I have some kids. And they are for the most part, pure unadulterated, magic. Maddening, at times, of course, for they know my buttons, but I wouldn't trade 'em for all the gold in the world. Once of the most interesting things about their development is watching them learn to lie. I,personally, am a horridly bad liar, so my lack of skill in such pursuits might have rubbed off upon them.
Sure enough, it is so easy to catch them out. One can see it on their faces, gestures, body language and posture (and I am not at skilled in the art of lie-detection as, for example Mossad is at Tel-Aviv airport). When confronted with the truth, in the face of a patent untruth, be it a little-white one, or a large "I promise I didn't scratch a likeness of little brother into the side of new car...". They look away, their skin flushes, her dimples appear as she smiles most uncomfortably, in the unfolding knowledge that the ruse is failing miserably, and the whole disinformation enterprise is losing altitude at a dramatic pace. They might implore their innocence, in one final attempt to confound, but the dimples remain, and the denial is accompanied by a knowing smile that is their undoing. As they get older they will of course learn to control these involuntary emotional responses (to greater or lesser effect) and pick-up a view other tricks like feigning anger or incense at even being accused, blame-shifting, or in desperation, counterattack.
There is no need to repeat Bear, Merrill or Citi's reluctant admissions of how many billions of little white ones they conjured. And Morgan came out of the closet yesterday with a mea culpa. But, thinking about how good it must feel to get The Lie off of your conscience, and how easy it is to see when people are lying (or more diplomatically, "not telling the whole truth"), I would ask the one that question that EVERYONE must be asking themselves today, post-MS disclosure: what about GS??!?!?!
Well.....according the Roubini article that flew its way around the global market place this week, MS had far and away the highest proportion of Level 3 assets to capital of any of the big US banks. I have no idea what their capital base is, and maybe writing down $3.7 bio brings them in line. But I cannot help but observe that both Citi and Merrill went through a couple of iterations of writedowns, and I would be very, very surprised if MS isn't the same.
ReplyDeleteAs for GS....equally, I have no particular insight there, other than to observe that they are humans, not deities. But if they are lying, at least we can say that they are lying to themselves as well, given the size of this year's bonus pool.
At all the IBs, staff have done much better shareholders. I don;t have a problem with mondo-comp, but to marry incentives properly, from this point of view, bonuses should be paid in restricted stock that vests only very slowly perhaps over the course of a full credit cycle. Deeply unpopular, perhaps, but would probably better market outcomes all-around.
ReplyDeleteI suspect that this time may be a bit different. I had lunch with an old friend/ quite senior NY manager of one of the write-downers a couple of weeks ago. His group is 140% of annual budget...and he's been told to lose head count. A majority of his group will get paid nowt at bonus time, because what funds there are will be used to keep the few 'stars.'
ReplyDeleteThis was a group that nothing whatsoever to do with credit or mortgages.
The consensus amongst people I talk to, even in no credit areas, is that they are gonna get stiffed this year. And even those that do get paid will, in many circumstances, get paid in mini-dollars, which itself is a #1 haircut on comp.
I suppose the brightside for the Merrills Lnndon guys, though, is that at least they don't have to worry about cable this year; 0/2.10 is the same as 0/1.50.
I had lunch with an old friend/ quite senior NY manager...
ReplyDeleteSuper nice touch, M.
What about GCS? How about: not a negative word is spoken till the water-walkers get their bonus checks and they're cashed?
ReplyDeleteNice post. My kids are exactly the same the worlds most transparent liars and terrible lie detectors.
ReplyDeleteMy son situational understanding is also terrible. He is the one still laughing and giggling when the teacher is at the end of her rope and looking to make an example of one of her wards.
Oh well there is hope as they are still young.
Old Vet, given the acceleration and deterioration of a;ll things credit, and the size of their class 2 & class 3 assets, they will find it difficult to remain mum for too long.
ReplyDeleteManc Trader - Tnx for sharing that. My older two (girls) are atrocious liars with my oldest breaking down into tears even before she's been accused, and my middle one precisely the portrait in the post. My youngest, however, a little guy is showing great promise at mastering the art of deception including the entire palette of aforementioned tools, all by aged 5. This would be cause for concern if he didn't have such good heart and character, so that he usually 'fesses-up because he seems to know (he's the cleverest of the lot) that he'll feel better, and not carry any guilt if he admits he done wrong. Of course the stakes are still low, relatively speaking, and he has time to up his game. My guess is that such keen understanding of the tricks of the trade and pre-sociopath behaviour will ideally suit him for either (Republican) politics or a Goldman partnership...