The Market, She's a Bitch

Submitted by LoS reader "Charles"

In many roles that have been traditionally dominated by men, the underlying structure of a given profession is often personified as a woman. The best example I can think of is that of a sea captain: both the ship and the ocean are almost always described as a woman. Mother Earth yields crops to farmers; look to Greek mythology to find the goddesses of Spring and the Harvest. A rejoinder to this observation is the stock market. I have never heard a trader or an equity analyst (during my employment at a sell-side firm) refer to the market as a woman. Indeed the stock market is almost always given the genderless pronoun "it" in both common and academic conversation.

I, however, firmly believe that the market is a woman, and I believe the most recent sell-off gives support to my argument. On February 27th, the market behaved exactly as a woman would in a similar situation. In bed.

Over the trailing trading sessions, the market was getting nailed – in a good way – and she was really enjoying it. Point by point, rising closer and closer to double digit returns. Coherent thought was miles away as she slipped deeper into a state of upward momentum. Rising. Higher. Higher. It seemed like the pure joy would never end. But was there risk? Globalization and transparent markets had mitigated all need for protection, so on she went. Closer and closer to the peak of 52-week highs.

Then, as if fate itself called down to her, she realized she had forgotten to take her birth control and she was not "this kind of girl". She was overexposed to sub-prime debt. The market went from legs-wide-open to frigidity in less time than it takes a fixed income trader to eat his Atkins lunch. And when the market closed, investors had to go to bed pissed off and feeling like they got kicked in the nuts.

Don’t worry, though. She'll be back.

Crazy Person or Bluetooth Headset? The Home Game

During my commute, I am frequently left to wonder about why it is that fellow travelers are talking to themselves. Are they crazy, maybe burdened with schizophrenia or with the tourettes? Or are they simply business professionals affecting the trappings of insanity by talking to the open air in front of them with the vehemence, volume and animation reserved for discussions with the voices within their head?

Hence Crazy Person or Bluetooth Headset.

This morning I was treated to two such travelers, allowing for two rounds of CPBH.

Round 1:

Man in his early 30's, nattily dressed but in a casual fashion. Dark curly hair a little bit unkempt but not overly so. He sat on the train having this conversation with open space: "Father, you are up. It's good to hear that [laughing a little crazily]." He continued but was cut-off by a cloud of people and background noise. Was he crazy or just bluetooth equipped?

Crazy person!

Round 2:

Asian man on the street, in a normal looking coat, mid-40's gesticulating wildly while screaming things in Chinese or whatever. But his hair gave him away. Too well-coiffed to be a crazy person.

Bluetooth Headset!

In business flight terminals, you can play the sister game Bluetooth Headset and/or Total D-Bag.

Jacob, Son of Isaac, the First Value Investor

Ben Graham usually gets credit for being the inventor of value investing. Recently, we sat down with Jacob who says he perfected the art about 4,000 years before Mr. Graham came along:

LoS: Hi Jacob

Jacob: Shalom

LoS: How did you get into value investing?

Jacob: Well I have to say it started at birth. Actually that's wrong, it started at my twin brother Esau's birth. You see he was born first and by his birthright had claim to my father's estate. He was stronger than I was so I knew even in my mother's womb that he would probably push his way out before me. Right from the start I realized I wouldn't be handed anything in life and would have to make my own way. I saw value investing as the best way to do that. I think recognizing my value bias while still in the womb has been key to my success.

LoS: Tell us about your first deep value pick

Jacob: My early career was unique in that I really only monitored one asset: my brother's inheritence (NYSE: MBI). Having watched it my whole career I was well prepared when MBI fell out of favor with the street, at the time I thought the market in general was over-valued so I was holding a large portion of my assets in the "cash" of the day which was actually just soup. The largest holder of MBI, my brother Esau, always had a Food-At-a-Reasonable-Price bias (FARP). He was tired of waiting for the intrinsic value of MBI to be realized by the market, and he was hungry and wanted some soup. I saw an opportunity to buy MBI at 0.003% of intrinsic value so I sold my soup "and the rest is Old Testament" as they say.

LoS: That's impressive, what are your best ideas now?

Jacob: Sorry but I never discuss my current portfolio, you never know when someone might dress up in wool and trick you into bequeathing your fortune to him. Or dress his ugly daughter up to look like his hot daughter and have you end up marrying the wrong one. I do have some advice for young investors though: Don't live until you're 180. It's much easier to have lifetime 20% returns if you die at 75.

LoS: Great point Jacob - thanks for your time. Next week Noah tells us how one contrarian bet on weather futures changed his life forever.