Dispatches from the New World of Work

CEOs with A Sense Of Humor

BP just reported very nice results. (I'm sure this comes as a great surprise to Americans paying $4.00+ per gallon at the pump—and Brits springing for $10.00+ for the same amount of petrol.) The "humor" part of the news item was the relatively new CEO, Tony Hayward, claiming that the good news was a product of "the first signs of real change inside the company." (He inherited a bit of a mess.)

He was joking, right?

If 100.00000000000% of BPers had been sound asleep at their work stations throughout the quarter, BP would have had great results as oil hit $120 per barrel.

Do these guys—e.g., "Big Tony"—really believe that their "programs are paying off"? I know it's a game, but surely they must understand what complete idiots they sound like.

On second thought, I guess I can understand their reluctance to tell it like it is: "Wow, are we ever lucky blokes! The Chinese are inhaling hydrocarbons by the gazillions of barrels with no end in sight, the guzzlin' Americans still think "conservation" is a 4-letter word, and the Royals in Saudi and their pawns at OPEC know they have the world over a barrel, as it were. Hence, with no action whatsoever by us, demand is soaring, supply is constrained, and our shareholders are rolling in the resultant loot. Plus, we'll be able to keep capital expenditures well under control, since there is utterly no incentive to find or refine more hydrocarbons and thence increase supply and thereby wound the geese that are laying the golden eggs. You can confidently look forward to us doing absolutely nothing except hiring more accountants and acquiring bigger vaults."

Wish I Could Bring Myself to Giggle (or At Least Smile) in Public

There's nothing to smile about in the world financial markets. The pain is spreading by the nano-second. But it's hard not to giggle at least a little. Just watching these Geniuses-of-Wall Street, who had Paul Simon perform at their kids' kindergarten graduation parties, pissing on one another is such an incredible spectacle. First, pissing on oneself: Former Citigroup chieftain John Reed celebrated the 10th anniversary of the mega-mega-mega Citicorp-Travelers merger he crafted by calling the deal a "mistake." Reed: "Stockholders have not benefited, employees certainly have not benefited and I don't think the customers have benefited." (Thanks, Johnny boy.) Mr Reed and his partner in crime, Travelers honcho Sandy Weill, of course benefited with a capital "B." Weill, having deposed Reed and run Citigroup, hand-picked Chuck Prince to succeed him, then blamed the Citigroup mess on Prince, calling the problem "poor management," as opposed to an infantile theory Weill and Reed concocted in the first place (e.g., "huge-er is better than merely huge").

Speaking of partners in crime, former Merrill Lynch boss of bosses David Komansky called the work of his chosen successor, Stan O'Neal, "absolutely criminal," the Financial Times reports. (Not a whole lot of restraint, or even vaguely adult behavior, there.) UBS, the Swiss gang of geniuses, spent a decade relentlessly "consolidating" to provide wall-to-wall-to-wall financial services to retail and commercial clients alike; and as part of the UBS flavor of the blame game explaining the loss of billions of Swiss Francs, in addition to crapping all over America per se for its bad genes, have decided that breaking up may be the new, revised wisdom du decade. For what it's worth, there's a pretty vigorous move afoot to chop up Citigroup as well; and pretty much everybody else, whose "realized synergy" was, in fact, measured by the barrels of red ink.

And, naturally, you heard it here last, Jerome Kerviel, the "rogue trader" who trashed France's SocGen almost single-handedly, is defending himself by blaming the bank for not catching him sooner!

As I said, it's all rather amusing, or would be, absent the global economic chaos that continues to boil. As an avowed enemy of almost any giant consolidations in the name of either "synergy" or the provision of "one-stop shopping," I am secretly, until now, drowning in smugness. Also, watching these geniuses turn out to have feet of maggot-infested clay is also chortle-worthy to one who has trouble with the whole Welch-ian (Jack, he who walkethed on water for 20 years—then bequeathed his successor a financial mess), "leader-as-God" phenomenon.

There's such a bizarre element of "obviousness" to this fiasco. E.g.: (1) That which goeth up and up and up doth not goeth more up and more up and more up forever and ever and ever. (You may want to write that one down.) (2) The fact that the experts (economists and mathematicians, for God's sake) had-have no idea how to value the derivatives-of-derivatives-of-derivatives, created by the bucket-load (to the tune of trillions and trillions of buckaroos), should have told anybody with a brain that the doggy doo-doo would splatter all over the fan sooner rather than later. (3) Then there was the notion that these un-understandable instruments could banish risk from the face of the earth "forever and ever and ever and ever, Amen." (4) And anybody near the coal face, with the greed meter dialed down even a little bitsy bit, might, just might, have seen that lending a half-mil or so to a jobless-homeless person might "eventually" present a problem. (Of course, history tells us that the greed meter is never dialed down in the slightest—never has been, never will be.) (5) And now the tragicomic spectacle of the creators of the mess calling the guys they stuck with the mess "criminals" for executing with vigor the strategies they concocted in the first place. (6) Not to mention Tom's favorite: Big mergers suck in 9 cases out of 8 and produce "synergistic-value" in 9 cases out of 7 and destroy lots and lots (and more lots and more lots) of value along the way.

What a hoot.
Not.
(Okay, sorta.)

Sub-prime Primer

A friend sent me the attached. I'm not in the habit of using this Blog to, effectively, forward email, but this was-is too good to pass up.

Brilliantly rendered!
All too true!

[We'd love to credit the person who put this together, but her-his name did not accompany the file. We'll certainly add a credit if anybody claims ownership.—CM]

Headline, page 1, Boston Globe, 20 January 2008:

"Broker's clients detail web of dashed dreams"

"When Marcia Neilson couldn't qualify for a home loan in early 2006 because of poor credit, her mortgage broker, Nicole Lyder, had an unusual solution: Add Neilson's daughter to the loan application.

"Neilson's 21-year-old daughter had just lost her job, but Lyder remained undeterred. 'That wasn't a problem,' Neilson recalled her broker saying.

"Neilson's real estate agent said Lyder enlisted him to drive Neilson and her daughter to Brockton City Hall. The pair filled out a business certificate that claimed they owned a hair salon in Brockton.

"The Neilsons qualified for a mortgage and bought a Dorchester house in June 2006 for $565,000. Last fall, Marcia Neilson learned from state investigators looking into Lyder's business practices that her loan application was padded in other ways: a statement for a $25,000 bank account in Neilson's name that she had no knowledge of.

"Fake documents, a phantom borrower, and other irregularities were common features of five subprime mortgages brokered by Lyder between November 2005 and June 2006 that were examined by the Boston Globe. Lyder's clients ranged from the barely employed to struggling working-class couples; one had just left a homeless shelter and two others gave up government-subsidized housing to buy homes. They said Lyder arranged loans that they later realized had monthly payments that far exceeded their means. All five loans are now in foreclosure."

Vile Bile!
Dearly Deserved!

Wall Street Journal, 22 January 2008: "Our fourth-quarter results were severely impacted by ongoing dislocations in capital markets and the slowing economy," said Kenneth D. Lewis, [Bank of America] chairman and chief executive officer. "However, we are cautiously optimistic about 2008 ..."

TP translation: "We made total asses of ourselves, allowing ourselves to be conned by a bunch of out-of-touch Nobel-winning 'economists' with their 'portfolio-risk smoothing models.' Then, as inevitably happens amidst the madness of crowds of overpaid executives bent upon 'keeping up with the Joneses,' we were flattened by that silly old saw, 'That which goes up eventually comes down.' Wow, talk about 'What they didn't teach us at Harvard Business School'! Truth is, we all ought to be put in stocks where people can throw rotten tomatoes at us—they'll have lots of time to do that given expected unemployment #s that we have wittingly facilitated. Meanwhile, I wish the very best to Angelo Mozilo, Countrywide CEO & Subprime Principal Perp, as he ponders how to spend the $112,000,000 I'm helping him pocket, obtained by shafting hundreds of thousands of innocents using sales 'incentive' schemes that make the numbers racketeers on the streets look squeaky clean by comparison. As to my 'cautiously optimistic for 2008,' what the hell else do you expect me to say? If I told the truth, you'd string me up even higher. Okay, okay, you win, I'm an idiot, an overpaid clown, conned like some mark for Three-card Monte on 17th Street in lower Manhattan. But I'm a rich idiot; you know what they say, 'Only in America.' Glad I wasn't born in Russia—Putin would already have shipped me, and probably my family, to Siberia; I hear it's colder there than in Charlotte, though given the cocoon in which I live, soothed by the dulcet tones of my executives singing my praises to me, I actually haven't been out in real weather for years."

(For those of you who wish to share the above, including this morning's
opening 446 point drop of the Dow, Tom has created a short PowerPoint, "The Subprime Times.")

Welcome 2008!
Red Ink, Department of:
$6,000 per ... Second!

Sometimes it feels to "us" (me) (Americans) that the "China problem" (trade imbalance) is all about cheap goods aimed for Wal*Mart's shelves here in Rutland VT. True, but there's much more to it—and it's much more universal than it seems to "us."

Consider: The European Union's trade deficit with China is growing at 15,000,000 Euros (about $22,000,000) per ... hour.

(That's about $6,000 per second if you do the math.)

Wow!
Whoa!
Some world!
Welcome to 2008!*

(*As if the possibility of 60 or so loose nucs in Pakistan were not enough to extend your NY's Day hangover—hey, it lowers our fear of Iran's "someday" nucs.)

(Speaking of "Welcome 2008," the picture above is our Grey Meadow Farm on 1 January 2008.)

Just Like It's Supposed to Work

Dollar way down. Euro likely to be strong-very strong for the foreseeable future. Airbus contemplates factory in Alabama. (More to it than this, obviously, but this is exactly the way markets are supposed to work. In New York City last Friday, the onslaught of European tourists—walking around with big bags of electronics—was a small version of the above.)