After my post mentioning Dr. Strangelove earlier today, late tonight I got to re-reading actor Sterling Hayden's classic (and controversial) seafaring book Wanderer. Hayden, who was a top Hollywood star at the time, suddenly up and quit, abandoning a career, and went sailing -- and he then chronicled it all in this 1963 book.

Yes, yes, Hayden is a dreamer and a romantic, and, yes,the book is more than 40 years old, but it still has its appeal. The following section is often excerpted, but it is still one of my favorite bits from Hayden's book. And you can substitute "entrepreneur" for sailing, and the gist will be the same.

To be truly challenging, a voyage, like a life, must rest on a firm foundation of financial unrest. Otherwise you are doomed to a routine traverse, the kind known to yachtsmen, who play with their boats at sea--"cruising", it is called. Voyaging belongs to seamen, and to the wanderers of the world who cannot, or will not, fit in. If you are contemplating a voyage and you have the means, abandon the venture until your fortunes change. Only then will you know what the sea is all about.

Little has been said or written about the ways a man may blast himself free. Why? I don't know, unless the answer lies in our diseased values. A man seldom hesitates to describe his work; he gladly divulges the privacies of alleged sexual conquests. But ask him how much he has in the bank and he recoils into a shocked and stubborn silence.

"I've always wanted to sail to the South Seas, but I can't afford it." What these men can't afford is not to go. They are enmeshed in the cancerous discipline of "security". And in the worship of security we fling our lives beneath the wheels of routine---and before we know it our lives are gone.

What does a man need---really need? A few pounds of food each day, heat and shelter, six feet to lie down in---and some form of working activity that will yield a sense of accomplishment. That's all---in the material sense. And we know it. But we are brainwashed by our economic system until we end up beneath a pyramid of time payments, mortgages, preposterous gadgetry, playthings that divert our attention from the sheer idiocy of the charade.

The years thunder by. The dreams of youth grow dim where they lie caked in dust on the shelves of patience. Before we know it, the tomb is sealed.

Where, then, lies the answer? In choice. Which shall it be: bankruptcy of purse or bankruptcy of life?

If you haven't read it, you really should wade into Frank Partnoy's (and co-author David Skeel's) recent paper on credit derivatives. It's long and detailed, but Partnoy is a felicitous and smart writer, and so it's worth it.

... we discuss the benefits associated with both types of credit derivatives, which include increased opportunities for hedging, increased liquidity, reduced transaction costs, and a deeper and potentially more efficient market for trading credit risk. We then discuss the risks associated with credit derivatives, such as moral hazard and other incentive problems, limited disclosure, potential systemic risk, high transaction costs, and the mispricing of credit. After considering the benefits and risks, we discuss some of the implications of our findings, and make some preliminary recommendations. In particular, we focus on the issues of disclosure, regulatory licenses associated with credit ratings, and the special treatment of derivatives in bankruptcy.

The Promise and Perils of Credit Derivatives

DAVID A. SKEEL Jr.
University of Pennsylvania Law School
FRANK PARTNOY
University of San Diego - School of Law

I must be tired. Just finished packing for holidays, and I spotted this new paper:

How Many Alternatives Should You Put in Your Investment Basket?
Andrew Clare and Nick Motson
City University London - Sir John Cass Business School and City University London - Sir John Cass Business School

In my fatigue, however, I initially thought the title was "How Many Americans Should You Put In Your Investment Basket". And under that name it seemed awfully timely.

Okay, that's really it. To paraphrase Keyser Söze, pfff .... I'm gone (on holidays).

There'll be some other folks around here over the next two weeks. An eclectic and interesting group of people will be coming by, so stick around and enjoy.

And I'll see you all in two weeks.

Since Paul went on vacation a few seconds ago and since I'm a strong advocate of overcoming insomnia through work I figured I'd immediately guest post to his blog (thanks, Paul, for asking me). 

 

Quantifiable Edges has an interesting little statistic on 52 week lows.

 

Basically, 1/3 of all the stocks on the NYSE hit a 52 week low yesterday. The last time this has happened was in 1990.

 

This has only happened a few times since 1971 (5) and in all 5 instances the market was higher 4 days later and 20 days later. Not enough data to make any reasonable conclusion. Whats interesting is that if you go one further year back, 1970, there's three more occurrences and they were all negative 4 days later. Again, not interesting (too few examples) but its

A)   another example of the extreme level this market has taken a beating, even when compared with 2000-2002 (which is somewhat striking if you think about what was going on then: Internet bust, enron/wcom, 911, recession, etc). 

B)   another example where people are comparing this year to the 70s. I disagree with this. I don't think we are in stagflation. I'm more worried about eventual serious deflation a la what "Helicopter Ben" was worried about in 2002. But I'm hoping at least over the next 4 days (and over the next decade), that 2008 isn't the new 1970 but the new 1990. 

-James Altucher

From another one of Paul's guest bloggers for the next two weeks...

There was a fair amount of of blog-borne back-and forth today over Adam Lashinksy's piece in Fortune on Kleiner Perkins, and its pursuit of clean tech and other energy investments. Ashkan Karbasfrooshan offer a sharp take on the horrror that the legendary firm might miss out on the next Twitter or Yelp.

Excuse me, but Kleiner can invest in all of the clean tech crap and bio nonsense they want... that at least seems to have some kind of meaning and impact down the road.  Besides, let's consider the horrible track record of VCs that invested in the skata that permeates most dot com VC's portfolio. Give me a f'n break.  We're now bashing a bunch of investors for taking a rain check of crpstr.com to invest in things that actually mean something and make a difference?

Granted that there are no sure things in this business, it's pretty incredible to be casting aspersions on the firm's three-year old strategy with oil now at $140.

-- Joseph Weisenthal, reporter and properietor The Stalwart