Addiction - Choice?

Addiction is everywhere.  While psychological dependencies of the mind are primarily associated with physical dependencies of substances such as drugs and alcohol, they also include uncontrollable behaviors relating to gambling, self-mutilation, overeating, cosmetic surgery, the internet, and just about anything else.  What I want to focus on is addiction as it relates to drugs and alcohol.

A Harvard psychologist, Gene Heyman, has written a book that is causing quite a stir in the world of addiction treatment.  In , “Addiction: A Disorder of Choice”, Heyman argues that contrary to conventional wisdom, addiction is not a disease, but rather a lack of individual self-control, an inability to take a long term perspective.  Not a disease, but a choice.  Wow! If this is true, it should throw a large wrench into the workings of a whole host of treatment programs and health-care policies.

Science appeared to have supported the view that addiction was a disease.  Neuroscience showed that the brains of addicts were uniformly abnormal.  Surely, this was evidence that addicts were just unfortunate souls, victims to the same sort of life lottery that claimed other victims of other diseases.  The uncontrollable behaviors of addicts had to be viewed sympathetically because these behaviors were beyond the influence of rewards, punishments and societal expectations.  But were the poor choices of addicts coming from their brain abnormalities or were the brain abnormalities coming from the poor choices?  For Heyman, the disease model of addiction just wasn’t adding up.  Why were addicts that never entered treatment programs more successful in achieving sobriety than addicts that went through treatment programs?  Why did 70 - 90% of addicts going through standard treatment programs, relapse within the first year of completing treatment?  Why did some treatment programs, such as those for airline pilots, which threatened job termination if the pilots were unsuccessful in their recovery, have success rates of over 80%.  For Heyman, the explanation for the poor success rate of treatment centers, came from research that showed that many of these addicts also suffered from other mental disorders.  As Heyman delved into the case histories of recovered addicts, the common thread for recovery was some cataclysmic event that ultimately led them to make the choice to quit their addiction.  Whether it was a car crash, a DUI charge, or their spouse leaving them, something occurred that made the addict realize they could no longer sacrifice the long term for their short term pleasure.

Heyman’s book reminded me of a Stanford University study involving marshmallows, four-year-olds, and choice.  Walter Mischel,  a Stanford professor of psychology, conducted the experiment on campus at the Bing Nursery School in the late 1960’s.  In a small room with a desk and a chair, the children were taken individually and asked to select a treat from an assortment of goodies.  Most chose the marshmallow.  Then the experimenter told the children they could eat the one marshmallow right away, or they could wait until the experimenter left the room to run a small errand, and when they returned, the child would get not one, but two marshmallows.  If, while attempting to wait for the second marshmallow, the four-year-old decided he or she couldn’t wait any longer, they just had to ring a bell and the researcher would return to the room, allow the child to eat the one marshmallow, but the second marshmallow would be denied.

Video tape of the experiment is quite revealing.  Some children ate the marshmallow right away.  Some agonized over the marshmallow, hiding their eyes, playing with their hair, kicking at the desk, until finally ringing the bell and eating the one marshmallow.  Most of the children lasted 3 minutes before ringing the bell and succumbing to their temptation.  However, 30% of the children held out for the required 15 minutes, and received their second marshmallow.  They delayed their gratification, and it paid off.

Starting in 1981, Mischel went back to locate the 653 children used in his experiment.  The children were now in high school.  He sent questionnaires to their parents and teachers and requested their S.A.T. scores.  There was evidence that children who delayed their gratification, had less behavioral problems at home and in school, dealt with stress better, had better relationships, concentrated better, and had higher S.A.T. scores than those children who could not wait to eat their marshmallow.  A child that waited 15 minutes to eat their marshmallow, on average, had an S.A.T. score 210 points above the child who waited only 30 seconds before eating his marshmallow.

Mischel tracked the subjects into their late 30’s, and found that the four-year-olds with little self-control, grew up to be adults with little self-control.  They had significantly higher body-mass indexes and often had problems with drugs.  Mischel’s research continues, but his findings say something about choice and delaying gratification.

But just what does it say?  Only, that we should be cautioned about making choices for the short term at the expense of the long term.  That, while we seek the freedom to do what we want, the desire for immediate gratifications often makes us irrational about the long term.  Lung cancer doesn’t enter the mind of a smoker as the next cigarette is lit up; addiction seems irrelevant as the next drink is downed by the border-line alcoholic; a troubled marriage is a distant thought as a spouse looks lustfully into the eyes of a stranger.  Our world today offers us more pleasure than ever before in history.  Unfortunately, without a little self-control, these pleasures will become curses.

Socrates drinks his Hemlock

Philosophy can trip me up at the best of times, but the death of Socrates in 399 B.C. has really puzzled me.  How could Athens, the birthplace of democracy and free speech, condemn a feeble, 70 old man to death, simply for some disrespectful blabbing?

The charges against Socrates were dubious at best.  Corrupting the youth of Athens? Impiety towards its Gods?  Please!  Socrates had been teaching for decades, and playwrights of the day could openly question Athenian involvement in its wars or ridicule its gods.  So why did the government come after Socrates near the end of his life?  And what lessons can we learn from this dark chapter of Western civilization?

Socrates’ students, Plato and Xenophon, gifted history with two decidedly biased cases for the defense, but absent from the record is a fair portrayal of the prosecution’s case.  For that we can turn to the little known father of blogging - I.F. Stone.

I.F. Stone

I.F. Stone was a fascinating, independent journalist, who from 1953 to 1971, self-published I.F. Stone’s Weekly.  At its peak in the 60’s, the four page political publication had a circulation of over 70,000.  Stone dared to go where the main stream media of his day wouldn’t.

I am a wholly independent newspaperman, standing alone, without organizational or party backing, beholden to no one but my good readers. I am even one up on Benjamin Franklin-I do not accept advertising.

Stone sought justice and truth and his exposés were backed up by meticulous research.  He fought against the Vietnam War, government lies, McCarthyism, and racial discrimination.  It is likely that his standing in journalism’s history would be much greater, except for the fact that he leaned a little too far to the left.  Kind of like a Noam Chomsky - if Chomsky was a newspaperman instead of a linguistics professor.  For the blogger, Stone should be an inspiration.  His stories were unique, informative, and groundbreaking. But he didn’t rely on special contacts, access, or insider information.  Instead, Stone delved deep into the public record.  He did his homework better than most of the affiliated journalists - poring over documents, Congressional records and hearings, connecting dots that others couldn’t see, and providing his readers with factual stories that couldn’t be found in any other publication.  Stone succeeded in giving the radical viewpoint.  In 2008, the Nieman Foundation for Journalism at Harvard, initiated the I.F. Stone Medal for journalistic independence.  The first award went to John Walcott, Washington bureau chief for McClatchy Newspapers.

In the early 70’s, after Stone’s health deteriorated, he gave up his weekly, learned Greek, and focused his boundless energy on studying the classics.  His book, The Trial of Socrates, gives a new perspective on the prosecution’s case against Socrates.  While Plato portrayed the 510 male jurors that condemned Socrates to death as a mobocracy, Stone gives evidence that Socrates was not just a harmless gadfly.  Socrates did not believe in egalitarianism or democracy and his teachings emboldened would-be tyrants.  After bloody, but short-lived,  tyrannical revolutions in 411 and 404 B.C., the citizens of Athens were fed-up with letting Socrates continue his anti-democratic rants.  The reign of the Thirty Tyrants resulting from the 404 B.C. revolution was particularly damaging to Socrates’ position in society.  A former student of Socrates, Critia, was one of the most vicious tyrants, and he led the violence against the democrats.  In less than a year, 1400 Athenians were killed and 5000 or 1/10th  of the city’s population were banished.  Socrates, however, was just fine.  He freely walked the streets, safe from persecution and fully complaisant to the dictatorial forces that rounded up, assaulted, killed, or exiled those around him.  Socrates spoke of virtue, but his actions were less than virtuous.

Imagine the fallout from a similar situation today.  Suppose a university professor set up a camp for radicals in some Washington D.C. neighborhood. Teaching students to loathe the elected government of the day, the teacher preached the virtues of a divine monarchy and inspiring one of his more ambitious students to actually attempt a violent coup d’ état.  After successfully killing off the freely-elected president in the White House, this new dictator then sets about killing off his opposition, and living large, until his tyrannical regime is defeated by democratic forces.  Luckily for the professor, a general amnesty is issued to quickly restore order in the society, so he is saved from prosecution. However, rather than sheepishly withdrawing from public, and counting his lucky stars he wasn’t a target of retribution, the professor proceeded to go right back to riling up a new set of potential revolutionaries.  Is it any wonder that a jury of Athenians would make a political decision to convict Socrates, and possibly spare themselves from a another Socrates-inspired tyrant?

The jury’s decision to convict Socrates was a political one, calculated to protect their democracy from a return of a violent and unfair dictatorship.  The death sentence for Socrates, however, was a reaction against Socrates’ intransigence.  Socrates wanted to turn the tables on his jurors, put Athenian democracy on trial, and prove to history the shortcomings inherent in a democracy.  Socrates goaded the jury into issuing their harsh sentence.  He could have paid a fine or accepted an exile, but he wanted to go out with a bang.

Lesson #1:  A single act of indifference can destroy your future.  At his trial, Socrates, defended himself as a man of virtue,  telling his jurors that he refused an unjust order by the Thirty Tyrants to arrest a wealthy land owner, so that the tyrants could seize his property.  However, Socrates did nothing to warn or help this innocent victim.  This glaring, act of indifference, tainted Socrates in the eyes of his jurors.

Lesson #2:  Get the facts before making a judgment. Plato’s Apology (defense of Socrates) is a beautiful example of how the masterful use of words can obscure the reality of a situation.

Lesson #3:  Be careful who you piss off.

Lesson #4:  Actions speak louder than words. Socrates spoke of virtue, but when it came time to “walk the walk”, he could only “talk the talk”.

Lesson #5:  Be careful what you unleash. It is unlikely that the unjust, tyrannical regime of those that included Critias, was in any way the type of preferred government that Socrates envisioned when he railed against democracy.  However,  he contributed to its possibility.

Lesson #5:  You’re never too old to make a contribution: In the eyes of many, I.F. Stone’s career ended in 1971 when his I.F. Stone Weekly stopped publication, and he retired from political journalism.  However, Stone carried on.  His book, The Trial of Socrates, is an exciting read that stands in sharp contrast to most of the staid, scholarly writings of Socrates’ demise.

Show me the Blood

If you’re not familiar with the TED Conferences and their website, you should be.  Many of humanity’s greatest endeavors are revealed there.  A few weeks ago, Bill Gates gave a talk on malaria.  Malaria needlessly kills 1 million people every year and at any given time 200 million more are suffering from its debilitating effects.  Gates lamented the fact that more money is spent on developing drugs for baldness than for malaria.  He stated that, “there is no reason that only poor people should have the experience” of being exposed to malaria transmitting mosquitoes and to reinforce this, Gates released a number of mosquitoes from a jar into the audience.  The point hit home - we have to be exposed to the reality of malaria (or anything else) before we act.

Today, we have the ability to access truth and reality as never before.   I don’t want a sanitized version of the events of our day, especially when the policies of elected governments are in question.  Show me the blood and guts arising out of military mistakes in Afghanistan; let me see the real suffering of mothers and babies dying of AIDS; lay out the consequences of my indifference when it comes to extreme poverty or injustice.  Why should we let news networks, editors, or government bureacracies, filter the news we receive?  The life and death issues of our time demand that our senses be exposed to their reality - no matter how painful.  Only then will we be compelled to act.

Albert Einstein

Hate pervades our culture.  Anne Coulter’s book, Guilty, is on the New York Times best seller list; Bill O’Reilly, Sean Hannity, and Glen Beck reap high viewership ratings on the Fox News Channel; Michelle Malkin is a popular blogger; Howard Stern and Rush Limbaugh do well on radio, and TMZ brings its mean-spirited tabloid journalism to television and the internet.  When tempted to confront, return in kind, or “sit and stew” over this hate, I turn to a quote by the 17th century Dutch philosopher, Baruch Spinoza.

I have made a ceaseless effort not to ridicule, not to bewail, not to scorn human actions, but to understand them.

Baruch Spinoza

Einstein, when asked if he believed in God, replied, “I believe in Spinoza’s God”.  But Spinoza was a rationalist whose philosophy planted him firmly in the camp of the atheists, so just who was the God of Spinoza and Einstein?

Spinoza took the view that “God is nature”.  Not that God was in everything, and everything was of God, like a pantheist might believe, but rather that the universe played out according to the laws of nature.  Spinoza’s God was not a “personal God”, and he did not believe in the supernatural aspects of religion.  To Spinoza, the “passions and emotions” that played out in Christianity and Judaism, did not provide an individual with true freedom.  Real freedom came from revealing and understanding the laws of nature, and removing the hopes and fears associated with being a slave to the belief in an omnipotent and judgmental God.  To Spinoza, knowledge not only unlocked the mysteries of the universe, but it served to guide one’s morality.  Virtue was something a person desired, not so much as a prerequisite for a blissful hereafter, but to ensure that life here on earth was enhanced through the mutual respect of men.

Baruch Spinoza

I love the way Spinoza argues against traditional religion while leaving the door open to the possibility that the Bible and religion do hold some truths.  While this diplomacy didn’t seem serve him very well during his lifetime, as he was excommunicated by his synagog and ostracized by his community, it does serve as an example as to how we can tolerate and learn from different opinions and actions.  I can embrace parts of Spinoza’s thinking without feeling like my entire belief system is under attack.

Unfortunately this tolerance of ideas is missing in much of  the world today.  Rather, ideas are treated as George W. Bush saw the larger world; “You are either with us, or against us”.  Ideas falling outside of our narrow belief systems are treated as something that must be destroyed.  Hate is the result.  We can choose to understand it like Spinoza, or we can let it seep into our psyche and allow it to diminish us.

Laws which prescribe what everyone must believe, and forbid men to say or write anything against this or that opinion, are often passed to gratify, or rather to appease the anger of those who cannot abide independent minds.

Baruch Spinoza

Fairfax Financial - Victim or Profiteer

Around the world, heads are shaking as to what caused this financial crisis and surprisingly a Canadian company, Fairfax Financial Holdings Ltd. (FFH), just might have the answers.  However, don’t expect Fairfax’s publicity shy CEO, Prem Watsa, who also happens to be The Globe and Mail’s 2008 CEO of the Year, to offer many details on what went wrong.  Watsa’s company has an incredible multi-billion dollar lawsuit pending against some of the biggest hedge funds on Wall Street and its $2 billion windfall from placing side bets against the financial system was legal but imho highly unethical.  In trying to break down the causes of the financial crisis, allow me to present the:

The 7 Reasons Fairfax Financial Holdings Ltd. Knows What Caused The Financial Crisis:

1.  Fairfax is a victim of Wall Street greed, corruption and organized crime.

2.  Fairfax is a victim of naked short selling and the lack of government regulation

3.  Fairfax is a profiteer of credit default swaps and the lack of government regulation

4.  Fairfax is a profiteer of the U.S. government bailout of the financial system

5.  Fairfax is a victim of leverage

6.  Fairfax has benefited from leverage

7.  Fairfax is a profiteer from the corruption and/or ineptitude of the credit rating agencies, the SEC, and the monoline insurers.

Taking a closer look at each:

1.  Fairfax is a victim of Wall Street greed, corruption and organized crime. Fairfax’s lawsuit alleges illegal stock market manipulation and collusion between hedge funds, analysts and journalists.  Recently revealed discovery in the $5 billion lawsuit shines a light on what might turn out to be widespread, ugly, organized crime on Wall Street.  A long list of dirty tricks, and criminal actions were used to try and destroy Fairfax’s share price and thereby benefit a group of sleazy, short selling hedge funds.  If these powerful hedge funds are shown to have broken the RICO (Racketeer Influenced Corrupt Organization Act), then how many others may be guilty?  Bernie Madoff ($50 billion hedge fund rip-off) may have had links to the Russian mob, Jim Chanos (Kynikos Associates) hangs around with the same hooker that brought down NY Governor Spitzer.  Who are these guys?  Just how corrupt is Wall Street?  Patrick Byrne (CEO of Overstock.com) has tried to expose the high level of corruption on his Deep Capture website, and the 2008 Weblog winner for Best Business Blog has been on a crusade against naked short selling.  Which brings us to the point #2.

2.  Fairfax is a victim of naked short selling and the lack of government regulation:  Defendants in Fairfax’s lawsuit likely engaged in illegal naked short selling.  Legal short selling is not at issue here, except that it should be monitored by the SEC for illegal trading.  Naked short selling is.  The practice is widespread, especially by large hedge funds, and it undoubtedly contributed to the financial crisis.  The SEC has failed to reign in naked short selling and has been immorally negligent in its supervision of hedge fund shorting practices.  While long positions in hedge funds are reported on periodic 13F Filings to the SEC, short positions are not.  The SEC’s temporary ban on shorting hundreds of financial stocks in the fall of 2008, is evidence enough that short positions should have been monitored and the laws against naked short selling enforced.

3.  Fairfax Financial is a profiteer of credit default swaps and the lack of government regulation: Profiteers basically take unethical advantage of situations and that is what Fairfax has done.  Credit Default Swaps have been a gravy train for financial institutions since the Commodity Futures Modernization Act of 2000.  The size of the cds market is difficult to fathom but take it from SEC Chairman Chris Cox last October,  it has played a large role in the financial crisis.

The roughly $60 trillion market for credit default swaps lacks transparency, is unregulated and creates an environment for market manipulation, Securities and Exchange Commission Chairman Christopher Cox said. The market’s size exceeds the gross domestic product of every country in the world combined, he noted.“It’s so important for Congress to act now,” Cox said at an SEC conference on disclosure for investors. “There is no longer any excuse for failing to act”.

That’s just great!  The “world’s greatest casino game” goes completely unregulated for years and now as banks, insurance companies and investment banks are collapsing all around us, the government wants to take action.  The facts speak for themselves; financial institutions took in billions of dollars in premiums, made guarantees to counterparties they would never be able to honor because they ignored reasonable reserve requirements, paid out millions in bonuses to themselves, and then when “shit hit the fan”, ran to the government to bail them out.  Fairfax was, of course, long cds’, betting on big problems for a host of sub-prime lenders and insurance companies.  They would argue their involvement in the cds market was for insurance purposes but this does not pass the giggle test.  Fairfax knows the difference between insurance (with its reserve requirements) and unregulated speculation.  Fairfax also knew that many of the companies selling cds guarantees were not going to be able to make good on them.  Which leads to the next point….

4.  Fairfax is a profiteer of the U.S. government bailout of the financial system: Fairfax played the “too big to fail” card when it came to choosing who it was going to buy its cds’ from.   By choosing the largest of financial institutions (too big to fail) and then limiting their counterparty risk by contractually obligating these institutions to continually deposit government securities in collateral accounts that would cover the current market value of Fairfax’s cds, Fairfax ensured itself of being payed off.  For a public company collecting over $2 billion dollars from its cds portfolio, there is precious little information provided by the company as to its counterparties.  However Citigroup (through Citibank Canada) is likely a primary counterparty, and some information about which companies Fairfax bet against can be gleaned from their subsidiary filings.  Why, in God’s name, are taxpayers bailing out Citigroup to the tune of $45 billion already, when much of it is going to payoff counterparties like Fairfax.   In 2008 Citigroup’s exposure to credit derivatives was in the hundreds of billions.  Companies that played the free and easy cds game should suffer the consequences when their counterparties don’t have the cash to pay up.  Our economic system demands that the Citigroup’s of the world fail.  Hedge fund tycoons are cashing in on their cds positions and real wealth is being concentrated in fewer and fewer hands - a sure recipe for long term economic disaster.  Trace the cash coming out of the “too big to fail” institutions like Citigroup, Bank of America, and Goldman Sachs and you’ll see profiteers like John Paulson (Paulson and Co.), reaping in billions of dollars personally.  While there’s nothing wrong with traders reaping in $billions from taking aggressive, high risk positions, there’s plenty wrong with them taking advantage of what amounts to a regulatory loop hole, and a knowledge that their positions would be backstopped by government.

5.  Fairfax is a victim of leverage: Hedge funds such as SAC Capital (the main defendant in Fairfax’s lawsuit) increase the power of their trading by borrowing against the base amount of their investor’s money.  In 1998 when Long Term Capital Management (another “too big to fail” entity) was saved by the Federal Reserve, its leverage was 30 to 1.  SAC routinely accounts for 3% of the NYSE trading volume and 1% of NASDAQ’s.  When the hedge funds described in Fairfax’s lawsuit, took to shorting Fairfax’s stock, it is easy to see they used leverage to bring down Fairfax’s share value.

6.  Fairfax has benefited from leverage: Fairfax was able to grow by some 30%/year from 1985 - 1999 by using leverage to aggressively acquire assets. Like many companies, Fairfax took advantage of a low interest rate environment to expand their business.  This low interest rate environment was created by globalization (cheaper manufacturing kept prices and inflation low), productivity (technology improved output), and a Federal Reserve (under Greenspan) that kept interest rates too low.  Greenspan created a systemic imbalance where the desire for riskier investments overwhelmed safer investments.  Leverage works great in an expanding financial atmosphere, but it similarly exacerbates problems when contraction occurs.  This is what we are now seeing around the world.

7.  Fairfax is a profiteer from the corruption and/or ineptitude of the credit rating agencies, the SEC, and the monoline insurers. For years, Fairfax knew that the credit ratings of many of the monoline insurers were unrealistic and likely “fixed”.  The game went like this.  Lenders were able to remove themselves from the actual risk of the loans they made by securitizing the loans.  An entity such as an investment bank (are there any left?)  would issue layers of bonds or equity (a hierarchy of risk and payout structures) and the proceeds would be used to buy up these loans and pay the original lender a fee.  Because the originator of the loan would have no lasting liability for the loan’s performance, loan quality was sacrificed for loan volume.  Homes were built, sold to unqualified buyers, and everything was fine as long as house prices kept going up and homeowners squeaked out their monthly payments.  The investment bank would now have a collateralized debt obligation (CDO) that was entitled to the cash flow from the portfolio of credits.  When sold to investors, the same portfolio of assets could offer different investors different risks and returns.  The investment bank would earn a fee for initiating the instrument and a management fee over the life of the CDO.  The credit rating of the instrument would, of course,  be vital in determining how much interest would have to be paid out to investors.  For a fee, a monoline insurers could be paid to wrap their AAA credit ratings around the CDO’s and guarantee their performance.  In the same way that municipalities paid premiums to monoline insurers to raise the credit standing of their bonds, and thereby lower their overall interest outlay, so could CDO’s.  The integrity of the whole system, however, depended upon the integrity of the credit rating agencies and their oversight by the SEC.  Both failed miserably.

In a January 3rd, 2009 New York Times Op-Ed piece, Michael Lewis (Liar’s Poker) and David Einhorn (President of Greenlight Capital) made the case against the credit rating agencies and the SEC.  In 1990 MBIA (one of the larger monoline insurers) was primarily an insurer of municipal bonds with equity of $931 million, debt of $200 million and a justifiable AAA credit rating.  By 2006, as a result of an explosion in CDO’s, MBIA had grown to have equity of $7.2 billion against a staggering debt of$26.2 billion, but somehow still preserved its AAA rating.  A downgrading of MBIA would simultaneously downgrade tens of thousands of credits that were guaranteed by MBIA.  In turn, this would significantly effect the revenues the credit agencies could expect from MBIA in the future.  There was little incentive for the credit agencies to do their job.  Similarly SEC investigators could be expected to “take it easy” on Wall Street, because a lucrative Wall Street career stood waiting in the wings.  The credit rating agencies were beholden to the insurers, the SEC investigators were beholden to Wall Street and the fictitious credit ratings of the monoline insurers created a great opportunity for a profiteer.

Given Fairfax’s cds portfolio, it is difficult to imagine a scenario where Fairfax did not understand and try to profit from the corruption in the system.  By taking cds positions against MBIA, Ambac, Radian, AIG, etc., Fairfax knew that eventually the evidence against the bond insurers would be so overwhelming that the credit agencies would have to make the downgrades and in turn trigger Fairfax’s windfall.  The real exposure in the system was not reflected in the institutions that were suppose to protect investors.  Fairfax didn’t so much make a strategic trade that paid off when their vision of the future became reality, as they made a trade against the corruption in the system that paid off when the obsfucation could no longer be tolerated.  Smart business or profiting from the corruption of others?

Conclusion:

I have no axe to grind with Fairfax Financial Holdings Ltd..  As far as I know, the company has not broken any laws and it’s only of interest to me because its operations touch on so many aspects of the financial crisis.  The company can be seen as a microcosm of our sad world today.   We cry foul when injustices are perpetrated against us, but cannot live our own lives devoid of unethical behavior.  Even though Fairfax had been damaged by the greed and corruption in the financial system, it could not resist the temptation to take advantage of this same systemic weakness and corruption.  Prem Watsa espoused the “value investing” of Benjamin Graham and then turned to a speculative opportunity (cds positions) that presented itself from a damaged system.

Fairfax might yet turn out to be a force for good.  If its lawsuit against the hedge funds can expose the prevalence of corruption on Wall Street, then the court findings might lead to improved SEC regulations and enforcement.  However, what is really needed is a paradigm shift that demands government take on a larger role in our lives.  From finance to energy, the environment, climate change, and the Millienium Development Goals, our challenges have to be met by forward thinking governments and people willing to sacrifice profits for ethics.