Crisis - Mahony Partners

Jan

2012

Friday Risk Reading: Shackleton

Crisis, Friday Risk Reading, Taking & Managing Risk

I was catching up on holiday reading and came across this excellent New York Times piece on Ernest Shackleton written by Harvard Business School professor Nancy Koehn. Shackleton's ambitious journey to reach the South Pole ended in failure but became a triumph of leadership, courage and determination as he brought his entire crew safely home after a nearly two-year ordeal in the most difficult conditions on the planet. (It's an astonishing story, and for a complete account of the saga, Read More

Jan

2012

More on Refco and MF Glboal

Crisis, Financial Services

Years after its collapse, Refco continues to make news. Yesterday, an appeals court overturned the conviction of an attorney, Joseph P. Collins, who had been the chief outside counsel for the futures brokerage and was found guilty of aiding the company's scheme to hide millions in debt and mask its true financial condition. When the fraud was discovered, Refco filed for bankruptcy, and its assets later were sold to Man group, which later spun them off as MF Global. Collins was convicted largely on the basis of testimony from a former Refco executive who cooperated with fe... Read More

Jan

2012

The 2011 Risk List: The year’s 5 best risk-takers

Crisis, Financial Services, Friday Risk Reading, Taking & Managing Risk

As 2011 disappears in the rear-view mirror, here’s my list of noteworthy risk-takers over the past year. These are the people and institutions that took risks intelligently and won. The list of risk-bumblers - those who mishandled critical situations - is certainly longer (UBS, Olympus, Yahoo, MF Global, I could go on) but their woes already have been well cataloged, and who wants to start the New Year revisiting disasters? So here are the top risk-takers: 1. Jefferies. Before this year, mid-size investment bank Jefferies happily stayed below the radar, built its business and made a tidy profit. All that changed when MF Global collapsed and investo... Read More

Jan

2012

Kodak misses the big picture

Crisis

For every troubled company that’s trying to restructure and eyeing a trip through bankruptcy to get a fresh start, Kodak is a case study on what not to do. For several days now, media headlines have reported on Kodak’s plans to file for bankruptcy protection, with no comment from the company. It's the wrong strategy. Kodak has lost control of the message and might lose everything. Unless it can provide some clarity on its course of action, liquidation rather than restructuring looks likely. Ironically, it’s uncertainty, more than bankruptcy itself, th... Read More

Jan

2012

SEC suit a challenge for life settlements industry

Crisis, Financial Services

The U.S. Securities and Exchange Commission on Tuesday sued Life Partners (NASDAQ: LPHI), a major dealer in the secondary market for life insurance policies. Life Partners and other financial firms have been at the forefront of the “life settlements” industry, which purchases life insurance policies from individuals, usually seniors, for a lump-sum and collects the face amount when they die. (Disclosure: Some years ago, I was an inve... Read More

Dec

2011

Jefferies vindicated

Crisis, Financial Services

Embattled investment bank Jefferies reported stronger-than-expected earnings and a slimmed-down balance sheet, confounding critics and sending the firm's shares on a surge. The news marks a victory for the firm's management and vindicates its strategy of aggressive communication during a crisis, as the firm sought to dispel rumors about its trading exposure and liquidity. Of course, no good deed on Wall Street goes unpunished, with analysts now Read More

Dec

2011

The Irony of MF Global: The System Worked

Crisis, Financial Services, Taking & Managing Risk

Were it not for the missing customer funds, the collapse of MF Global would be hailed as an example of how well the financial system worked. That’s a very big “if,” of course, and the loss of customer funds is a scandal all its own. But the market worked - and that's an important lesson. The accountants, the regulators and the board of directors did their part - not perfectly and perhaps not quickly – but they asked the right questions, demanded disclosure of the firm’s trades and forced management to defend its strategy. Customers, shareholders and counterparties then concluded MF Global had too much risk and abandoned the firm – exactly the sort of rough justice that’s at the core c... Read More

Nov

2011

On air crashes and financial failures

Crisis, Financial Services, Friday Risk Reading

I happened to be reading Malcom Gladwell’s excellent book, Outliers, just as MF Global was collapsing, and I came across Gladwell’s discussion about another kind of crash – those involving airplanes. Gladwell offers an interesting observation about the causes of air disasters that could apply to the failures at financial firms, like MF Global, or the whopping trading losses reported two months ago at UBS. Gladwell shows that air disasters aren’t caused by a sudden, dramatic mishap but an accumulation of small errors rooted in poor communication: “The typical accident involves seven consecutive human errors. One of ... Read More

Nov

2011

The 4 reasons Jefferies beat the rumors

Crisis, Financial Services

Sure, the positive comments today from Meredith Whitney helped, but give Jefferies (NYSE: JEF) credit for handling its communications well in a very challenging environment. At one point the stock was down 20 percent as rumors swirled about the firm’s exposure to European sovereign debt and a downgrade by Egan-Jones. By day’s end, however, the stock had recovered nearly all its lost ground. Here were the four reasons Jefferies was able to beat the rumors: 1. They m... Read More

Nov

2011

The Herculean task of the Olympus committee

Crisis

It’s hard to square the statement by Olympus that its M&A transactions, which are now the subject of an independent investigation, “were in no way improper.” Presumably, the propriety of the deals is up to the investigation to determine. It’s precisely that sort of statement that makes investors skeptical about the company’s commitment to shedding light on these deals. As one fund manager told Reu... Read More