Hubris and nemesis
Today's FT quotes an interview it had given to Dick Fuld, Chairman and CEO of Lehman's, in 2001. They asked him whether its $7.2bn in equity was sufficient for an investment bank. He replied with a story about playing blackjack in Las Vegas in the 1970s when he was a young bond trader at Lehman's. He said he was joined by a high-roller who was having terrible luck. Every time the high-roller lost, he doubled his bet, which impressed young Fuld. "That's the answer," he thought, "Get enough capital and double up." But as dawn neared and the high-roller's losses mounted to several million dollars, Fuld said he felt sick to his stomach. "I don't care who you are," Fuld remembered thinking, "You don't have enough capital."
posted by Whispering Walls at 7:55 am
14 Comments:
Looks like he forgot.....
I had a nightmare this morning, and waking up feeling rather anxious, got up to make a calming cup of tea.
Switched on the radio back in the bedroom and listened to Adam Shaw talking about the Lehman Brothers shakeout.
"The problem is these guys have very specialised jobs, and now that they have lost them, will realise that there are only a very a limited number of hedge funds and investment companies. The music has stopped and a lot of them are left standing.."
Needless to say I cheered up hugely and a broad smile spread across my face - although that may have been the cup of tea - whatever - and I soon was able to pop back to sleep for a couple of hours..
Every cloud has a silver lining..
Indeed KL
Ah Anon - everybody hates hedge funds. Radio 4 was interviewing darling Darling this morning and suggested that he stops hedge funds short-selling. Ho hum. Hedge funds can only sell short if they can get the stock to borrow. Hedge funds make markets more efficient and also can provide relatively safe investments in bear markets. It is a cut throat business. Many will fail this year. I hope my water fund survives but if it does not at least it may give you something to smile about.
Water water everywhere - surely this has to be an excellent bet even as the rain comes tumbling down. Remember, water sells for more than oil.
ww - there should already have been a central clearing for swaps - just shows how lax everyone has been. And DEFINITELY go for your water stocks. I bet we are within 10/15% of the bottom - especially on stocks with a decent yield - and when it turns it will be a doozey.I'm already trying to bottom fish in the commercial property market, but noone wants to sell at the prices being offered.We have to wait for the imortal phrase " There is no combination of circumstances under which we will sell at that price" - which is when you know you've got a bargain.
and PS I love hedge funds - properly run they are tremendous. The problem is everyone eventually starts to believe their own PR
Thank you KL x
AN APOLOGY
In true Private Eye style, I would like to offer an apology.. When I said that hedge fund/investment fund short-termies were a bunch of crooks whose rapacious greed and short-term profiteering was the biggest scourge on humanity, clearly what I meant was..
Unless they are helping to massage up the price of my substantial holding of Lloyds TSB shares on the back of a 'rapacious raid' of short-term speculative selling of HBOS shares with clearly a limited basis in market value reality...
Clearly, as a 'champagne socialist' I shall be wiping a few crocodile tears away for the jobs of those chucked on the scrapheap if I'm able to get to the point of paying off my mortgage.. But hey, what 'goes around, comes around', and 'pride comes before a fall', but one has to enjoy the good times while one can...
That said, I still think 'Derivatives' are, as Mr Buffett said, 'Financial Weapons of Mass Destruction'.. Well, I have to have something for which to give a grovelling backtracking apology in the next exciting episode of this blog..
Toodle-pip...
Apology accepted Anon!
Ooppss..Scratch that - the shares are heading south again...
Cue 'It's a rollercoaster of emotion' type financial/football cliches...
Decisions, decisions...
What to do about my lefty-liberal guilt now that Lloyds TSB shares are soaring on the back of a 'private companies take the profit, while the poor state taxpayer carries the risk'..
Maybe if I ponder it long enough it will no longer be a problem as the shares will tank when the problems start crawling out of the woodwork having previously been invisible through the 'rose-tinted' glasses...
Capitalism has many flaws, but you have to admit, the soap opera is rarely boring...
It's certainly a thrilling ride, Anon.
Off-topic, but on a similar theme..
http://news.bbc.co.uk/1/hi/sci/tech/7626944.stm
Will this be known as the 'Curse of Radio 4' ? Or Andy 'jug-ears' Marr ?
That's been rather a damp squib, hasn't it?
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