Home › Forums › Financial Markets/Economics › Jim Cramer gets Pounded by John Stewart on the Daily Show
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March 16, 2009 at 11:54 AM #367678March 16, 2009 at 12:39 PM #367094
Allan from Fallbrook
ParticipantDave: Excellent post and not a thing I can think to add to that.
My background is in corporate finance and accounting and I spent eight years with a large international insurance broker (Willis) as an office CFO (San Diego and then Orange County).
While in Orange County (and this is back in 1994), my boss (the CEO, a former Bear Stearns guy and Ohio State MBA) and I met with a rep from one of the investment banks regarding FRNs (floating rate notes) and repos (repurchase agreements). These were highly leveraged instruments, and nearly identical in type and flavor to those bought by Bob Citron, the Treasurer of Orange County, to the tune of nearly $2Bn. Rates of return in the high teens were being touted (we were told that 18% was the norm on an annualized basis), as was the relative “safety”, risk-wise.
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. It was a convoluted scheme to say the least and to refer to it as safe was laughable. In December of that year, Orange County was forced into BK when Citron’s overleveraged position was exposed by rising interest rates and Credit Suisse called his margin.
My point is this: The rep knew what a piece of crap he was marketing, but it was the hot ticket in town right then and one that was putting the most money in his pocket in the short-term. While we certainly weren’t an institutional investor, our risk posture and risk allocation model should have been obvious. However, this was a whole lot less about a client’s needs and a whole lot more about a stock jockey lining his pocket, NO MATTER WHAT THE EVENTUAL FALLOUT. Yeah, in a long-winded, circuitous fashion I’m making your point for you, but, the more things change, the more they stay the same.
March 16, 2009 at 12:39 PM #367382ParticipantDave: Excellent post and not a thing I can think to add to that.
My background is in corporate finance and accounting and I spent eight years with a large international insurance broker (Willis) as an office CFO (San Diego and then Orange County).
While in Orange County (and this is back in 1994), my boss (the CEO, a former Bear Stearns guy and Ohio State MBA) and I met with a rep from one of the investment banks regarding FRNs (floating rate notes) and repos (repurchase agreements). These were highly leveraged instruments, and nearly identical in type and flavor to those bought by Bob Citron, the Treasurer of Orange County, to the tune of nearly $2Bn. Rates of return in the high teens were being touted (we were told that 18% was the norm on an annualized basis), as was the relative “safety”, risk-wise.
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. It was a convoluted scheme to say the least and to refer to it as safe was laughable. In December of that year, Orange County was forced into BK when Citron’s overleveraged position was exposed by rising interest rates and Credit Suisse called his margin.
My point is this: The rep knew what a piece of crap he was marketing, but it was the hot ticket in town right then and one that was putting the most money in his pocket in the short-term. While we certainly weren’t an institutional investor, our risk posture and risk allocation model should have been obvious. However, this was a whole lot less about a client’s needs and a whole lot more about a stock jockey lining his pocket, NO MATTER WHAT THE EVENTUAL FALLOUT. Yeah, in a long-winded, circuitous fashion I’m making your point for you, but, the more things change, the more they stay the same.
March 16, 2009 at 12:39 PM #367549ParticipantDave: Excellent post and not a thing I can think to add to that.
My background is in corporate finance and accounting and I spent eight years with a large international insurance broker (Willis) as an office CFO (San Diego and then Orange County).
While in Orange County (and this is back in 1994), my boss (the CEO, a former Bear Stearns guy and Ohio State MBA) and I met with a rep from one of the investment banks regarding FRNs (floating rate notes) and repos (repurchase agreements). These were highly leveraged instruments, and nearly identical in type and flavor to those bought by Bob Citron, the Treasurer of Orange County, to the tune of nearly $2Bn. Rates of return in the high teens were being touted (we were told that 18% was the norm on an annualized basis), as was the relative “safety”, risk-wise.
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. It was a convoluted scheme to say the least and to refer to it as safe was laughable. In December of that year, Orange County was forced into BK when Citron’s overleveraged position was exposed by rising interest rates and Credit Suisse called his margin.
My point is this: The rep knew what a piece of crap he was marketing, but it was the hot ticket in town right then and one that was putting the most money in his pocket in the short-term. While we certainly weren’t an institutional investor, our risk posture and risk allocation model should have been obvious. However, this was a whole lot less about a client’s needs and a whole lot more about a stock jockey lining his pocket, NO MATTER WHAT THE EVENTUAL FALLOUT. Yeah, in a long-winded, circuitous fashion I’m making your point for you, but, the more things change, the more they stay the same.
March 16, 2009 at 12:39 PM #367585ParticipantDave: Excellent post and not a thing I can think to add to that.
My background is in corporate finance and accounting and I spent eight years with a large international insurance broker (Willis) as an office CFO (San Diego and then Orange County).
While in Orange County (and this is back in 1994), my boss (the CEO, a former Bear Stearns guy and Ohio State MBA) and I met with a rep from one of the investment banks regarding FRNs (floating rate notes) and repos (repurchase agreements). These were highly leveraged instruments, and nearly identical in type and flavor to those bought by Bob Citron, the Treasurer of Orange County, to the tune of nearly $2Bn. Rates of return in the high teens were being touted (we were told that 18% was the norm on an annualized basis), as was the relative “safety”, risk-wise.
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. It was a convoluted scheme to say the least and to refer to it as safe was laughable. In December of that year, Orange County was forced into BK when Citron’s overleveraged position was exposed by rising interest rates and Credit Suisse called his margin.
My point is this: The rep knew what a piece of crap he was marketing, but it was the hot ticket in town right then and one that was putting the most money in his pocket in the short-term. While we certainly weren’t an institutional investor, our risk posture and risk allocation model should have been obvious. However, this was a whole lot less about a client’s needs and a whole lot more about a stock jockey lining his pocket, NO MATTER WHAT THE EVENTUAL FALLOUT. Yeah, in a long-winded, circuitous fashion I’m making your point for you, but, the more things change, the more they stay the same.
March 16, 2009 at 12:39 PM #367698ParticipantDave: Excellent post and not a thing I can think to add to that.
My background is in corporate finance and accounting and I spent eight years with a large international insurance broker (Willis) as an office CFO (San Diego and then Orange County).
While in Orange County (and this is back in 1994), my boss (the CEO, a former Bear Stearns guy and Ohio State MBA) and I met with a rep from one of the investment banks regarding FRNs (floating rate notes) and repos (repurchase agreements). These were highly leveraged instruments, and nearly identical in type and flavor to those bought by Bob Citron, the Treasurer of Orange County, to the tune of nearly $2Bn. Rates of return in the high teens were being touted (we were told that 18% was the norm on an annualized basis), as was the relative “safety”, risk-wise.
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. It was a convoluted scheme to say the least and to refer to it as safe was laughable. In December of that year, Orange County was forced into BK when Citron’s overleveraged position was exposed by rising interest rates and Credit Suisse called his margin.
My point is this: The rep knew what a piece of crap he was marketing, but it was the hot ticket in town right then and one that was putting the most money in his pocket in the short-term. While we certainly weren’t an institutional investor, our risk posture and risk allocation model should have been obvious. However, this was a whole lot less about a client’s needs and a whole lot more about a stock jockey lining his pocket, NO MATTER WHAT THE EVENTUAL FALLOUT. Yeah, in a long-winded, circuitous fashion I’m making your point for you, but, the more things change, the more they stay the same.
March 16, 2009 at 12:56 PM #367104davelj
Participant[quote=Allan from Fallbrook]
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. [/quote]That’s actually another large problem, especially in the financial world. There aren’t enough folks who evaluate and analyze things and say, “Shit, maybe I’m just stupid, but I just don’t get it.”
As my father, who was the CFO of a fairly large conglomerate many moons ago, used to say: “If it doesn’t make sense on the back of an envelope, it’s probably not worth screwing around with.”
Related, as someone recently noted (I think it was Paul Volcker): “Most folks appear to be more certain of everything than I am regarding anything.”
Which is just another way of saying that too many folks don’t know what they don’t know and are unwilling to internalize or acknowledge it. This ailment is particularly acute in the world of finance. And clearly it’s done a hell of a lot of damage.
March 16, 2009 at 12:56 PM #367393Participant[quote=Allan from Fallbrook]
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. [/quote]That’s actually another large problem, especially in the financial world. There aren’t enough folks who evaluate and analyze things and say, “Shit, maybe I’m just stupid, but I just don’t get it.”
As my father, who was the CFO of a fairly large conglomerate many moons ago, used to say: “If it doesn’t make sense on the back of an envelope, it’s probably not worth screwing around with.”
Related, as someone recently noted (I think it was Paul Volcker): “Most folks appear to be more certain of everything than I am regarding anything.”
Which is just another way of saying that too many folks don’t know what they don’t know and are unwilling to internalize or acknowledge it. This ailment is particularly acute in the world of finance. And clearly it’s done a hell of a lot of damage.
March 16, 2009 at 12:56 PM #367559Participant[quote=Allan from Fallbrook]
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. [/quote]That’s actually another large problem, especially in the financial world. There aren’t enough folks who evaluate and analyze things and say, “Shit, maybe I’m just stupid, but I just don’t get it.”
As my father, who was the CFO of a fairly large conglomerate many moons ago, used to say: “If it doesn’t make sense on the back of an envelope, it’s probably not worth screwing around with.”
Related, as someone recently noted (I think it was Paul Volcker): “Most folks appear to be more certain of everything than I am regarding anything.”
Which is just another way of saying that too many folks don’t know what they don’t know and are unwilling to internalize or acknowledge it. This ailment is particularly acute in the world of finance. And clearly it’s done a hell of a lot of damage.
March 16, 2009 at 12:56 PM #367596Participant[quote=Allan from Fallbrook]
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. [/quote]That’s actually another large problem, especially in the financial world. There aren’t enough folks who evaluate and analyze things and say, “Shit, maybe I’m just stupid, but I just don’t get it.”
As my father, who was the CFO of a fairly large conglomerate many moons ago, used to say: “If it doesn’t make sense on the back of an envelope, it’s probably not worth screwing around with.”
Related, as someone recently noted (I think it was Paul Volcker): “Most folks appear to be more certain of everything than I am regarding anything.”
Which is just another way of saying that too many folks don’t know what they don’t know and are unwilling to internalize or acknowledge it. This ailment is particularly acute in the world of finance. And clearly it’s done a hell of a lot of damage.
March 16, 2009 at 12:56 PM #367708Participant[quote=Allan from Fallbrook]
I remember sitting through this presentation and thinking, “I have no idea what the hell this guy is talking about”. [/quote]That’s actually another large problem, especially in the financial world. There aren’t enough folks who evaluate and analyze things and say, “Shit, maybe I’m just stupid, but I just don’t get it.”
As my father, who was the CFO of a fairly large conglomerate many moons ago, used to say: “If it doesn’t make sense on the back of an envelope, it’s probably not worth screwing around with.”
Related, as someone recently noted (I think it was Paul Volcker): “Most folks appear to be more certain of everything than I am regarding anything.”
Which is just another way of saying that too many folks don’t know what they don’t know and are unwilling to internalize or acknowledge it. This ailment is particularly acute in the world of finance. And clearly it’s done a hell of a lot of damage.
March 16, 2009 at 1:13 PM #367109ParticipantDave: I used to get a fairly significant ration of shit from our “producers” (sales force) because I would sit and ask them question after question regarding their deals. Willis had a fairly astute policy that required the CFO to chair sales meetings, which used to drive the sales staff nuts, largely because they couldn’t bullshit the accounting and finance guys with their pie-in-the-sky projections.
I so pissed off one of the senior sales guys when I repeatedly told him a deal didn’t “pencil” that he dumped over a thousand #2 pencils in my office during the weekend following my nixing his deal.
I know a lot of guys that worked accounting and finance for Sachs, Stearns and Merrill and I can tell you that they were under incredible pressure to toe the line when it came to production incentives and bonuses. Due diligence and objectivity go right out the nearest window when your ass is on the line and I can remember having shouting matches with my CEO, who was a sales guy himself and a former Bear Stearns trader, as he tried to jam dogshit deals down my throat. These guys would wheedle and cajole and threaten and beg and the volume went up the closer you got to the end of the quarter or (especially) the end of the year. I was pushed to “play ball” and be a “team player” and not some “stick in the mud” accountant.
It wears on you after a while and the lure of the “dark side” beckons. I can remember sitting in a gentlemen’s club in Orange County (Fritz’s on Katella), smoking a Cuban Cohiba, with some 19yo gyrating in my lap and thinking, “I can get used to this!”. The reason I was there? I had approved a particularly thorny deal, but one that did make sense, profitability-wise, and this was my “reward”.
What did Glenn Frey say in his song “Smuggler’s Blues”? “It’s the lure of easy money, it’s got a very strong appeal”.
March 16, 2009 at 1:13 PM #367397ParticipantDave: I used to get a fairly significant ration of shit from our “producers” (sales force) because I would sit and ask them question after question regarding their deals. Willis had a fairly astute policy that required the CFO to chair sales meetings, which used to drive the sales staff nuts, largely because they couldn’t bullshit the accounting and finance guys with their pie-in-the-sky projections.
I so pissed off one of the senior sales guys when I repeatedly told him a deal didn’t “pencil” that he dumped over a thousand #2 pencils in my office during the weekend following my nixing his deal.
I know a lot of guys that worked accounting and finance for Sachs, Stearns and Merrill and I can tell you that they were under incredible pressure to toe the line when it came to production incentives and bonuses. Due diligence and objectivity go right out the nearest window when your ass is on the line and I can remember having shouting matches with my CEO, who was a sales guy himself and a former Bear Stearns trader, as he tried to jam dogshit deals down my throat. These guys would wheedle and cajole and threaten and beg and the volume went up the closer you got to the end of the quarter or (especially) the end of the year. I was pushed to “play ball” and be a “team player” and not some “stick in the mud” accountant.
It wears on you after a while and the lure of the “dark side” beckons. I can remember sitting in a gentlemen’s club in Orange County (Fritz’s on Katella), smoking a Cuban Cohiba, with some 19yo gyrating in my lap and thinking, “I can get used to this!”. The reason I was there? I had approved a particularly thorny deal, but one that did make sense, profitability-wise, and this was my “reward”.
What did Glenn Frey say in his song “Smuggler’s Blues”? “It’s the lure of easy money, it’s got a very strong appeal”.
March 16, 2009 at 1:13 PM #367564ParticipantDave: I used to get a fairly significant ration of shit from our “producers” (sales force) because I would sit and ask them question after question regarding their deals. Willis had a fairly astute policy that required the CFO to chair sales meetings, which used to drive the sales staff nuts, largely because they couldn’t bullshit the accounting and finance guys with their pie-in-the-sky projections.
I so pissed off one of the senior sales guys when I repeatedly told him a deal didn’t “pencil” that he dumped over a thousand #2 pencils in my office during the weekend following my nixing his deal.
I know a lot of guys that worked accounting and finance for Sachs, Stearns and Merrill and I can tell you that they were under incredible pressure to toe the line when it came to production incentives and bonuses. Due diligence and objectivity go right out the nearest window when your ass is on the line and I can remember having shouting matches with my CEO, who was a sales guy himself and a former Bear Stearns trader, as he tried to jam dogshit deals down my throat. These guys would wheedle and cajole and threaten and beg and the volume went up the closer you got to the end of the quarter or (especially) the end of the year. I was pushed to “play ball” and be a “team player” and not some “stick in the mud” accountant.
It wears on you after a while and the lure of the “dark side” beckons. I can remember sitting in a gentlemen’s club in Orange County (Fritz’s on Katella), smoking a Cuban Cohiba, with some 19yo gyrating in my lap and thinking, “I can get used to this!”. The reason I was there? I had approved a particularly thorny deal, but one that did make sense, profitability-wise, and this was my “reward”.
What did Glenn Frey say in his song “Smuggler’s Blues”? “It’s the lure of easy money, it’s got a very strong appeal”.
March 16, 2009 at 1:13 PM #367601ParticipantDave: I used to get a fairly significant ration of shit from our “producers” (sales force) because I would sit and ask them question after question regarding their deals. Willis had a fairly astute policy that required the CFO to chair sales meetings, which used to drive the sales staff nuts, largely because they couldn’t bullshit the accounting and finance guys with their pie-in-the-sky projections.
I so pissed off one of the senior sales guys when I repeatedly told him a deal didn’t “pencil” that he dumped over a thousand #2 pencils in my office during the weekend following my nixing his deal.
I know a lot of guys that worked accounting and finance for Sachs, Stearns and Merrill and I can tell you that they were under incredible pressure to toe the line when it came to production incentives and bonuses. Due diligence and objectivity go right out the nearest window when your ass is on the line and I can remember having shouting matches with my CEO, who was a sales guy himself and a former Bear Stearns trader, as he tried to jam dogshit deals down my throat. These guys would wheedle and cajole and threaten and beg and the volume went up the closer you got to the end of the quarter or (especially) the end of the year. I was pushed to “play ball” and be a “team player” and not some “stick in the mud” accountant.
It wears on you after a while and the lure of the “dark side” beckons. I can remember sitting in a gentlemen’s club in Orange County (Fritz’s on Katella), smoking a Cuban Cohiba, with some 19yo gyrating in my lap and thinking, “I can get used to this!”. The reason I was there? I had approved a particularly thorny deal, but one that did make sense, profitability-wise, and this was my “reward”.
What did Glenn Frey say in his song “Smuggler’s Blues”? “It’s the lure of easy money, it’s got a very strong appeal”.
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