Well it’s be a year now and the regulators are still picking through the pieces. In a bombing campaign the Pentagon has a target assessment team whose job is to make sure that the target has been obliterated correctly. On Wall Street no such luck. so how could hapless market participants protect themselves. What were the clues?
Answer: Jon Corzine of course.
After a successfully Machiavellian career at Goldman Sachs (NYSE:GS) he becomes a senator representing the garden state of New Jersey. As a democrat. Go figure. A 1% from Wall Street casts himself as a democrat. You know of the people and all that.
Well senators can and are very powerful people. There are only 100 of them and each guy gets a six-year shot. But it’s not like the trading floor. Power operates in the shadows. What you see is not what you get. There are subtleties. You cannot pick up the phone and sell a billion dollars of something and be done with it. Jon Corzine failed to appreciate the opportunities and nuances of senatorial power.
So he decides to become a state governor. Still with New Jersey. But it’s still a political office. Yes you are the chief executive officer of a rather large state but you are also a political leader. Long story short Jon Corzine failed to grasp the art of politics. So he exits the political stage but still has this un bridled ambition with no clear cause.
He returns to Wall Street. After Goldman Sachs he is not content with a boutique or mid level play. He has to be the big fish in the big pond. He needs big victories to over-shadow what Goldman Sachs routinely churns out on a slow day.
So he gambles on european sovereigns. Europe is collapsing, apparently for what many on Wall Street and main street see as obvious reasons. Jon Corzine needs a different reality so he reaches for the wrong side of the bet. Behavioural investing gurus will study this one for a long time. Essentially Jon Corzine could not stop himself from flinging the dice against the wall.
So next time you look at an person or a firm to manage your precious hard-earned capital think about what drives these people.
Jon Corzine had gamblers ruin all over him cloaked by what should have been excellent credentials. In fact it turned out to be the ultimate in long tail risk.
Regulators and angry customers still continue to shift through hoping to uncover more. But the trail grows cold.
What will investors be fooled by next time.
George Gutowski writes from a caveat emptor perspective. follow him on twitter@financialskepti