Risk Rap

Rapping About a World at Risk

Killing Me Softly

Watch Your Step

During the last Great Market Crash it was said that you needed to take extra care as you made your way through the canyons of Wall Street. Apparently legions of bankrupt investors and brokers were jumping out of the windows from the precarious ledges of their skyscraper offices many stories above street level. I don’t believe that an instance of leaping from a building to commit suicide over failed investments was ever verified during the last Great Crash. Though I am certain that some did close out their positions with dramatic finality of self liquidation, the documentation on jumping is slim.

Yesterdays news on the self inflicted death of Adolph Merckle follows close on the heals of last months suicide of Rene-Thierry Magon de la Villehuchet. Mr. Merckle apparently amassed a large short position in the German auto manufacturer Volkswagen. He was engaged in a form of takeover arbitrage pitting his investment prowess against the elite German auto manufacturer Porsche. He was confident that the fortunes of the depressed industry segment would deteriorate dragging Volkswagen down with it. Porsche’s interest in Volkswagen buttressed its equity value in the face of the market meltdown. This generated a loss of over 400 Mn euro’s for Mr. Merckle. He decided to walk into the front of a train near his home to close out his position in life.

If the high profile deaths of Mr. Merckle and Rene-Thierry cast an added depressive pall to the market crash, the disappearance of Sonja Kohn adds an element of intrigue and danger. Mrs. Kohn has dropped out of sight, leaving the firm she founded, Bank Medici, in the hands of Austrian regulators, who took it over last week. Mrs. Kohn was a key marketer of Bernard Madoff’s investment fund. She purportedly raised lots of money from the world’s well to do and power elites. According to reports, she had some clients among the Russian Oligarchs. These are the types of people that you try not to disappoint let alone swindle. They have a way of settling scores with people who don’t live up to their end of the bargain.

My has the worm turned. Last year at this time the wealthy and powerful were reveling in their decade long run of good fortune the kind markets bestowed upon them. This year evaporating wealth, financial ruin and death silently stalks them. Their salons, country clubs, penthouses and boardrooms offer them no protection from the aggrieved people of their making and a tortured conscience.

You Tube Video: Prokofiev, Romeo and Juliet

Risk: reputation, fraud,

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January 7, 2009 Posted by | classic, credit crisis, hedge funds, Madoff, reputational risk | , , , , , , | Leave a comment

US Economy Bleeding Jobs

The ADP National Employment Report was just released. The US economy is bleeding jobs. Over 693,000 jobs were lost during the month of December 2008. The report shows steep declines in all market segments that include, small and mid-size businesses, large businesses, manufacturers, service businesses and construction. The Report shows that job loss is accelerating more rapidly then observed levels during the 2001 recession.

Full ADP report and an explanation of their methodology can be accessed here.

You Tube Video: Johnny Cash, The Ballad of John Henry

Risk: economy, jobs

January 7, 2009 Posted by | economics, unemployment | , , , , , , | Leave a comment