Friday, July 31, 2009

Summer and Family...

Since I left Goldman in 2002 I have had the blessing of spending the summers with my family in Kelowna, BC Canada. Kelowna is where I grew up and there is something very special about being able to bring one's own children back to the place you, as a parent, have spent your childhood. For 2 months the 6 of us live together, our family of four and my parents, and it is truly a wonderful tradition...

Our property here is an orchard. We have over 10,000 fruit trees - apple, pear, peaches and cherries. All of us have our jobs - raking prunings, mowing grass, weeding, moving sprinkler pipes, feeding the crew, picking up garbage, picking fruit, selling it road-side. It is a working summer as well as a playing summer and is an amazing counter-balance to our Fairfield County structured life. Pictured left are my two children and their cousin selling Lapin Cherries at $2 a pound! I LOVE sitting road-side... talking to people, handing our samples and selling the 'fruits' of our collective labor, and so do my kids. ( though mostly my father's)
This may be my last post for a little while as I am heading off to Park City then to Savary Island, a remote island off the coast of BC, with the family..... Blessings to all.

Thursday, July 30, 2009

US Treasury to Auction $235 bn in Bills and Notes

I have written so little on the markets over the past month, sorry about that. Needless to say equities have been enjoying a nice move to 2009 highs, and the question on the table is whether it is sustainable. I am withholding my opinion until I get through the mountain of investment reading I have stacked up.

The big news this week, is about the success and/or failure of the HUGE government debt auctions. From JP Morgan - "The world is watching U.S. bond markets closely, as the Treasury will issue $235 bn in bills and notes in a little over a week. Yesterday’s 5-year auction was on the weaker side on a bid-to-cover basis, but not extraordinarily so. To date, rising Treasury issuance has had little adverse impact on yields (Fed purchases of $220 bn have helped), but are only 12%-15% of the FY 2009 deficit)." Did you read that part about the $235 billion in a week????? Yes my friends, this is at the heart of what concerns me about the markets in general. People have too much debt and so does our country....

Sunday, July 26, 2009

Beautiful ( Afghanistan) - Guest Post.

On January 13, 2009 the New York Times reported on an incident occurring in Kandahar, Afghanistan, on November 12, 2008 in which men sprayed the faces of several young girls attending a school with acid, disfiguring at least one girl seriously. Some of the men were arrested, but no tie to any organization was established. The article speculated that the Taliban was behind it. All the girls have since returned to school.

Not one of the girls
Eyed by the boys
Sitting by the wall
Fingering my veil
Trying to follow
Where is Brazil? . . .
Why was I there
At that instant
A moment earlier
A moment later
Grabbing and twisting
Then flash of pain
Purple-etched in my face
Forever . . .
Not a leaflet dropped
In the dead of night
Nor a placard waved
By an angry crowd
Just a girl walking
Down a rutted road
On the way to school

Preston Tsao

Thank you Preston for these words that awaken us to the injustices of the world. I remember when we had coffee and you told me about this article and how it affected you. You honor that girl with this poem and we honor you for writing and sharing it.....

Thursday, July 23, 2009

Breast Cancer Research Foundation and So You Think You Can Dance

You might be thinking with that title, "Say what?" I started the day on a two hour board meeting call for the Breast Cancer Research Foundation, an organization that has as it's mission to find a cure for this horrible disease.  In 2008 alone they gave over $34 million dollars to 166 of the top scientists around the world.  It was founded by Evelyn Lauder, a truly amazing women, who chairs every board meeting with passion and enthusiasm.  All our lives have and will be touched by this disease and I am honored to play a small part in moving us closer to a cure. 

Tonight, I watched one of the most beautiful and moving performances I have ever seen on "So You Think You Can Dance".  It told the story of  Breast Cancer in dance.  The dancers were Melissa and Ade,the choreographer Tice Diorio,  and it was truly, truly moving.  I was crying, the judges were crying, the audience was left in tears... It was posted 51 minutes ago on YOUTUBE....  Click here to watch.

Every Wednesday night I watch this show with my two children not only because the dancing is amazing, but because of the stories that are told through dance.  Thank you FOX for this amazing program.

Wednesday, July 22, 2009

Goldman, Morgan Stanley's Earnings and 10,000 Women...

My friend Preston Tsao, founder of Met Circle, a family office networking group, posted a comment in response to my piece on the Paul Krugman oped on Goldman. It is good and deserves a front page read. ( see below) I have received many emails from friends at GS, friends on the street, and others about this post and all agree this piece was out to lunch. It was inflammatory, very one-sided, and promotes the bashing of wall street firms in general, and GS in particular, that will get everyone no where fast. I keep begging one of the smartest and rational people on the planet I know to write a response to it and to explain the business of modern finance in general, so I will keep working on him. ( a former GS partner as well )

If you want to read a GREAT GS story please read this piece from Philanthrocapitalism on the 10,000 Women Initiative. I wrote my own very positive piece on this for the HuffingtonPost last year and it is truly special.

I am sure you all saw the earnings of Morgan Stanley today which are in contrast to the record profits shown by Goldman. They are having a conference call to discuss these earnings this very second. They posted a loss of $1.2 billion which includes a loss of $2.3 billion, BILLION, related to an accounting loss on their debt, and a $850 million payment to the government related to TARP ( $10 billion loan). Like GS, MS paid dearly for the privilege of taking government money and the American public should be cheering not screaming as it relates to these particular TARP loans. (details here and here ) The Wall Street Journal piece talks about a lot of 'accounting noise' in this report which is a big problem. I do think the American public deserves a lot of transparency when it comes to financial earnings and this a problem. Mr. Krugman why don't you write about this issue?

Earnings from Wells Fargo - here. ( which links to other financial earnings - JPM..)

From Preston on the Krugman piece....

The most annoying thing about Paul Krugman’s NY Times article on Goldman Sachs is that it is factually inaccurate. And the factual inaccuracies make the populist issues more upsetting. He writes:“Goldman’s role in the financialization of America was similar to that of other players . . .”The fact is that Goldman was somewhat of a laggard. CS First Boston and UBS were much more active in the creation of CDOs, and JP Morgan invented the credit default swap.“ . . . except for one thing: Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large.”

First of all, derivatives were never sold by any bank to the public at large. They were purely institutional products. You never heard your doorman brag that he just bought a great BBB tranche of subprime mortgages. Moreover, the reason the banks held on to these securities had more to do with greed than fiduciary responsibility. The banks actually thought that the buying institutions were the suckers and that they could make more money as principal abandoning their usual agency role.“Goldman, famously, made a lot of money selling securities backed by subprime mortgages – then made a more money mortgage-backed securities short, just before their value crashed.”In late 2006, sensing trouble in the home mortgage markets, Goldman sold their mortgage positions, sometimes at a loss. Goldman was the first to move, though Jamie Dimon at JP Morgan had concerns. Merrill and Citigroup were still bullish. But when Goldman took its position in the ABX (in essence a short on subprime), it was at least 6 months before the crash, and the ABX credit default swaps were trading at par! And again, Goldman was not trading against the public but the likes of AIG, Merrill, Citibank and the big institutions.Wall Street is not perfect, but the recovery of the US and the world will require the drive and imagination of the young men and women on the Street. And at appropriate levels of compensation to attract and retain the talent (unfortunately at levels incomprehensible on Main Street). For example, one of the key elements of the recovery will be the revival of the shadow banking system. And what is that? The derivative and structured finance system created by Wall Street and demonized by Krugman.

Thank you Preston...

Tuesday, July 21, 2009

FIRE - Kelowna, BC, Canada

This was the view two evenings ago from our backyard in Kelowna, BC British Columbia. Three major fires have been burning here since Saturday afternoon. BC, like many other places in the west, have had little rain for some time. The forests are as dry as a bone. The risks are so high and the impact so horrible. One of the fires was in a major residential neighborhood that backs in to a forest but thankfully that one for the most part is under control. 12,000 people have been evaculated from their homes though few have been destroyed. ( Thank YOU!!) A large lake, Okanagan, is between the fires and where we have a home/farm, so no worrries in terms of safety, but I had to share this incredible photo. Read more here.

Friday, July 17, 2009

Goldman Sachs Reports Great Earnings and Paul Krugman Attacks!

Warning this is a bit of a rant and not an OPED that I have taken hours writing.. but here it is.

There was a time when saying you worked at Goldman Sachs was perceived as a good thing. There was a time when most people would want their children to aspire to work in financial services, on Wall Street, at a firm like Goldman. There was a time when people felt that financial intermediaries played an important role in society, and improved the standard of living for all. There was a time when it was felt that what was good for Wall Street was good for Main Street, but I guess those times are over.

Though their have been many negative articles on Goldman over the past while the piece in the current issue of Rolling Stone and now this piece by Paul Krugman in the New York Times, are certainly about as finger-pointing and negative as it gets. As a past GS employee of 14 years and a former partner of the firm I have to take a stand. I do understand where they are coming from, at least I think I do, but their point of view is most definitely extremely biased and in the Rolling Stones piece, downright twisted and damaging.

I am generally a big fan of Mr. Krugman and I am somewhat shocked this is how he truly feels about Goldman. Goldman Sachs, like every other for profit business that I know of, is in the business of serving clients WHILE making money. They have been very good at it for a very, very long time. If they were not good at it they would likely be out of business, and sadly I could now name a list of firms that are gone. Last time I checked people buy the stock of public companies because they make money. The higher the earnings over the long term, the higher the value of the stock. It is THE JOB of the employees and the management, to maximize profit over both the short and long term. It is not their job to be 'socially responsible' , though actually GS is somewhat so through the GS Foundation, their commitment to Community Team works, and the 10,000 Women Initiative. As per my blog entry below, Generosity is in, so let's hope they act even more socially responsible going forward because it is good business! Further, if GS only did what was in the best interest of GS and not their clients, one would think they would not have clients for long.

What a ridiculous statement to say Mr. Krugman, that what Goldman does is 'bad for America'. For me this is where your credibility with me took a big tumble. In this article you show and share little understanding of what Goldman, or any other complex financial intermediary actually does to make money. Yes the business of money did get too big, but having a sophisticated money system is generally speaking a very good thing for the economy. Look at economies that do not have it. Without a credible and trustworthy banking system their is no velocity to money which inhibits growth. We need firms like Goldman who put capital at risk, in size, and do it well. Your article is very damaging to having a credible banking system which is damaging to the US recovery. If people do not trust that their money is safe, they will not put it there, which what was happening last fall. That is a very big problem indeed.

I agree with you that dicing cruddy cash flows ended up bad for America, but if you are going to play the blame game it was for the most part 'sophisticated' investors who bought them looking for incremental returns because interest rates were so low and large players, like Fannie and Freddie ( government sponsored entities) crowded out other investors. If you want to be troubled by how public companies cost the taxpayers money I suggest you look there. Also I doubt anyone was holding a gun to anyone's head to buy these toxic securtities. They chose to. Yes some people, including GS made money when the losses started to hit, but so did a lot of other folks. Yes it was their job to be market makers for this stuff on the way out, and if they did not do that for their clients then their clients should think about doing business elsewhere. But remember this is the business all these folks are in and generally it is big boys and girls that play in it.

Because your attack focused on poor quality loans how could you not mention the rating agencies as I feel they were much more at fault then Wall Street. THEY are responsible for looking at the quality of the underlying loans and giving them a risk measure!!!! That is what they are paid a fee to do. Where is your article about them?

GS is in the business of taking risk, deploying capital to make a positive return, and providing financial advisory services. They are good at it. In a world where a lot of firms and people have failed because they were not good at it and did it anyways, Goldman outperforms. They made a lot of money this quarter for a lot of reasons. They certainly were given some cheap money from the government but as they have said, they did not really need it and have since paid it back on the terms given. I do believe the powers that be had to step in or the system would have failed. In my opinion Lehman should not have been allowed to fail. That was a mistake and unfair. Bear is a different issue. As for AIG that is much more complicated and I don't know the details but my understanding is that all counter parties were treated the same. Did the administration stand behind the trades BECAUSE GS stood to lose too much? That is for an inquiry to figure out. Was AIG too big to fail? I think so but honestly.. not sure. I counter party of that size has never failed and it most certainly would have been a mess.

Further on how GS made money this party. You can call in to their earnings report remarks at Net earnings $3.4 billion. Yes in a moment where so many are struggling that is a shocking and perhaps offensive number, but, it is better for America that this number is positive, then negative. I have listened to the call and they said their diversified business model is why they had such a strong quarter. That number did include a $426 mm payment to the government related to the repayment of TARP money ( that remember they said they did not need!). Mr. Krugman, you should have mentioned this fact. Did you listen to the call? I believe the main reason they are doing so much better then others is because they are not a traditional bank and thus do not have as much exposure to the retail consumer business. Again, this is a good thing. They did report hundreds of millions of losses related to real estate like everyone else. Does that make you feel better?

As it relates to compensation what is more offensive? An investment banker who has worked 70 hours a week for 15 years after performing top of her class as an undergrad and an MBA making a million dollars, or a baseball player who never graduated from high school making the same amount? What about hedge fund manager ( not a GS one ) who charges 2 and 20 when times are good and gives none of it back when the fund is down? And if you are going there what about the Facebook dude who is worth $1 billion or was it $4 billion because he conceived and built a company that so far makes little revenue but is really cool? Last time I checked this was America. Last time I checked this is more than any other country I know of one of opportunity where hard work, opportunity, choices, talent and sometimes luck can get you somewhere. Who are you Mr. Krugman to judge anyone's paycheck? Additionally, Goldman is a public company and the Board of Directors and Shareholders need to hold management accountable for compensation. Also I assume GS will be paying a nice tax bill to the government, and so will the employees, and last time I checked the government needed the money.

I am sure you are aware Mr. Krugman that the real estate market is not doing to well. Thousands of people getting big pay checks at the end of the year means that they have money to spend including possibly buying apartments and homes. Without Wall Street doing well, the real estate market in the NY area has no hope to bounce back. In this case what is good for Wall Street is good for the general economy and specifically good for government tax receipts. Recovery has to start somewhere, and you may not like that it is starting at Goldman, but be happy it is starting.

What you are really saying is that you do not like that relatively few people are doing well while others are hurting. I hear you. I am sorry for that too. I wish things were different. Goldman will be a leader out of this recession but we need to get out of the recession and some firms will lead. Is that fair? Tell me what fair looks like for you? Last time I checked life was not fair but you still do the best you can and work to make it more just.

With respect to reforming the system, YES it needs reforming, but that does not happen in a quarter. If you want to keep pointing the finger anywhere with respect to this mess point it to the regulatory system, or should I say lack there of, why don't you write an article that looks at the number of people and amount of money spent to regulate the financial system, which failed, and write an article about that? It is not Goldman's responsibility to make the rules that are in the best interest of the public, it is their job to play by them, and as far as I know, they do. If they broke the law, arrest them. If they cheated, if they stole, if they were dishonest in their dealings fine.... but to hang them out to dry for making money, come on. Again, this is America, right?

If you are a regular reader of this blog you know that I do not always take the side of GS. Read my HUFFPO Opeds on the right for proof. I do try to hold them accountable because frankly I expect a lot of the firm and the people that work there. I expect them to be the leaders. Did they show strong leadership as it relates to this crisis? In terms of how they managed the firm it seems yes. (they survived and made money) In terms of how they helped the system as a whole? Not really. But no other firm did either. It begs the question should we expect them to show their leadership with respect to how to make the system better? I think yes. Should that be part of the regulatory reform? I think yes.

But in reflecting and playing the blame game as it relates to the crisis what should they have been accountable for? They should have been accountable for playing within the rules set by the powers that be, and being accountable for their business practices to their shareholders and board of directors. Should we expect them to try to make less money in what they do? Tell me how they are suppose to do that and why that makes sense for a public company. And if you are going to argue for government involvement please take a look again and Freddie and Fannie to see how well that worked out for American taxpayers. Healthy competition is what regulates how much money firms make. That will happen with time.

The real question perhaps is did GS use their influence and power to secure special deals for the firm? Again I will leave that up to the folks doing the inquires to figure it out. GS, like many other firms at the time, were too big to fail and they could have because of fear and panic in ths system not because they were financially unsound.

The Rolling Stone piece went on and on about GS alumni being everywhere and it being some sort of conspiracy. Goldman people, men and WOMEN, are SOME of the smartest on the planet, and that is in part why they are everywhere with respect to positions of influence. BUT BUT BUT I can understand why there is concern given recent events. (please read "Why Goldman Sachs Women Partners are Invisible" - right) I have written endlessly that there is too much of a 'like-minded boys club' as it relates to power seats in this country. We need to look more broadly and deeply for leaders and be VERY mindful about diversity. In the recent paper by the National Council for Research on Women we call for the adoption of a critical mass principal which if adopted I believe would do much to prevent the possibility of group think and this clubby system. I strongly believe that greater diversity in power seats, public and private, could have prevented this crisis. I firmly believe it.

I will end with this. I believe that a capitalistic system, with a moral and ethical overlay, is the best system. I believe that we got way too capitalistic, way too selfish, way too greedy, and this is the outcome. This however goes beyond Wall Street and it is time to stop the attacks and focus on reforming the system in a way that leads to long term, sustainable, growth and prosperity for the masses. Everyone needs to be accountable for the decisions they make and for what they put out in to the world. I believe that "to those to which much is given much is expected." I expect our government to be accountable for building a regulatory system that protects the people. I expect corporate America to play by the rules set for them. I expect a firm like Goldman, to show tremedous leadership and accountability at this time of crisis. I expect a brilliant man like Mr. Krugman to use his platform responsibly. I expect us all to see the world better and work to make it that way. Enough said.

Thursday, July 16, 2009

Generation G - GENEROSITY ....

A big THANKS to my friend Kathy LeMay for sending me this link from trendwatching. Generosity is in and I love it... and my oh my is it needed. What they are referring to is the "importance of 'generosity' as a leading societal and business mindset." Will this be a trend that will stay? I sure hope so....

I do however want to add a few words of caution as it relates to this article. If you click on the link you will see a nasty sign in one of the images telling Wall Streeters to just go ahead and JUMP out the windows. YES there are a lot of greedy people who work on Wall Street, but there are also a lot that are not. You don't have to be rich to be selfish. Yes I want accountability but this kind of thing does not drive it. This kind of protesting does no one any good. No one. Please let's just stop with the nastiness and inspire one another, encourage one another, and not cut each other down. If you bear witness to this, speak out, and better yet, act in a way that sets a higher standard. Some of the words that were hurled at me in response to my OPEDS on Huffpo were truly painful, especially the "why don't you just die you Wall Street ( a word that rhymes with bore)." But, but.... if we stop speaking out where does that get us? Take a stand and best of all, be generous. It's hip....

Tuesday, July 14, 2009

Jack Welch - "No Such Thing As Work Life Balance"

Jack Welch offered some 'blunt advice for women trying to climb the corporate ladder, you may have to make the tough choice about taking time off to raise your children and reaching the corner office" reports the Wall Street Journal. Well duh? But, and a big BUT, to that comment is that you may not, and this is no longer a reasonable excuse or reason for why there are so few women in positions of corporate leadership. I assume the questioning related to this article was around why so few women at the top, and Jack's response reflects old school, chauvinistic thinking. Yes women are the ones that bear the children and are much more likely to both make the choice and have the option to stay at home, but the reality of work is that women are still ridiculously likely to face workplace discrimination which impairs their ability to succeed no matter how hard they work. I would suggest that Mr. Welch orders himself a copy of the recent white paper from the National Council For Research on Women which looks at why there are so few women in fund management, as in it is a long list of reasons for why so few women and work-life balance issues is just one of the many and way to overused.

A big thanks to Alexandra Lebenthal for sending in this thoughtful response and for bringing this article to my attention.

Monday, July 13, 2009

President Carter says - "Invest in Women"

A friend just sent me this piece from THE HINDU called "We Must Challenge The Way So Many Faiths Treat Women." It is an exceptional read by humanitarian and former US President, Jimmy Carter. I could not agree more that "religion has provided a reason or excuse for the deprivation of women’s equal rights across the world for centuries" and it has to end. My favorite lines were these...." The evidence shows that investing in women and girls delivers major benefits for everyone in society. An educated woman has healthier children. She is more likely to send them to school. She earns more and invests what she earns in her family." Sound familiar? This is the logic model that drives me in the work that I do in the world and is the logic model behind the Women's Funding Movement. Thank you President Carter for your words and your wisdom.

Tuesday, July 7, 2009

Subprime losses and more....

Baseline Scenerio, a newsletter I suggest you subscribe to, linked to an update from S and P on loan losses associated with sub-prime and alt A mortgages and the numbers are not pretty. I would love to go back to look at their estimates from 2 years ago but my gut tells me losses at these levels were unimaginable. We have become so numb to mind-blowing loss numbers that it seems like old news but just sit for a minute and ponder these statistics from calculated risk.
- Subprime 2006 - 40% losses, 2007 - 31%
- Alt A 2006 - 27%, 2007 - 21%
- Loss severities are expected to rise to 70% foor 2006 and 2007 sub-prime
If this is old news the new bad news is still to come around commerical real estate. The size of that market is north of a trillion and some are estimating that property values are going to tumble 50%. I will keep my eye out for some good reading on this topic but keep your seatbelt fastened regarding this financial crisis, it is not over....

Monday, July 6, 2009

Feminine Leadership and the Financial Crisis

My friend Kathy LeMay sent me this piece, "Can Feminine Leadership Mend the Financial Crisis in Iceland?" written by her friend Masum Mamay. It is a must read on this topic and her conclusions are very consistent with those in our paper "Women in Fund Management: A Roadmap to Critical Mass and Why it Matters." She says "the climate was ripe for and open to what has been called a ‘feminine’ way of leading characterized by balance, transparency, fairness, social responsibility, accountability and sustainability."
She features a woman wealth manager who bases her business on these principles: "We have five core feminine values. First, risk awareness: we will not invest in things we don't understand. Second, profit with principles: we like a wider definition so it is not just economic profit, but a positive social and environmental impact. Third, emotional capital: when we invest, we do an emotional due diligence - or check on the company - we look at the people, at whether the corporate culture is an asset or a liability. Fourth, straight talking: we believe the language of finance should be accessible, and not part of the alienating nature of banking culture. Fifth, independence: we would like to see women increasingly financially independent, because with that comes the greatest freedom to be who you want to be, but also unbiased advice."
I like it...........

Sunday, July 5, 2009

Hedge Fund Wives - Learning to Cope....

Though I am not sure I would actually read this book I thought this article by the author was very entertaining. Hedge funds are (were) the modern day industrialists when it comes to wealth accumulation... like it or not. Though I have not actually counted how many of the FORBES 400 come from this industry, it is way more then a handful. I would love to cross reference the richest in America with the most generous in American both in absolute and relative terms. If you are going to be famous for making money how about being famous for giving it as well? Thankfully there are quite a few hedge fund wives who seem to be taking up that honor and responsiblility and doing it very well indeed. I hope they get mentioned in the book and not just the ones who spend all day shopping and planning parties. My feeling is that 'to those to which much is given, much is expected.' Happy summer reading...........
One book I did just read and really enjoyed is "The Day My Mother Left" By James Prosek. I met the Author at an art event in CT and he was really lovely.... An easy read and a touching story.

Friday, July 3, 2009

Off to Canada.....and a bit on the Markets

Sorry for the lack of posts this past week... it was a whirlwind. We travel to Canada in the summer and it is always craziness getting ready to go. This year was particularly busy because of the launch of the NCRW "Women In Fund Management Paper" on the 24th. We have been receiving great feedback on the report and CBS Evening News is working on a segment which should air in the next week or so.

I hope to settle in and catch up on all my financial reading. The unemployment number released yesterday was obviously horrible and the markets responded accordingly. I continue to be very bearish overall though I do not think we will test the lows of March 9th. The 'green shoots' remain quite difficult to find and if anything the news just seems to be less bad, not particularly good. Unemployment is the real killer which will continue to weigh heavy on forclosures and other credit related losses. There have been headlines in the news of late about bank portfolio credit card losses hitting 10% which is scary. The other big sector heading for big trouble are commercial real estate loans. Banks are trying hard to earn their way through the losses and some will, but some will not. This recession will stretch out and their be winners and losers. Enough bad news for a beautiful BC day.

Hope your summer is off to a great start. Take care....