Thursday, November 27, 2008

Of Perfect Storms and Horses's Asses

As much as I try to disabuse the employment of cliches, or limit myself to the less-than-ordinary ones, I occasionally slip whether out of laziness or fatigue.

But I cannot countenance hearing one more hedge fund manager diminish their culpability in their spectacular loss of untold millions or billions by laying the blame upon The Perfect Storm.

Now I read Sebastian Junger's book, (which was probably a hundred pages too long) and I saw Wolfgang Peterson's rather cheesey movie of the same. And as far as I can remember, the weather was shitty when they went out, and the reason they went was primarily greed. Once out there, they made bad decisions - again driven primarily by greed - which is why they ended up with Davey Jones. Moreover, forecasters saw the storm building so it wasn't a surprise except to those who were exceptionally ignorant, or supremely unlucky. But defying the forecasts of the building storm and choosing to navigate the waters was thus nothing short of hubristic arrogance, desperate greed, or if you were a passenger, and it wasn't your decision, very bad luck indeed.

Which brings me back to those who blithely blame the now-metaphorical Perfect Storm. You can see just how disingenuous such self-absolvement actually IS. They were not gingerly caught out. They intentionally piloted their Funds (and with them their investors) directly into harms way. They could have stay in port. They could have returned money since no one with such a flexible hedge mandate is obliged to invest, and nearly all pay legal respect (or at least lip-service) to their intention to Preserve Capital. None (and I mean the Info Memo's of which I've read too many) say "We're tits-in long-and-levered come hell, high-water or Perfect Storm". No. I am sorry but they defied forecasts, logic, common sense and as such have lost their right to blame the Perfect Storm.

Even journalists blaming a generic Perfect Storm for our current ills pay metaphoric homage to Junger's book, but this, too, is disingenuous, and patently disrespects all those forecasters who, since the beginning of The Great Leveraging in the mid 1980s have been warning about excess credit-creation, burgeoning cross-default risk inherent to various less-than-essential derivatives markets, balance-sheet zaitech, agent-principal dilemma, moral hazard, pari-passu and liquidity position risk, the constraining impact of persistent trade, budget and current account deficits, the inanity of NOT popping (or even ameliorating) likely bubbles, the threats posed by abnegating regulatory oversight whether for parochial profit or fear of foreign predation. So with all due respect, this was NOT a Perfect Storm, in the sense it was somehow spontaneously created to the surprise and amazement of all, but rather a result of our own creation, resulting from years of collective policy neglect, political pandering and rent-seeking that, far from being a surprise, has run to script similar to that foretold by numerous wise and observant men and women.

So to all you managers out there who are conjuring year-end letters to justify gates, or merely absolve yourself of blame, shame, thereby avoiding the necessary ego-cleanse, be advised that if you employ the "Perfect Storm" excuse, you will indeed look the "horse's ass" (yes that last cliche IS worn, but it is perhaps the most apt) at least my readers, and IMHO by your wiser and more prescient peers.


Anonymous said...

Hi Cassandra.

Recently, you wrote a satirical post on Naked Cap about Gitmo. In the comments section of that particular post, I stated that it was a stupid post because it lacked imagination. I stated that it was written by a blogger who had run out of ideas, so she had to resort to button-pushing in order to drum up a response from her Pavlovian minions.

To wit:

"The Bush Administration is evil because [Fill in blank]."

The mere utterance of The Bush Administration will then solicit a response---as many understandably hate the Administration.

Unfortunately, the blogger who must resort to this type of writing is merely provoking her audience.

Then, add to the mix a blogger like Yves--who in all of her sanctimony---merely cut and pasted others' works...and accepts praise for it....well---that situation is begging for a satirical response. You seem to fancy yourself as a satirist, so I'm sure you appreciate it.

You asked why I read NC in your response to my deleted posts.

In the spirit of Naked Cut and Paste, I'll answer as follows:

"I will admit to you now, in the event that you have not already noticed that I have a problem. No, it is not drink (though do I enjoy my wine), nor anything sexually sordid, but rather that I have a morbid fascination with left-wing bloggers. It is, in my defence, likely a vestige (naive as it may be) from my core philosophical belief that one must read, know and understand all points of view to pragmatically have any hope of winning the war of ideas, and hence public policy. Idealistic, and naive, but I cannot help myself, secretly wondering whether they really believe their own phantasms and vitriol."

And now that we got that out of the way, I am happy to announce that you actually have a new reader. Judging by the fact that my comment is the first one in your most recent blog entry---that was written over 24 hours ago--- it looks there are now 3 of us here. [Hi Yves! Love ya, Miss Ya!}

Hope you enjoy a little satire. Yves can vouch for me---You're going to love having me around!

"Cassandra" said...

DD - Should I be flattered?

I suppose the difference between my "little problem" and your "little problem" is that despite the inherent fun and sport of poking the proverbial beehive, I would never countenance wasting precious moments phoning up and harassing Michael Savage, or, for that matter, grafitti-ing the walls of Chicago Boyz clubhouse. I (like Yves) admire and encourage civilized debate, based upon ideas and respect, but deplore base bullying and dogmatism. I do not see eye-to-eye with many commentators, but happily agree to disagree in civil (and hopefully humourous) fashion. In fact, some fine (and mutually profitable) friendships have grown from this point of departure. So everyone is welcome until they the cross thee proverbial line of civility and respect. Enjoy!

Anonymous said...

DD- where is your fucking blog if you are so god-damned full of ideas. I like this blog (it's original and amusing) and I like Naked Capitalism, both the commentary and the links. I agree that it's important to consider all viewpoints, but if your stated purpose is to trash or, "defeat," these ideas, what exactly are you considering? I do enjoy the irony though of an apparent ideologue using the word pragmatic in describing his own actions. Thanks for the laugh.

Anonymous said...

Cassie ---

Your comments on hedge fund performance are and have been spot on... Keep up the good work.

"Cassandra" said...

DD ihas shown him/herself to be a highly unpleasant guest and will be ignored heretofore.

Anonymous said...

Please don't let semi-creepy incidents like this deter you. Your insights are provocative and timely, and presented in a lively and creative writing style. I appreciate the donation of your time and talents towards the Greater Understanding and look forward to more in the future.

"Cassandra" said...

thank you, miguel.

I'm reasonably stoic, with a thick skin, and in any event, somewhat selfishly, do it for my own pleasure. That said, there is an undeniable feedback mechanism at work that requites kind complements such as yours.

Anonymous said...


I have yet to find a blog with as much original insight into our present capital markets situation. I eagerly anticipate reading your new posts, so please keep it up. I share many of your views. It is highly comforting to know that we aren't alone in this wilderness of MSM inspired hyper-optimism/head-in-sand/Goldilocks/soft-landing propaganda. You have to expect the nut-bars to turn up every now and then.

Anonymous said...

By the way, the post about those gold stocks back in October was spot on. You nailed a nice low in the HUI.

"Cassandra" said...

Yes that was a good one. For some strange reason nailing the inflection is easier than finding the fortitude to hold such a position for long enough to deliver the return in order to compensate you for the risk.