Finance, Mathematics, Software

I’ve read books by people that don’t really know all the details of what they are selling to their publisher as facts. That seems to be a good way to sell books when you think you got fired because you knew more than the people that hired you.

At Morgan Stanley, I took over the slot of a guy that went into the group described in a book by Frank Partnoy. I inherited the Monte Carlo engine this guy wrote for pricing the trades that did not fit into any of the standard models. He went into a different world where his quantitative expertise was no longer so important. His new world was very much about slicing up a collection of cash flows and getting the various tranches favorable ratings from S&P, Moody’s and Fitch so that institutional investors would buy them. Partnoy had a very limited understanding of what he was seeing and got fired because of that. Maybe he will write another book about the Morgan Stanley investors that lost money from the trades they willingly entered. Except he can’t. Facts are a bitch.

I also know something about Ugly Americans. That guy sued one of my clients and I got a $15,000 lesson in third party subpoenas. Relevence does not matter. You either have to respond to everything their lawyers demand or spend money fighting. And if you do, that will send up a red flag. The judge gets to look at the transcripts of the deposition and decide what is relevant after you hand over everything.

I just finished reading A Colossal Failure while on vacation at my grad school friend’s “cabin” in British Columbia. That’s what Canadian mathematicians call 3,000 ft² with floor to ceiling windows and a great view of the bay

My take was that McDonald was quite honest about what he saw and he had people at Lehman that genuinely liked him and kept him in the loop even after things went pear shaped. If you just listen, people tell you things. His buddies tried to help him capitalize on shorting Lehman and he lost money on that. Cue John Maynard Keynes.