gall and gumption

Sunday, August 19, 2007

How Many Ways Can You Spell Spam?

Years ago, when I was in college and my grandmother was still alive, she answered an ad that said she could make $1,000 a week stuffing envelopes. All she had to do was send in $5 or something and she'd find out how. She sent in the $5 and then got deluged with all these letters -- it turned out that you would make $1,000 a week if you could get a bunch of other people to send you $5 to find out how to make $1,000 a week. Well, she caught on at that point, and was not interested further, but letters from this outfit kept coming. They had lots of BLOCK LETTERS and EXCLAMATION POINTS!!!!! And, following good marketing practice, used the word "YOU" a lot -- which always makes me feel special, because then I know they really care about me.

I suspect that a lot of the money made from spam is not made from the sale of actual products, but from the sale of the hope of making fortunes through the production of spam.

I do peek in my bulk mailbox just to make sure I haven’t missed anything that shouldn’t have gone in there. That has become a fruitless exercise over the last year, as the volume of spam has increased hugely. It comes in waves. I had a bout of Viagra spam a few weeks ago, and I remember before that some penis enlargement offers. The subject headings of some of these looked like they ought to have been scrawled on the side of a building in Lagos, Nigeria.

Then that ended and now it is the free gift offers. (A free sample of Febreeze Air Freshener! How exciting!) Then the Coke and Pepsi taste tests. Then the gift cards. Lots and lots of gift cards. I’d need a warehouse to store all these gifts. I have won literally hundreds of lotteries. Then a lot of people were very keen to give me a laptop computer. Did even one person in 10,000 did click on the message with the heading “Nordstom?” I am in doubt about “Easy way to a flat belly,” too, and I feel no need to answer the call to “Separate yourself from other men.” (A lot of the penis-related spam seems to speak to an anxiety about other men. These are the ones that have some relation to the product they are selling. There are others where I just imagine some poor boiler-room worker rushing to fill his quota of messages for the day, grabbing at random bits of prose, like this: “’Chinese’ said Johnny. ‘I don’t understand any of them.’”

I wonder, for instance, whether all of the Free Gift Card people are working for the same company. At any rate, their software doesn’t seem to keep track of whether two or three or forty people from the same spamshop are sending the same messages to the same addresses. Are they in some sort of boiler room operation or are they doing “Chrisitan Work From Home?”

Then there is the spam that is disguised as spam. A couple of these have gotten through the filters, and they carry subject headings that seem to assume a certain familiarity. I think, “I don’t who she is, I don’t know why she’s leaving town, or why I should care. But maybe she’s someone I met somewhere.” Open. Scroll down down down through a lot of white space occasionally interrupted by the sort of alphabetic leftovers that always travel with glurge. But there is no glurge. At the very bottom is one line, written without punctuation, inviting me to look at some very special pictures.

I have my doubts as to the existence of the pictures. I imagine this entire pursuit, like something out of Grimm’s Fairy Tales, or maybe Kafka, or one of those strange Victorian stories of curses, ghosts, or fetishes. The product is elusive, whether it is the free laptop or the $50 TJ Maxx gift certificate or the carton of diapers and baby wipes. Answer the message and you will pursue the offer through this tangled, foggy wilderness, from which come messages assuring you that all you have to do is get to the next stage, to get ahead of the competition, to participate, to join thousands of successful entrepreneurs. You aren’t chasing a laptop now, you’re chasing the prospect of making a fortune selling the idea of selling the idea of a laptop. Somewhere along the line you may be persuaded to part with a small sum of money. The whole point of the exercise is that right there: to skim a little, not enough so anybody minds. But all those little bits can add up..

"Pump-and-dump" is when spammers buy shares, orchestrate a spam campaign promoting the company, then wait for a share price to rise before selling their stock for a profit.

I read this in the Caribbean Net News without noticing that it was also reportedly the biggest spam dump ever.

Wealthy people can buy quality advice, have all the access they need to information, can protect themselves with armies of lawyers; Warren Buffett is safe. He’s safe because he has other ways of getting a laptop than taking up some free offer off the Internet. He doesn’t have to think, “Well, maybe they mean it this time.” Movies end happily when the scrappy little underdog takes on the big bully and takes him down. But the sad reality is that it’s the weak that get preyed on, continually. Why? Because it is easier.

People who can afford to pay for a laptop computer don’t want to be given a free one from some mystery spam outfit on the Internet. The people who want such things free are 1) people who have no money, and 2) people who have no information. The two categories are not the same. And they don’t make their investment decisions based on spam either.

“I tried being poor once,” said Picasso, “It was too expensive.”

Picture a guy named Larry, who’s got his own little crew of aspiring dealers. What’s the matter? No nibbles? Well, Larry has some leads he’ll sell you. Larry makes $25K a month. And you buy some of his leads (which ones do you suppose Larry is willing to sell?), and you buy some of those How-to-Sell DVDs via mail order from some guy in Missouri. Do you dare to complain of this arrangement? Well, you aren’t a team player. You are possibly a socialist.

After six months the weak are quietly winnowed out of these operations--they aren’t team players, they aren’t trying hard enough, they aren’t happy to spend 10 straight hours cold-calling on a strict commission basis. Larry has sold his less productive leads, got a percentage of any sale made, maybe got a cut of something from the Missouri guy. A new crop of single mothers, retirees, part-time community college students and immigrants arrives. The great thing about taking money and free labor off the poor – aside from how easy it is – is how many of them there are.

Larry’s riches are proof that El Dorado exists. Question L arry and you are criticizing the Idea that money can be made, is made, without any exchange of goods or creation of value. All effort is the effort to transfer money from A to B. Larry is a profound seer into the mysteries of money. Don’t criticize Larry; Be Larry.

For the last two years I’ve watched this housing disaster building. The money got cheaper but the price of houses went up and up, but the money kept coming. Why did it suddenly become so appealing to put people into houses? Why did we suddenly find it so important to put people into homes they couldn’t afford? When did we suddenly start giving a shit about the poor in this way? Somewhere down the food chain it was about having a place to live, but higher up it was about the Idea.

So there, some buyer chases the Idea of a home, the big symbol of arrival in America. “Don’t get priced out! Real Estate never goes down! They’re not making any more land,” and if you’re living on the edge of poverty – the condition of a lot of the country’s middle class – you feel it is your responsibility to buy. And the interest rates are low, though the prices have shot up to such an extent that it is delusional to think that the rates give you any kind of a break. And you didn’t even have to put up a down payment!

But if you can get in you will have this great symbol, you’ll be established, and also this symbol will make you some money. Two religious mysteries of America right there, two pillars of American personal identity. When these pillars of identity collapse under people, it’s sad, yes, but occasionally you get a glimpse of something primitive and nasty, of this disintegration, regression. That’s the only way I can explain horrible things like this. Then I suppose these people go away and have all the work of assembling an identity again. “Hi! We’re the Murphys! Do we look like the sort of people who would abandon their dog in an empty house? We’ve got brand new furniture!” That is, they will assemble their identity again out of things.

The people who made money trading in mortgages were not interested in trading in houses, but they needed people who believed that you could get free money by trading in houses. That belief drove the production of those securities. The people who wrote the mortgages didn’t carry the risk. That went up the food chain to – who? The people who bought the debt were no more interested in actual mortgages than speculative house buyers were interested in actual houses. Nouriel Roubini explains what they were interested in.

different (equity, mezzanine, senior) tranches of cash CDOs that receive a misleading investment grade rating by the credit rating agencies; then you create synthetic CDOs out of the same underlying RMBS; then you create CDOs of CDOs (or squared CDOs) out of these CDOs; and then you create CDOs of CDOs of CDOs (or cubed CDOs) out of the same murky securities; then you stuff some of these RMBS and CDO tranches into SIV (structured investment vehicles) or into ABCP (Asset Backed Commercial Paper) or into money market funds. Then no wonder that eventually people panic and run - as they did yesterday – on an apparently “safe” money market fund such as Sentinel. That “toxic waste” of unpriceable and uncertain junk and zombie corpses is now emerging in the most unlikely places in the financial markets.

Understand that some of these investors borrowed money to play with “zombie corpses.” That is, they planned to pay for these securities with the money they were sure would be realized in swapping them about.

Second example: today any wealthy individual can take $1 million and go to a prime broker and leverage this amount three times; then the resulting $4 million ($1 equity and $3 debt) can be invested in a fund of funds that will in turn leverage these $4 millions three or four times and invest them in a hedge fund; then the hedge fund will take these funds and leverage them three or four times and buy some very junior tranche of a CDO that is itself levered nine or ten times. At the end of this credit chain, the initial $1 million of equity becomes a $100 million investment out of which $99 million is debt (leverage) and only $1 million is equity. So we got an overall leverage ratio of 100 to 1. Then, even a small 1% fall in the price of the final investment (CDO) wipes out the initial capital and creates a chain of margin calls that unravel this debt house of cards. This unraveling of a Minskian Ponzi credit scheme is exactly what is happening right now in financial markets.

So we find ourselves in the Cayman Islands again. Such a tiny little place, and what untold wealth is buried there!

Except when the zombies vaporize it.

Bear Stearns, the fifth-largest US investment firm by market value, sought bankruptcy protection for the funds July 31 in Cayman Islands Grand Court.

The hedge funds, managed in New York and incorporated in the Cayman Islands, invested in home mortgage securities. The funds collapsed amid rising subprime defaults.

Bear Stearns closed the funds after granting $1.6 billion in emergency financing in June. The attempted bailout was the biggest since the collapse of Long Term Capital Management in 1998.

Over the next few months, by the end of the year, the term “hedge fund manager” will be a standing joke. But when the money was gushing they were wizards of mysterious acuity and vision.

Poor people did not create this scheme. If Wall Street had not wanted to buy these mortgages, the poor (and yes, often black) homebuyers could have sat in their cardboard boxes all along those sidewalks and begged for housing relief till they cried blood, as my grandmother used to say. If it hadn’t figured out a way to make money out of their need, Wall Street would have stepped over them and gone on about its business. But in the years of the growing bubble, these people were encouraged to buy, and encouraged to take on this debt that there was no hope on earth of their repaying.

For the past year, more and more Americans find themselves living in houses under crippling mortgage payments on debt that is worth more than the house. Not a whole lot better than a cardboard box, I imagine, in terms of peace of mind, security, and brightness of future prospects. But the Fed has stepped in for – or rather, stepped over, those cardboard box-dwelling citizens – and come to the rescue of Larry.

Update: I fixed the links and did a little bit of tweaking.

Update II: Via Metafilter, here's an explanation of what the Fed did.

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At 8:05 AM, Anonymous Norman said...

Larry and his friends say they love capitalism and the free markets. But when the creative-destruction aspect of capitalism surfaces, they wail for the central banks or the government or anybody to bail them out, and the ones who wail the loudest are the ones who behaved the most irresponsibly. And the Fed will oblige, or try to. So Larry rakes in the money on the way up and gets to keep it on the way down. Is this a great country, or what?

By the way, I have about $22,000,000 sitting in an offshore account that I need to move to the States. Give me your social security number and all your bank account information; I'll transfer the money to your account and you can keep 40% of it.


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