There are many web pages devoted to making fun of economists but this one will do.  I liked it because it was text only – no annoying pop ups or hook up links or similar internet diversionary tactics.  In other words, the website owners have failed to monetise it.  Losers.

I selected this joke for its upper quartile performance but also for the local content:

When Albert Einstein died, he met three New Zealanders in the queue outside the Pearly Gates. To pass the time, he asked what were their IQs. The first replied 190.

“Wonderful,” exclaimed Einstein. “We can discuss the contribution made by Ernest Rutherford to atomic physics and my theory of general relativity”.

The second answered 150. “Good,” said Einstein. “I look forward to discussing the role of New Zealand’s nuclear-free legislation in the quest for world peace”.

The third New Zealander mumbled 50. Einstein paused, and then asked, “So what is your forecast for the budget deficit next year?”

Funny. But seriously isn’t it natural to seek such revenge on those whose job it is to predict the loss of your job? When you watch the po-faced economists talking about ‘creative destruction’ or read their dire predictions for future employment levels, don’t you fantasise about them queuing up at WINZ?

If you were going to judge economists on their predictive performance over the last couple of years most of them would have to resign en masse. Ross Gittins, writing in the Sydney Morning Herald, points out that the global financial meltdown “has revealed major weaknesses in conventional economics”.

“Economists will need to face up to these if their discipline is to recover its reputation and relevance,” Gittins says.

Even the current superstar economist, Nobel laurete Paul Krugman, has penned  an apology for the profession he headlines for, slamming it for its “blindness to the very possibility of catastrophic failures in a market economy”. Titled ‘How did economists get it so wrong?’, Krugman concluded economists will “have to learn to live with messiness” if anyone is going to take them seriously again as prophets.

“When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right,” Krugman says in his humourless punchline.

This was MFS’ Christmas 2007 message for New Zealand investors:

“MFS Limited continues to see great opportunity to solidify its market leading position in the New Zealand debenture finance market.”

Now this reads like a punchline to a bad joke but even then I thought there was something odd about issuing a press release just days before Christmas telling investors not to worry – this was a classic contra-indicator.

I recall a financial adviser rang me to ask what the story meant – he didn’t realise there was anything he shouldn’t be worrying about at MFS.

“It means you should worry,” I told him.

With Christmas 2009 just around the corner MFS (subsequently renamed Octaviar after an hilarious court battle with a US investment firm that used the same acronym) has finally liquified leaving its NZ subsidiary OPI Pacific Finance in similar circumstances and the thousands of debenture investors who bought its useless bits of paper, at a cost of about $300 million, devoid of hope.

And all along the way NZ MFS/Octaviar investors have been buoyed by false hopes – first the famous ‘put’ option that the NZ management failed to put, followed by a moratorium that is now officially dead.

Meanwhile, the MFS chief, Michael King, was out enjoying himself with his pony prompting one of his disgruntled investors to vent: “He pretends to be media shy and I just find it disgusting that he’s playing polo while the rest of us with our hard-earned are suffering.”

There’s a lesson here: never entrust your money to Australians who play polo, even if they think of you at Christmas.

Where are the Lehman Bros stars of yesteryear?

Well, Dick Fuld, former chief executive of the most famous defunct firm in recent history (who speaks of Enron anymore) is living quite comfortably still despite dropping over US$1 billion from his net worth.

According to a Reuters article, Fuld, who presided over the collapse of Lehman Brothers, which had been around in one form or another for 150 plus years, was holed up with his wife Kathy in a “bucolic setting beside a river and amid tree-covered slopes in Ketchum, Idaho”.

However, the Fulds have been down-sizing. They were forced to sell their New York apartment for US$25.87 million in August – probably at a small loss – as well as part of their art collection by “artists such as Arshile Gorky and Barnett Newman” for an additional US$13.5 million.

The couple have also stopped playing squash and chartering private jets. More tellingly, Kathy no longer shops at Hermes, or so a “source close to the couple”, told Reuters.

“It could be that they’re pulling back the spending or it could be that she doesn’t want to be seen spending, so she could be having someone else do the shopping for her,” the source said.

We’ve all got problems.

As the frontman for Lehman Brothers, Fuld has naturally had to cop a lot of flak for the failure of the firm and while it would be nice to blame one person for the near-collapse of the world’s financial system, you can’t.

Anyway, he’s already been punched in the face.

As “two very senior sources – one incredibly senior source” told it, Fuld “went to the gym after … Lehman was announced as going under. He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron and he walked over and he knocked him out cold. And frankly after having watched this, I’d have done the same too.”

Like most of the world’s media the Financial Times has run a special feature contemplating the Lehman’s collapse one year after the event.

Not one of the FT columnists suggested investment bankers should be punched in the face but Niall Ferguson did come up with a wacky argument that Michael Jackson might still be alive today if Lehman Brothers had been rescued.

Ferguson’s point is that back-testing fictitious Lehman rescue operations is a futile exercise – it’s gone and if it were not Lehman Brothers some other similar, debt-bloated entity deemed too big to fail, would have failed. The music stopped for a good reason.

Blame it on the good times.

I noticed the phrase “investor exuberance” in a news story for the first time in what seems like forever: Is this the fabled ‘green shoots’ or a red alert to sell?

While I am not authorised to answer that question, a fund manager suggested to me that the recent stockmarket surge was best described as a “FOMO rally” – for ‘fear of missing out’.

Indeed, a Mr Stuart Smith, senior client adviser with Australian firm Bell Potter Securities, said in the AAP story that we’re overdue for a correction.

“I think we’re overdue for a correction and I’m not alone. Valuations are stretched,” he said.

What a wet blanket. But, to be fair, other news today was mixed.

A Sydney Morning Herald story, for example, was headlined “Global financial crisis increases suicide risk – Roxon”, in which Australian federal Health Minister, Nicola Roxon, cut the ribbon on a new suicide prevention website.

Claims on Australia’s public health payment system, Medicare, for depression and psychological treatment were up over 50 per cent, the story says.

“In the economic downturn there are going to be financial pressures on families which will strain relationships,” Roxon said.

“So we must remain particularly alert at this time.”

Closer to home, Suzanne Edmonds, head of lobby group Exposing Unacceptable Financial Activities (EUFA), was calling once more for a Royal Commission of Inquiry into the finance company domino effect. Edmonds too touched on the subject of suicide.

Her headline – “Finance company victims still want Royal Commission of Inquiry” – was equally depressing.

But just as not every finance company was a fraudulent Ponzi scheme, it’s also not true that everyone who has lost money over the last two years was a ‘victim’ – at some point they may even have been exuberant investors.