Eugene Linden
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Latest Musing

The Supreme Court's Own Goal on Climate Change

[This article appeared in Lawfare. It's long for a musing, but I think it's important that the public see just how shoddy was the majority reasoning in West Virginia v EPA]

In 1970, Sen. Roman Hruska of Nebraska achieved a dubious immortality when he argued that mediocrity deser...

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Books


Fire & Flood
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Deep Past
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Articles by Category
endangered animals
rapid climate change
global deforestation
fragging

Books
The Ragged Edge of the World



Winds of Change
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Afterword to the softbound edition.


The Octopus and the Orangutan
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The Future In Plain Sight
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The Parrot's Lament
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Silent Partners
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Affluence and Discontent
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The Alms Race
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Apes, Men, & Language
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bio

             I’ve spent my entire writing career exploring various aspects of one question: Why is it that after hundreds of thousands of years one relatively small subset of our species has reached a point where its fears, appetites, and spending habits control the destiny of every culture, every major ecosystem, and virtually every creature on earth?  What happened that enabled us to seize control in a blink of an eye?

         I began scratching at this question in my first book, Apes, Men and Language, published nearly 40 years ago. In that book I explored the implications of some experiments from the 1960s  that showed that chimpanzees could use sign language in ways similar to the way we use words – to express opinions and feelings, to make specific requests, and to comment on the events of their day.  Since the moral basis of our rights to use nature as so much raw material is deeply entangled with the belief that we are the lone sentient beings on the planet, I wondered what it would mean if it turned out that other animals possessed higher mental abilities and consciousness? I never expected that the scientific establishment and society would say “oops, sorry,” but I also never imagined that the issue would turn out to be as fraught and contentious as it has.

         That first book was the result of a curious turn of events. My first major journalistic assignment was an investigation of fragging (attacks by enlisted men on their officers) in Vietnam. That article, “The Demoralization of an Army: Fragging and Other Withdrawal Symptoms,” was published as a cover story in Saturday Review in 1971. It got a good deal of attention, and a few publishers contacted me about possibly writing a book. I was eager to do that, but a few publishers lost interest when they learned that I wanted to write about experiments teaching sign language to apes and not Vietnam. Dutton gamely stayed on, however, and "Apes" is still in print in some parts of the world.

         Since that first book, I’ve revisited and explored animal thinking in several books and many articles. In Silent Partners: The Legacy of the Ape Language Experiments, I looked at what happened to the animals themselves in the aftermath of the experiments as the chimps were whipsawed by a society that shifted back and forth between treating them as personalities and commodities. I wrote articles for National Geographic, TIME, and Parade, among other publications about animal intelligence as the debate progressed at its glacial pace.

Then, in the 1990s, I had an epiphany of sorts. I’d heard a story about an orangutan that got hold of a piece of wire and used it to pick the lock on his cage, all the while hiding his efforts from the zookeepers. Here seemed to be a panoply of higher mental abilities on display, unprompted by any rewards from humans, and it occurred to me that, if animals could think, maybe they did their best thinking when it served their purposes, and not some human in a lab coat. Out of this flash came two more books, The Parrot's Lament: Tales of Animal Intrigue, Intelligence and Ingenuity, and, The Octopus and the Orangutan: More Tales of Animal Intrigue, Intelligence, and Ingenuity, as well as a few more articles for TIME, Parade, and Oprah among other publications. I’ve found this approach to thinking about animal intelligence both liberating and fun, and I intend to explore this a good deal more.

 

         The question of what makes us different than other creatures was but one aspect of my career-long efforts to understand how we have come to rule the planet. At the same time that I was exploring the question of higher mental abilities in animals I also began to think about how our notions our notions of our own specialness related to the consumer society. If intelligence, language and consciousness gave us dominion, it was the consumer society that gave us the tools to exploit nature for our own benefit. I’ve developed my thoughts on the nature and origins of consumer societies in four books, Affluence and Discontent: The Anatomy of Consumer Societies (1979), The Alms Race: The Impact of American Voluntary Aid Abroad (1976), The Future in Plain Sight: Nine Clues to the Coming Chaos (1998), and, most recently, The Ragged Edge of the World: Encounters at the Frontier Where Modernity, Wildlands and Indigenous Peoples Meet (2011), which tries to tell the story of the inexorable expansion of the consumer society through vignettes and stories.

 

         And then, of course, there are the consequences of our tendency to treat the planet as a cookie jar. This has been the dominant subject of my environmental journalism, which began as soon as I returned from Vietnam in 1971. Over the years, I have covered nearly every major environmental issue in publications ranging from Foreign Affairs to large circulation publications such as TIME and Parade. Sadly, journalistic effort of myself and many others have done little to slow the accelerating destruction of earth’s life support systems. Still, I’m proud that my TIME cover story on threats to the Ndoki, an ecological eden in the Congo, helped rally support for its protection, and that another TIME cover on the threatened extinction of the tiger in the wild proved useful in bringing pressure on China to reduce its role in the out of control poaching that supplied the traditional medicine market. Perhaps, I’m most proud of an article for Foreign Affairs, which I co-authored with Thomas Lovejoy and Daniel Phillips, which offered a blueprint for how to mobilize conservation efforts on a continental scale – something that urgently needed if vast ecosystems such as the Amazon and Congo rainforests are to be saved. My pride, however, has been tempered by the failure of this idea to gain any traction.

Over the years, it’s become clear that the threat of climate change trumps every conservation issue. The Ndoki has been saved from loggers, but the drying of northern Africa threatens to nullify this protection. Similarly, polar bears have been saved from the threat of uncontrolled hunting, but now have to cope with a warming arctic, which robs them of the sea ice from which they hunt ringed seals. I’ve written several articles and op-eds about various aspects of this existential threat as well as one book,The Winds of Change: Climate, Weather, and the Destruction of Civilizations, in which I tried to convey the scale of the threat by revisiting the role natural climate change has played in human evolution and the history of civilization.

 

In recent years, apart from my writing, I’ve pursued an active career in the world of finance, serving as chief investment strategist for Bennett Management, a family of funds that invests in distressed companies. I've also served on several corporate boards.

 

A selective list of my publications is available on this site under the title, “Publications,” and I append to this narrative a more traditional bio, which organizes my writings and activities by topic.

 

                                  EUGENE LINDEN 

 

WRITING:


         Fiction:

         Deep Past.  Hardcover: Rosetta, May 2019. Audio: Blackstone. Kindle
 

         Social Criticism and Current Affairs:

         Books:

         The Ragged Edge of the World: Encounters at the Frontier Where Modernity, Wildlands and Indigenous Peoples Meet. Viking, April 2011. Plume, April 2012. The Future in Plain Sight: Nine Clues to the Coming Chaos.  Simon & Schuster, August 1998. Reissued, Plume, Jan. 2002. Affluence and Discontent: The Anatomy of Consumer Societies. Viking/Seaver Books; Nov. 1979. The Alms Race: The Impact of American Voluntary Aid Abroad. Random House; May 1976.

         - Articles and essays for TIME, and for journals ranging from Foreign Affairs to the Wall Street Journal.  Cover story on the demoralization of American forces in Vietnam for Saturday Review in Dec. 1971.

 

           Environment:

         - The Winds of Change: Climate, Weather, and the Destruction of Civilizations. Simon & Schuster, Feb. 2006. “Seeing the Forest: Conservation on a Continental Scale,” Foreign Affairs; July/August 2004. Numerous cover stories and essays for TIME. Helped conceive TIME's celebrated, 1989 Planet-of-the-Year, special issue on ``Endangered Earth,'' TIME International's special issue," Our Precious Planet," and wrote major articles for both issues. Wrote main article for TIME's first global special issue in 2000, "How to Save the Earth." WroteSmithsonian’s May 2003 cover story, “The Nature of Cuba.”

 

         Animal Intelligence and Language

         Books:

         - The Octopus and the Orangutan: More Tales of Animal Intrigue, Intelligence, and Ingenuity. E.P. Dutton, Aug. 2002.  The Parrot's Lament: Tales of Animal Intrigue, Intelligence and Ingenuity. E.P. Dutton, Oct. 1999. Silent Partners: The Legacy of the Ape Language Experiments. TIMES Books; April 1986. Apes, Men, and Language. Saturday Review Press/Dutton; Jan. 1975. Soft: Penguin, Feb. 1976, revised edition, 1981.

          Major Articles:

         "Can Animals Think" (cover story for TIME), and "Apes and Humans" (cover story forNational Geographic)

 

        

         Business and the Economy:

         Books:

         The Mind of Wall Street, Leon Levy with Eugene Linden. Public Affairs, Oct. 2002.

         -  Articles on the emergence of the distressed securities industry for TIME and FORTUNE.  Essays on the perils of the integrated global market for TIME and MSNBC.  Major article on the makings of the Asian meltdown as part of cover package forTIME InternationalSeveral articles on entrepreneurial thinking while a senior writer at INC. in 1984, including the centerpiece article of INC.'s fifth anniversary special edition.

 

 

         Awards and Citations:

         2007: Grantham Prize Special Award of Merit.  2001: Poynter Fellow in Journalism, Yale University. 1997: finalist, John Oakes Award. 1996: Overseas Press Club Citation for Excellence; Lowell Thomas Award. 1995: Genesis Award; honorable mention, National Press Club Robert Kozick Award. 1994: Genesis Award; Harry Chapin Media Award; Population Institute Global Media Award. 1991: Finalist, National Magazine Award; Walter Sullivan Award.

 

          Selected List of Keynotes and Major Speeches:

         The Library of Congress, Woodrow Wilson Institute, Carnegie Council, U.S. State Department, Senior Seminar at the Foreign Service Institute, Saint John the Divine, the CIA Transnational Issues Group, LeNS International Conference on Law Enforcement and National Security (keynote), the 2001 Democratic Senatorial Retreat, 7th International Conference on Environmental Enrichment (keynote), Cooper Union

 

 

BOARDS

  • RARE Center for Tropical Conservation, 1997 to 2002
  • World Wildlife Fund, National Council 2003 – 2009
  • Wildlife Conservation Society, Education Committee, 2000- 2007
  • The Green Guide, 2000 - 2008

         -    Golden Books Family Entertainment. Inc., August, 1999 -2001  

  • PGI Inc. 2003 – 2008
  • Evercom Inc. 2003-2005
  • Cibus, 2004 – Present
  • Syratech, 2005 – 2009
  • Insight Health Services, 2007 – 2010
  • Haights Cross, 2010-Present

 

AFFILIATIONS

 

         -    The Century Association

  • PEN
  • The  Katoomba Group
  • Associate Fellow, Timothy Dwight College, Yale University

 

PRESENT EMPLOYMENT:

Chief Investment Strategist, Bennett Management (a family of investment funds specializing in distress and bankruptcies)

 

PREVIOUS EMPLOYMENT:

         Contributor TIME, 1995-2001; Senior writer at TIME, 1987-1995; senior writer at INC., 1984; executive editor at Technology Illustrated, 1983

        

         Education: Yale University, BA

 

                 

 

 

 

                          

 

 

 

 

 

 

 

 

 

 

contact Eugene Linden

Short Take

HOW THE OPTIONS TAIL HAS COME TO WAG THE MARKET DOG: A Simple English Language Explanation of How Structural Changes in the Stock Markets Contribute to Whipsaw Movements in Prices.

Lately a string of violent price movements and reversals in the equity markets make it look like the markets are having a nervous breakdown. The last day of trading in April 2022 saw a 939 point drop in the Dow. The day before that, the Dow rose about 625 points, and two days before that it fell over 800 points. The very next week, after two quiet days, the Dow rose over 900 points after the Fed announced its biggest rate hike in 22 years (ordinarily a big negative for the markets), and then, the next day, fell over 1000 points (more on this later).  There have been plenty of headlines – about the Ukraine Invasion, inflation, the threat of a Fed caused recession, supply chain disruptions – to justify increased uncertainty, but the amplitude of the moves (and the sudden reversals) suggest something more may be at work. Here follows an effort to explain in simple language the significant changes in the market that have contributed to this volatility.

 

“This time it’s different” is perhaps the most dangerous phrase in finance as usually it’s uttered by market cheerleaders just before a bubble bursts. That said, markets do change, and those changes have their impacts. One change in the markets has been the shift from intermediaries (such as brokers) to direct electronic trading, a shift that has made the markets somewhat frictionless, and allowed computer driven funds to do high speed trading. This shift began a couple of decades ago. Today’s markets can move faster than a human can react.

 

Another shift has been the degree to which passive investing through index funds and algorithmic trading through various quant funds have come to eclipse retail investing and dominate trading. A consequence of this is that to some degree it has mooted individual stock picking because when investors move in or out of index funds, the managers have to buy or sell the stocks held on a pro rata basis and not on individual merit. This change too has been developing over recent decades.

 

A more recent and consequential shift, however, has been the explosion in the sale of derivatives, particularly options (the right to buy or sell a stock or index at a specified price on or before a specific date). Between 2019 and the end of 2021, the volume of call options (the right to buy a stock at a specified price on or before a particular date) has roughly doubled. During times of volatility, more and more retail and institutional investors now buy calls or puts rather than the stocks. 

 

Today, trading in options has reached a scale that it affects market moves. A critical factor is the role of the dealers who write options and account for a significant percentage of the options issued. Dealers have been happy to accommodate the growth in option trading by selling calls or puts. This however, makes them essentially short what they have just sold. Normally, this doesn't matter as most options expire out of the money and worthless, leaving the happy dealer to book the premium. Being short options, however, does begin to matter more and more as an option both moves closer to being in the money and closer to expiration. 

 

This situation is more likely to occur when markets make large and fast moves, situations such as we have today given the pile of major uncertainties. Such moves force dealers to hedge their exposure. 

 

Here’s how it works. If, for instance, a dealer has sold puts on an index or a stock, as a put comes closer to being in the money (and closer to expiration), the dealer will hedge his short (writing the put) by selling the underlying stock. This has the combined effect of protecting the dealer -- he's hedged his potential losses – while accelerating the downward pressure on the price. In other words, this hedging is pro-cyclical, meaning that the hedging will accelerate a price move in a particular direction.

 

Traders look at crucial second derivatives of stock prices, referred to by the Greek letters delta and gamma to determine exposure to such squeezes. As an option moves closer to in the money it's delta -- it's price movement relative to the price movement of the underlying, and its gamma -- the rate of change of the delta relative to a one point move in the underlying, both rise. The closer to both the strike price and expiration date, the more the dealer is forced to hedge. The result is what’s called a gamma squeeze. Once the overhang of gamma exposure has been cleared, however, the selling or buying pressure abates, and gamma may flip, with new positioning and hedging done in the opposite direction. The result can be a whipsaw in the larger markets. This same phenomenon can happen with indexes and futures.

 

How do we know that the hedging of option positioning are contributing to violent price changes and reversals in the market? While not conclusive, perhaps the strongest evidence is that large lopsided agglomerations of options at or near the money have been coincident with surprising market moves as expiration dates approach. In fact, some market players use this data to reposition investments, in effect shifting investment strategy from individual companies to the technical structure of the markets. This is what Warren Buffett was referring to when, at his recent annual meeting, he decried the explosion of options and other Wall Street fads as reducing companies to “poker chips” in a casino.

 

The week of the May Fed meeting gave us a real-time example of how a market move that looks insane on the surface reflects the underlying positioning in various derivatives. To set the stage: ordinarily, given debt burdens and the threat of recession, the markets would be expected to react badly to a Fed tightening cycle that is accelerated by the biggest rate hike in 22 years. On Wednesday, however, market indices began to soar on Wednesday when Fed Chairman Powell, one half hour after the Fed announced it 50 basis point raise, suggested that the Fed was not considering larger 75 basis point hikes during this tightening cycle. Traders interpreted this as taking the most hawkish scenario off the table. Up to that point, institutions were extremely bearish in their positioning, heavily weighted to puts on indexes and stocks, and also positioned for future rises in volatility in the markets. Right after Powell made his comments, investors started hedging and unwinding this positioning, and all the pro-cyclical elements entailed in this repositioning kicked in. By the end of the day, the technical pressures producing the squeeze had largely abated, setting the stage for a renewed, procyclical push downward the next day, as the negative aspects of the tightening cycle (and other economic headwinds) came to the fore. 

 

What these violent moves in the market are telling us is that while in the broader sense, this time is not different --the overall sine wave of the market is still that bubbles build and burst -- how the present bubble is bursting may be following a different dynamic than previous episodes. The changes since the great financial crisis-- the rise to dominance of passive trading through indexes and algorithmic trading through various quant strategies – reduced the friction in the markets as well as the value of picking individual companies. Now, the more recent explosion of option issuance, further accelerates market moves, and leads to unpredictable reversals that have to do with option positioning rather than fundamentals such as earnings, politics, or the state of the economy. 

 

The tail (the options and other derivatives markets) now wags the dog (the equities markets).

 

 



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