Category Archives: Business

The Big Short

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Anne on the Forest Park SE Pedestrian Bridge

Anne on the Forest Park SE Pedestrian Bridge

It ain’t what you don’t know that gets you into trouble.
It’s what you know for sure that just ain’t so. – Mark Twain

“The Big Short” is Adam McKay’s movie based upon the Michael Lewis book by the same name. It is a historical drama about the great recession, from the point of view of the few that profited greatly from our national economy’s demise, by betting against it. It’s a boy’s club tale, starring Ryan Gosling, Christian Bale, Steve Carell and Brad Pitt. There’s plenty of fourth wall interaction in the movie, Gosling acts as both character and narrator through this medium. One effect that I appreciated were the many period stills that punctuated the movie. I know, it hasn’t even been ten years, but a lot has changed since then. The movie has a lot of technical financial terms to explain, read boring. It relies on cameos for this function. One of my favorites was Margot Robbie’s bubble bath scene. Hey, I’m a guy. Anyway, it’s a first-rate movie and I highly recommend it.

Truth is like poetry. And most people f-ing hate poetry.
– Overhead in a DC bar

Gosling does a voiceover near the end of the movie where he explains all the ramifications from the great recession, “100s of bankers went to jail, the big banks were broken up and Congress enacted sweeping financial regulations.” Then with a record needle’s scratch, he corrects himself, “None of that stuff happened. Instead, it was all blamed on immigrants and the poor.”

All that is solid melts into air; all that is holy is profaned.
– Communist Manifesto

Then there was Carell’s interview with the Standard & Poor’s bond rating representative. She had just come from an appointment with the eye doctor and was wearing one of those disposable sets of wraparound shades. She was the perfect image of blind justice, until she ripped them off and admitted her culpability, in selling AAA bond ratings for fees.

Eat Here, Get Gas

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CA SR 46 Oil Field

CA SR 46 Oil Field

The Perma-Bear texted me at lunch on Tuesday, “$2.04 gas on Natural Bridge.” I think that he is looking to pick up a little extra cash before Christmas. Here’s the back story, in ’08 I bet the Perma-Bear that gas in Saint Louis would hit $5/gallon before it hit $2. Loser buys the winner a gallon of gasoline. I liked the odds at the time. A few years ago, when gas hit $4.75, I had to remind the Perma-Bear of our bet, but as his text implies, he’s all in now. That night, Anne heard on the news that gas has broken the $2 barrier, in the Saint Louis area, with a price of $1.95. I will pay my debt, but the Perma-Bear is out of the office until Friday. That leaves me a little bit of wiggle room, because I expect that gas prices will continue to fall. If when I next meet the Bear and gas is less than $2/gallon, should I pay the two-bucks or should I pay the going market rate at the time? I think that if I pay him two-bucks and a gallon is less than that then I’m overpaying my debt, because fundamentally the bet was over a gallon of gas. I want to honor my debt and if that debt is $2 or $1.95, so be it. We’ll work it out, but what if I don’t see the Perma-Bear on Friday? That opens all sorts of possibilities. I’ll be off work until next year and that means two more weeks of falling gas prices. How low can we go? All of this might seem like weaseling to the casual observer, but I believe that the Perma-Bear enjoys this game-play as much as I do. I want to honor my bet, but since it will be a cash exchange, it has to be face-to-face. The question is when will we next meet?

Gas Wars

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Stellar Jay at Nepenthe

Stellar Jay at Nepenthe

Remember those pre-gas crises price wars that would sometimes occur. Two gas stations on opposite corners would go toe-to-toe with each other in a gas war. It was fun to drive through those intersections every day, because each new day would bring a lower gas price. I image that post OPEC these gas wars do still occur, but not with the same frequency or ferocity as before. That is until the local gas war graduated to one of global dimensions. A worldwide gas war is now being fought between OPEC, or more specifically Saudi Arabia and North Dakota, by which I mean fracking. Fracking has greatly increased US oil production, given us greater energy independence then we have enjoyed in decades and lowered the global price of oil, albeit not without a serious environmental impact. All the while OPEC and other energy producers have continued to leave their spigots wide open. In just a few years crude oil prices have plummeted by a third and continue to freefall. When oil was running $100 per barrel, fracking was highly profitable, but fracking is expensive. It is estimated that this technique has a breakeven point of $75 a barrel. Prices are currently running $67. As in any gas war both sides suffer and eventually one side breaks. Either the frackers go from boom to bust or OPEC knuckles under. Not all members of OPEC are well positioned to weather this price war. So far, this war is all goodness to us consumers. We pay less at the pump, this nationally translates into a free $75B tax cut and for the first time in ten years economists are forecasting a 3% US GDP growth in 2015. Like WW II was to the Great Depression, this gas war maybe to the Great Recession. This time, no blood was spilled, just oil.

I have bet twice on oil and it looks like I’ll lose twice. In 2011, I bought a Prius when oil was high. That old adage, buy low, sell high, now comes to mind. I also bet on high gas prices with the Perma-Bear. Back in 2008, when the economy was tanking, he bet that gas would hit $2 a gallon and I bet that it would hit $5 first, here in Saint Louis. We each agreed that the loser would pay for a gallon of gas. Those 2.5:1 odds were just too tempting. A few years ago, when gas was flirting with $5, I had to remind him of our bet. He remembers it now though. Today, I filled up at $2.37 and another guy paid $2.25. A friend of a friend analyzes oil prices for the Air Force and predicts that gas in Saint Louis will hit $2 a gallon in a month. I fully intend to pay off my wager, but with quickly deflating gas prices, I wonder how quickly I should do that. In 2008, I was working daily with the Perma-Bear, now not so much. If I could duck him for a week or two, or even a month, would my debt fall from $2 to $1.75, or even $1.50? After all, I’m still making car payments.

Headed Home

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Ubiquitous Seattle Salmon and Grape Cappers

Ubiquitous Seattle Salmon and Grape Cappers

I rolled into work this morning a little on the late side. I was really late. I was over four-hours late. I guess I needed the rest. I slept through my alarm and probably only awoke when the marimbas stopped. No one seemed to care though. The people I was supposed relieve had long since left, plus a couple new guys had shown up as additional relief. I hung around work for an hour, before heading off for the airport, by way of Pikes Market. I jaunted downtown for a quick photo-op, before heading off to SEATAC, where I sit now. I’m flying back through Denver again. On the way out I didn’t have to get off the plane. This time I have to change planes. I hope that I don’t sleep through the landing and eventually wake up somewhere strange. “Where am I, Oakland? Oh, you said Aukland.” Anne asked if my trip was successful. I told her from my point of view it was. I made a boatload of money. She meant from the company’s point of view, which I knew. She went on to tell me a joke: An engineering consultant was called in to fix a device. After a couple of taps of percussive maintenance he got it running again and handed them his bill for $50,000. What? All that money for only a couple of hammer blows they exclaimed. The engineer said the hammering was only cost a $100, but knowing where to hit it that’s worth $49,900. Over and out, folks.

Zero Dollars and Zero Cents

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I-44 Sunset

I-44 Sunset

“As of April fourteenth, two-thousand and fourteen, the amount of principal owed on this loan is zero dollars and zero cents. The amount of interest owed on this loan is zero dollars and zero cents. The amount of escrow owed on this loan is zero dollars and zero cents. This account is now closed. Thank you. Goodbye.”

I liked the sound of that automated message so much that I ended up listening to it three times, before I decided to speak to a human, who once again confirmed that our thirty-year loan had been paid-off. She seemed suspicious at first, when I first announced that our account had been closed, but she patiently answered all my questions, repeating things when I asked her to. Maybe she was a bit peevish at first, because I was the one that got away. She eventually warmed up to me though, because I was always courteous to her and maybe because I symbolized the light at the end of the tunnel.

We are now free and clear, masters of our own domain, home safe. What triggered my phone calls was our monthly mortgage statement. It was like no other of the 360 previous mortgage statements that we have received over the years. For one, instead of a bill, it included a check from the bank. I really wasn’t surprised by any of this. I had been anticipating this day for some years now, but I was surprised by the amount of the check, I had expected a much bigger payout. As it turned out, the bank had used most of our escrow funds to pay our insurance for this next year. We’ll have to pay our taxes at the end of the year and then the insurance again at this time next year. Then we’ll repeat, for as long as we can or care to, but we’ll never pay another penny to the bank.