When Vision Fails

From Black Swan Trading:

Just when you thought it was safe to go back in the water, subprime rears its vicious jaws again; this time in Europe. As reported in Bloomberg this morning, “UBS AG, Europe’s largest bank by assets, reported its first quarterly loss in almost five years after declines in the U.S. subprime mortgage market led to $4.4 billion in losses and writedowns on fixed-income securities.” I’m sure you remember the recent run on U.K. bank Northern Rock Plc. And last week we saw subprime bite into Merrill Lynch and Japan’s Nomura Holdings. The week before that Bank of America, Wachovia and Capital One Financial all reported subprime-related gashes in their quarterly results.

This crêpe hanging led to the following observation:

Makes one wonder if CEO’s are lucky or good? During the boom times, the CEO’s at all the major houses were visionaries. Remember how credit parcelled out into smaller bundles was supposed to reduce risk? Remember how stress-tested all these portfolios were supposed to be? Sure, most CEO’s can impress with mission statements, customer centric marketing plans, technology integration, blah, blah, blah when the environment is good…but when the business cycle changes, there are only a few that seem to shine.

Unfortunately many "prosperity teachers" are guilty of the same thing.

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