Tuesday, September 16, 2008

Life changing decisions have been made.

I quit school quite awhile ago, and today is why.

Today is D-Day. This is when everything unwinds, and unless the United States steps in, we will face total systemic collapse of the U.S. financial system.

I've been waiting to drop the news to readers, and now that we find ourselves standing at the precipice, I find this to be an appropriate time. Back in October of last year, I stopped making value plays and went heavily short the U.S. financial sector. As time went on, it became apparent that we really were facing the cataclysm Warren Buffett had been discussing since I attended my first annual meeting in 2003. I took a leave from school and did not sign up for the spring semester. By March, when Bear Sterns collapsed, the writing was on the wall.

Two things were clear; 1) the financial system was going to face a systemic shock from which it would never fully recover in its original form and therefore, 2)The old models of education and career advancement were soon to be rendered useless. I thus made the decision to put myself on indefinite leave from school and shut down the process of pursuing an MBA after the Masters I was currently pursuing. I was already in the process of applying to M7 business schools when I made this decision. There would be no jobs waiting for me when I graduated two years later, inexperienced, and $120,000 poorer.

My old employer made me a good offer in terms of quality of life, which is important to me, and as a result I have returned t my old job as a mainframe programmer doing data mining for investigations for the federal government. We first talked back in March, but things work slowly at the government, and I only started working for them again on September 2 even though things had been in process for several months.

Because of the generous qualitative terms, this in no way impacts my ability to invest or post. Following economic news and processing that into investment decisions only takes around two hours out of each day, so I am fortunate enough to be in position where I can continue to do that and work a great job at the same time. The two don't conflict.

With each passing day, this proves to be a wiser decision. There will be 40,000 layoffs in Manhattan and 40,000 financiers with meaningful prior experience desperate for jobs by time I am able to obtain an MBA. Harvard allows credit to stay for five years, so I have time to reverse my decision should I deem it necessary,. But I don't expect it will be. No one is paying $350,000 to first-year spreadsheet makers anymore.

I feel fortunate to have had the luck and foresight to navigate the past 12 months and to actually come out ahead, and my heart sinks for those were stuck in a position from which they couldn't (or still cannot) escape. If you are 40 years old or more in Manhattan, your career is finished. I don't even know what you do. I don't know where you go.


Anonymous said...

Congratulations (or condolences) on reentering the workforce Rick. As you correctly called, financials have virtually swooned this year. Any thoughts on what sectors might feel the shockwaves next?


Rick said...

Many thanks, Walter! I personally don't think that the financials are finished falling. We still have a very long way to go in my opinion, so most of my effort is concentrated here.

The next area of business to feel the shockwaves will no doubt be the hedge funds, which will very soon start to blow up in a very big way. That doesn't help us since they aren't public (we can't short them) but it does have serious implications for us because they will have to unwind all of their positions upon liquidations. This means that stocks that should be going down will skyrocket, stocks that should be going up will cliff dive, etc. This sets off even more margin calls on people who are short, and causes all around chaos. Should be a grand time.