Michael B. Duff

I was talking about how much I was enjoying Zerohedge lately and made a comment about how naive I had been about the market before I started reading ZH and Michael Lewis.

I don’t actually invest in anything, but if I did I think I would be like a white trash version of this guy.

A Texas oil billionaire walks into an investment bank.

TEXAN: I’m here to invest a chunk o’ money! Who wants to get off their ass and sell me somethin’?

SALESMAN: I’ll help you, sir. What kind of portfolio did you have in mind?

TEXAN: Well son, I believe in three things: God, Guns and Gold. I invest in God every Sunday. I want you to set me up with the rest.

[One lovely aside here. Putting the words “smith and wesson stock” into Google brings up a report about their financial instruments, with no reference to the physical “stocks” they make. Investing in SWHC is no doubt much easier, requiring much less paperwork, than acquiring physical guns made by the company. A sign of our times, I think.]

SALESMAN: We can certainly help with that. Just so happens we have an equity position in Smith & Wesson, available at 4.3. But I should warn you, this stock can be kind of…

TEXAN: End of the world, son. That stock has nowhere to go but up.

SALESMAN: Yes, sir.

[Two months later, three magazines and five rifle designs made by Smith & Wesson are outlawed by a new federal statute. SWHC stock value drops to 2.8.]

SALESMAN: We also have a very popular gold fund that has performed very well this year. We could set up a standing buy order and add to your holdings every month.

TEXAN: Now just a minute! If I buy gold I want GOLD! The shiny kind that smells good!

SALESMAN: Oh, it’s all real gold, sir. We have certificates, contracts, London guarantees and a picture of the vault!

TEXAN: Sign me up!

[Two months later: “Hey guys, Jerry has a customer dumping $1 million in GLD on the 3rd Friday of every month at 10 a.m.. Program the HFT to buy $1 million GLD every 3rd Friday at 9:59:59:30 at +.10 and sell it to him. We’ll make ~.10 cents off every dollar he buys and off every dollar that follows him.]

[Two years later: The SEC orders a physical audit of GLD bullion holdings, revealing that they can only make physical delivery on 60% of what they hold. The price of real gold jumps 40%. GLD shares drop to nothing. SALESMAN has been promoted six times and can no longer be reached for comment. Texas billionaire has lost $12 million. Salesman has earned $3 million in bonuses.]

[Notice that the one thing the Texas billionaire did not invest in was oil, the one commodity he knows something about.]