OK, so you probably didn’t see that many of them manning the Occupy Wall Street barricade. But CFOs can be victims of Wall Street all the same, according to a notorious finance gadfly.
Many still remember Lee Munson’s drunken, profanity-laced New York Observer interview at a midtown Manhattan bar. Just months before 9-11, the then-25-year-old stockbroker became a poster child for the excesses of an earlier burst bubble that night, when, fueled by a journalist’s open bar tab, he bragged about his Gucci and Prada lifestyle, arrogantly abused the help and compared his profession to drug dealing.
More than 10 years on, Munson has relocated to Albuquerque, where he lives with his wife and daughter, and founded PortfolioLLC, an investment management firm. A frequent guest on CNBC’s The Kudlow Report and Fox Business Network, he has increased his exposure with the December publication of his book, Rigged Money: Beating Wall Street At Its Own Game, in which he launches a diatribe against Street excesses.
CFOworld spoke with Munson recently, wondering how his thesis that finance has “usurped” capitalism, and does not in fact serve businesses, would apply to CFOs.
“When I first got started on Wall Street, I aggressively made a lot of cold calls to make my fortune,” he recalls. “I specifically targeted CFOs.”
“When I would give them a hot, sexy dot.com idea or some other sexy idea involving swaps or forward contracts [this would highlight the] bifurcation between their personal life and their professional responsibilities,” he says, using much less salty language than his 25-year-old self once did. “Whether it’s going to a bank or an investment company, they need to remember that Wall Street is not interested in whether the investment succeeds,” he argues, advising CFOs to ask themselves, “Will this investment banker that I’m talking to hurt if things don’t work out?”
“The CEO wants anything that can help,” Munson points out. “Where a CFO can miss the mark and hit the bulls eye” is by fully informing the CEO of all risks involved in hedging, and being fully transparent about hedges and other financial strategies.
On the other hand, he says, a CFO, being prone to the same irrational impulses as the rest of the 99 percent, “can also screw up a company.” The gold mining industry had “very much a herd mentality, routinely hedging forward profits” for many years. “Are they trying to hedge now? No.”