. In other words, plenty of hungry lawyers may have sufficient grounds to sue Fuld's butt ten ways to Tuesday.

Also lots of prosecutors would love to put him behind bars for a long while. Let's not forget that Sarbanes-Oxley requires that a CEO sign off on financial statements as true and accurate, and in doing so, takes responsibility for their content.

Now, if you're Fuld, and you're sweating and conniving a way out of this mess, you know you can't really plead insanity. As bizarre as some in the current crop of U.S. CEOs are, they hardly qualify as insane. Yet there is another option that looks a bit like insanity, a sort of blind and resentful denial of any responsibility. Don't even try to be reasonable.

So if we could rig Fuld up to a lie detector, it would be interesting to find out if he really believes what he's saying right now -- if his public face concords with his private thoughts.

In other words, is Dick Fuld crazy? Or just crazy like a fox?