Wednesday, May 25, 2011

Political Hiring

Does anyone else have an issue with the fact that the IMF is on the verge of putting a lawyer in the top seat just because a large European contingent wants a European there, a large feminist contingent want a woman there, and Lagarde is the only European woman even remotely close to the IMF?


The scope of the problems that the IMF is going to have to solve over the next ten years are HUGE. DSK may have been a misogynist douche, and he may have been a borderline socialist (center right of the left party in France), but he was, at the very least, an economist, and understood a lot of the issues faced by economies among a world filled with asset bubbles fueled by an overextension of the Asian growth model. He'd apparently been very, very effective in his leadership.


Christine Lagarde is an antitrust and labor lawyer, which is the exact OPPOSITE of the perspective needed at the IMF right now – they need to promote business investment and growth in the developed world, and consumption growth in emerging economies – both of which are undermined by the aims of most labor and antitrust lawyers.


This is a classic political hire – reminds me of the Drew Faust and Jane Mendillo hires at Harvard, post-Larry Summers. Summers was controversial, and then said something perceived as sexist, so the university made a conscious effort to hire people who were a) women and b) would not be even remotely controversial, either in terms of their appointment or in how they would run things.


The results have been objectively awful. Harvard has had a massive operating budget deficit that would have never happened under Summers (who wouldn't have allowed the idiotic tripling of bureaucratic positions that can't be eliminated and the overextension of financial aid), and a drop in endowment value of 35% with simultaneous major timing errors in investment (that were OBVIOUS and easy to avoid), and significant Asset-Liability mismatch (contributing to the operating budget deficit… seriously, do you know how badly you have to botch AL matching to have a 250 million deficit when you had a 34 billion dollar endowment and a 1.1billion operating budget? Even if the endowment was restricted and only a fifth of it was general use… remotely intelligent budgeting on Faust's part and standard risk control by Mendillo would have avoided any sort of budget crisis).


The difference between Harvard and the IMF is that Harvard can survive mismanagement much more than the world can survive a mismanaged IMF.


It's as I keep saying to the people who want to beat on Bill Belichick for not taking a pass rusher – if the ideal candidate doesn't exist, you can't manufacture them. Take the people you have available and pick the most talented.  Based on her background, I have trouble believing that Christine Lagarde is that candidate. Seriously, pick an economist, or at least an industry practitioner!


Yes, I know I've been a little unspecific about her particular views, but I have read a lot of interviews with her, and I don't agree with a lot of what she says – I disagree with her on her financial regulatory approach, she's trying to impose a financial transaction tax that makes absolutely no sense, she thinks that volatility caused by speculators is a major factor undermining the euro, she has a MAJOR chip on her shoulder about what she sees as "testosterone fueled" economic developments (keep your identity small!), she underestimates labor mobility in financial markets – as you'd expect from a French labor lawyer, she plays politics with irrelevant notional values of derivatives, she wants to replace the dollar as the world's reserve currency (which would be good for the US, in my opinion, but holy crap, a stupid idea right now, especially given the Euro crisis!)… etc.


(I understand that some of these views may be controversial. They're entirely mine and don't represent that of my firm, my family/friends, or anybody else)



Sunday, May 15, 2011

Optimism vs overoptimism

My friend Madison posted this. I felt the desire to respond.

The issue I have with studies and articles like this is that while people overestimate the positivity of their own outcome, they probably underestimate their own ability to DEAL with bad things or less-than-optimal things that happen to them - this is largely driven by personality. For example:

Even if you are pessimistic (or realistic) about your chances of extreme success (either professionally, in marriage, or whatever else), you can still have an optimistic bias if you believe you'll be able to handle that outcome alright. This may not be 100% true with health, but with most other things it probably is true.

I've been sporadic blogging recently, I know. I have a few ideas for future posts but life is EXTREMELY busy with the album and other stuff... but I'll be back ( :

Thursday, May 12, 2011

Showing Support for Adam Foster


Does anybody have any opinions on the best way to show support for Adam Foster in his situation?

Tuesday, May 10, 2011

And that's why you don't listen to the media for stock advice

One of the things I was taught early on was to note what stocks the media thinks have bright futures, because they're very likely to underperform moving forward. This article, originally written in May, 2006, is a particularly extreme (and morbidly entertaining) example of this principle.