“It’s sad, so sad
It’s a sad, sad situation
And it’s getting more and more absurd” – Bernie Taupin
I am now in Day 19 of my sports embargo, and so when I amble onto my treadmill every weekday morning, my TV of choice has become CNBC instead of ESPN.
It had been a long time since I really paid any attention to the outside financial world, since I had long ago entrusted my investments to a professional advisor (the reasons I did this were explained in my recent post to JJL about mistakes).
So lo and behold, I start recasting my gaze on the stock market at exactly the time it seems to be imploding, due to this “subprime mortgage” credit mess. I guess that’s ironic given my recent focus on mistakes, because the problem has been caused by a lot of “smart” people making a lot of big credit and investment mistakes.
This is where “so sad” part comes in – today I noticed in the Wall Street Journal that many of the hedge fund managers who knowingly made these risky mortgage security investments are not really owning up to it in their communications with their investors. In other words, sorry seems to be the hardest word for them.
Here’s part of the article, written by Gregory Zuckerman:
“Running a hedge fund means never having to say you’re sorry, at least not in so many words.
That isn’t to say some hedge-fund managers don’t have a lot to feel bad about. In the past few weeks, some of the biggest names in hedge-fund land — Goldman Sachs Group, Highbridge Capital Management, AQR Capital Management, Renaissance Technologies — have certain funds that lost as much as a third of investors’ money as stock and credit markets seized up, and stocks moved in unexpected ways, in reaction to the spreading subprime-mortgage debacle.
None of these highly paid managers are prostrating themselves before their clients, begging forgiveness, however. Instead, in letters to clients, they point fingers at other hedge funds, once-in-a-lifetime events and their own computer programs.”
Ah yes, it’s the computer’s fault. I can imagine “I had no control over my spreadsheet” is a common refrain in the hallways of a few of those places.
Here’s one particular head scratcher that came from one fund – “The culprit is not the Basic System but our predictive overlay.”
That darn predictive overlay – I have quite a bit of trouble with that myself, when I’m trying to select what I want for breakfast. But the good news is that if I get indigestion, I can put the blame on something else.
Why can’t folks just come out and say the “six most important words” – “I admit I made a mistake”. My old boss who taught me the “most important words” concept would be furious with all this equivocation going on.
I just have to connect the dots here – if this market and it’s high dollar participants would have learned and applied those 4 steps of learning from mistakes I mentioned last week, nobody would have lent 110% of the house value to people with no credit at 1% interest (that ratchets up to 8% in 3 years), then packaged a whole bunch of those loans in securities that hedge funds and other institutional investors bought and are now underwater on.
It’s called risk – it doesn’t ever disappear. And when we’re caught ignoring it, we should own up to it and learn.
Now I’m going back to my predictive overlay to figure out what I’m having for dinner…… 
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{ 7 comments… read them below or add one }
Terry, that’ll teach you to exercise. That’s where it always begins … getting into shape.
G14 says… BBQ Pork Chops with 4 cheese potatoes and green beans.
The world would be so much better with apologies flying around. Thanks are nice, too.
Terri:
That is indeed so sad and a lesson. We’re all connected — events, people, decisions, etc. What someone does has large repercussions on a chain of events that impact others.
Food for thought! Pardon the pun
yes, why can’t people just say they are/were wrong?? there are so many times in this life when I am thrilled to be wrong, but then again, it’s not like I’m losing anyone 7+ figures…
Hi Larry, Jesse, Valeria and Liv – thanks for your comments.
Larry, I’m learning quite late about this exercise thing – I think I’ll just listen to my iPod from now on…..
Jesse – thanks are very nice indeed. And those pork chops tasted pretty darn good!
Valeria, so good to hear from you -hope all is well. I wish more people really understood the “connectedness” we all have. We can only keep trying to spread the word.
Liv, there certainly is a higher level of “wrong” when you are talking about millions of other people’s money. That said, I like it when we can actually be thrilled to be wrong. Like when I feel certain something is going to turn out bad, and it somehow doesn’t.
All the best to you all.
Interesting that it had been a long time since you really paid any attention to the outside financial world. Personally, I had completely given up on it. I closed shop and left my stocks at the mercy of the rise and fall of the market, with a dim hope that it would resist the force of gravity. It had been almost one and a half years since I closed shop until a few days ago when a friend sent me a video of Jim Cramer, blowing up a head gasket and releasing steam over the state of the economy. You can check it out on youtube by clicking here: Jim Cramer melts down. Be patient until the 1:42 mark and buckle up all the way to the end .. it’s going to become a wild ride all teh way to the end! Long story short, he awoke my interest. I’m not ready to jump back in the game because I’m already juggling so much. But I
Hi Herman – as always, I thank you for stopping by. I’ve seen that Cramer video – that guy can get a lather up, can’t he! My best instinct at this point is to once again step back a bit from the financial world and let the law of averages work its course. I learned my lesson back in 1987 when I pulled everything out after that crash. They call us a nation of optimists, so we’ll see if that holds true yet again.
All the best!