Source : http://www.bloomberg.com/apps/news?pid=20601087&sid=aptzWbDXOdR4&refer=home Here comes an example of how risk management at "a firm with a reputation for strict risk management " works : Chief Financial Officer Samuel Molinaro said the asset-management arm is sealed off from the rest of Bear Stearns with a ``Chinese wall.'' ``Clearly there are controls in place in the asset- management side too,'' Molinaro said on the call. ``Obviously we didn't envision market dislocation of this degree.'' WOW, Mr. Molinaro I am REALLY impressed with this kind of statement. May I ask whether you sent your Risk Manager to a Cayman Island golf tournament ??????
Suss, during a bull market, those guys are "geniuses". They didn't have to employ risk management. During a bear market, it all comes tumbling down.
revenge of the sheeple? some news of interest, thanks to reuters: NEW YORK, Aug 1 (Reuters) - Bear Stearns Cos (BSC.N: Quote, Profile, Research) was hit on Wednesday by a legal claim stemming from the meltdown of two of its hedge funds, sending its shares, already under pressure from woes at a third fund, to a 19-month low. The securities firm has been slapped with an arbitration claim for allegedly misleading investors about its exposure to subprime mortgages. The claim, filed with the NASD, was brought on behalf of a 73-year-old retired insurance salesman in Wisconsin who lost $500,000, according to the man's lawyers.
It never ceases to amaze me......Barrings Bank, Orange County, LTCM, the list goes on and on, and now Bear Stearns. No matter how many times this happens, its continued proof that the so-called "experts" don't learn from their own mistakes - and that the "smart money" ain't always so smart. They have WHOLE DEPARTMENTS that are labeled "Risk Management", "Risk Assessment", blah blah blah, millions of dollars in risk analytics software, monte carle simluations, star wars defense systems, yadayadayada.... And they STILL f@%#% up.....more casino executives skimming off the top until caught, nothing new under the sun. Only on Wall Street.......WCM......White Collar Mafia
My favorite line from the WCM is the classic: "WCM Firm X neither admits nor denies any wrongdoing in the matter." And then pays off the government, the regulators, the authorities, and everyone else necessary to the tune of hundreds of millions in fines - payola to get them out of the casino to keep the tables full of customers.
& the lesson is!.. .. (DRUM ROLE)......no matter who or how large the company you trade through is.. segregate your account.. no ifs.. no butts.. segregate or experience a company who decides to consolidate.... the choice is yours.. do it now!!... dont pontificate whilst masticating with your mates about it over lunch... get those damn forms... The larger a company the easier it is to have an errant "geezer" (as we say in the uk) slip though and f@#=/ your lifes hard work Enron BA Refco Conrad "Im a Lord" Black Barrings and these are the ones we hear about.. let alone those who thus far have got away with it... remember..stop loosing money first if you want to stay in the game... many weak links come from those who you expect the least problems from before its too late.. I hope I always remember this...
Another example of "superior" risk management => Another day, another slew of reader tips about tanking hedge funds. We are told that one of the big winners is Highland Financial Holdings, a NY-based firm founded in 1998 heavily invested in MBS that prides itself on its commitment to risk management, so much so that it's constantly flashing its 2004 Hedge Fund Manager of the Year award from Risk Magazine on its website. Highland is so committed to "risk management and transparency," that its Highland Special Opportunity fund is transparently closing down and is now worth 2 cents on the dollar after a fire sale of securities at distressed prices. Another fund of the company, Highland Spectrum is rumored to be down 50% for the month of July. One of the biggest losers is JPMorgan, which we are told has a $75 million investment in Highland. Highland's "Investment Philosophy," from its website: HFH Group has created a highly disciplined value oriented approach to security selection. Our approach is either top-down (sector level) or bottom-up (loan level) depending upon the credit quality and/or type of security we are trading. Each approach seeks to exploit security mispricings we observe in many MBS and ABS. The foundation of our investment philosophy is rooted in the knowledge that the short end of the yield curve offers a superior risk-adjusted opportunity set for generating consistent returns. Other gems in the "Risk Management" section: Risk management is an integral part of HFHâs culture and is viewed as one of our most important jobs... HFHâs risk management approach emphasizes prudent portfolio diversification, asset and liability rotation and continual rigorous analytical review. Taken together, these strategies have resulted in both low volatility and consistent capital preservation... HFH was awarded Hedge Fund Manager of the Year in 2004 by Risk Magazine for our commitment to risk management and transparency. Highland Financial Holdings
Suss, during a bull market, those guys are "geniuses". Risk management is unnecessary. During a bear market, the complexity and illiquidity of exotic instruments doesn't allow for risk management. It's deja vu all over again.