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Here in my part of the United States we experienced the switch to Daylight Savings Time last night. That is to say, we transitioned from “Standard Time” to “Daylight Time”. I live in California, so that means going from Pacific Standard Time (PST) to Pacific Daylight Time (PDT). I hate the daylight savings time switch. I have always hated daylight savings time whether we were moving our clocks forward in the spring, or back in the fall. I used to say that it was like getting jetlag without the benefit of going anywhere. This morning, as I lay in bed, I realized that that little joke obscured the true reason why I find this time change so unpleasant.

I was thinking about what it would be like if we hadn’t gone to daylight time last night, but instead, I had taken a red-eye flight to somewhere one time zone to the east. For me that could mean flying from San Francisco to Denver. When I landed in Denver I would have reset my watch to one hour later – ugh. But the transition to DST is worse than that. Why? Is it just because I am now in Denver and able to visit friends and see and do things that I cant do back home? That is what I used to think, but that is not the real reason.

I realized that at any given moment there are three kinds of time going on that are relevant to my normal life. There is what I call “clock time”, the time displayed on a clock, there is “solar time”, the place where the sun is in the sky (which is the time that would be displayed on a sundial), and there is “circadian time”, the time that it subjectively feels like to my body.

If I flew from San Francisco to Denver I would experience jetlag because my circadian time would be out of sync with clock time. But it wouldn’t be that bad because the local clock time and solar time would be in sync. For me the sun would rise and set 23 hours after the last time I had seen it rise and set. My body would adapt relatively quickly, taking its cue from the sun, causing my circadian time to come into alignment with both the local solar time and clock time.

The transition from PST to PDT is much worse than that. This is because the morning after the switch both my circadian time and solar time would be out of sync with clock time. The clock would tell me that the sun rose 23 hours after the prior sunrise. But that wouldn’t be true. I would experience (approximately) 24 hours between sunrise on the morning before the switchover and the morning after the time change.

At this time of year in California, the sun rises 1 or 2 minutes earlier each day (because of elliptical orbits and the tilt of the earth’s axis, the change in time of sunrise from one day to the next is not constant.) That means that it will be April 24th before the solar time and the new DST clock time are back in sync again. My body is able to adjust to the daily 1 or 2 minute change in solar time that occurs throughout the year without my even noticing it. My body is able to adjust to travel between time zones because the solar time in the new time zone corresponds to the local clock time, helping me correct my circadian clock. But I have a terrible time with the daylight savings time change because only the clock time has changed – my circadian time and the solar time are both out of sync with what the government tells me the time is now.

 



The US Congress faces yet another debate about raising the debt ceiling, and a group of Representatives are threatening to hold the debt ceiling “hostage” to extract promises of cuts to Social Security and Medicare. Meanwhile, not long ago there was the raging months-long debate about the omnibus spending bill, and some kind of spending bill will need to be debated and voted upon again later this year. On and on. Round and round. Year after year.

I hate the way the conversation around the budget is framed. It's not so much who wants to spend or not spend on this or that which bothers me (though I certainly have opinions), it is the way we have taken to talking about the matter. The way I want the conversation to be framed, by the government, the media, and the people, is simply this: what does the collective population want, and how do we want to pay for it. Because really, at the end of the day, that is what it is all about. This way of thinking paints a much clearer picture about all the nonsense that takes place along the way.

There are those that will claim that that is the oversimplification of the century, so, allow me to explain.

The American people, through their representatives, demand that the Federal government provide a certain set of goods and services. Of course, there are endless compromises as no two people want exactly the same things in exactly the same amounts at exactly the same time. Indeed, often there are things which one group considers absolutely vital, which another considers anathema. Moreover, the “basket” of goods and services provided by the government is so vast and complex that no one citizen could ever get a handle on it all, let alone make thousands of choices between each of them. What we do instead is to elect representatives who claim to know the needs and wants of their constituents. Those representatives in turn hire armies of aids and advisors to help them make choices – choices which may or may not represent what they told their constituents they were going to do.

In the end, through a seemingly endless process of haggling and horse trading, a grand agreement is made, specifying what the Federal government will, or will not, provide. Along the way, experts, such as those at the Office of Budget and Management, will have come up with estimates of what each of these many, many line items might cost. Total that up and you’ve got the list of goods and services that the American people have demanded and an estimate of what that will cost.

At this point it is certainly possible that Congress might look at that dollar figure and say, “yikes!” So, back they go to trim and cut and tweak to get that amount down to something that won't make their constituents grab torches and pitchforks. Eventually the final, final agreement is arrived at, voted on, and passed.

Now the question is simply how do we want to pay for it. Ooops. Did I say, “simply”? Well, it's fairly simple in theory. The Federal Government has a few ways to pay for things. (1) Tax the population and other entities such as businesses. (2) Borrow money by issuing bonds. (3) Print more money. Each of these options have their own pros and cons.

People don’t really like it when the government takes some of their money to pay for stuff, even if those self-same people asked for that stuff. The more money the government takes, the less people like it, until finally, out come those torches and pitchforks again. Meanwhile, changes to taxes in any direction have impacts on the economy which can upset the whole apple cart, effecting how much money the government will receive in the end and how many goods and services people will need from them.

Borrowing money is nice in the short run, because the government gets money to spend but taxpayers aren’t immediately on the hook for it. Of course, borrowing has the problem that sooner or later the money has to be paid back, plus interest, and that becomes an issue for some future budget. And, as usual, there are impacts on the economy when the Federal Government starts issuing more debt. In particular, the government is then competing with other borrowers in the debt market, that raises interest rates, which causes a whole cascade of effects of its own. Indeed, the Federal Reserve does a lot of buying and selling of bonds specifically to manipulate the economy.

Finally, printing money is the easiest thing to do. Voila! Incurring no debt and not raising people’s taxes! What could be better? Well, it isn’t that easy. Printing money devalues the currency which decreases everyone’s buying power. So, it fundamentally has the same effect as raising taxes. Taxing people (and corporations, et als) leaves them with less money to spend. Printing money makes the money that people have worth less, requiring more of it to buy the same things (inflation.) Printing money also has the danger of upsetting foreign countries, unsettling foreign exchange markets, and in the extreme, has the risk of reducing the importance of the US dollar as a major world currency for transactions (which is useful to the USA for a separate set of reasons.)

The government, through various branches and offices, gets to choose how much money it wants to raise by each of these means to pay for the items in the budget. Within each of these methods for funding, there are additional decisions.

Printing money is the simplest. The only decision (after how much) is how fast. Raising money by taking on debt is also comparatively simple in terms of decisions. How many bonds of what payment durations, sold how quickly at what interest rates. Note that it’s not actually simple, its just comparatively simple.

Taxation is the killer, which is unfortunate since it is also the least problematic. How much money is the government going to take from which groups of actors in the economy. Will these payments be a flat amount, or a percentage of earnings, or based on something else. Will certain actors or activities be exempt from taxation. And so on. That is why the IRS tax code runs to thousands of pages.

At the Federal level, there it is. What goods and services do we want the Federal Government to provide, and how do we want to pay for it.

At the state level, the process is pretty much the same, except that states cant print their own money, but they can ask the Federal Government for funding assistance. Also, states have opportunities to tax things that the Federal Government generally doesn’t, such as property, various kinds of licenses, sales, and so forth. Similarly, counties and cities make decisions about goods and services to be provided to their citizens, and how they are going to pay for it, including getting money from their state governments.

So, at its core, the issue really is that simple. What do the people want, and how do they want to pay for it.

Into all of this, politicians have tossed things like the debt ceiling. These are all just ruses to allow groups to renege on their agreements. By invoking these limiting mechanisms, whichever group is wielding the levers of power at the moment gets to use these mechanisms to cut back on the purchase of goods and services that they had previously agreed to as part of compromises made in good faith. “Yes”, they say, “we agreed to spend money on this bridge, and those entitlements, and that tax cut, but, we hit the debt ceiling, so were taking back the money that was allocated to the things that we don’t like.” [Note: this isn't entirely accurate. It's more like the group in power is able to use the threat of not raising the debt ceiling force certain cuts to current spending and to get the other side to pre-conceded cuts in the next budget before those negotiations even begin.]

This, of course, is bullshit. The set of goods and services were negotiated and decided. The cost was estimated. It was understood that the money was going to have to be raised from various sources. Those means were chosen. But now that we are in the process of buying, using, and paying for this stuff, we are shocked to discover that we don’t have enough money to pay for it all.

Rather than having a cudgel like the debt ceiling which allows one party or the other to smash bits of the agreements that they don’t like, we should have a law that says that Congress needs to negotiate the budget in good faith, needs to decide honestly how it will be paid for, needs to accept the future impacts of these decisions (such as increasing the national debt), and provides, in advance, a contingency plan for what happens if we blow the budget for any reason.

I want to hear the conversation framed as; what goods and services do you want? OK. That is going to cost approximately this amount – are you willing to spend that amount? If not, what are you willing to give up? If so, how do you want to get that amount of money? Yes, the devil is in the details, but framing the conversation in a way that is simple, straightforward, and accurate way will make the debates about those details clearer and more rational.

 

My mother with a friend's dog, Harry



Dear Mom,

There are so many things that I want to tell you, but I can’t make it through telling you these things in person. So, I have written them down and asked your caregiver to read this to you.

I wanted to tell you how much I love you. How terribly important you have been to me throughout my life. How much of you is in me. How much you have made me who I am. I am the child of both you and dad, but I wanted to make sure that you know how much I cherish those aspects of myself which came from you. More than anything the kindness and caring, but also your love of knowledge, your breadth of interests, and your sense of humor, subtle and ironic.

Did you know that for me, every dinner was a conversation about nurturing and love? That I had watched the hours of effort you put in and the stress you endured when dad was on his way home amid the rush to get dinner ready on time. His entrance demanding, “when’s dinner!” was made all the more painful because I had been watching you working. I was sitting in the kitchen, watching TV, but you were at the stove just beyond the TV, so I was watching you too. This was a conversation in which dad did not participate, spoken in a language which he did not appear to understand. He sat down at the dinner table, ate, and then left. The love and nurturing were between us. Of course, I didn’t understand this ‘till many years later. It was only in my late 20’s that I began to figure this out, and later still that I felt I understood how food represented to me love, caring, and compassion.

For my whole life I have never understood the word “milquetoast” (a timid or feeble person), because to me, “milk toast” was one of the things that you gave to someone you cared about when they were sick. Milk toast, bananas, apple sauce, and love. So too I find the term “mamas’ boy” absurd, defined as “a boy or man who is excessively influenced by or attached to his mother.” How could being attached to or influenced by one’s mother ever be excessive.

I remember tiny little things from growing up. I remember you at the kitchen sink, doing dishes, and then hitting Spot on the back with a fork when he bit Seymour for stealing his food. I remember you closing the window at the bottom of the stairs at the house on North Street, telling me that if cold air blew over your chest you would get a cold. I remember that you could never get a blueberry pie to set up, so you called it “blueberry pie soup.” I remember lying on the couch in the living room at North Street after coming home from school with what turned out to be a fractured arm, and the concerned look on your face when I slept through that whole day.

I remember losing my shoe in mud on a beach in Canada, and you trying to wash me off in water that turned out to be electric due to a downed power cable. I remember stepping into an elevator, thinking that you were behind me, only to discover when the doors had closed that I was alone.

I remember gerbils in terrariums in the room between the kitchen and the garage. I remember hatching chickens in an incubator in the kitchen. I remember taking your wristwatch apart, but not being able to put it back together. You didn’t scold me. I remember you driving me and some other kids to day-camp. I remember making paintings by blowing paint over sheets of paper with straws.

I remember you letting me stay home from school when I was “sick”, even though I was clearly faking it. I remember going with you to the Cambridge Center for Adult Education – you took classes in paper sculpture, and flower arranging, and stained glass, and jewelry making, and mosaics. I remember talking you into buying things for me: a block of balsa wood at Ken-Kay-Krafts, and endless bottles of Testor’s paints for model cars and planes; cactus and other plants that ultimately you had to take care of; raspberry-lime rickeys from Brigham’s. I remember you buying me marbles and maple syrup candy somewhere – maybe it was the Salem Witch House?

I remember watching the first moon landing from your and dad’s bed. And Thalassa Cruso’s Making Things Grow, and The Galloping Gourmet too. I remember watching endless hours of cartoons in the kitchen while you made dinner at night, or breakfast on Sunday morning.

I remember a piece of cardboard with coins taped onto it which you used to teach us about money. I remember you typing my school papers for me because I had left my assignment till the last minute and didn’t have time to type it myself. I remember dad complaining that you walked too slowly and having to choose between keeping up with him or hanging back to walk with you.

I remember calling you from the bed in my hospital room after my heart-attack - asking you to come out to be with me, even though I knew you hated travel.

I remember shopping trips to the kitchen supply store on Newbury Street, and Mass Hardware, and I remember hiding in the middle of the round racks of clothing at Jordan Marsh while you shopped. I remember your driving what seemed at the time to be a ridiculous distance to Waltham to buy bread, or to get pizza at the really good place that was worth the long drive.

I remember the vegetable garden on the far side of the garage at North Street. I remember somewhere getting the plant growth hormone called gibberellic acid. I wanted to see what would happen if I injected it into plants instead of putting it on the leaves as you were supposed to do. For some reason you let me try it. I remember making Halloween costumes from sheets, and carving pumpkins – wondering if some day my pumpkins would come out as well as yours (they never have.)

I remember you bathing me in the bathtub in the new bathroom at North Street after the renovation, and I remember the old, long bathroom from before the renovation. I feel like I remember the changing table in that old bathroom, but I am sure that must be a false memory. Was the room light yellow? Was there a window at the end of the room? Were there sheer curtains with embroidered flowers on them? That is how I remember it, but it is likely to be something part remembered, and part imagined.

I have travelled an unorthodox path through my life; taking years to get through college, not marrying nor having children, leaving my career at its peak to go off and have fun. But I hope that I have made you proud. I hope that I didn’t cause you too much grief along the way.

You said to me recently that you don’t want to be an “inconvenience” or a “bother”. You took care of me my entire life. That is something that I can never repay, nor do I want to repay it. This is not about reciprocity. This is about love. There is no inconvenience. There is no bother. My only wish is that you be as comfortable as possible.

I want you to live forever, but no one does, and “death comes to us all.” I want you to know that I understand. That you did everything you were supposed to do, and you did it so well. I understand that you have to leave.

I want you to know that you should feel completely free stay as long as you want, but also to leave whenever you need to, whenever you want to. I will cry for a long time, but that too is inevitable – that is the inevitable consequence of your being such a great mother, such a great person, and such a deeply caring caregiver to me all of my life. You have done everything necessary to make me the man that I am today, able to stand on my own, able to care for you now, and able to survive after you are gone. Please stay, if you want to stay, but don’t stay because of me. Go when you are ready. There is nothing you need to worry about. Erica and I will take care of everything.

And I will always love you.


 Elise Cunin Sigal, my beloved mother

1933-2022


Elise C. Sigal, 89, of Oakland, CA and formerly of Newton, MA, passed away peacefully on Monday, October 30, 2022, surrounded by her children. For 63 years the beloved wife of the late Marlowe A. Sigal. Devoted mother of Erica Sigal and Andrew Sigal.


Born in Bath, PA, and raised in Allentown, PA, Elise spent most of her adult life in Boston and Newton, MA, before moving to Oakland, CA, to be close to her children. She graduated from Brandeis University with a degree in music history.


Elise was an avid gardener; she turned her especial love of trees into a volunteer position at Harvard’s Arnold Arboretum, assisting in a variety of roles for over two decades, ultimately running their plant information phone line. She was an active participant in the Newton community. She worked with the Newton Creative Arts Committee where she served for a time as Chairperson. 


She shared her late husband’s passion for early music, antiques, and historic homes, frequently attending performances and museums. Elise also hosted visits to her home by musicians and early music organizations. 


She is missed by all those whose lives she touched.


In lieu of flowers, the family asks that remembrances be made to the Cunin/Sigal Research Award Endowment at the Arnold Arboretum, Boston, MA or the Elise C. Sigal Musical Education Fund at the Sigal Music Museum, Greenville, SC.

In the nearby city of Albany, California, there is an old landfill which is now generally known as the “Albany Bulb”, or just "The Bulb." Over the years it has been a landfill, a dump, an encampment for homeless residents, and a park, as well as being a canvas for some extraordinary art (more at AlbanyBulb.org)

In October 2019 I was walking one of my favorite loops at the Bulb. On the return leg, I saw writing spray painted along the edge of the paved path. I read it as I walked. I was stunned. I was touched. In fact, I was so gobsmacked that I had gone on at least another hundred feet before I realized that I had to go back to the beginning to record this message before it disappeared, as is the fate of so much of the ephemeral art created at there.



I have transcribed the text here, primarily so that search engines will index it, should anyone be looking for it. I have attempted to retain case, punctuation, and spelling, even when it is technically incorrect. This is, after all, a cry in the wilderness, not an essay for a picky college English teacher, and I feel that hand of the author reveals something of what they are trying to express to the world.
OK, so, one time you, yes you and I got high here. You told me that every thing was going to be OK. For the most PART it has been. But you died 3 weeks AGO AND I MISS YOU. Hope youre doing well. Call me if you need anything, though you left, im still here… Anyways. i have to go now. Don’t forget about me Please… good night, sweet dreams
I have no idea who the author was. I don’t know if this was created by a writer, or a poet, or an artist who regularly paints messages in public places, or, as I suspect, if they are the words of someone who truly had recently lost an important person in their life.

In any case, for me it evokes sadness, but also either bewilderment, or naivete, or extraordinary faith. The author is speaking to their lost companion as though they were right there, as though their friend can hear them and can even respond. Either this person is naïve (in a very touching way) as to what death really is, or has such deep faith in an afterlife that they truly believe their friend is right there, listening, and might even need something from them, or, as I believe is most likely, they are so lost that they cannot accept the fact that their friend is gone. I wonder about their fear that their friend might forget them – perhaps it is a reflection of their own fear that they may forget the one that is gone.

This video still makes me sad when I watch it, even years later. I hope that for this anonymous writer, everything has been OK.

Meow, meow, no more meow rights, meow?

That's right, Henrietta, no more meow rights, meow.


(with apologies to Fred Rogers)
Ribbon Cutting

In mid-2019 the Carolina Music Museum was renamed as the Sigal Music Museum in honor of my father, and in recognition of the gift of his collection to the museum. We have been trying to have a renaming ceremony ever since, but COVID has forced it to be delayed several times. Finally, on April 22, 2022, we were able to have the event, at which I was honored to speak and cut the ribbon for the opening. [For more on the Sigal Music Museum, see my prior post about it The Uncarved Block: the Sigal Music Museum]

I have been asked for a copy of my remarks, which I present here.

----------------------------------------------------------------------------
Good evening.

Thank you all for coming. I can’t tell you how excited, happy, and proud I am to be here today.

I suspect that only a few of you know the story of how my father’s collection made its way from Boston to its beautiful new home here in Greenville.

My father had been collecting musical instruments for decades. From time to time he would consider the question of what he wanted to have happen to them after he died – and then he wouldn’t do anything about it. Occasionally someone from one institution or another would approach him about the collection, but for a variety of reasons it never worked out.

And then he had his heart attack. When I heard the news, I called his hospital room from my home in Oakland, California. True to form, he said it was no big deal and he would be back at work by Wednesday – this was on a Monday. Well, I was glad to hear that!!! But… I decided to call his doctor just to be sure. His doctor said, “Ohhhh, no. No indeed. Your father is an 88-year-old man who just had a massive heart attack. You want to get out here right now.” So, I got on the next flight to Boston.

I spent a lot of time with dad at the hospital, talking about a lot of things – including, of course, what he wanted done with the collection. He said he would want it to stay together as much as possible, though he acknowledged that with a collection of its size, that could be a tall order. He recited a list of institutions where he might like to see the instruments go. He even talked about possibly starting his own museum - apparently, he told me, there was a crazy guy in South Carolina who had done just that!

Unfortunately, believing you are superman can only take you so far, and within about a week he was in a coma, and then died. Perhaps that is a lesson for all of us that think we are immortal.

In his will he left the collection to my mother, with a note asking her to dispose of it in accordance with his wishes. That became one of the main tasks that my mother, my sister Erica, and I, had on our plates. We spoke with most of the institutions he had previously named. Some of them wanted certain parts of the collection but not others. Some wanted the collection but with unacceptable provisos. And so on. The search for where the collection should go stretched out to months upon months.

Along the way, our good friend Darcy Kuronen connected me with Tom Strange, that crazy guy in South Carolina, and his museum. The Carolina Music Museum was very new; with no track record, but with the flexibility to make the decision to take the collection. And they wanted all of it! Every instrument, every book, every email my dad had sent or received, every everything. And in recognition, they wanted to rename the museum in his honor.

It sounded perfect, but it was still a difficult decision that we agonized over. Could they pull it off? Did it make sense for the collection to go somewhere with which my father had had no affiliation? How crazy was this [Tom] Strange guy? There were a couple of other good options, but in the end, this museum, this city, and these people won us over. And it was a great decision.

It is wonderful to see these pieces as they deserve to be seen. Not tucked into every corner of our former home. Now they will be cared for in perpetuity in an appropriate setting.

Finally, these instruments will be available for scholars, novices, or those that are simply curious to examine, study, or just to enjoy. Students can now come to see and to learn how these instruments contributed to the origins of Western musical traditions. And perhaps they may inspire young people to develop the kind of passion that my father, my mother, Tom, and everyone else here today all share.

My mother has since said that the gift to this museum has worked out better than she could possibly have imagined. I couldn’t agree more. My only regret is that my father didn’t make this move himself, so that he could see the care and appreciation that everyone at the Carolina Music Museum – now the Sigal Music Museum - has lavished on The Marlowe A. Sigal Collection.

Thank you.
OK, I am confused. 

I am not a lawyer, but I thought I understood the law in this case.

As of February 9, 2021 (last Tuesday), there was there was an undecided question about an ambiguity in impeachment law. The Senate was asked to decide if the Constitution allows for a former President, who has been impeached by the House, to be tried in the Senate after leaving office. By a vote of 56 to 44, the Senate voted that yes, the Constitution grants it the jurisdiction to try a President after they have left office. Decision made; law decided. This was then the law of the land, and the Senate proceeded with the trial.

This afternoon, on February 13, 2021 (Saturday), Mitch McConnell spoke before the Senate saying that: (A) He was certain that former President t**** had incited the mob to insurrection. But (B) he did not believe that the Constitution allows for trying a former President. Thus, he said, he voted to acquit t**** because the trial should not have occurred.

But wait. Hang on here. The US legislature decided a point of law, thus setting the law unless and until new law overrode it, or the courts struck it down. Then a jury (who also happened to be the Senate), heard the case presented by prosecutors and defense. That jury was supposed to hand down a verdict based on whether or not they believed that the defendant was innocent or guilty as charged. The jury was not being asked whether or not the law was valid.

McConnell, and other Senators, decided to acquit t****, even though they felt he was guilty, on the basis that they didn’t agree with the law. Isn't that the same as if a jury, hearing a case against a doctor that performed an abortion, found the doctor guilty of murder because they didn’t agree with how Roe v. Wade was decided? Or wouldn't it be the same as if a judge handed down a sentence on a person found guilty of a hate crime, using the criteria for a non-hate crime, because that particular judge didn’t agree with hate crime legislation?

Juries don’t get to decide the law. They only get to decide if the law was broken. Judges only get to decide the law if it is ambiguous. Otherwise they only get to decide what the sentence should be. It doesn’t matter what they think of the law. Right?

So, am I wrong? If McConnell believed that t**** incited the insurrection, then he should have been compelled to find him guilty. Other Senators announced ahead of time that they would be acquitting t**** because they didn’t agree that he could be tried. But as jurors, it was not within their purview to make such a decision. Didn’t they invalidate themselves as jurors by refusing to give their honest opinion on the facts of the charges, and vote based solely on those facts?

I’m confused.

God was clearly such a geek.

He got all the nerdy stuff working great – atoms, molecules, sub-atomic particles, photons, etc. He perfectly balanced all the different forces – gravitation, weak force, strong force, electromagnetism… really, really, tough problems in universe creation! And we know that was what really interested him, because he did all that stuff first and spent nearly 2/3’s of his time on it.

Then he finally got around to the yucky, squishy stuff – animals. Even there he took the techie approach, setting up a bunch of single celled animals with this really cool DNA stuff and a set of rules for reproducing and mutating. Then he let the machine do all the real work. When that was done he took credit for fashioning all the beasts that walketh, swimmeth, or flyeth, which I suppose technically he did do, but, not in so many words.

Finally he gets around to making man and creates him in his own image. What a self-important dweeb. But it turns out that he completely forgot that one guy all alone in the Garden of Eden is going to get really bored, which can only lead to trouble. So what does he do? A total hack. He takes a rib from man and creates woman. That is a kludge if ever I saw one.

Then, like any nerd that has spent the past 6 days head down working on a project, living on Mountain Dew and Doritos with hardly any sleep, on the 7th day he totally crashes. Like out cold for 24 hours. Not even a shower first, just boom, into bed still covered with Cheetos dust.

To top it all off, he didn’t get around to writing any documentation for eons, but when he did finally get it done it sucked. It needed all kinds of updates by end users (most of whom were really just guessing). Stupid books like Humans Made Easy, and Humans for Dummies, ended up being best-sellers because the original document set was borderline useless. In the end all the tech support had to be done by users groups.

Geesh! What a geek!

Introduction

Recently there has been a swirl of news related to the sudden, meteoric rise in the price of GameStop stock (as well as that of AMC and others). I have heard a lot of misunderstandings related to what occurred. Friends, family members, strangers, and people in the media, seem to harbor a variety of errors in their understanding of stock markets, “short selling”, hedge funds, and the like.


I intended to write a brief primer on some of these things in the hopes of making it clearer. However, this appears to have turned into a rather lengthy discourse on variety of subjects that the GameStop trading issue touches on. Nonetheless, I hope some will find this useful.


Note: I am not securities lawyer, nor a lawyer of any kind. I am not a broker, advisor, nor investment manager. I have no role in any investment business of any kind, other than as an individual investor who has been managing his own portfolio for 40 years. None of the information presented below is intended to be construed as investment advice. When making investment decisions, always seek advice from a qualified professional. None of the examples I provide below are intended to reflect any real-world event. I have used Apple Computer as an example to explain various transactions. This should not be construed as an endorsement of Apple, its products, or its stock. Nor was Apple Computer involved in the GameStop events in any way.


Liquidity

We refer to some assets as “liquid” and others as being “illiquid”.


For example, as of this writing, the stock of Apple Corporation is considered to be “highly liquid”. Thousands of people buy and sell millions of shares of Apple Corporation (AAPL) each day. As of this writing, the average daily volume of AAPL is almost 109 million shares! At today’s closing price of about $140/share, almost $15 billion (with a “b”) worth of Apple stock changes hands on an average day. If you wish to either by or sell shares in Apple, it will be very easy for you to do and will take just fractions of a second. There will always be someone out there that is happy to buy AAPL shares from you or sell them to you. The stock might not be trading at a price that you like, but whether you can acquire or dispose of it is not in question.


Other assets are “illiquid”. This includes all sorts of collectibles, for example “Beany Babies.” If you want to buy or sell a particular Beanie Baby, you could go on eBay and either buy or sell it there. However, it could take an unknown amount of time to either find someone selling the Beanie Baby you want or find someone willing to buy your Beanie Baby. The price to either buy or sell could vary widely depending on who the other party is, what the condition of this particular beanie baby is (which is never an issue with corporate shares), how badly you want to buy/sell the Beanie Baby, and how much the other party feels it is worth. Unlike Apple stock, there are not millions of Beanie Babies changing hands every day in a well-organized market.


Another common example is an asset like a house, which is generally considered to be “highly illiquid”. Selling a house (in the US) normally involves finding and hiring a realtor, advertising the house, making it available for inspection by interested parties, and potentially waiting while a prospective buyer arranges for a loan from a bank, has the house inspected, and so forth. Depending upon the house, the location, and the price, in the US this could take as little as a month, but it could take years or even decades. Buying a house is similarly complex and time consuming.


Why do we care about liquidity?

Well, the more liquid market is, the easier it is for individuals to buy and sell in that market. If you’re an investor, you probably like securities and commodities markets due to the liquidity. If you have money to invest, you “go to the market” and purchase whatever investments you like. If you no longer want a given investment, you go back to the market and sell it. Buying and selling are normally almost instantaneous for commonly traded stocks. [Side note: there are “thinly traded” stocks in which there are relatively few trades per day, but even in this case, there will usually be thousands of shares changing hands on an ordinary day.]


You might like investing in art, or collectibles, or real estate; but in doing so you must understand that you may or may not be able to get into or out of an investment when you want to, or you may have to take a significant loss in order to get out of such an investment in a hurry. Because of illiquidity, you’re probably not going to be willing to invest unless you’re quite sure that there are significant gains to be made.


Buying “on margin”

Stated simply, buying stock on margin is purchasing stock using money that a broker lends to you for that purpose.


Imagine that you think Apple stock is going to do very well in the future. So, you use the money that you have for investing to buy shares in Apple. This is a very normal transaction that happens every day. If the stock goes up in value, great, you make money. If it goes down, you lose money. Very straight forward.


Now let’s say that you really, really think that Apple is going to do super well in the future. You might wish that you could buy even more shares than you can afford. You might be able to borrow money from friends, relatives, or a bank, and use that to buy the stock. Alternatively, you could borrow the money from a broker to buy more shares, “on margin”. If you’re right and Apple goes up, then you will have made even more money than had you simply purchasing the stock outright, because you own more shares than you were otherwise able to afford. On the other hand, if you’re wrong and Apple goes down, you will own more shares that have lost value. You will have lost more money than if you hadn’t borrowed to buy those extra shares. Also, no matter what happens, you still owe the broker the money that you borrowed. Sooner or later you’re going to have to pay up. Buying shares on margin multiplies the amount you could gain, and the amount you could lose. This is a form of “leveraged investing.”


If you ask friends or family to lend you money, they might just give it to you (sweet), but if you ask the broker to buy you Apple on margin, they are going to want collateral on the deal. In this case, the collateral is simply the stock itself. But stocks go up and they go down, and if your investment goes down, then you might no longer have sufficient collateral to cover the loan.


Let say you bought $10,000 of AAPL on margin. If your stock were to lose $1000, then there would be only $9000 worth of Apple in the account. Now your $10,000 loan is collateralized by just $9000 worth of stock. To make sure that there is always enough collateral in the account to cover your loan, brokers have what’s called an “margin requirement”. This is an amount of money that they insist you have in your account so that there is enough collateral to cover the loan even if the stock goes down in value. For example, let’s say the margin requirement is 20%. To buy that $10,000 worth of Apple, the broker is going to insist that there is at least $2000 in your account (in addition to the $10,000 worth stock.) If Apple stock goes up, good for you. Everything is just peachy. However, if Apple were to decline, the total value of the account will go down. If you then skip town, the broker could be left holding the bag, but, because of the margin requirement, they can still make themselves whole by selling the stock and making up any loss from the cash you provided as collateral.


Under normal circumstances that is not the conclusion anyone wants. You want to keep the investment, and the broker does too. But there is no longer enough value in the account to cover the 20% margin requirement. The broker wants to maintain the account with total assets worth at least the value of original investment plus a 20% buffer. With the stock worth less than its original cost, you are going to have to kitty up some more dough.


The broker is going to make what is called an “margin call”. Basically, they’re going to call you up and say, “hey, you gotta put more money in the account.” If you don’t, they will sell enough of your shares of Apple to bring up the amount of cash in the account, and lower the number of shares, thus covering the exposure. This is part of the margin loan deal. The broker can sell your shares if they feel they need to. [Note that the margin amount in your account does not need to be in cash, it could be shares of some other stock. However, if that is the case, should that other stock go down, that too might trigger a margin call if there is then not enough total value in the account to cover the margin requirement.]


Finally, the broker didn’t just lend you that money out of the goodness of their heart; they are going to charge you interest on the amount loaned for the entire period that you borrowed it. So, your chosen stock needs to go up by at least enough to cover the interest on the loan, and you want it to do so pronto.


Going “long”

When someone owns shares of a stock (or some other investments) we will often say that they are “long” that stock, for example, “I am long Apple.” Similarly, if someone owns a lot of shares in different high-tech stocks, we might say that they are, “long high-tech”.


For the purposes of this discussion, “long” is really only interesting in that it is the opposite of “short”.


“Short” Selling

Short selling (or “selling short”, “going short”, or “shorting”) is the crux of what was going on with GameStop recently.


Simply stated, a “short” is selling something that you don’t own – in this case, shares of a stock. A broker will lend you the stock so that you can sell it. You might want to do this if you believe that the stock is going to go down in value over time, just as you would go long if you thought the stock was going up. You borrow the stock today at its current market value and sell it at the going price. Later you buy that stock back at the then current market price and return it to the broker. Assuming the stock did go down over that period, you keep the difference between what the stock was worth when you borrowed and sold it, and what it was worth when you repurchased and returned it. Of course, if the stock went up instead, you’re going to have to rebuy it at a higher price than when you borrowed it, so you lose the difference.


Note, that this is effectively borrowing from the broker, and so it is a transaction on margin. You will have to pay interest on the transaction, there will be a margin requirement, and you may be subject to margin calls. The only difference is that in this case you would face a margin call if the stock went up (making your short position worth less) rather than getting a margin call when the value of the security goes down, as is the case in a normal purchase on margin.


Limited gains but unlimited losses are possible

One important thing to be aware of with short selling is that there is a limit to how much profit you can make, but your potential loss is theoretically limitless.


For example, let’s say you buy (long) a stock at $20 a share. The most you can lose is $20 a share if it were to go to zero. On the other hand, it could be the next Google and just rise and rise and rise making you more and more profit. However, if you sell that same stock short at $20 a share, the most you can possibly make is $20 - if the business goes bust. However, if you were dead wrong, and the stock shoots up, you are losing money all the way up. In practice, stocks don’t go from $20-$1 million over night, so practically speaking, you can’t actually lose an infinite amount of money, but depending upon how many shares you have shorted, you can lose a hell of a lot more than you can gain, and theoretically your potential loss is unlimited. Sophisticated investors are supposed to understand this risk.


Is short selling legal, and why does it exist?

Short selling is entirely legal. It is a common practice. I have done it myself.


Why is there this thing called short selling, and why is it legal? Basically, it helps increase liquidity in the market overall. The more buying and selling of stocks, the greater the market liquidity. By allowing people to borrow stock that they don’t own and then sell it, you have increased the number of transactions, and the number of people buying and selling stock. Since liquidity is good, the availability of short transactions is good for the market.


Also, prohibiting short selling would be almost impossible. The SEC could prohibit brokers from lending shares to investors, but it would be very difficult to prohibit individuals (or firms that aren’t brokers) from lending stock to each other and then selling it.


We should also note that it is usually wealthy individuals who do things like this. Not because poor people are actively excluded from these markets, but because poor people don’t normally have the money available make such risky investments - if they can afford to invest at all. They might also have poor credit, in which case the broker would not be willing to lend to them for any margin activity, be it long or short.


Hedging

Hedging is basically “hedging your bets”. Hedges are simply ways of insuring your portfolio. You buy a stock or other investment that you expect to go up, and then you also by something else that will go up if that first thing goes down – i.e., you buy two investments that move opposite to each other. Most of this requires sophisticated analyses. Hedging in a portfolio is a way to reduce risk at the cost of purchasing the hedge. Though it reduces the possible total gain of the portfolio, it reduces the amount of money that can be lost.


Effectively, hedging, it is a fancy kind of insurance. People buy insurance all the time to hedge various risks. You use your life savings to buy a house. That is a major “investment” for you. But all kinds of things could go wrong that would wipe you out: fire, flood, Godzilla, etc. So, you buy insurance to cover your loss if something happens to your house. This is the same thing as buying a hedge on your portfolio. If your investment goes down, your hedge goes up, reducing or eliminating the loss. Hedges cost money (and hence lower your return in the case where things go well), but they reduce risk. Making money with as little risk as possible is the name of the game.


Hedge funds

Originally hedge funds were basically managed portfolios in which the hedge fund manager and his or her team used all kinds of fancy esoteric methods to make money regardless of whether the economy went up or down, the stock market went up or down, etc. They promised to use hedging to make money with as little risk as possible. Some hedges sound crazy (to me), but apparently the math works out (usually.)


Over time, the hedge fund world changed. A lot of funds gave up on the idea of low risk, and instead used their sophisticated investing techniques to take big risks in the hopes of extraordinary gains. Bernie Madoff’s fund (which turned out to be a hoax) was pretending to be just that. It was actually a Ponzi scheme, but it seemed to investors at the time as though Madoff was successfully taking big risks and returning outstanding results. There are still hedge funds whose business is making money with as little risk as possible. But there are also now funds which call themselves "hedge funds", courting investors by chasing extraordinary gains.


Most hedge funds specialize in some particular strategy. One of the original types of hedge funds is referred to as “long-short equity”. Such a fund buys one investment (“going long”), and shorts some other investment, so that no matter what happens they make at least a little bit of money on the deal, and if they did it right, the risk was negligible.


However, nothing is ever certain. You can never eliminate all risk and still make any returns. During the great recession of 2007-2008, markets were roiled by a “once in a century” shakeup and a tremendous (temporary) loss of liquidity. Facing margin calls, hedge funds (and others) were forced to get out of positions at a time when no one was buying, and so had to sell at “pennies on the dollar.” During that period, long/short hedge funds lost prodigious amounts of money, in spite of having their positions carefully hedged. They hedged against a normal market environment. They did not hedge against markets collapsing as they did in 2007. In a similar way, funds that were recently shorting GameStop were not hedged against the possibility of the stock shooting up with no one willing to sell them the stock they needed to close out their short positions.


Another type of hedge fund is a “distressed” fund. These funds look for opportunities in businesses, real estate, or other investments which are in trouble - investments which are “distressed.” They then attempt to make money either by short selling the investment or buying the investment and attempting to increase its value (possibly by breaking it up and selling the parts ala “corporate raiders”), or by bringing in new management for the business, or by putting together a group of investors that will buy the business and attempt to turn it around, or other things. [Side note: the 2007-2008 recession created lots of opportunities for distressed investing. However, there was so little liquidity in the market that many funds weren’t able to take advantage of these opportunities.]


There are lots of other kinds of hedge funds, but these are the two types that are interesting for our story.


Are hedge funds only for the rich?

A complaint that people tend to have about hedge funds is that they are only for the rich. That the game is rigged for the wealthy, and the little guy can never get ahead. It is true that small investors generally cannot invest in a hedge fund, but not for the reasons most people think. It’s not some rich guy club that is out to screw the poor and won’t let less affluent people in.


There are two main reasons why only wealthy individuals can invest in hedge funds.


First, these are odd, esoteric, investments with specialized risks. So, hedge funds will only accept investments from experienced investors. This is to keep novices from investing in products where they might not understand the risks that they are taking. “Shares” in a hedge fund are private sales to sophisticated investors and are largely unregulated. People who cannot afford to lose large amounts of money should not be in this arena, even if it can offer great rewards. So, hedge funds will not accept investments from inexperienced investors who cannot afford big losses if things go wrong.


Second, these sophisticated mechanisms often require long timelines to execute. If you’re going to buy real estate in Tokyo and hedge it against Argentinian cattle (hyperbolic example), that’s a very illiquid set of trades. For this reason, hedge funds often limit the timing or frequency with which you can extract your money. They may allow investors to withdraw money only once per year, or only on one particular day in the year, or even less often than that. So, they want to make sure that the partners (their investors) have sufficient personal funds to put in huge amounts of money, and not take it out for a very long time. Having lots of small investments from people with limited net worth, that might want to remove their money at any time, would make it impossible for a hedge fund to successfully execute its strategies.


Fiduciary duty

Another thing that’s important to understand is fiduciary duty. “A fiduciary duty is an obligation to act in the best interest of another party.” (definitions.uslegal.com) Hedge fund managers, as well as other investment advisors, are required to act in their clients' interest. It is illegal for them to do things which are not expected to benefit the client. So, when people point at hedge fund managers and accuse them of being greedy, their actions aren’t entirely driven by greed. If they see a market opportunity that fits their mission, they are obligated to invest if such an investment is in the best interest of the hedge fund and therefore its clients. If they see an investment which is outside their stated mission, or is not in the fund’s best interests, then they are legally prohibited from making that investment. It is said that they have a “fiduciary duty” to their clients (which doesn’t mean that they aren’t greedy, just that in this case they are not acting on behalf of their own greed.)


Holding stock in street name

Investors virtually never take possession of the stock certificates for the shares that they own. Actually having the physical pieces of paper is kind of a pain in the ass. You’ve got to get them from your broker, store them safely, and then get them back to your broker when you want to sell. At the end of the day, you want to participate in the profits of Apple Corporation, you don’t care about that piece of paper.


So, under normal circumstances brokerages hold their client’s stocks for them “in street name”. This means that if you put in order for AAPL, the brokerage buys the shares on your behalf and just makes a note that they are yours. It’s pretty much all electronic anyway these days. You will get such privileges as receiving dividends (if any) and voting those shares at a shareholders meeting, but underneath the covers it’s all done with smoke and mirrors.


One aspect of the GameStop fiasco is that many of the people involved didn’t understand how it was that brokers could just lend somebody’s stock to someone else. Basically, the stock was held in “street name”, not owned by the individual investor. So, the broker could lend it to someone else without so much as a by-your-leave from the investor.


Just as with the EULA’s (End User License Agreements) that people sign all the time without reading them, this information is spelled out in the contracts people sign with their brokers (and probably don't read). Most people never need to know this stuff - it hardly ever matters. But these facts managed to ruffle a lot of feathers of people who didn’t realize them during this GameStop business.


So, what the hell happened with GameStop?

Well, some managers at hedge funds, as well as sophisticated individual investors, saw GameStop as a distressed business, and therefore an opportunity. These investors saw in GameStop what they had seen in Blockbuster Video years before. People used to go to Blockbuster to rent videotapes or DVDs. But along came Netflix, first allowing customers to rent and return movies through the mail, and then online. Then Walmart jumped into the act, and Amazon, and others. Blockbuster was late to the online game so didn’t survive.


GameStop is a bricks and mortar store that sells video games. But nowadays most gamers play online or buy and download games over the Internet. GameStop’s business is drying up. When COVID-19 came along, people stopped leaving their homes at all, let alone going to a store to get something that they could get more easily, safely, and conveniently online.


GameStop’s business is a bad business to be in right now. They are selling buggy whips in the age of the automobile. Investors observed this, predicted its stock would go down (eventually to zero), and so sold the stock short. But, surprise, surprise, a group of young people figured out a way to outsmart the short sellers. They realize that there were so many short-sellers that if they bought enough stock to drive the price up just a little bit, margin calls would force covering of shorts making the stock price go up further, which would force more margin calls, causing it to spiral upwards, costing the short-sellers vast amounts of money. It is uncommon that a stock is so highly oversold, with so much leverage, that a small amount of buying would generate such a large and rapid reaction in the market. Well, now we know. Ooops.


Were laws broken?

As noted, I am not a securities lawyer. Indeed, I’m not a lawyer of any kind. But I am certain that the hedge funds and brokers (including Robin Hood), are run amok with lawyers. These entities might very well get as close to the line of legality as they possibly can, but their lawyers should make damn sure that they don’t step over it, especially once the eyes of the world were focused on them, as they were once GameStop blew up in the news. Thus, I would be surprised if any of these entities broke any laws or regulations.


On the other hand, the individual investors trading in GameStop, not having the benefit of staffs of lawyers, may have broken laws, intentionally, by accident, or due to a lack of understanding of how the laws are applied. Of that I cannot say.


Should any laws or regulations be changed because of these events?

Honestly, I don’t know. But I suspect not. The hedge funds that lost money knew what they were doing. They are highly sophisticated investors. They knew the risks they were taking, even though in this case it turns out that they underestimated those risks. It’s hard to blame them though, because nothing quite like this ever happened before, so these events weren’t in their models.


The investors in the hedge funds, and other investors that got hurt in the short selling, should have been sophisticated investors. Brokerage houses should have been making sure that novice investors weren’t buying shorts.


Those investors from the Reddit board observed a market opportunity and took it. They were not working based on secret insider information. They did not break into systems, or hack something, or steal money. Everything they did, they did out loud, in the open, on public bulletin boards, using publicly available information. Clever. Not illegal.


Should laws and regulations be changed to better protect innocent investors, or protect the proper operations of the markets as a whole? Again, I don’t know, but I suspect that no changes are required. Sophisticated investors who practice these strategies are now warned that there are really clever people out there that might very well exploit any error they make. These sophisticated investors should carefully review their investment practices to make sure that there are no other such errors in their portfolios. But that doesn’t mean we need to create a new law requiring them to do so.


Conclusion

Hopefully, this post will help people understand what happened, what these investment mechanisms are, why they exist, and how a group of individual investors on Reddit managed to shoot gaping holes in the portfolios of a group of hedge funds. I hope this will help people understand that, though we do have terrible wealth disparity in this country, this particular event does not expose a world of nefarious wealthy investors taking advantage of their wealth to collude with other greedy, rich, old men (and women.)


Wealth disparity is a crushing problem which is destroying the fabric of our society and our economy. But it should be cured by increasing taxes on people like me, and breaking down systemic racism and the barriers that limit what people of lesser means can achieve in their lives. Opportunities should be increased. School systems should be improved. College should be made affordable. And so on. Ending a handful of investment mechanisms such as short selling and hedging won’t solve any of these problems.