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.