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The Poetry of Finance

by Travis Pantin
Mon, 21 Jan 2008 at 8:00 PM

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An anonymous finance blogger who goes by the name "Macro Man" recently penned this finance-themed sonnet:

Shall I compare thee to a levered trade?
Thou art more lovely and more temperate.
Rough winds do shake the market call you made;
Perhaps thou erred in selling options of short date.
Sometimes too hot the market darling shines,
And oft the ertswhile star is dimmed;
And every trade from time to time declines,
Alas! The over-levered ones are trimmed;
Just as a short-term extreme is made,
And soon a tidy sum thou ow'st;
Forsooth, thou start to feel afraid,
In real time, thy loss it grow'st and grow'st:
The levered trade, in time of volatility?
A dang'rous game, as you can finally see.

During periods of irrational exuberance, he writes, financial TV shows multiply. But right after they get their start, the market almost always tanks.

"The psychology of this is pretty straight forward," Mr. Ritholtz writes. During a bull run, "People become emboldened to take chances, swing for the fences. They lose all risk aversion. Launch a 3rd (or 4th) business news channel? Why not! Its a bull market!"

The evidence backs up Mr. Ritholtz's arguments: The TV shows "The $treet" and "Bull" made their debut in 2000, and the real estate show "Hot Properties" began in fall 2005.

According to Mr. Ritholtz, the lesson to be learned is that during extreme bull and bear markets, "many people lose the ability to make rational risk/reward analyses." In other words, when new business channels start popping up everywhere, buy gold and run for the hills.

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