On utter ignorance, overrating and employees not fitted for purpose

Hobbes, following up on the Bear Stearns-JP Morgan Falcon Crest-like saga, like any David Beckham, fashion designer, advertising campaign or the Red Baron, financial geniuses are overrated.

Bear Stearns investment bonkers team
Top investor bankers didn’t see it coming, didn’t avoid it, didn’t fix it, didn’t acknowledge it. The night cleaner on 16th floor at their head quarters could have given them some pretty damn good pieces of advice if –and that is a big if- they could have been humble enough to ask for his/her opinion and smart enough to outsmart their financial engineers and get some sense of what was going on.

Pet Fed home team
Allan Greenspan’s legacy is that of a melting economy… I wonder what Mr Bernanke privately thinks of his predecessor. Not only he created the housing bubble by maintaining impossibly low interest rates after the Internet demise, but he didn’t supervise either the type of soap that the banking kids were using to blow the new bubble. What’s left to the Pet Fed? Not much, a clumsy patchwork of nervous responses to the Street’s orders requests.

JP Morgan smarter-than-thou team
Armed with Pet Fed’s chronic stress, and before Asian markets opened on Monday, the JP’s all-star banking team ran to the rescue of the banking industry, trust in the finance world and the Pet Fed. What? You make me only bidder for the fire sale of Bear? Send the troops in!

JP Morgan was reportedly paying 1/15 of Friday’s closing price, not even worth the victim’s HQ.

Result? Markets happy, Pet Fed happy, JP happy, George W. Bush entertained with his new Baby Einstein HD-DVD collection, and we can go home. ‘We got’im’.

Well, not exactly. Shareholders at Bear Stearns kind of didn’t sign acceptance of the take-over that would leave them overnight with nothing. Who would anyway? As an example, Northern Rock’s shareholders are flexing muscles for the legal battle ahead (including or mainly the opportunistic hedge funds who got it wrong).

Leaving in denial (or lied to by management) for so long is Bear Stearns’ investors problem. Now not signing the sale seems sensible from any angle you look at it. But it is JP Morgan Chase’s savvy lawyers’ lapse at getting the key documents signed are again proof that a fool at the helm would do a much better job. So when the sellers wanted to go back to the bargaining table, the buyers had no choice.

Now they talk of $10 per share instead of $2, and I bet it will be a lot more.

But life keeps going on, markets went up, and down gain, and up again yesterday, with massive movements that took down HBOS a 17% (in rumours of a collapse, rumours!) and up the whole banking family. Roller-coaster.

Whether they like it or not the Masters of the Universe ARE accountable to shareholders. But whether we like it or not, over and over again these high flyers play hard and make massive mistakes at no price whatsoever.

I tell you what, celebrity CEOs has a bright side. We do not know who will lie to us, who will be good at the job or who will be more concerned about his/her golf handicap than a 10-fold increase in a buying price as a result of the legal team not properly doing the due diligence (after all, it was a weekend! They also had handicaps to improve). But at least, as a proxy, we can trust our gut feeling when he smiles on the cover of Fortune with his/her Californian tan and Hollywood teeth.

Until tomorrow,

.Calvin

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