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,

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

For Where Your Treasure Is

The Death of Marat
Atheism is aristocratic; the idea of a great Being that watches over
oppressed innocence and punishes triumphant crime is altogether popular.

History has is own way of keeping score. The celestial ledgers record every human transaction and movement. The scales swing ever slowly as it constantly seeks a perfect balance of Yin and Yang. Eventually history will find a way to assure that payments are made on any outstanding balances. All overdue accounts will be assiduously credited or debited in exact amounts for proportion due in good time. Poetically the new cosmological balance is restored with a settlement that is more often ironic then just.

So it is with Rene-Thierry Magon de la Villehuchet’s suicide. To date one of the more dramatic consequences of Bernard Madoff’s massive swindle. Mr. Villehuchet apparently lost $1 bn in the fraud perpetrated by the wealth manager from hell. It is understood that a good portion of that tidy sum was comprised of clients assets entrusted to Mr. Villehuchet due to his astute investment acumen and discernment abilities. It is also believed that the massive loss also comprised the bulk of his family’s personal assets as well. Apparently the aristocratic estate of Mr. Villehuchet’s family now stands in ruin. It would seem that the goal of the French Revolution’s street rabble to fully disenfranchise the aristocracy and separate them from their power and privilege with the razor edge of a guillotine was finally realized 230 years later by a New York based hedge fund manager. Let it be noted that Robespierre was a friend of the bourgeoisie so perhaps he finds some tacit comfort from his long occupied grave that Madoff one of his fellow sans-culottes finished the work that the Jacobin’s failed to do.

The French Revolution was one of the signature events of history. It announced the unfettering of the political power of the bourgeoisie made possible by the rise of capitalism. A scant two centuries ago the radical capitalists used the guillotine to enforce a Reign of Terror to supplant the rule of the Aristocracy and establish their reign of liberty to make money.

Capitalism’s history during the past 200 plus years has firmly established the virtuous solemnity of money making. It has created a pantheon of incipient transactional values based on situational ethics and moral relativism. Money and its power has alone become the object of veneration. Much like the Golden Calf that Moses’s people erected, western societies are consumed with the passion of worshiping monetary wealth and all the power and position it confers on the one to whom it belongs. More accurately we should say to whom the objects of wealth own.

It is in this light that we find Mr. Villehuchet’s suicide yet another signature event of our time. Mr. Villehuchet’s life had no purpose outside of his wealth and objects. Very sad. If Mr. Villehuchet killed himself because he lost face with his client’s due to his poor choice of entrusting Mr. Madoff with his client’s assets that’s even sadder. If Mr. Villehuchet killed himself because he was complicit in the fraud scheme that’s the saddest reason of all. But whatever motivated the Viscount of Discount to end his life all point to his warped value system so common and rampant within the banal culture of the old aristocracy and the nouveau riche. How poverty stricken are those whose primary concern is the love of money. Pity them because they are poor in spirit.

Yes Mr. Villehuchet’s self induced passing may signal an urgency to reexamine the values of capitalism. We must begin to invest in values that will produce consistent sustainable returns.

Rest in peace Mr. Villehuchet. If there is an afterlife I’m sure that you and Robespierre will have much to discuss.

You Tube Video: Skeeter Davis: The End of the World

Risk; values, investments

December 27, 2008 Posted by | culture, hedge funds, Madoff | , , , , , , , , , , , , , | Leave a comment