Digital Ink Los Angeles

Heard a great analogy on NPR the other day — having to do with lunchtime trades completed on the playground.  That’s right — the playground.

With kids and their great imaginations, you know some kid had to think up something as creative as credit-default swaps, or amortized assets, or sub-prime mortgage securities.  Right?

Think of it this way.  A kid forgets his lunch, or, even better, never had a lunch to begin with.  No worries — just make up a tradable security that will ensure you lunches for a long time to come.

The kid announces, “I’ll offer a BIG piece of my mom’s delicious chocolate cake if someone gives me their cold-ham sandwich…”

Of course, one alert-minded kid responds, “Hey, dude, what chocolate cake?’

The forward-minded, industrious entrepreneur (See Bernie Madoff at Wiki) replies confidently, “Well, my mom loves to bake a HUGE CHOCOLATE CAKE at the end of the year, and I can offer you a slice — a BIG slice if you trade me your ham sandwich and a bag of potato chips…”

We know there’s one born every minute, so a normally shy kid who wants to show his moxie says, “Oh yea?  Well, you can have my tuna-on-rye and an apple if I get a nice, frosting-heavy slice of that cake.”

The young securities trader strikes a pose of thought, as he scans the playground for new trading opportunities, then says, “OK, but I can’t guarantee that the cake will be chocolate — after all, my mom likes to change her mind sometimes.”

The exchange is locked in with a handshake, and the young entrepreneur shuffles away, unwrapping his tuna sandwich with an apple bulging from his pocket.

Day after day, we hope for a better life.  What if that tuna sandwich is ALL THAT WE NEED?  Didn’t Aesop write a fable about a fox and some grapes.

By the way, I love chocolate cake, too.  As, I imagine, most people do.

It goes without saying that things are starting to get a little weird when we begin to attempt a valuation of our material possessions.

A gallon of gasoline is currently around $2 at California pumps, with slightly different prices across the country.

Housing prices have dived — some markets seeing a nearly 70% decrease in values — with foreclosures reflecting the upside-down nature of this industry.

A rush toward gold — which bodes well for most investors who got in before the new Gold Rush price increases — is indicative of this New Economy.

In fact, guns, gold, and safes are really the new way of investing.  Kind of reminds me of an episode of HBO’s Deadwood.

But, 130 years later, we now have credit-default swaps, retention bonuses, and derivatives linked to the sub-prime mortgage industry. Now that’s progress.

Let’s imagine the value of a few simple things:  Water, Air, Fire, and Earth.

Our water markets are expanding faster than the iPhone, with many companies poised to control this commodity. Our Air quality is worsening year upon year, with “clean-burning coal” facing closer scrutiny as a viable new-energy solution.

Which takes me to Fire, or the combustive element we’ve grown so fond of since our days in the Ice-Age caves of Europe and Asia.  What is Fire but the source, figuratively and literally, of Industrial progress.

And then, there’s Earth — good ‘ole dirt.  What’s the value of an acre?  Depends on if you’re talking Malibu, Ca., or Lagos, Nigeria.  What we do know is the amount of Earth available isn’t growing, but Earth’s population is.

What’s the value of things?  How do we measure what was worth something today?  Compare Britney Spears in 2000 to the “Circus” Britney of today.  Or, better yet, consider the idea that speculative fine-art trading has exceeded the Dow market in value over the last 10, 20, even 50 years.

What’s it all worth?  Trade you a 1955 Mickey Mantle for a 1986 Michael Jordan to find out.