The choices they make

I learned something important last month: Corporate America has a long, long way to go before it can ever claim that it treats women fairly.

I work for a firm that is consistently ranked amongst the best firms to work at for women and minorities. What a crock of shit.

Taco Land:

I work for Company X’s internal consulting group. We get to work on some pretty cool assignments for the CEO and is army of SVPs. I get paid well, my hours aren’t awful, and I rarely feel like I have a gun to my head—–it’s a very different feeling when compared to my time at Bulge Bracket Bank.

Now, everyone knows that I’m trying to get into the multicultural strategy/marketing space. I think that working in Latin America for a little bit can build my credibility in the US Hispanic space, so that’s why everyone thought I’d be a perfect fit for the upcoming assignment in Taco Land (a Latam country, but since I can’t give any details I’ll just call it Taco Land).

The Taco Land project sounds phenomenal: Design the country strategy for every product and division for the next three years. Unbelievable experience.

What I have to offer: Cultural relevancy given that I grew up in a Central American family. Spanish fluency. Sick family and professional connections in Taco Land. An eye for new trends in Latam (proven in past work). Etc. Etc. Etc. Perfect for the job.

Unfortunately, they structured the travel schedule as follows: 2 weeks in Taco Land, 4 days back, repeat for 4 months. In other words, I’d be in NYC for 8/36 days. That’s bullshit. I very politely told them that “this is an amazing opportunity that I would love to contribute to, if they are more flexible on the travel demands.” They said no, so I declined the project and am getting the stink eye at work.

My group emphasizes work life balance when recruiting for new talent. The group is literally 75% female. Every single person in this group cold have but work first and taken a job with McKinsey or Bain or BCG, but chose instead to work at a place that supposedly respected their work life balance. Yet, not one woman over the age of 24 volunteered for this position and very few men of any age volunteered either.

They made a decision to stack someone other than the best player for the job when they structured the project this way. They made a decision that prevented other members of the team from volunteering for this project.

Yet I’m viewed as the bad one who left the team high and dry…that’s not fair. They made a decision too….


I have another great story but this post is getting long…I’ll save it for another day.

May 21, 2010, 11:25
Filed under: Market Trends, Politics, Social Trends

I’m angry at BP. Very angry.

Goldman—Market Maker or Sleazy Salesman?

This is a quote from the front page of today’s  New York Times:

“Our investigation has found that investment banks such as Goldman Sachs were not market makers helping clients,” Mr. Levin said. “They were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis.” Wall Street firms, Mr. Levin said, were “all too often betting against the financial instruments that they sold, and profiting at the expense of their clients.”

I originated CMBS at a bulge bracket bank. In October of 2007, my team along with the head of credit for all of fixed income new damn well that Goldman had shorted its mortgage portfolio. “Brilliant,” I said.  “Unbelievable. It’s like they had a motherfucking crystal ball,” said the head of credit.

This bulge bracket bank knew that Goldman shorted its portfolio and could have mimicked the strategy if they had wanted to. Sure, the shorts were more expensive in October than when Goldman bought them a few months prior, but in Wall Street you can buy anything you want so long as you have the appetite for it. This bank clearly lacked the appetite.

As for the quote, that vilifies Goldman for shorting products it hawked to investors.  I’ve already wrote about this before, but the traders that make and sell securities are legally prohibited from talking to the traders that take positions for the bank.  This would have insider scandal written all over it if the two teams could talk and note that those are words that no one has used yet.

Goldman was a market maker. Now, perhaps HR should reassess the incentives these traders get.  Perhaps pegging bonus’ to a % of sales leads to reckless behavior.  Instead, Goldman should tie compensation to sales and credit losses.  Just an idea.

Sleazy salesman or market maker…you know what I think


I posted the following (paraphrased) on my Facebook:  

Don’t know where I land re: Goldman. On the one hand, Goldman is a market maker and has always sold securities that some investors hold while others short. On the other hand, Goldman shorted its own mortgage portfolio in 2007 yet willingly sold securities to investors knowing they were on the wrong side of the bet. I think it comes down to whether investors could have known that Goldman shorted the CDOs it sold. If this was public information, then you can’t blame investors for running towards a fire that others were clearly fleeing from.

Since then, I’ve talked to my buddy at Goldman and confirmed that the prop desk that takes positions on for Goldman is legally prohibited from sharing notes with the desk that designs and sells the securities. That makes a lot of sense since Chinese Walls are the only way to prevent insider trading.  Interestingly, even though it’s true that Goldman’s short position against the Abacus securities were relatively insignificant relative to the firm’s larger positions, the bet did jump to CEO Lloyd Blankfien’s attention.   I imagine that the trader ordering the short was was called into Lloyd’s office:  

Lloyd: Why the fuck are you taking a $3B position against the mortgage industry

Trader: Sir, all of my research and experience tells me that shit is about to go down

Lloyd: Then why are all of our competitors still buying mortgage securities

Trader: Because they have inferior information.  I’m willing to best the soul of my first born child on this one

Lloyd:  Alright. Go ahead and short our mortgage portfolio, but, if you’re wrong it’s your ass that’s on the line

I am 100% positive that Goldman’s CEO knew the firm was shorting securities that another desk was going out and selling. However, that in itself is neither illegal nor wrong. His job is NOT to share arbitrage opportunities with investors at large.  His job is to ensure that there is a marketplace for securities and that’s exactly what he’s done. I personally absolve Goldman for shorting the mortgage industry although I would never vouch for something that I myself am trying to get rid of.

On the other hand, if its true that the creators of the Abacus security knew that it was comprised of XYZ collateral but told investors that it was comprised of ABC collateral—well, that’s plain old fraud.

Democrats need to take Marketing 101

I am about to graduate from business school with a degree in marketing.  Now, many of you “financier” MBAers may look down on my marketing degree, but it is actually quite useful once you realize that every institution on earth needs to do one thing to survive: Sell.

The Catholic Church needs to sell its ideology, Goldman Sachs needs to sell its financial services, and Banana Republic needs to sell clothes.    The rest of this post will assume that the Democratic party (and all political parties in general) need to sell ideas to gain support and votes.

There is one crucial framework that marketing 101 that the Democrats are only recently getting wind of:  STP, which stands for segmenting, targeting and positioning.  Any institution worth its salt knows which consumer segments exist in its market, then  it does its homework to identify target  “customers” that are most likely to buy its goods, finally the institution develops a position that will appeal to its target customer.  Duh.

The #1 mistake that rookie institutions make is that they ignore STP and try to be all things for all people.  That is exactly what the Democrats have done for too long. Perhaps we should define the Dems as being cautious liberals or are they quirky conservatives? I’m not sure. I don’t think anyone is sure, and that is exactly why the Dems are having an identity crisis at the moment.

I’ll drive my STP point home with a simple analogy: clothing retail.   Sears was once the King of Retail. No retailer on earth sold as much to as many customers as Sears.  They grew and tried to be all things to all people.  Sears started selling clothes, then appliances, then eye glasses and car repair services. Sears even had a pest control service at one point in time.  This strategy seemed to work until more sophisticated retailers joined the party and focused on a specific segment then targeted them with a unique market offering/position.

If you look at the following chart as the spectrum of needs retail customers look for, you can safely place Sears smack dab in the middle.  There they are, trying to be all things to all people.  Competitors entered and made sure to meet specific customer needs.  Sears found itself straddling the market and was unable to fully meet the needs of their customers.  I mean, why would you shop at Sears and try to find something you like if you could find exactly what you want at the other stores? They lost share. They’ve lost sales. They are in trouble.

The Democrats lost Massachusetts because they “Pulled a Sears.”  They are straddling voters and coming out empty because they can’t fully satisfy the liberals nor can they compete with Republicans who are doing a better job of satisfying the conservatives.   The Democrats need to do some serious STP analysis.

Segment:  All voters ages 18+

Target:  Start with all voters that are not conservatives and then get much more specific than that.

Position: The political party best suited to accomplish _________________  (meet a need that the target audience wants met)

  • Stabilize the economy
  • Create incentives that help new industries (and jobs) develop so that the US remains competitive in the future
  • Restructure public services so that constituents receive higher value at lower costs (i.e. Health Care, Social Security, etc)
  • Etc, Etc, Etc

The point is that they need to define a position and try to execute a few things very well and not trying to solve all problems under the sky.

I must end this post by congratulating President Obama for having the cojones to tell the party exactly what my favorite Marketing 101 professor told us:  Focus, Specialize and Act Decisively.

President Obama recently said ““I think the natural political instinct is to tread lightly, keep your head down and to play it safe…don’t play safe.”  He’s right. The Dems cannot afford to play it safe, they need to focus and be unquestionably Democrat in rhetoric and action.

The Oracle of Omaha (aka Warren Buffet) Speaks Again
March 1, 2009, 11:25
Filed under: Market Trends, MBA, Politics

Quotable quotes from Mr. Buffet’s 2009 letter to the shareholders (my comments are in paranthesis)—-

By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.


As the year progressed, a series of life-threatening problems within many of the world’s great financial institutions was unveiled. This led to a dysfunctional credit market that in important respects soon turned non-functional. The watchword throughout the country became the creed I saw on restaurant walls when I was young: “In God we trust; all others pay cash.”


The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear. (I AGREE!!!!!)


Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat. (To every single Republican and Dem-Hater who was agains the stimulus package and thought “doing nothing is an option” TAKE THAT!!!!! You are wrong. As unsavory as government intervention is we must admit that it was necessary. Period.)


Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead. (I love it)


As predicted in last year’s report, the exceptional underwriting profits that our insurance businesses realized in 2007 were not repeated in 2008 (Note: Buffet became very concerned about his insurance business in 2005 when Katrina hit. His insurance firm had to pay out  a lot of claims. They were prepared to do so and were fine, but he noted that the firm would be in trouble if it global warming had the effect of making a Katrina like disaster more common). Nevertheless, the insurance group delivered an underwriting gain for the sixth consecutive year. This means that our $58.5 billion of insurance “float” – money that doesn’t belong to us but that we hold and invest for our own benefit – cost us less than zero. In fact, we were paid $2.8 billion to hold our float during 2008. Charlie and I find this enjoyable. (hehehe)


That’s the good news. But there’s another less pleasant reality: During 2008 I did some dumb things in investments. I made at least one major mistake of commission and several lesser ones that also hurt. I will tell you more about these later. Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action. (The sign of a good manager is one who recognizes mistakes once they happen. The sign of a great manager is one who recognizes flawed behavior….bias and escalation seem to be his two bigest flaws, but recognizing their presence in his thinking is the first step of obliterating there impact in the future.)


At that time, much of the industry employed sales practices that were atrocious. Writing about the period somewhat later, I described it as involving “borrowers who shouldn’t have borrowed being financed by lenders who shouldn’t have lent.” To begin with, the need for meaningful down payments was frequently ignored. Sometimes fakery was involved. (“That certainly looks like a $2,000 cat to me” says the salesman who will receive a $3,000 commission if the loan goes through.) Moreover, impossible-to-meet monthly payments were being agreed to by borrowers who signed up because they had nothing to lose. The resulting mortgages were usually packaged (“securitized”) and sold by Wall Street firms to unsuspecting investors. This chain of folly had to end badly, and it did. (Sounds like my Credit Crisis for Dummies post!)


Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser. (HERE HERE!)  The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrower’s income. That income should be carefully verified. Putting people into homes, though a desirable goal, shouldn’t be our country’s primary objective. Keeping them in their homes should be the ambition. (OKAY, I haven’t really revealed what I used to do before business school but lets just say that a huge portion of my job was trying to convince decision makers that played a significant role in the housing market that our goal shouldn’t just be “generate new home loans” but “to mitigate risk, and keep more people in their homes.” I COMPLETELY agree with Buffet here.  Now everyone can or should own a home. Everyone has the right to shelter, but that doesn’t always mean white-picket-fence shelter. A rental apartment or manufactured home must suffice in some cases. What the government and country must do is provide affordable housing options that allows people to have a roof over their head that they can actually pay for on a monthly basis.)


Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is nowfar higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one. (This concerns me because it means that strong companies that should survive may not if they do not have enough cash stockpiled to pull them through the credit crunch.  If my scenario plays out then our economy will be left with weak, zombie like companies that crutch on the government. This is not good. This is like Japan in the 90s and everyone knows what happened to Japan—-an entire lost decade of growth.)


Derivatives are dangerous. They have dramatically increased the leverage and risks in our financial system. They have made it almost impossible for investors to understand and analyze our largest commercial banks and investment banks. They allowed Fannie Mae and Freddie Mac to engage in massive misstatements of earnings for years. So indecipherable were Freddie and Fannie that their federal regulator, OFHEO, whose more than 100 employees had no job except the oversight of these two institutions, totally missed their cooking of the books. (LOL! It’s true. I was just in a finance group meeting and we were doing a case on derivatives. The boys in the group were going ga-ga over the terminology. It’s as if engineering a derivative is the equivalence of owning a giant phalice….he who makes the biggest, most obscure, most complicated derivatives trade is the biggest.  They are dangerous.)



Now, for those MBAs looking for a summer internship or fulltime offer—-take a look at these companies for inspirtation, they are all owned by Mr. Warren Buffet himself:

American Express Company . . . . . . . . . . . . . . . . . . . . 13.1% ownership

The Coca-Cola Company . . . . . . . . . . . . . . . . . . . . . . . 8.6%

ConocoPhillips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7%

Johnson & Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1%

Kraft Foods Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9%

POSCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2%

The Procter & Gamble Company . . . . . . . . . . . . . . . . . 3.1%

Sanofi-Aventis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7%

Swiss Re . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2%

Tesco plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9%

U.S. Bancorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3%

Wal-Mart Stores, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5%

The Washington Post Company . . . . . . . . . . . . . . . . . . 18.4%

Wells Fargo & Company . . . . . . . . . . . . . . . . . . . . . . . 7.2%


The Oracle

The Oracle




 Investors should be skeptical of history-based models. Constructed by a nerdy-sounding priesthood using esoteric terms such as beta, gamma, sigma and the like, these models tend to look impressive. Too often, though, investors forget to examine the assumptions behind the symbols. Our advice: Beware of geeks bearing formulas. (LOLOL!!!)


The investment world has gone from underpricing risk to overpricing it. This change has not been minor; the pendulum has covered an extraordinary arc. A few years ago, it would have seemed unthinkable that yields like today’s could have been obtained on good-grade municipal or corporate bonds even while risk-free governments offered near-zero returns on short-term bonds and no better than a pittance on long-terms. When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.


Local governments are going to face far  tougher fiscal problems in the future than they have to date. The pension liabilities I talked about in last year’s report will be a huge contributor to these woes. Many cities and states were surely horrified when they inspected the status of their funding at yearend 2008. The gap between assets and a realistic actuarial valuation of present liabilities is simply staggering. (OH NO!)


John Edwards
February 25, 2009, 11:25
Filed under: Politics | Tags:

Does anyone know what happened to him? Did Elizabeth leave him? How is she doing in terms of the cancer?