Moorlach’s Risky Investments

Chriss Street fired off a press release Wednesday afternoon touting his wisdom and foresight. Seems he decided to reverse his previous position to “hold to maturity” the county’s investments in risky Structured Investment Vehicles (SIV’s).  In this case, Street decided to sell off the county’s holdings in the Sigma Financial SIV early. At the end of August the county had 74,141,850 invested by former County Treasurer and current Chairman of the Board of Supervisors John Moorlach. The investments were scheduled to mature the end of October.

Street had been watching the daily value of Sigma, which had been hovering below 90% of the investment. When the daily value ticked above 90% street decided to sell, at 91.5 cents on the dollar. Since the investments had earned a little over their life, the county came out of this “Risky Investment” ahead by a little less than $200,000. Had street waited till the investment matured, the OC taxpayers could have lost a bundle, Street estimates as much as $50 million. That’s because today, after trading dropped the value to around 20 cents on the dollar, Sigma Financial has ceased trading. No telling how much those who didn’t get out will loose.

Now I’ve been known to take every opportunity to smack Chriss Street upside the head for his own investments in SIV’s, this investment was made by John Moorlach in October 2006, before Street became Treasurer. So while I am unsure if it was luck, wisdom, or a blind dog finding a bone, Chriss Street gets an atta-boy for this one. With that said however, What a creative way to say you narrowly escaped losing 100% of your principal, and gee shouldn’t we be glad that you only lost -8.5% on short money that should have returned +2.5%. Where’s the money, principal and interest, from the Whistlejacket SIV under receivership? At this point the Whistlejacket investment has lost $11 million of the initial investment of $80 million.

Funny though, for all of John Moorlach’s claims of wisdom and foresight, he was rather critical of Street at a meeting of the County Audit Oversight Committee meeting days after Street cut our losses and sold off “Moorlach’s Risky Investments.” He allegedly grumbled something about “who would sell of an investment at a loss less than 2 months before maturity?” Apparently John that would be someone with more wisdom than you.