On MTM, insolvency, and market over-corrections

[Arraya]

drunkle-Dave lives in a smoke and mirrors filled byzantine labyrinth of virtual money, theoretical valuations and ever morphing rules to make it all work out in the end. That kind of thinking does not work when applied to the real world and hashing life out in a cooperative and fair manner. The money men that are running this country have lost their minds and dave is caught in the same rapacious consensus trance of keeping the system afloat at all costs. Probably on an unconscious level he knows that any true reform could very well affect his world in a big way. But your not even aloud to think that far our of the box, for it is heresy!

Still, the clock is ticking quickly and the villagers are sharpening the pitchforks. I’d think they would bring in the troops to uphold their banking system if it came down to it. It’ll be an interesting show and they are guaranteed to fail by any rational measure of success, which they will surely try and define in their morphological world of definitions. haha

“A collective problem, if not recognized as such, always appears as a personal problem… [T]he cause of disturbance is … not to be sought in the personal surroundings, but rather in the collective situation.” — Carl Jung

[davelj]

[quote=Allan from Fallbrook]

I have friends who have worked accounting and finance in investment banking and these people had their jobs threatened if they pushed too hard in terms of diligence or accountability.

I agree with your point that oftimes it isn’t criminality that drives the decisions, but stupidity or greed or a combination of the two. It used to amaze me how many MBAs were absolutely ignorant and not just about the financials, but basic business fundamentals. Same goes for many of the CPAs I worked with. Scary stuff.[/quote]

I know this happens all the time. But – and I think you’ll agree – it’s normally not a situation where the Person In Charge is saying, “Hey, you gotta approve this transaction even though I know it’s total shit.” Although that probably happens sometimes. It’s generally a case where the PIC is saying, “Look, I know it’s not perfect, but it’ll probably work out fine – just approve it.” And they actually believe it.

One of the problems in our business culture – and I don’t know how it can be fixed – is that optimists tend to occupy the senior ranks of management at most companies. Why? Because over time the economy grows and over time the optimists are right more often than the skeptics. It’s just very difficult for a perma-skeptic to run a company, particularly a large one, because s/he’ll look too “dumb” (re: conservative) too much of the time to succeed. So as the optimists rise to the top together, shit gets loosey-goosey below them and when things start to slow, all manner of hell breaks loose. Witness now.

I find very few skeptics and folks who like to hear folks say “no” running large companies. Generally big companies are run by uber-optimists and yes-men who sucked up to the yes-men that they replaced. That’s just the nature of things.

The skeptics generally start their own companies. Which remain small, for better or worse. High growth almost requires some degree of irrational optimism. Again, there are exceptions, but I think this is an accurate generalization.

[davelj]

[quote=Allan from Fallbrook]

I have friends who have worked accounting and finance in investment banking and these people had their jobs threatened if they pushed too hard in terms of diligence or accountability.

I agree with your point that oftimes it isn’t criminality that drives the decisions, but stupidity or greed or a combination of the two. It used to amaze me how many MBAs were absolutely ignorant and not just about the financials, but basic business fundamentals. Same goes for many of the CPAs I worked with. Scary stuff.[/quote]

I know this happens all the time. But – and I think you’ll agree – it’s normally not a situation where the Person In Charge is saying, “Hey, you gotta approve this transaction even though I know it’s total shit.” Although that probably happens sometimes. It’s generally a case where the PIC is saying, “Look, I know it’s not perfect, but it’ll probably work out fine – just approve it.” And they actually believe it.

One of the problems in our business culture – and I don’t know how it can be fixed – is that optimists tend to occupy the senior ranks of management at most companies. Why? Because over time the economy grows and over time the optimists are right more often than the skeptics. It’s just very difficult for a perma-skeptic to run a company, particularly a large one, because s/he’ll look too “dumb” (re: conservative) too much of the time to succeed. So as the optimists rise to the top together, shit gets loosey-goosey below them and when things start to slow, all manner of hell breaks loose. Witness now.

I find very few skeptics and folks who like to hear folks say “no” running large companies. Generally big companies are run by uber-optimists and yes-men who sucked up to the yes-men that they replaced. That’s just the nature of things.

The skeptics generally start their own companies. Which remain small, for better or worse. High growth almost requires some degree of irrational optimism. Again, there are exceptions, but I think this is an accurate generalization.

[davelj]

[quote=Allan from Fallbrook]

I have friends who have worked accounting and finance in investment banking and these people had their jobs threatened if they pushed too hard in terms of diligence or accountability.

I agree with your point that oftimes it isn’t criminality that drives the decisions, but stupidity or greed or a combination of the two. It used to amaze me how many MBAs were absolutely ignorant and not just about the financials, but basic business fundamentals. Same goes for many of the CPAs I worked with. Scary stuff.[/quote]

I know this happens all the time. But – and I think you’ll agree – it’s normally not a situation where the Person In Charge is saying, “Hey, you gotta approve this transaction even though I know it’s total shit.” Although that probably happens sometimes. It’s generally a case where the PIC is saying, “Look, I know it’s not perfect, but it’ll probably work out fine – just approve it.” And they actually believe it.

One of the problems in our business culture – and I don’t know how it can be fixed – is that optimists tend to occupy the senior ranks of management at most companies. Why? Because over time the economy grows and over time the optimists are right more often than the skeptics. It’s just very difficult for a perma-skeptic to run a company, particularly a large one, because s/he’ll look too “dumb” (re: conservative) too much of the time to succeed. So as the optimists rise to the top together, shit gets loosey-goosey below them and when things start to slow, all manner of hell breaks loose. Witness now.

I find very few skeptics and folks who like to hear folks say “no” running large companies. Generally big companies are run by uber-optimists and yes-men who sucked up to the yes-men that they replaced. That’s just the nature of things.

The skeptics generally start their own companies. Which remain small, for better or worse. High growth almost requires some degree of irrational optimism. Again, there are exceptions, but I think this is an accurate generalization.

[davelj]

[quote=Allan from Fallbrook]

I have friends who have worked accounting and finance in investment banking and these people had their jobs threatened if they pushed too hard in terms of diligence or accountability.

I agree with your point that oftimes it isn’t criminality that drives the decisions, but stupidity or greed or a combination of the two. It used to amaze me how many MBAs were absolutely ignorant and not just about the financials, but basic business fundamentals. Same goes for many of the CPAs I worked with. Scary stuff.[/quote]

I know this happens all the time. But – and I think you’ll agree – it’s normally not a situation where the Person In Charge is saying, “Hey, you gotta approve this transaction even though I know it’s total shit.” Although that probably happens sometimes. It’s generally a case where the PIC is saying, “Look, I know it’s not perfect, but it’ll probably work out fine – just approve it.” And they actually believe it.

One of the problems in our business culture – and I don’t know how it can be fixed – is that optimists tend to occupy the senior ranks of management at most companies. Why? Because over time the economy grows and over time the optimists are right more often than the skeptics. It’s just very difficult for a perma-skeptic to run a company, particularly a large one, because s/he’ll look too “dumb” (re: conservative) too much of the time to succeed. So as the optimists rise to the top together, shit gets loosey-goosey below them and when things start to slow, all manner of hell breaks loose. Witness now.

I find very few skeptics and folks who like to hear folks say “no” running large companies. Generally big companies are run by uber-optimists and yes-men who sucked up to the yes-men that they replaced. That’s just the nature of things.

The skeptics generally start their own companies. Which remain small, for better or worse. High growth almost requires some degree of irrational optimism. Again, there are exceptions, but I think this is an accurate generalization.

[davelj]

[quote=Allan from Fallbrook]

I have friends who have worked accounting and finance in investment banking and these people had their jobs threatened if they pushed too hard in terms of diligence or accountability.

I agree with your point that oftimes it isn’t criminality that drives the decisions, but stupidity or greed or a combination of the two. It used to amaze me how many MBAs were absolutely ignorant and not just about the financials, but basic business fundamentals. Same goes for many of the CPAs I worked with. Scary stuff.[/quote]

I know this happens all the time. But – and I think you’ll agree – it’s normally not a situation where the Person In Charge is saying, “Hey, you gotta approve this transaction even though I know it’s total shit.” Although that probably happens sometimes. It’s generally a case where the PIC is saying, “Look, I know it’s not perfect, but it’ll probably work out fine – just approve it.” And they actually believe it.

One of the problems in our business culture – and I don’t know how it can be fixed – is that optimists tend to occupy the senior ranks of management at most companies. Why? Because over time the economy grows and over time the optimists are right more often than the skeptics. It’s just very difficult for a perma-skeptic to run a company, particularly a large one, because s/he’ll look too “dumb” (re: conservative) too much of the time to succeed. So as the optimists rise to the top together, shit gets loosey-goosey below them and when things start to slow, all manner of hell breaks loose. Witness now.

I find very few skeptics and folks who like to hear folks say “no” running large companies. Generally big companies are run by uber-optimists and yes-men who sucked up to the yes-men that they replaced. That’s just the nature of things.

The skeptics generally start their own companies. Which remain small, for better or worse. High growth almost requires some degree of irrational optimism. Again, there are exceptions, but I think this is an accurate generalization.

[Allan from Fallbrook]

Dave: I’d refine your point as follows: I think more than a few of the people in charge really don’t fully understand the complexity of the operations they are running and at both the micro (individual deals and projects) and macro (enterprise wide) levels.

Citi is an excellent case in point. You don’t take a large market bank (Citibank), national insurance company (Travelers) and investment house and throw them together. You not only have major cultural issues (because, God knows, insurance folk and investment banking folk don’t even speak the same language, business-wise), but the logistics and mechanics of running the “one stop financial and insurance shop” that uber-optimists put together is mind-boggling.

Let’s face it: Most CEOs are salesmen and saleswomen, pure and simple. The CFO ideally should be a watchdog, but the complexity has overwhelmed more than a few CFOs as well, and many have been co-opted by “performance incentives”, which is nothing other than the CEO buying loyalty. At some point, you cross a complexity threshold, where the size and breadth of an organization makes it inherently unmanageable.

At that point, you have CEOs, who are pro-growth and pro-revenue to begin with, with very limited attention spans, reviewing potentially multi-billion dollar deals and making decisions with little to no forethought or foresight.

That’s when reliance on analysts, ratings agencies and other so-called “experts” becomes tremendously important and presents a huge vulnerability. I’m certainly not excusing the CEOs and management teams, far from it. They should have known better and were handsomely paid to know better, but didn’t.

Again, not criminality, but stupidity, cupidity and greed. Akin to those senior managers I worked with that didn’t know how to read a P&L properly, the cheerfully and willfully enthusiastic idiots were running the show. And, they were being told by those who should have been practicing diligence and probity, like Moody’s and Andersen (remember Enron?) and Jones Day, that all was well.

It wasn’t and here we are, arranging deck chairs on the Titanic.

[Allan from Fallbrook]

Dave: I’d refine your point as follows: I think more than a few of the people in charge really don’t fully understand the complexity of the operations they are running and at both the micro (individual deals and projects) and macro (enterprise wide) levels.

Citi is an excellent case in point. You don’t take a large market bank (Citibank), national insurance company (Travelers) and investment house and throw them together. You not only have major cultural issues (because, God knows, insurance folk and investment banking folk don’t even speak the same language, business-wise), but the logistics and mechanics of running the “one stop financial and insurance shop” that uber-optimists put together is mind-boggling.

Let’s face it: Most CEOs are salesmen and saleswomen, pure and simple. The CFO ideally should be a watchdog, but the complexity has overwhelmed more than a few CFOs as well, and many have been co-opted by “performance incentives”, which is nothing other than the CEO buying loyalty. At some point, you cross a complexity threshold, where the size and breadth of an organization makes it inherently unmanageable.

At that point, you have CEOs, who are pro-growth and pro-revenue to begin with, with very limited attention spans, reviewing potentially multi-billion dollar deals and making decisions with little to no forethought or foresight.

That’s when reliance on analysts, ratings agencies and other so-called “experts” becomes tremendously important and presents a huge vulnerability. I’m certainly not excusing the CEOs and management teams, far from it. They should have known better and were handsomely paid to know better, but didn’t.

Again, not criminality, but stupidity, cupidity and greed. Akin to those senior managers I worked with that didn’t know how to read a P&L properly, the cheerfully and willfully enthusiastic idiots were running the show. And, they were being told by those who should have been practicing diligence and probity, like Moody’s and Andersen (remember Enron?) and Jones Day, that all was well.

It wasn’t and here we are, arranging deck chairs on the Titanic.

[Allan from Fallbrook]

Dave: I’d refine your point as follows: I think more than a few of the people in charge really don’t fully understand the complexity of the operations they are running and at both the micro (individual deals and projects) and macro (enterprise wide) levels.

Citi is an excellent case in point. You don’t take a large market bank (Citibank), national insurance company (Travelers) and investment house and throw them together. You not only have major cultural issues (because, God knows, insurance folk and investment banking folk don’t even speak the same language, business-wise), but the logistics and mechanics of running the “one stop financial and insurance shop” that uber-optimists put together is mind-boggling.

Let’s face it: Most CEOs are salesmen and saleswomen, pure and simple. The CFO ideally should be a watchdog, but the complexity has overwhelmed more than a few CFOs as well, and many have been co-opted by “performance incentives”, which is nothing other than the CEO buying loyalty. At some point, you cross a complexity threshold, where the size and breadth of an organization makes it inherently unmanageable.

At that point, you have CEOs, who are pro-growth and pro-revenue to begin with, with very limited attention spans, reviewing potentially multi-billion dollar deals and making decisions with little to no forethought or foresight.

That’s when reliance on analysts, ratings agencies and other so-called “experts” becomes tremendously important and presents a huge vulnerability. I’m certainly not excusing the CEOs and management teams, far from it. They should have known better and were handsomely paid to know better, but didn’t.

Again, not criminality, but stupidity, cupidity and greed. Akin to those senior managers I worked with that didn’t know how to read a P&L properly, the cheerfully and willfully enthusiastic idiots were running the show. And, they were being told by those who should have been practicing diligence and probity, like Moody’s and Andersen (remember Enron?) and Jones Day, that all was well.

It wasn’t and here we are, arranging deck chairs on the Titanic.

[Allan from Fallbrook]

Dave: I’d refine your point as follows: I think more than a few of the people in charge really don’t fully understand the complexity of the operations they are running and at both the micro (individual deals and projects) and macro (enterprise wide) levels.

Citi is an excellent case in point. You don’t take a large market bank (Citibank), national insurance company (Travelers) and investment house and throw them together. You not only have major cultural issues (because, God knows, insurance folk and investment banking folk don’t even speak the same language, business-wise), but the logistics and mechanics of running the “one stop financial and insurance shop” that uber-optimists put together is mind-boggling.

Let’s face it: Most CEOs are salesmen and saleswomen, pure and simple. The CFO ideally should be a watchdog, but the complexity has overwhelmed more than a few CFOs as well, and many have been co-opted by “performance incentives”, which is nothing other than the CEO buying loyalty. At some point, you cross a complexity threshold, where the size and breadth of an organization makes it inherently unmanageable.

At that point, you have CEOs, who are pro-growth and pro-revenue to begin with, with very limited attention spans, reviewing potentially multi-billion dollar deals and making decisions with little to no forethought or foresight.

That’s when reliance on analysts, ratings agencies and other so-called “experts” becomes tremendously important and presents a huge vulnerability. I’m certainly not excusing the CEOs and management teams, far from it. They should have known better and were handsomely paid to know better, but didn’t.

Again, not criminality, but stupidity, cupidity and greed. Akin to those senior managers I worked with that didn’t know how to read a P&L properly, the cheerfully and willfully enthusiastic idiots were running the show. And, they were being told by those who should have been practicing diligence and probity, like Moody’s and Andersen (remember Enron?) and Jones Day, that all was well.

It wasn’t and here we are, arranging deck chairs on the Titanic.

[Allan from Fallbrook]

Dave: I’d refine your point as follows: I think more than a few of the people in charge really don’t fully understand the complexity of the operations they are running and at both the micro (individual deals and projects) and macro (enterprise wide) levels.

Citi is an excellent case in point. You don’t take a large market bank (Citibank), national insurance company (Travelers) and investment house and throw them together. You not only have major cultural issues (because, God knows, insurance folk and investment banking folk don’t even speak the same language, business-wise), but the logistics and mechanics of running the “one stop financial and insurance shop” that uber-optimists put together is mind-boggling.

Let’s face it: Most CEOs are salesmen and saleswomen, pure and simple. The CFO ideally should be a watchdog, but the complexity has overwhelmed more than a few CFOs as well, and many have been co-opted by “performance incentives”, which is nothing other than the CEO buying loyalty. At some point, you cross a complexity threshold, where the size and breadth of an organization makes it inherently unmanageable.

At that point, you have CEOs, who are pro-growth and pro-revenue to begin with, with very limited attention spans, reviewing potentially multi-billion dollar deals and making decisions with little to no forethought or foresight.

That’s when reliance on analysts, ratings agencies and other so-called “experts” becomes tremendously important and presents a huge vulnerability. I’m certainly not excusing the CEOs and management teams, far from it. They should have known better and were handsomely paid to know better, but didn’t.

Again, not criminality, but stupidity, cupidity and greed. Akin to those senior managers I worked with that didn’t know how to read a P&L properly, the cheerfully and willfully enthusiastic idiots were running the show. And, they were being told by those who should have been practicing diligence and probity, like Moody’s and Andersen (remember Enron?) and Jones Day, that all was well.

It wasn’t and here we are, arranging deck chairs on the Titanic.

[davelj]

[quote=Arraya]drunkle-Dave lives in a smoke and mirrors filled byzantine labyrinth of virtual money, theoretical valuations and ever morphing rules to make it all work out in the end. That kind of thinking does not work when applied to the real world and hashing life out in a cooperative and fair manner. The money men that are running this country have lost their minds and dave is caught in the same rapacious consensus trance of keeping the system afloat at all costs.

It’ll be an interesting show and they are guaranteed to fail by any rational measure of success, which they will surely try and define in their morphological world of definitions. haha

[/quote]

Arraya, you must be right. I mean, given the level of pedantic sophistry that your posts display – worded carefully as vague, non-quantitative observations that can’t be challenged – how could there be any other result?

And it’s rare that I see words like “morphological” used… in the proper context. Well done!

Now, I would reply further but I’m starting to get engulfed by all the smoke… and confused amongst the many mirrors… *coughing and confused*… Must. Find. Way. Out. Of. Labyrinth…

[davelj]

[quote=Arraya]drunkle-Dave lives in a smoke and mirrors filled byzantine labyrinth of virtual money, theoretical valuations and ever morphing rules to make it all work out in the end. That kind of thinking does not work when applied to the real world and hashing life out in a cooperative and fair manner. The money men that are running this country have lost their minds and dave is caught in the same rapacious consensus trance of keeping the system afloat at all costs.

It’ll be an interesting show and they are guaranteed to fail by any rational measure of success, which they will surely try and define in their morphological world of definitions. haha

[/quote]

Arraya, you must be right. I mean, given the level of pedantic sophistry that your posts display – worded carefully as vague, non-quantitative observations that can’t be challenged – how could there be any other result?

And it’s rare that I see words like “morphological” used… in the proper context. Well done!

Now, I would reply further but I’m starting to get engulfed by all the smoke… and confused amongst the many mirrors… *coughing and confused*… Must. Find. Way. Out. Of. Labyrinth…

[davelj]

[quote=Arraya]drunkle-Dave lives in a smoke and mirrors filled byzantine labyrinth of virtual money, theoretical valuations and ever morphing rules to make it all work out in the end. That kind of thinking does not work when applied to the real world and hashing life out in a cooperative and fair manner. The money men that are running this country have lost their minds and dave is caught in the same rapacious consensus trance of keeping the system afloat at all costs.

It’ll be an interesting show and they are guaranteed to fail by any rational measure of success, which they will surely try and define in their morphological world of definitions. haha

[/quote]

Arraya, you must be right. I mean, given the level of pedantic sophistry that your posts display – worded carefully as vague, non-quantitative observations that can’t be challenged – how could there be any other result?

And it’s rare that I see words like “morphological” used… in the proper context. Well done!

Now, I would reply further but I’m starting to get engulfed by all the smoke… and confused amongst the many mirrors… *coughing and confused*… Must. Find. Way. Out. Of. Labyrinth…

[davelj]

[quote=Arraya]drunkle-Dave lives in a smoke and mirrors filled byzantine labyrinth of virtual money, theoretical valuations and ever morphing rules to make it all work out in the end. That kind of thinking does not work when applied to the real world and hashing life out in a cooperative and fair manner. The money men that are running this country have lost their minds and dave is caught in the same rapacious consensus trance of keeping the system afloat at all costs.

It’ll be an interesting show and they are guaranteed to fail by any rational measure of success, which they will surely try and define in their morphological world of definitions. haha

[/quote]

Arraya, you must be right. I mean, given the level of pedantic sophistry that your posts display – worded carefully as vague, non-quantitative observations that can’t be challenged – how could there be any other result?

And it’s rare that I see words like “morphological” used… in the proper context. Well done!

Now, I would reply further but I’m starting to get engulfed by all the smoke… and confused amongst the many mirrors… *coughing and confused*… Must. Find. Way. Out. Of. Labyrinth…

[Author]

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