Poetry Corner

THERE was a time when meadow, grove, and stream,
The earth, and every common sight,
To me did seem
Apparell'd in celestial light,
The glory and the freshness of a dream.	5
It is not now as it hath been of yore;—
Turn wheresoe'er I may,
By night or day,
The things which I have seen I now can see no more.
The rainbow comes and goes,	10
And lovely is the rose;
The moon doth with delight
Look round her when the heavens are bare;
Waters on a starry night
Are beautiful and fair;	15
The sunshine is a glorious birth;
But yet I know, where'er I go,
That there hath pass'd away a glory from the earth. ...

From Ode: Intimations of Immortality by William Wordsworth

Wordsworth basically says: remember back when the smallest things gave you such joy? You can remind yourself about it just by spending some time watching children and seeing how easily they amuse themselves. But the now mature Wordsworth asks where has that feeling gone?

Now, the first time you read this poem, the prognosis looks pretty bleak. He seems to say that this childhood delight and freedom is gone, and that we have to settle for just our memories and "find strength in what remains behind" (180). He uses a metaphor to of a vast sea and land to sum up this point. We start off in birth in the ocean. As we age, we make it to shore and then further move inland. Once there, we are left only with what we remember of that vast immortal sea.

Yet starting from stanza nine, you can make an entirely different interpretation as well. For he says he has found "perpetual benediction" not in "delight and liberty, the simple creed of childhood." Rather, he finds it in his "obstinate questionings of outward things," or the innate curiosity within him. Why? Well if you think about it, curiosity may be directly linked with our childhood delight and liberty. After all, life begins with an empty conception of the world. So much of the world remains inexperienced in the eyes of the child, and nearly every moment leads to some new experience. All of a sudden, the reader has come across an explanation for “those first affections, those shadowy recollections” of our childhood joy. Why did everything once raise such great feelings of interest and joy within us, yet now seem ordinary and boring? The great affections we felt for these things arose because we were experiencing them for the first time. Yet as these things were “the fountain light of all our day, … [and] of all our seeing,” they have become habitual experiences and cease to amaze us. (151)

Now I'll leave it to you to decide whether you want to see how this interpretation is carried into the rest of the poem. But the argument itself is an interesting one that you don't often think of. In the end, the reader learns that there is nothing so enviable about childhood. Our peaceful attitude is simply the result of a life filled with experiences in a complex world. And although maturity takes us far inland in Wordsworth's analogy, we would not choose to give up our "calm weather" and stability for the vast unknown of the sea.

Of course, the second part of this argument is that it is the satisfaction of our curiosity which leads to happiness. So break out of the routine and keep asking questions: the world is big enough to always learn or experience more, if you take the time to notice it.

P.S. Reader's of The Black Swan may also enjoy thinking about how that argument relates with this.

WaMu Chief Sees Perfect Storm

Washington Mutual today, after setting aside 500 million more for loan losses, said that they are amid what he called "a near perfect storm" in US housing. I wonder if he got the term from Prem Watsa, who has used the term often and is predicting a 1 in 50 or 1 in 100 year catastrophic event. Either way, it is good to know that the Fairfax team does hold CDS against Washington Mutual, among the many other mortgage names.

To see the list of other holdings in the Fairfax CDS portfolio, see this.

Countrywide's Confidence turned to Crisis

"Countrywide also concedes that its vaunted proprietary system for estimating loss probabilities and delinquency rates was bamboozled by real-world conditions in 2006 and 2007"

Direct Link

Flight to Safety

Dazel from the Berkshire Hathaway Shareholders board pointed out something that hasn't recieved much press- the recent dramatic fall in treasury yields, especially short-term. See this link.

Meanwhile in the world of computer-model trading,

"Wednesday is the type of day people will remember in quant-land for a very long time," said Mr. Rothman, a University of Chicago Ph.D. who ran a quantitative fund before joining Lehman Brothers. "Events that models only predicted would happen once in 10,000 years happened every day for three days."

More "black swans"!

"Black Swan" Event for AHM

Earlier this month, I shared my thoughs about the underwriting at American Home Mortgage (copied below for your convenience):

And finally, some food for thought: American Home Mortgage, an Alt-A loan originator, recently withdrew its guidance for the year and said it expects a loss because of a large influx of warranty penalties. To clarify, when most loan originators sell a loan to an investor, they usually include a warranty that the loan will not go delinquent within the first three months, or otherwise the company will buy back the loan. Those following the subprime fiasco know that this was the cause of the downfall of New Century and several other lenders. (Delta Financial, on the other hand, has so far avoided this) The question is, if loan underwriting has gotten so bad that many loans are going bad in three months, how much better could the loans be that they wrote 6 months, a year, two years ago? The question is important considering subprime and Alt-A combined made up 40% of 2006 loan originations, and many loans written in the last few years are set to reset in the 07-09 period.

Well, late Friday afternoon American Home decided to delay dividend payments on their common and preferred shares in order to preserve liquidity. "The disruption in the credit markets in the past few weeks has been unprecedented in the company's experience and has caused major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities."(my italics) So in other words, they were hit by one of Nassim Taleb's black swans: a rare, large-impact event that is beyond normal expectations. It's not that this credit tightening was unpredictable- anyone following the matter could have seen how poor loan standards had become and the future instability to come. But because the good times have been rolling for so long for the financial industry, many choose to ignore the possibility of a credit crunch. Now, those same firms are getting hit hard. I'm starting a new label entitled "Black Swan" that will keep track of the firms that will claim to have been struck by unprecendent, black swan type events. My guess is the list will soon be pretty long.