Digital Ink Los Angeles

According to the NY Times article on February 1, 2009, ExxonMobil:

“…beat its own record for the highest profits ever recorded by any company, with net income rising 3 percent to $40.6 billion, thanks to surging oil prices. The company’s sales, more than $404 billion, exceeded the gross domestic product of 120 countries.“

With the onset of the worst domestic economy in 80 years, and plunging balance sheets at Wall Street banks, ExxonMobil managed to return “highest profits ever recorded by any company.” They must be great businessmen and astonishingly good at their jobs.

Bernie Madoff was arrested on December 11, 2008, for charges of securities fraud and outright theft, constituting the largest investor fraud ever perpetrated in history, to the tune of almost $65 billion.

Bernie Madoff had a keen business mind and was really good at his job: theft. On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum allowed. At the rate of ExxonMobil‘s current profit return, by the time Madoff gets out of jail, they’ll have profited $65 trillion from consumers. Profiteering is good. America was founded on this, right Mr. Gecko?

“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.“
– Gordon Gecko, Wall Street (1987)

Pumping Profits or Ponzi Ploys, which is worse?

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.