The Haiku of Finance for 06/02/25

Wall Street TACO trade

Arbitrage for tariff wars

May taste like chicken

The Haiku of Finance for 06/29/20

Serious money

Never laughs at Wall Street jokes

Shrugs off market noise

The Haiku of Finance for 12/31/18

Wall Street ends a year
Trading desk closes it out
Leave cash for bonus

James Bond Belongs On Wall Street

Wall Street often undervalues military veterans. Snobs who've never broken a sweat look down their nose at people who've worn muddy boots and dirtied their hands. The only veterans that might be exempt from the categorical cold shoulder are those with intelligence backgrounds. The appeal has little to do with qualifying skills and aptitudes. It has everything to do with a popular culture phenomenon that romanticizes intelligence work as something exclusive to a small elite, just like how Wall Street sees itself.

Intelligence analysis has a lot in common with financial analysis. Both rely on open source material for background data on geopolitical conditions and economic trends. Analysts in the US military and intelligence community use detailed methodologies for tracking changes in a competitor's strength. Private sector analysts have the same mentality when tracking a company's financial statements and news releases. Both types of analysts take the protection of confidential and proprietary information very seriously, and they take pains to safeguard privileged information from disclosure. It should be easy to make the argument that intelligence people would be assets on Wall Street. It's even easier to use a movie icon as shorthand for the advantages of having an intelligence pro in a financial house. That icon is none other than Agent 007, James Bond.

Anyone who's seen a Bond film knows the guy's fictional lifestyle. He travels the world with ease, wears a tuxedo to gambling tournaments at five-star hotels, drinks martinis, wears an expensive watch, drives a customized luxury car, and comes face to face with the most powerful and intriguing people in the world. James Bond is the archetype of alpha achievement and unquestioned competence, with a healthy serving of of sociopathy. Stereotypical financial titans think of themselves exactly the same way. Plenty of senior investment bankers and private equity fund managers negotiate high-stakes deals with intriguing international counterparts. They can afford a James Bond lifestyle in real life. 

Your typical high-powered Wall Street type gets deal flow from peer referrals, and hiring also works the same way. Image and prestige matter more than actual qualifications. An investment banker who sees a resume labeled "intelligence veteran" doesn't think about the candidate's analytical skills, geopolitical outlook, or cultural expertise. They think, "It's Agent 007. This person must have a lifestyle just like mine." That's all that matters.

Military veterans aiming for Wall Street careers can make this irrational bias work in their favor. Executives who think they need a Bond-like presence on their team are suckers for an intelligence veteran's pitch. The dumb trust fund kids running around Wall Street's mid-levels make hiring decisions on instinct. Action movies form their entire picture of military life. They'll hire for a "killer" advantage if they think a veteran brings shock and awe to a deal. You don't have to be a James Bond (or Jane Bond for the female equivalent) to close the deal, but the image's unspoken power just might open a door that would otherwise be closed to veterans.

Right this way, Mr. Bond. We've been expecting you . . . in the Fortune 500 boardroom.

Financial Sarcasm Roundup for 01/28/16

Hatred and love are powerful emotions. Sarcasm is not an emotion but it may be even more powerful.

The Federal Reserve made markets nervous yesterday. I say tough luck for wimpy stock market experts. Big players have had it too easy with ZIRP subsidizing their gambling. Moving toward a more historically normal interest rate environment means crybaby institutional investors will lose money. Just look at the confused commentary coming from Wall Street's idiots. They don't remember what normal feels like and their bond trading desks are full of Millennial whipper-snappers who think credit is always free.

The US Treasury alerts us to derivatives clearinghouse risks. That sure throws some cold water on the theory that transparency and mark-to-market pricing would make derivatives less threatening to the economy. The Fed and SEC have planned for trading halts and fund backstops. Now they need to think about liquidity backstops for clearinghouses. I suspect that will be a bridge too far in a crisis, so AIG-style instant firm resolutions will be the preferred risk mitigation tactic instead.

China's statistics chief is in trouble. Beijing couldn't keep their numbers frauds hidden forever and now they need a public scapegoat in true Manchurian style. The news may fool a few Western investment firms (the ones that don't understand China) into thinking things will get better when the head stats guy is replaced. A couple of high-profile career terminations won't stop the Chinese stock market's slide.

I try really hard not to hate people, even if they deserve it. Hateful people deserve sarcasm instead.

The Haiku of Finance for 12/31/15

Another year gone
Wall Street did not learn a thing
Get dumber next year

No One Learned Anything In 2015

Wall Street closed out another year with nonsense galore. The DJIA went nowhere for 2015 and even closed down today. You can be sure that some salesperson somewhere will pitch this as a buying opportunity in 2016. I won't pitch anything at all. Reviewing the year's action doesn't uncover much that anyone could sensibly pitch.

Stocks, bonds, and real estate remain severely overvalued worldwide. No one has to take my word for it. Anyone with a junior high school reading level can review reports from the Bank of International Settlements on how public market valuations have come uncoupled from macroeconomic reality. Hardly any professional portfolio managers will take those high-level warnings seriously.

Consider this the year-in-review from Alfidi Capital. There isn't much I can say here that I haven't been saying for the past several years. Mean reversions across multiple asset classes and geographies are long overdue. Predicting the timing is a waste of effort. Knowing the likely scale and consequences of the correction is more productive. Contrarians made fortunes in the Great Depression and 2008 financial crisis by preparing in advance and staying away from inflated risks. I am ready to watch Wall Street learn its hard lessons in 2016.

Financial Sarcasm Roundup for 12/30/15

Social media users often tempt me to follow them down endless rabbit holes of replies. That is not how I prefer to spend my time. I would rather use my hours wisely in the pursuit of sarcasm.

The SEC's report on last August's volatility spike is out. It should have taken the SEC weeks, not months, to produce this report and it doesn't even draw any conclusions. A bunch of people at the SEC must be very concerned about how any hard evidence of malfunctioning markets would make them look bad or endanger their prospects with future employment on Wall Street. Fund managers are becoming very concerned about how liquidity interruptions in the bond market can trigger illiquidity in equity markets. They worry about being forced to sell stocks just to pay for bond fund redemptions. The SEC doesn't even get that the trading halts triggered in August can cause such illiquidity. We're sleepwalking into another market crisis and the SEC has no idea how to untangle its vine jungle of trading rules.

The wealthiest Americans have created their own private tax system. Affluenza has replaced civic obligation as the defining characteristic of this country's ruling elite. Rich people who claim they are willing to pay more in taxes aren't serious. Their claims are a stalking horse for increasing the burden on "tax donkeys" in the upper middle class of professionals who could displace them. I'll bet Bermuda is really nice this time of year. I wouldn't go there for vacation because these "income defense" people would just shoo me away. They don't even realize that they are the intended targets of their super-rich masters' desire to push the income tax burden downwards.

Bridgestone will allow Carl Icahn to walk away with Pep Boys. I think this deal is a play on the sharing economy for cars. Think about how car-sharing services will eventually hurt sales of new cars to Millennials who can't afford to drive anyway. Car-sharing services will still have cars on the road, driving constantly. Those cars will have to last longer and will need constant maintenance. Auto parts and services will always be in demand, even if corporations own most of the cars. Lots of aspiring Uber drivers can switch to jobs stocking parts at Pep Boys once Uber starts buying self-driving cars.

Let me get back to Bermuda as a tax haven. I don't see why Congress doesn't grant the same preferred status to Puerto Rico. Just think of all the professional income defenders who could then set up shop on that poverty-stricken island and help alleviate its insolvency. I guess the ultra-rich prefer to confine their tax donkeys to the same island where they take vacations, just to push them around in person. No one pushes me around. I'm a CEO, in case anyone forgets.

Christmas Eve 2015 Wish List

The whole world waits for Santa Claus while I count my natural intellectual gifts. I enjoy dispensing grace, like a benevolent monarch blessing worshipful subjects while posing regally upon my resplendent throne. I willingly carry the burden of genius through this season of joy. I am sufficiently joyful for a whole bunch of you readers. Sharing my Christmas wishes multiplies such joy.

My first wish is for Wall Street to quit ripping off investors. This happens in so many guises you'd think it's hard for crooks in suits to think of new scams. Lo and behold, their creativity never ceases. Hedge funds, structured notes, multi-manager funds of funds, late-stage unicorn startup funding, and other such garbage are things the investing public can do without.

Here's another wish: Wall Street needs to quit hiring trust fund kids. It's easy for these lazy creeps to bring in new money because they just whine and cry until their parents cough up dough. The problems come later when they refuse to do work and their less privileged co-workers have to pick up the slack. The whole banking sector would be better off not hiring these mental weaklings in the first place but those new asset referral bonuses are just too good for some managers to pass up.

I wish economic annihilation for all of my enemies and bonanza for myself and my many friends. Haters crawl out from their caves to spew racism at me on Twitter or slander me anonymously online. A whole bunch of English-speaking morons can't handle my genius so of course they compensate by embracing pure evil. True friends are more fun to have around, especially when they swoon after exposure to my overwhelming talent.

Finally, I wish the idiots who take shopping carts out of grocery store parking lots would acquire their own conveyances. I used to think this phenomenon was confined to low-income neighborhoods. Now I see it in well-off San Francisco neighborhoods. A whole bunch of financially secure people think it's okay to drag a grocery store's cart all the way home and not return it. The store then has to send its workers in a truck all over the place to haul these things back. They pass the cost on to you, people, while the staff in the store remain short-handed. If you're too weak to carry more than one bag of food home, then buy your own cart, for crying out loud.

Pass the eggnog and I'll mix it with brandy. I do that all the time during the holidays. I can metabolize booze like you would not believe because I'm the next step in human evolution. Santa can squeeze his fat red behind down someone else's chimney tonight, unless he has a big pile of cash to give me with no strings attached.

The Haiku of Finance for 12/23/15

Festivus grievance
Dumb people love lame products
Complaint for Wall Street

Alfidi Capital Airs Grievances For Festivus 2015

Attention Wall Street and the rest of the financial services sector. Today is Festivus and you know what that means. I've got a lot of problems with you people, and you're going to hear about it! You have all disappointed me very much this past year. I was spewing lots of Festivus grievances this morning on my Twitter account and now here comes the main event.

First of all, financial commentators who should know better kept casting the Federal Reserve's prospective interest rate change as something either "hawkish" against inflation or "dovish" for GDP and employment growth. Nobody even bothered to track the shift in the Yellen Fed's thinking as something where any change would lead to a return to normalcy. Wall Street disappoints me when its public mouthpieces can't slice the "layer cake" messaging.

Fund management companies continue to roll out garbage securities products. All of the leveraged and inverse ETFs out there can't possibly outperform the simpler passive ETFs but hardly anyone wants to state the obvious. I'm happy to say it myself. Simple, passive, broad market ETFs are cheap and efficient. Boutique but still passive ETFs for sectors and commodities have their place as hedges. Complex, leveraged, and "active" ETFs are expensive wastes of time.

The sector is still hooked on active management as an excuse to charge an arm and a leg for "outperformance" that never happens. Come on, folks, indexing sounded the death knell for active investment management decades ago but fund managers are still in denial. Robo-advisers are now completing the circle by cutting the costs of personalized risk management down to a few basis points. Financial advisers and their back offices will still be in denial long after AIs have taken their jobs.

Enough with the hedge fund craze already. It was cute to watch math PhDs play with algorithms for a couple of years, but now an entire enabling subculture has grown up around these stupid products. Hedge funds are nothing more than elaborate schemes for transferring wealth from dumb rich people to clever rich people. Cheap capital helps enable this stupidity. Illiquidity in a market crisis will end it.

I would gladly challenge any Wall Street CEO to a Festivus feat of strength because I know I'll win. I train for this stuff day and night. Alfidi Capital exists to shove a shiny Festivus pole right up Wall Street's crawl space.

Financial Sarcasm Roundup for 11/24/15

I should have blasted this out yesterday but cleantech thoughts kept me occupied all day long. It is better to be clean than dirty. Just ask any pig headed to the slaughterhouse.

Wall Street averages continue to rise in spite of global economic headwinds. Greater fools are always ready to rush into the top of a bull market. I have been waiting for these fools to get financially kneecapped for the past several years. The spectacle will be worth the wait. My cash will be ready when the top-buyers are all broke.

The Federal Reserve may raise rates in December, according to the consensus interpretation of its most recent notes. It's important to remember that the Fed can immediately reverse itself if a rate increase proves too explosive for the system's emergency brakes. Our mandarins are playing it by ear because they have enticed every investor to take on extraordinary risks. The first rate rise past 0.25% will test the yield curve's long end, and make long-duration bondholders wonder whether their portfolios are safe.

Some obsessive food selfie people have figured out that restaurants and other food service sector companies will monetize their food photos on Instagram and other social media sites. It's great that people who want us to know what they eat will make money from their idle habits. Eating is a natural function, so perhaps we can take other natural functions to their logical monetary conclusions. People who take shower selfies can sell Instagram advertising space to makers of soap and shampoo. Do I have to mention other bathroom functions? Don't make me go there.

I promised my cleantech contacts that I would clean up my act. I behaved myself this time around. My word is my bond.

The Haiku of Finance for 10/12/15

Wandering career
Chase bonus around Wall Street
Tech will end this ride

Career Wanderlust On Wall Street Faces Obsolescence

Wall Street's top performers usually move around a lot. They jump from one firm to another every few years if the gaining firm finds their high-powered connections or book of accounts desirable enough to warrant a signing bonus. The upside to such wanderlust is a fatter paycheck for a small number of people. The downside is a mercenary culture that rewards greed over loyalty. The future may be different.

A specter of automation haunts Wall Street. Robo-traders can do everything human brokers can do at much lower coast. The AIs fronting automated portfolio rebalancing systems can't jump to rival firms and don't need bonuses. Their programmers and domain experts can jump firms, but there are far fewer of them than today's hordes of financial advisers and investment bankers. The hordes will be gone in a few years and Wall Street firms will be more efficient in their absence.

I used to work at a wealth management firm that tried to pretend its career revolving door did not exist. The "You and BS" people bragged about poaching top earners who brought clients from other firms, but stuck loser labels on their own defectors. Every firm thinks that way, even the once-mighty Merrill Lynch whose "Mother Merrill" culture encouraged people to stick around. I meant what I said when I told prospects I was loyal to my firm. They must have though I was naive not to have a mercenary mindset. That may be why they never wanted to invest with me. Many people really do reward disloyalty, as if it were a sign of maturity.

The most disloyal people end up with the biggest bonuses after years of cheating their teammates. Perhaps that's my bias showing, or just a broad truism. Bonus pay to reward wanderlust may not directly reflect the competence or integrity of a prized hire. If the pay is based on the hire's proven trailing revenue then it has everything to do with the winning firm's revenue. The future of AI relationships means all of a firm's human best practices will be permanently recorded in computer code. No ethically challenged humans need apply. Money formerly earmarked for bonuses will return to clients as saved transaction costs or to shareholders as dividends.

Wanderlust has a point if it diverts performers away from trouble. Sometimes the only way out of a bad job situation is to say goodbye and never look back. That worked for me once I realized that no investment firm or client would ever care enough to pay me for my work. It still works for a little while longer, until AIs copy all of the human skills they need.

The Limerick of Finance for 10/04/15

Bernanke said bankers need jail
They made the economy fail
Big shots got away
Still able to play
Financial markets are still frail

The Haiku of Finance for 05/25/15

Wall Street memory
No room for noble virtue
Greed over honor

Financial Sarcasm Roundup for 05/25/15

I spent this Memorial Day weekend remembering those Americans who died while serving in the military.  Most of the rest of the country went on vacation.  That's nice.  I'll remember them the next time an enemy force is shooting at me.

Stanley Fischer is dialing down expectations for the Fed's interest rate increases.  The Fed let its messaging get far ahead of its planned actions.  Now they have to walk markets back.  They can change their long-range estimates anytime.  They can't change much about their balance sheet without severely disrupting the fixed-income market.  It's time to smack some bond fund managers who are too lazy to compare the Fed's PR to its financial statements.

China solicits private investment in its infrastructure.  Doubling down on overbuilt urbanism takes some serious chutzpah.  All of those phantom cities in the hinterland could not possibly need more water treatment facilities.  Beijing is betting that the outside world is too stupid to care.  Any day now, sovereign wealth funds will line up to throw good money into this black hole.  If they cannot or will not do so, ordinary Chinese savers will be forced to convert their shadow banking WMP products into these new PPP investments.  Same garbage, different landfill.

I don't have any links to hard data on the IQs of Wall Street people.  I'm pretty sure that hedge fund managers and analysts would test high on IQ and low on EQ.  They're blind to black swans that can instantly destroy their investment philosophies.  I'm also sure that most investment bank managers would score high for sociopathy.  I don't think any of them stopped to honor Memorial Day the right way.

The Haiku of Finance for 02/27/15

Broker rule struggle
Wall Street greed for account fees
Need more strict control

The Haiku of Finance for 07/26/14

Read Wall Street report
Full of lies and poor judgment
Fruitless search for truth

Ethical Half-Lives In Finance

The few conversations I've had with people younger than me who aspired to finance careers always covered personal integrity.  I could not ignore this subject because it is the ultimate litmus test of whether someone belongs in a large corporation.  I use the term "belong" in a somewhat pejorative sense, as you'll see below.

I worked for three very large financial sector firms at various points in my career.  They all publicly held themselves out as putting the client's interests ahead of their own.  I observed their employees honoring this commitment more as an exception to general practices behind the corporate veil.  It is possible to make a decent living by genuinely caring for a client, meeting their expectations, and charging them reasonable fees.  Managers in large corporations often discount that objective by pushing their revenue producers (brokers, advisors, traders, loan officers, etc.) to make their department's growth numbers look good.  That's how managers get promoted.

The competition for promotions in finance is fierce and unforgiving.  A fast and loose approach to ethics is an easy ticket to the big time.  It is very difficult to have a long career in a large organization without resorting to unethical behavior.  The outsized rewards in finance tempt normal people to stray over to the dark side.  The ones who cross over often enough will never look back, and never realize where they went wrong.  Those rare people who climb ladders ethically and build business honestly deserve respect.  The rest of these people are clawing, grasping, vicious vipers who masquerade as humans to deceive clients.  They "belong" in a large corporation in the same sense that criminals belong in prison.  Society must keep its sociopathic predators under positive control.

I care more about my personal integrity than my career.  I performed very poorly when I worked in large financial institutions because I told the truth, followed rules, and executed my duties correctly.  My supervisors marked me for elimination after observing my behavior.  I wasn't fit for employment in their eyes because I would not lie or manipulate people.  I stand out as an oddball and I couldn't care less.  I dislike unethical people as much as they dislike me.

The half-lives of financial careers may be longest in corporate finance because incidences of temptation occur least frequently there.  It's always possible to falsify payment invoices but internal auditors can catch those instantly, especially if they're tied to the enterprise's supply chain.  There may very well be plenty of honest CFOs and treasurers around, and maybe this is why so many of them are sitting on piles of corporate cash rather than investing in overpriced assets.

Career half-lives are probably shortest in the financial sector's customer-facing roles.  I specifically envision retail brokerage, institutional sales, and investment banking rainmakers as the career paths that winnow out honest people very quickly.  The pressures to meet performance goals and earn bonuses are largest in those fields.  Opportunities to deceive investors appear daily.  The biggest liars and laziest trust fund babies win the retail production games.

Anyone who considers a career in finance should think very hard about the choice they will face soon after they begin work.  Personal integrity and career success in a large enterprise become mutually exclusive at some point during upward career progression.  Employees will choose one path over another.  Choosing personal integrity usually leads to unemployment.  Choosing career success usually means making ethical compromises.  Those compromises come with severe legal risks that cannot stay buried forever in an era of pervasive surveillance.  Having both integrity and success is possible with self-employment.  I have extended my career's half-life by working for myself.