Monthly Archives: November 2011

How universal is that theme?

How many times have we been fooled, or used our best judgment and made a mistake that we’ve come to regret?

Ask Eddie Murphy that question.

What do you think would pop up first in his mind among the mistaken paths he’s taken?

Beverly Hills Cop 3, Pluto Nash, transvestite hookers, accepting hosting duties for the Academy Awards or walking away from hosting duties?

He’s only human, as are we all, so there’s probably many more regrets in the mix.

Until I started writing this blog I never realized how obsessed I must be with Eddie Murphy, as he’s been cited now for a third time and on the other two occasions his was the illustrative photo.

Not so this time.

I’ve learned my lesson.

As a product of the 60’s and 70’s the classic song from “The Who” always comes to mind. Certainly Peter Townshend learned his lesson and now probably removes all traces of child pornography from his computer.

After all, isn’t “learning your lesson” the desired endpoint of any mistake?

The depressing close to that song is that what we think of as change is most often not.

“Meet the new boss, same as the old boss” also has a universal truth about it. That and the fact that we always do get fooled again.

This weekend we learned that Billy Crystal, the one time host of the Oscars is coming back to rescue the production after the surprise departure of Murphy.

The surprise departure came after the surprise selection.

Meet the old boss, same as the new boss.

And then comes news that Italian Prime Minister Silvio Berlusconi was truly resigning his position following Parliament passing economic reforms. He didn’t use Twitter to make the announcement as he had earlier to deny the announcement.

Instead, Berlusconi blamed “transformati” as the reason for his sad state. That is, the tendency of Italian politicians to change their policy positions based on shifting winds.

He described his decision to resign as being a “generous act.”

Replacing him and seeking to pull off the same kind of rescue as Billy Crystal is expected to do, is Mario Monti, a past member of the European Commission and who just a week ago was appointed Senator for Life.

With that a”Senator for Life” appellation also goes the title “Colonel”, befitting such previous lifetime luminaries as Moammar Khaddafi, who also had quite an Italian connection.

I’m not certain what the designation entitles the bearer to, but it would look great on a desk nameplate. Monti has already asured the populace that he will devote his complete attention to the task of rescuing the Italian economy.

Those efforts are already being hailed as “The Full Monti.”

After 20 years of dealing with the antics of Berlusconi, Italians are now ready to go back to their old ways and form a new government every few months. Even then, the unifying theme was that the old boss was the same as the new boss.

Monday is the start of yet another week and I’ve had a personal best for total options income generation, even compared to some options cycles that were 5 weeks long.

Sounds great, but I’m wondering whether I’ll have the strength to resist the lure of Berlusconi-like generous option premiums or whether I’ll get fooled again.

At question is Green Mountain Coffee Roasters.

This week, I’ll have only cash that’s been made available through the assignment of my Caterpillar shares. Every other holding that had calls written against it are still right where they belong. Still in my portfolilo and very close to their most recently written strike prices.

On Fridays that end like that I want something other than a “Down Monday”, which typically gives the opportunity to repurchase shares.

This week, other than Caterpillar, there’s nothing to buy back.

The prudent me would do what I’ve done the past few weeks. In fact, this has been the third time in 3 weeks that my Caterpillar shares have been assigned. Each time I’ve bought shares back and resold options. Along the way, I’ve been very happy as the “in the money” weekly options provided an adjusted 2% ROI.

To buy shares back again seems like such a “no brainer” especially if they open lower than the price where exercised, as they did last week.

But then there’s Green Mountain just waving at me, sort of like those underage hookers that Berlusconi seemed to favor.

In return for picking up shares about 3 weeks ago, I received a 6-7% premium each week. But likewise in return, the devil required accepting a 35% share price haircut.

So with so much uncertainty and questions out there regarding Green Mountain, is it possible that a momentum stock can actually be a value, or is it destined to spend the rest of its existence along with the heap of one time momentum stocks that never see glory days again.

I know that I should stick with Caterpillar or some other proven cyclic winner, but human nature refuses to believe that lightening will strike twice. Even if it does, human nature then tells us that we won’t be the unlucky guy who keeps getting shown in the Guinness World Records for the number of documented times he’s been actually struck by lightening.

Alright, so there’s human nature, but there’s also that need to “do as I say” kind of thing, as my segment on last week’s “Bloomberg Rewind, where I mentioned that I was holding Green Mountain and would continue to do so even after the precipitous fall, was replayed the next evening.

As Rick Perry would say “Oops”.

To compound things a bit, I’ll be enroute to Arizona when the market opens and am sitting on a number of new short call positions that I was hoping to open. With luck of the draw a week earlier I’d boarded a Southwest flight for Nashville that didn’t have Wi-Fi service, but it was an otherwise quite Thursday.

I’d missed nothing on that day, besides most of my weekly trades come on Monday and Wednesday.

There’s not too much that I can do about tomorrow’s flight. That too, will be hit or miss, but if a miss, our feet will be on ground before noon, NYSE time. At that time I can decide whether to ignore what common sense tells me to do.

In the meantime, I’m still somewhat confused by the goings on in the GOP quest for the Presidential nomination.

In that regard, it’s hard not to get fooled again. What other choices are there? The perfect example of how an intelligent person doesn’t get fooled again is to consider whether you’ve ever re-ordered from Godfather’s Pizza.

Without a single real vote being cast, the infinite number of debates, the most recent on The Cartoon Network, it appears the the choice is narrowing down to a steady and unexciting Mitt Romney or a ridiculously resurgent Newt Gingrich.

Either way, that represents getting fooled again.

The reality, though, is that American politics, sometimes those who lose in their quest to become boss, eventually do become the new boss, so giving up is never a good idea.

Look at Richard Nixon and Ronald Reagan.

Using Berlusconi’s view of politics, Romney’s perceived shifts are reflective of “transformati”, while Gingrich’s dogmatic adherence to 20 year old policy positions are the sign of a principled politician.

And if anyone knows a principled politician, it’s likely Berlusconi, as he’s purchased many over a lifetime of public service.

I suppose that many are saying the same thing about our current President, but many will likely change their minds if we can string 3-4 months of good employment numbers together.

In the meantime, knowing that giving up is never a good idea, there may be hope for Green Mountain, yet.

Maybe so, but I can tell you that regardless of what I finally do with the money, I wont get fooled again, again.

That gives me at least one more opportunity to take a stab at Green Mountain. If shares have at least another week of life left in them before the expected implosion, there may be very good opportunity to sell in the money weekly calls and erase some of last week’s loss.

If that strategy works, all that will remain is wondering how long to keep pulling that off until I do get fooled one last time.

 

 

 

 

We’re Americans.

We love excess and excesses and are probably harboring lots of pent up need to exercise excess, just waiting for an economic turnaround to finally get here.

In the meantime as those parts of the world that were once derisively referred to as “third world” are discovering the joy of excess, we still know how to party with the big boys.

I’m not certain whether I meant that literally or figuratively.

On Wednesday and Thursday my oldest son and I were in New York City, a place I rarely went to during all of the years spent growing up in the Bronx.

Of course, back then, the only places in “the city” to visit were things like museums and art galleries and they always seemed to take their child unfriendly causes to excess. Even the dinosaurs were a bit much, as if bigger was actually better when it came to extinct species.

Some of the great homes along Fifth Avenue, past residences to the Astors, the Morgans and others weren’t appreciated by me back then, either.

Not even the Macy’s Thanksgiving Day Parade, a display of inflated cartoon characters taken to excess was enough to attract me to see them on anything other than a TV set.

They didn’t have things like Bloomberg News and CNBC back in the old days. Not just to watch on TV, but to physically step foot into.

Those are great attractions. I’d see them any day. And that’s exactly what we did while visiting the past couple of days.

Sure, Wall Street was always there, but I never knew about Wall Street when growing up.

The funny thing is that I still have no desire to actually visit the epitome of capitalism. No desire to have the obligatory bull and bear picture taken. I did, however, want to have a picture taken with some Occupy Wall Street protestors, especially since they are, among other things, protesting the great excesses of Wall Street and banking.

Maybe next year,

Ah, but a picture of a real New York corned beef sandwich. Now we’re talking pictures.

On the way back home we stopped for New York deli food. Not to be overly chauvanistic, but you really can’t get that kind of corned beef or pastrami anywhere else. The nice thing about the New York delis is that they don’t offer corned beef sandwiches with a choice of cheeses or breads.

You get a choice of pickles, or if you don’t like choice, you just get them all.

Talk about excess, but at least the elimination of cheese respects your need to maintain healthy cholesterol levels and the pickles must do something good.

I think that they’re meant to be swallowed whole to help propel the other ingested contents toward their ultimate destination.

The corned beef sandwich shown barely captures half of the entire sandwich.

No match for these delicious monstrosities, we gave in to woefully inadequately sized stomachs and sheepishly asked for doggie bags.

I was never so embarrassed, having always finished all of my restaurant meals in the past.

We placed the leftovers in bags and put them into the car trunk and just watched the rear chassis sag and groan a bit. A sight and sound very similar to that which we observed in many of the deli’s patrons.

The deli trop was a fitting end to the previous day when the market fell 394 points.There were lots of groans.

Talk about more excess.

Yet another day where the end result was one of an over-reaction, except there was really nothing to which the reaction was in response. Not even a rumor about a plan to have a plan to solve the Italian debt crisis falling through.

In professional trading circles that’s referred to as a third derivative.

I can understand that kind of excessive reaction only because it’s not very rare anymore, but I still can’t understand the root cause. How is it that all of these very smart people who are driving the trading decisions of the big money players so rapidly fleeing their convictions?

But still,  I can also understand the excessive reaction of Green Mountain Coffee Roaster shares after announcing  poor earnings and questions continuing regarding accounting regularities.

Of course, when I bought my shares a few weeks ago I was fully aware of the overhang and the possibility of finding a chalk outline on the floor of the board room. That kind of unpleasntness could easily send a momentum stock reeling.

And it did.

But nearly 40%? After already suffering a 40% or so decline from its recent high?

Excessive?

Earlier in the morning I was sitting in the parlor of the cute boutique hotel in which we stayed and was watching the ticker showing Green Mountain’s descent.

It was ironic that while I was stirring my coffee with what appeared to be a genuine silver spoon that my Green Mountain daily disaster’s bitterness was being tempered by silver’s own descent.

Of course, silver and its wealthier cousin gold, have seen their own recent share of excesses, as everyone seems to hunger to own them, as well.

Since I now own a sizeable piece of the ProShares UltraShort Silver ETF’s, I like it when silver prices go down. So as silver was doing just that, after a recent climb, my small Green Mountain piece, which has been nicely hedged with weekly options over the past three weeks was less of a nuisance.

In a show of true excess, Bloomberg Rewind actually lived up to its name and then some. On Thursday, it showed a clip of my Wednesday appearance on the show talking about the impact of Green Mountain’s after hours announcement.

Sort of like Bloomberg Meta Rewind.

Although the clip seemed to indicate that I wasn’t worried about the then 35% after hours price drop, I think it was taken out of context.

What I had actually meant to say was that I violently vomit at the very thought or taste of Green Mountain Coffee.

But I can see how they might misinterpret my words.

When the day finally settled, some of Wednesday’s excess was sucked out of the system, although Green Mountain decided to just settle in near its low for the day.

Normally after having a stock take a big hit like this  I would exercise the “Having a Child to Save a Life ” strategy. But with Wednesday’s broad drop and Thursday’s half hearted recovery, I may not see any cash free up from assignments to pick up additional, but now discounted Green Mountain shares.

That prospect leaves just as bitter a taste, because an opportunity is a terrible thing to waste.

Or I could choose this opportunity to follow the Bernard Baruch axiom of selling when you hit the 10% loss level.

Conveniently, I’ll include my options premiums received over the past 3 weeks in the calculation and ignore that advice.

I suppose that you could possibly stick to your process to excess and inadvertently create a new dogma.

I’m not a fan of dogma of any variety, unless it’s potentially my own. Unfortunately, I don’t have enough adherents to be able to call it “dogma.”

A cult? Maybe, but it might just be a cult of one.

But if I did have real dogma and it really became popular, I think I would call it “Hot Dogma” and see to what excess I could get people to suck it down. It definitely sounds more palatable that way.

To make it all easier, have a little Green Mountain Coffee to wash it all down. That’s much better than the Kool-Aid the other guy was offering.

I had a flashback this morning.

It had been nearly 50 years since I’s been on the Palisades Parkway in New Jersey, the road that hugs the Jersey side of the Hudson River.

Obviously, we didn’t get to that side very often and with the exception of an enduring admiration for Bruce Springsteen and his endless stories about his home state, I’ve never had reason to return.

I’ve made it a point to avoid all New Jersey public restrooms along the way as I’ve made the journey from Washington, DC to New York

The last time that I can recall being on that road was part of a family outing that took us to the old Palisades Amusement Park. Like Freedomland, an amusement park in the Bronx, Palisades Amusement Park has long met the wrecker’s ball and real esate speculator’s grasp.

Unlike Freedom Land, at least Palisades Park has found immortal fame by being the title of a rock song from the late 50’s by the Coasters.

For all I know, it may have been the Platters and it may have been in the 60’s, but you don’t pay good money to read this blog for certified details.

As a child, I also remember going through what turns out to be a series of universal beliefs among children, up until reaching a specific developmental milestone.

My Sugar Momma, with whom I celebrate our 27th wedding anniversary today, will gladly volunteer the opinion that I’ve never reached certain developmental milestones.

Nonetheless, I believed that the person appearing on the television screen could see what I was doing, because all kids believed that.

Captain Kangaroo must have thought that I was a sick f**k.

And like all kids, I also believed that everything that occured in life happened because of something that I had done.

Sort of like Laszlo the Dog believing that the FedEx guy left his turf because he barked loudly and ferociously in his direction, each and every time he comes.

That’s the same reason why kids always believe that they were the cause of their parents’ divorce.

I continue to grieve over the Elizabeth Taylor and Eddie Fisher divorce, even though there little rational basis for feeling that way.

But here I was today, a very exciting day for me, but now one tinged in shame and a feeling of personal responsibility once the market decided to have a seizure.

My bad.

Thanks to the entirely accidental efforts of my publicity agent I found myself appearing on Bloomberg Rewind, hosted by Matt Miller.

As a strong believer in mathematical modeling, I can state with great certainty that every time I appear on Bloomberg Rewind, the market goes into a tailspin.

The facts bear me out on this one and I understand that it can only be my fault.

There I was to promote myself, my book and my fervent belief that the GOP debate should have included Joe Paterno and should have not been influenced by the sad reports and allegations.

Anyway, the past couple of days I had moaned about just how boring the past two days had been, but I’ll still take the 200 point gains, thank you.

Driving along the Palisades Parkway and following the market’s dreadful action, I couldn’t help but believe that I was responsible. The images of childhood came back, but along with them were those developmental traits that had been long buried.

What had I done to cause a 400 drop? Was there anything that I could do to make things better? Could I have been a better investor and not such a disappointment to the market’s overlords?

How did this child bleed them?

Surely things would get better when cooler heads prevailed. Of course, that’s what most believed 2,000 years ago, as well.

When the market opens on Thursday, that may well be the case. But as far as Green Mountain Coffee Roasters, things aren’t likely to work out that way.

After delaying its earnings release by about two weeks and being in the crosshairs of David Einhorn, today was a bad day to announce disappointing earnings.

In general, you know that it hasn’t been a good day when the best news was that Groupon’s share price didn’t fall as much as the overall market.

“Yes, Mrs. Lincoln, but his tophat is untouched'”

It was also a bad day to own Green Mountain shares, although Thursday will be worse as the institutional sellers begin to bail. Now might be a good time to scrap that strategic deal with Starbucks and instead infuse those soon to be non-proprietary K-Cups with some Diageo offerings or maybe some brown heroin.

But still, the thoughts haunt me.

Was there anything I could have done about that? Was that my fault?

Surely I could drink more coffee. Increased risk for prostate cancer may be a small price to pay for a couple of dollars rebound.

Besides, I already have the mustache and already donate to my namesake, the American Cancer Society.

Or I could not have gotten myself so enthralled with the $5 weekly options premiums over the past 3 weeks that it would have wiped out all feelings of guilt and responsibility.

Granted that those premiums bought the cost basis down, but still, I have to take responsibilty. I mean, why else would this company with questionable accounting and a questionable story ahead of it, just drop off the cliff?

As I deal with today’s plummet, I also dealt with that childhood belief that the TV characters were seeing me and watching everything that I did.

Still, if that’s what it took to be on good behavior, maybe that’s a childhood trait that we should retain forever, maybe helping our weakened super-egos deal with all of the temptations out there.

And do, today I was on good behavior.

I even wore a sport jacket and tie as I learned that the people on the TV screen were actually three dimensional characters. Not only in their appearance, but in personality, as well.

Knowing that my segment would be up against yet another GOP candidates debate, I tried to fight off the guilt that I was responsible for the sorry state of the candidates.

Who shall lead them?

No one seems to really want it.

It just amazes me that people are beginning to talk up the Newt Gingrich surge in the polls.

What I’d really like to see, now that I’m in New York for a couple of days is a Rupert Murdoch New York Post inspired front page shouting out that “The Troll Rises in The Poll.”

Granted, the extremists that seem to prop up the most unlikely of candidates have already backed away from that ocularly crazed Minnesotan, although that could just as easily describe Jesse Ventura.

Watching a replay of the debate after arriving back at the hotel following Bloomberg Rewind, it was clear that the candidates were there own worst enemies.

Especially Rick Perry.

There’s no plausible reason for anyone else to take blame for his belief that he could lead.

With a market selling off 400 points lots of people are ready to fall into the “follower mode” and persue their need to panic.

As long as everything remains on paper, and paper only, why not pay attention to what technicians are always telling ius?

Not only do stock prices revert to their means, but so too should our emotions.

Whether feeling giddy about a couple of hundred points climb or in panic over losses like today, common sense should tell us that even those emotions should seek to revert to a mean, especially before doing anything stupid.

Like dumping shares wholesale.

Or you could just pop Zoloft.

Ultimately, I don’t know if another “child shall lead them.”

That would be sacrileous to think so. It’s bad enough that I was in Cirque in NYC laughing at what appeared to be a statue of a Hindu God.

I disown those moments. I feel guilty about them.

But the child in each of us, the child that reacts based on an undeveloped system of cognition will definitely bleed us, if we allow it to happen.

Take today’s 400 point loss on paper and only feel guilt if you choose to join in on the fear. Instead prey on the greed and the fear that others exhibit.

Lead yourselves out and everything else will follow.



 

The other day was a perfect sign of the doldrums we’re in at the moment.

No. it wasn’t the boring day in the stock market that I discussed yesterday. And sure, today was more of the same.

Regardless of how boring these first two days of the week have been, no one that I know is about to complain about the extra 200 points that have been tacked on to the Dow in the absence of any tangible news. Since I don’t consort with short sellers for the most part, everyone I know has been happy with the relative calmness of the past two days and happily accepted the added bonus of gains.

Actually, as I look at my Google+ circle I guess I really don’t consort with anyone, unless geometry now allows you to define a circle on the basis of a single point.`

In what seems a lifetime, I haven’t heard anyone mention the word “volatility” or use the phrase “risk on/risk off.” For that matter, “catch a falling knife” and “rip your face off rally” have also taken much needed breaks. Although that, too, may be related to my lack of circle size.

But I do watch lots of TV and those sounds have been silent.

What could have been a day of great excitement on Tuesday turned into just another great yawner as Italy failed to live up to diminished expectations.

Conrad Murray guilty of involuntary manslaughter of Michael Jackson?

Yawn.

Silvio Berlusconi, Prime Minister of Italy, set to resign once economic reforms are passed?

Yawn.

But the real sign of the boredom that’s set in centered on the latest Republican dynamics in their contest for the 2012 GOP Presidential nominee.

Had you not known better, you would have thought that the debate a few nights ago from Las Vegas was part of the process of coming down to the wire with the last remaining and surviving candidates.

Bloodied from the previous grueling debates all that were left from the once huge pool of Presidential wannabes were Newt Gingrich and Herman Cain.

Clearly at this point it would have to be a battle of gladiators to fight until the death, if only two of the standing candidates are there to debate.

Much like ancient Greek gladiators who knew no fear and retired only upon the time of their battlefield death.

Instead it was the meeting of the two sausage kings, Newt Gingrich, sausage by stature and shape and Herman Cain, sausage provocateur du jour.

Obviously, they had nothing better to do, while the likes of Ron Paul, Michelle Bachmann and the rest all had reasons for not getting involved with what promised to be a verbal blood bath.

Given that previous debates have seen the moderators criticized for asking questions that sought to elicit differences among the candidates, you would have expected more of those kind of fireworks, but not between the candidates.

Instead, the Republicans, led by Newt Gingrich in a combination Kumbaya/Rodney King moment urged his fellow combatants to resist the goading of the moderators who were clearly allied with the Democrat enemy in attempting to get the Republicans to bicker in public.

In the world of politics it’s not surprising to find words nuanced, but most people seem to have the same understanding of the meaning of “debate”.

In the past, the meaning of that word hasn’t been open to debate.

What is this thing you call “debate?” is a question that’s rarely asked, except at GOP debates.

Instead, this most recent debate was just a lovefest, so well suited for the likes of Bill Clinton’s biggest detractor on the morals front, Newt Gingrich, who had proven himself to be quite the player and illicit lover.

Not that there’s anything wrong with that.

 Not on the same plane as Democrat John Edwards, but still, pretty scummy and hypocritical. Even for a politician.

Not to be left out, Herman Cain, deacon of his church, is battling allegations daily of seeking to insert unwanted sausage into each and every order.

Papa John’s doesn’t have to be the only one playing the Sausage Fest game. 

 And why not? As Godfather’s Pizza CEO, he knew the great value of extra toppings and great customer service.

Back in those lonely Washington DC days, lobbying for the NRA, not to be confused with the other NRA, which was once led by an actor who knew how to quiet the desert dwelling and commandment craving crowd with his own staff, Cain was just a good servant.

Even if you have something better to do, you can’t just leave your sausage unattended for any length of time. Otherwise, it will go bad from disuse.

Cain knew that all too well and was proud of that sausage. Listening to his comments this afternoon, how could you not possibly believe that his attentions to an increasing number of women were anything other than pushing his fine product.

On a real positive note and demonstrating the entrepreneurial spirit that is still alive, Godfather’s Pizza announced their new limited time special offer. The Herman Cain. An extra large pizza with unwanted sausage.

With nothing much better to do this day, I at least got a couple of “yawner” kind of trades off. The kind that will barely be enough to cover Wednesday’s trip to New York City. I sold some calls on Goldman Sachs, Halliburton, British Petroleum and Amazon.

Although not on the agenda, if the boredom continues, I may just stop off to see the Occupy Wall Street phenomenon and maybe snap a picture or two.

Unfortunately, I’ll be competing against Wednesday’s GOP debate.

While they’ll be lining up for another debate, this one sponsored by CNBC and taking place in Michigan, I’ll be appearing on Bloomberg Rewind, hosted by Matt Miller, who is bravely growing out his mustache on air, in honor of “Movember” in order to help raise awareness of prostate cancer.

I’m hoping that I’ll be asked my opinions on debates and the candidates, but I don’t think that’s in the cards, although I did warn the producer that I suffer from a variant of Tourette’s Syndrome and may occasionally blurt out details of my tax plan.

Although I’ll miss the CNBC sponsored debate, because I do have something better to do for a change, that excuse won’t last very long.

The next debate is being sponsored by the Cartoon Network and any number of GOP candidates seem to have an inside track to be the crowd favorite on that one. You can never go wrong with Paul or Bachmann in that regard, but watch out for that Gingrich. He cuts a pretty cartoonish figure, reminiscent of Humpty Dumpty.

Hopefully, by then volatility will be back and Italy will entertain us in the manner that we had come to expect.

I’m tired of yawning these past two days and am pinning all hopes on the dysfunction that everyone has been expecting to come out of Italian politics to lead us back into the promised land of uncertainty.

But in a nod to the contrarians, so far, Berlusconi is letting us down by avoiding the theatrics that we’d come to expect.

It’s not as if he has anything better to do, after all. Why can’t he upstage Papandreou and make Merkel and Sarkozy do slow boils as they try to save the European Union despite their “challenged” Meditteranean brethren.?

Besides, what’s a 75 year old billionaire going to do? Go out with a couple of underage hookers?

Exactly. So he does have something better to do.

Yawn.

 

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.