Uncertain Times: A Chief Investment Officer's Journey - Part 2

Uncertain Times: A Chief Investment Officer's Journey


by Alton R. Cogert, CFA, CPA, CAIA

    The moment the 24th Mechanized got its fighting orders, a glance at the map had told him their heading would put them on course for Cunaxa. Twenty-four centuries earlier the brothers Cyrus and Artaxerxes had battled each other at Cunaxa to rule the Persian Empire. Artaxerxes lost the battle; Cyrus lost his life, leaving 10,000 Greek mercenaries stranded in enemy territory far from home. One of those men, Xenophon, survived to write a book that still figured in leadership courses. At least, it did at West Point. It was no coincidence that Bob had taken Xenophon’s Anabasis to Iraq, even—so it seemed as they roared through the night—into battle. At forty miles an hour on rough terrain the M2A2 Bradley’s diesel was designed to keep pace with an M1 Abrams battle tank. Bob had stuffed several books in his jacket pockets that night, Xenophon’s Anabasis among them, to pad the blows from the rim of the Bradley’s hatch.

    Across the desk, Greening was wrapping up. “I’m glad we had this conversation, Bob.” Improbably, the VP advanced his hand and Bob shook it, dazed. “When you’re ready to do the paperwork, see Martha in HR. She’s got it waiting.”

    She’s got it waiting! How long had this ambush lain in store, ready to be sprung?

    Bob sat a moment, feeling for all the world as Xenophon must have done, a man marooned a thousand miles behind enemy lines, very far from home. [NOTE 1-2]

    It was time to act. Bob packed his family photos and his personal files, turned off his computer and the Bloomberg monitor, dropped his keys and left. Security would do the rest. The CEO’s recently voiced line, “You’ve got a bright future with us, Bob,” would have to happen elsewhere.

    The 24th Mechanized Infantry never reached Cunaxa. The French disengaged from the smoking remains of the Iraqi 45th Infantry and the whole line wheeled right, the Americans and British slowing to maintain the Allies’ arcing line abreast to attack the Republican Guard. That didn’t happen. The Guard joined the general Iraqi retreat, where Allied aircraft bombed men and materiel to destruction on the “Highway of Death.” Three days later Bob’s U.S. 24th Infantry played a major role in the battle at Rumailah (the battle of the junkyard), hammering Republican Guard vehicles into the sand. That was where Bob tasted fear again, keeping one eye on the sky. The Air Force killed more “friendlies” than Iraqis did.

    Eighteen years earlier, Lt. Robert S. Short had done his bit to win a bigger battle than he faced now. He could do it again. He must. As he escaped the building he was once again keeping his eye on a metaphorical sky—avoiding the most familiar faces. He made it to the parking lot and the refuge of his car, wondering what to tell his wife. He reasoned that Susan might not be surprised. She knew that her husband was bright, but his communication skills were another matter.

    That had been the brunt of Greening’s criticism.

    Bob toyed with his car key. How had his apparent failures short-changed the company? Greening had listed other factors to justify dismissing him but Bob had been too shell-shocked to take it in. No matter. He’d piece it together. He had to before he could move on.

© C.B. Woodbridge Publishing, 2009

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[NOTE 1-2]
    Consider the environment Bob faced during 2008. Equities down over 40%. Supposedly safe fixed income investments buffeted by a near total lack of liquidity, and pricing that expects the worst in defaults and then some. Mortgage-backed securities that would pay in full, corporate bonds that were the pillars of the economy, and other ‘rock solid’ investments all valued at ‘fire sale’ prices.
    On top of that, we found auditors effectively calling the shots on what must be written down as ‘Other Than Temporarily Impaired’ and pushing the dangerous standards of ‘fair value’ found in ‘mark to market’ accounting. Meanwhile, rating agencies, running scared from their own problems, delve into investment portfolios as much to salvage their own reputations as to understand the risks in the portfolio.
    To this, we can add senior management and a Board of Directors stunned that a ‘conservative’ portfolio can get into trouble so quickly.
    If all the above factors wouldn’t make Bob Short feel marooned, it most surely made many other CIO’s feel that way—even without the added pressure presented to Short at the beginning of our story.