What Became of Midas' Sons?

Despite one of my favourite old saws being "Never feel sorry for a guy with his own plane", I must shed a small tear today for the legendary insurance Hall-of-Famer Jack Byrne - the man responsible for the miraculous rehab of GEICO, architecting the sale of Fireman's Fund at the top of the market, and the construction of White Mountains into a powerful force in the industry. When in came to insurance, while not getting everything right (remember Olympus Re??!?), he has been pretty awesome.

On the home front however, things have not been going so well. One son, Patrick, tried to turn a couple of Hasids in Utah trying to move last year's merchandise into an internet household name, and, after squeezing and manipulating his own stock upwards became famous for paranoiac rants about aliens and naked short-selling when the market realised that the future for Hasidics in Utah is limited at best. OSTK is bumping along bottom now, and Byrne senior has long since jumped ship.

The other son after a stint in investment banking, and a hedge fund in which he was redeemed by his only investor - the Sage of Omaha - set up a reinsurance company Flagstone, which today, ignominiously sold itself to Validus for 70 cents on the dollar, and and about 3/5 of what investors' put into it (perhaps a touch more including some paltry dividends), reminding one of the joke "How do you make a million in the reinsurance business? Start with two million and give it to......"

One might wonder whether the Senior Byrne is thinking  of that other Old Saw - "From shirt-sleeves to shirt-sleeves in three generations...". But I think not. While the younger Byrne's clearly do not have dad's Midas-ian-Touch, that has not prevented them from feeding at the trough - clearly at their investors' expense.

Apprentice Sorcery

It has come to my attention that Knight's "algos" sorta kinda went crazy the other day. Not syphlitically demented it would seem according to CEO Tom Joyce, but Doc Brown or Wallace (& Gromit) errant invention crazy.

But the reality is, we don't know because Joyce hasn't told anyone what precisely went wrong. Given that it was (allegedly) just the market-making unit, the more apt picture might be the one at top left, where like Knight, our lovable "hero" Mickey, enlists the help of some servants, magically conjured, to speed the completion of his tasks at least effort. Of course he wasn't in full control of what he conjured with predicatble results.

Sound familiar? But such episodes are not limited to, nor even more prevalent than, technology, as Mssrs Kerviel, Leeson, and Adoboli can attest. Indeed, during my last year of university, and first years thereafter, I cut my teeth at one of the largest and most venerable bullion dealers. Though mostly upstairs, I spent a reasonable amount of time down on the floor in the weird and wonderful world of the Comex, a place where (unlike the Dukes Bros of OJ fame) one appreciates the size and depth of the market. It wasn't glamourous. Nor was it noble. But it was crazed and exciting. And there, one strange August afternoon, I bore witness to a similar algo failure in Gold Pit of 4 WTC. One floor trader, who'd gotten long, and then very coked-up (not the "I'd Like to Teach The World To Sing" variety) and not necessarily in that order, became convinced that he, in his coca-omnicience, was not only incredibly right, but omnipotent, proceeding to single-handedly buy everything and anything in order to move the market upwards, (a Knight-like programming error if ever there was one) until, under the weight of the market, and his losses, like Knight's algos, he too was forcibly turned-off and shut down, whilst everyone around him rubbed their eyes and shoook their heads in disbelief (before of course they proceeded to cover their shorts). It truly is a wacky world, one that Mr Joyce must, at present, be regretting.