Monday, March 17, 2008
With apologies to the Charlie Daniels Band:
The devil went down to Wall Street, he was looking for a soul to steal.
He was in a bind ‘cause he was way behind: he was willing to make a deal.
When he came across this young man trading credit, oil, and stocks.
And the devil jumped on a trading desk and said: “Boy, let me tell you what:
“I bet you didn’t know it but I’m a Wall Street trader too!
“And if you’d care to take a dare, I’ll make a bet with you.
“Now you got good performance, boy, but give the devil his due:
“I’ll bet a Ferrari of gold against your soul, that says I’m better than you.”
The boy said “My name’s Johnny and it might be a sin,
“But I’ll take your bet , you’re gonna regret, ‘cause I’m the best there’s ever been!”
Johnny, check your Bloomberg now and watch that market hard
‘Cause hell’s broke loose on Wall Street and the devil deals the cards.
And if you win you get this shiny Enzo made of gold.
But if you lose, the devil gets your soul!
The devil logged in at a desk and said “This starts with me.”
And made a hundred million bucks shorting the S and P.
As mortgage-backs took a big dive he made an evil hiss.
And showed Johnny his P/L, and it looked something like this:
When the devil finished, Johnny said: “Well, you’re pretty good old son.
“But you just sit down in that chair right there and let me show you how it’s done!”
Lever up the balance sheet, fifty-to-one
We look like the Land of the Rising Sun
A bull market baby, limit long
And pray like hell when things go wrong
Johnny bowed his head because he knew that he’d been beat
And he laid his Bear Stearns shares down on the ground at Satan’s feet
The devil said: “Boy, just come on back if you ever wanna try again,
I done told you once, you son of a bitch, I’m more powerful then Ben!”
And he sang, “Lever up the balance sheet fifty-to-one!
“You look like the Land of the Rising Sun
A bull market baby, limit long
But you gotta pay the devil when things go wrong.”
It's pretty hard not to have some sympathy for the devil this morning. For years, many financial market participants have engaged in a sort of Faustian bargain involving leverage, strategies that seemed too good to be true in real time, and betting large sums of other people's money. Now that the devil has come back to claim his own, should we really be surprised?
The Fed is attempting its best Daniel Webster imitation, but is finding it difficult to defend the indefensible. In return, the devil seems intent on dragging Bernanke and co. into the bowels of hell as well.
And as for Bear? Surely they are Berlioz, sentenced to a grisly death by Woland for not believing in the devil's existence. How else to explain Jimmy Cayne's almost comic bridge-playing timing and the obvious lies uttered by Alan Schwartz last week?
Macro Man doesn't know if Bear's demise is the beginning of the end, or just the end of the beginning; what he does know is that this is what happens when the devil goes to Wall Street to reclaim his own.
UPDATE: After some consideration and a query from poster MP, Macro Man has decided to sell out his 96 June Euribor puts for 33.5 ticks. Chances must be rising that the ECB is forced to blink, and blink soon.