Continuing with our mortality theme, and having already paid homage to departed rats, cats and bears, I mark with interest the passing of Wall Street icon Byron Wein. In offering up the following, I mean no disrespect to the man. I only knew him as everyone else did — from his annual list of 10 surprises for the upcoming year. True, he was wrong on most of these, but that’s precisely the point. I like the gamma associated with the strategy, because, when you miss, you fare no worse than having met expectations, while, on those occasions where your improbable predictions come true, you are entitled to an ostentatious victory lap.
I did have one personal encounter with By, though, which, in the telling, does not reflect particularly flatteringly on him. For all I know, he was a nice enough fellow, and I am idiosyncratically leery of disrespecting the dead. But I enjoyed the episode so thoroughly, particularly as a tale of the human foible of hypocrisy (mine and his), that I cannot resist the temptation of sharing with y’all.
Though, for a variety of reasons, I now shun these affairs, back in the deuce, I routinely participate in conference panels. And one time in 2005, I was invited to join a hoity toity confab — for which Byron acted as moderator, and which featured, among others, the former CIO of Soros Fund Management. It was one of my higher profile gigs, and I wanted to be at my best. So, I paid particularly close attention on the prep call and even (highly uncharacteristically for me) took some presentation notes.
Then the big day arrived. About 500 attendees – including my mom who drove down from Schenectady and my Aunt: New Mexico Mitzie, took their places in one of the larger presenting rooms at Chelsea Piers. I was ready. Or so I thought.
Byron took to the mic and immediately went off script from what we had previously discussed. One by one, he threw softballs at the other panelists, and then, with about 10 minutes left in the session, he turned to me, announcing:
“Folks, we have with us a gen-u-wine hedge fund risk manager, and I want to ask him a question. So, Mr. Gen-u-wine Hedge Fund Risk Manager, I don’t think guys like you have any clue about risk management. Convince me that I am wrong”.
More in amusement than in sorrow or anger, I did my best. I admitted my own fallibility and that of my peers. Spoke briefly of our methods and of our humble desire to little other than add modest value to our organizations. I saw encouraging looks on the faces of family and friends (though Aunt Mitzie had murder in her eyes), and felt that, at minimum, I had not failed.
Byron apparently thought otherwise, ending the session with the following comment:
“Thank you everyone for attending. This concludes the panel. I am now going back to my office to redeem out of all my hedge fund investments”.
I don’t know what I did to piss Byron off, but this much is certain: whatever I was laying down, he wasn’t picking up.
I’m not sure from which funds, and in what amounts he withdrew his capital, or, indeed if he withdrew any capital at all. But now, 18 years later, I apologize to those impacted — for abetting the loss of this most coveted investor allocation.
However (and on my immortal soul), I learned later that week that Byron had resigned from his post as Morgan Stanley’s Chief Investment Strategist — to assume the position of Vice Chairman of Peaquot Capital – a “first generation” hedge fund straight out of Central Casting. It had a storied run, including significant regulatory trauma, during the last round of which, in 2010, the Federales forced it to close its doors, extracted a substantial fine, and imposed a lifetime ban on founder Art Samberg – from the Investment Management Industry.
Peaquot was always a bit sketchy, but I was forever willing to give them a pass for having a cool name. I always thought that its moniker was a tribute to the ship in the novel “Moby Dick”, and that the concept of an investment vehicle dedicated to hunt Big White Whales was highly clever. But I was wrong. Captain Ahab’s revenge-seeking vessel name was Pequod, while Peaquot is simply the appellation assigned to a rather obscure Native American tribe, located in the Northeast, whose main claim to fame is its ownership of the Foxwoods Resort and Casino in Ledyard, CT. In other words, hardly the Apaches, Comanches or Seminoles.
So, I withdraw the mad props I previously awarded to the late Mr. Samberg, and, by connection, to the recently departed Mr. Wein.
Byron’s actions were, in my judgment, highly hypocritical, but I stop short of calling him a hypocrite. Because we’re all hypocrites. Take me, for example. Though I vibed humility in response to Byron’s 2005 grilling, it was all a ruse. I know for certain (as do you) that my risk management riffs are pure gold, that choosing to work with me will virtually ensure your safe passage to fame and fortune. So, I lied through my teeth on that panel, moderated by a recently departed Wall Street legend, 18 years ago.
But what in God’s name does any of that have to do with the probing market analysis that is the hallmark of this publication? I’m glad you asked. Because, whether due to hypocrisy or irrationality, investors are acting in ways that plainly contradict associated messaging.
For the moment, of course, market participants are taking their cues from geopolitical events transpiring in the Middle East, and here, beyond doubt, the hypocrisy well runs deep and wide. Outrage tilts towards the victims, rather than the perpetrators, of the worst terrorist attack in at least two decades. World leaders spit mad warnings at Israel, while giving a pass to the Ayatollahs that cooked up this mess.
Take the Turks, for example, and their polecat leader Erdogan. Sunday marked the 100th anniversary of their existence as a democratic republic, having been formed out of the WWI ruins of the Ottoman Empire, the latter of which, since the 16th Century, included Palestine. Not sure how well the Palestinians did under the four centuries of Ottoman rule, but I suspect it was a rough go for them.
It is thus rather dubious for the Turkish leader to label Israel a war criminal, and to call for its outright destruction. Is it hypocritical as well? I reckon that’s for each of us to decide on our own.
But the markets are reacting in odd ways to these tidings. Crude Oil continues to trade in yawningly narrow ranges, military action notwithstanding. And, increasingly, investors are tired of owning it:
I call this strange, believe that the risk/reward for a long Crude position is materially favorable, and encourage you to act accordingly.
Meantime, the equity markets are positively anemic, so much so that General Dow has faded into negative territory, having, in aggregate, yielded ground from its positioning when the Comeback Year of ’23 began. What gives? The economy is booming. The Fed, set to weigh in again on All Saints Day (Wednesday), is, according to the market indicators, 99.9% certain to stand pat.
Earnings are humping along, stronger than they have been in several quarters. But investors are punishing the reporters – no matter what tidings they bring to the podium:
In terms of doings in Washington, there’s a new Speaker in town, which, first principles, looks like a win for us all. But it does appear to me like the whole sequence was under Trump’s control, which – not gonna lie – scares the bejesus out of me.
At any rate, if we make it past Tuesday, we will have survived another October, leaving, improbably, less than forty trading days in this once joyous/increasingly bitter investing year. The final eight weeks will not be easy, and the best advice I can offer is that the more honesty and the less hypocrisy with which you operate, the better off you’ll be.
So, it’s time for me to own up to a few things. My mother lived in Chicago, not Schenectady. She did not attend the above-mentioned conference or panel discussion.
I have no Aunt Mitzie, in New Mexico or anywhere else.
But what I related about the infallibility of my risk management magic is the stone-cold truth. And I invite you to ride with me to untold riches. You may choose to challenge me on that, but there’s only one way to find out.
So, give me a call.
TIMSHEL