I’m preparing to go on David Asman’s excellent “Scoreboard” tonight and we’ll be discussing Jon Corzine’s problems at MF Global. (For those not following –and granted it’s all a little “inside baseball,” — he bet big on Euro bonds and that bet went south, pretty much taking down the firm.)
Apart from the trade going bad — that happens to everyone — the real crime is that Corzine had to know at some point the trade was a stinker and just didn’t listen to that internal whispering. Instead, he probably made matters worse by doubling down.
You see my take is that you pretty much know when a trade is going bad, just like you know when a relationship is going bad. You get this little sense that things just “aren’t working out”, but instead of listening to that little voice, you slog on until it’s a real mess. In Corzine’s case, the mess will put his company into chapter 11.
Anyway, my bigger point is that your mind and body do a pretty good job of steering you away from bad. You tend to know if you’re eating too much, or need more exercise, or have been treating your family poorly.
You just have to constantly listen and act on what you’re hearing. I’m betting if Corzine had done so, MF Global would still be solvent.