Friday, July 11, 2008

More on the Bill Gross Interview

One thing I love about blogging is it creates discussion. I did a post on Bill Gross interview yesterday and an investment friend of mine explained why he came to a different conclusion. As I have said before all this is an art not a science., just like investing. I figured it would be interesting reading for some of you.

His response

By way of background, in addition to the BIA training I was also an Intelligence Officer. Part of my training included 6 months of formal intelligence training, to include interview/interrogation techniques taught by acting CIA interrogators. Bottom line is we did not view is behavior to be deceptive and felt you may have "over-interpreted" a few of the signs. This is actually a very common occurrence that, unfortunately, can be left out of brief investor training programs. As you mentioned, this stuff is more art than science, and we are just as likely to be wrong as you are.

One thing to keep in mind is that the indicators taught are designed to be evaluated in the context of a structured interview. Specifically, it's important to establish a 'base' of behavior patterns by asking a series of unrelated, fact-based questions. This allows the interviewer to identify trends/changes in these behavior patterns as indicators of deceptive behavior (the trends would obviously be clusters). Not necessarily a hard and fast rule obviously. The Gross interview was obviously not structured that way, and in fact, the initial questions asked were more opinion-oriented in nature, thus it is very difficult to set the base and identify indicators. I would also argue there was a bit of ambiguity in a few of the questions that left the answers subject to interpretation. You would typically want to structure the questions such that there is a more clear answer. Specifically, he asked if pimco was reducing 'risk' or 'exposure' to Lehman. That could obviously mean from a counterparty or investment standpoint, which are both sources of pimco's exposure to Lehman (and Gross may not be as informed on either aspect given his high level role). That's obviously just one example of a couple. Any ambiguity in the question will likely be amplified in the answer. We also did not notice the non-verbal clues, but again hard to judge given lack of a base from which to judge. If anything, he maintained consistent anchor points and body language. These are just the thoughts of two people, so again, feel free to discount and/or take with a grain of salt.

My Response

A couple of thoughts. Completely agree that the best use of BIA is under structured questions. You have general questions and then a trap question. However, during training we reviewed several interviews that were not structured. Bill Clinton being an example. So though that is ideal it is not a requirement. You would also prefer to see the entire body. All we have is chest up. At the 3:00 minute mark when he is cornered I felt like there was an anchor shift. A shift of weight looking at him from left to right. I also felt there a short boost of serial movements with facial muscles, the weight shift, and head moving. I try to watch every Bill Gross interview he does and he is always very stoic and very still. Even in this interview the first 2 minutes there was hardly any movement where as at the 3 minute mark there seemed to be a burst or cluster to me. By any standards slight and maybe nothing but for Bill Gross it seemed like alot.
It is definitely an art and at this point I don't even know if is usable. I would be willing to bet though that PIMCO is doing something. Could be very wrong.

His Follow Up Thought

Definitely hear you on the movements at 3 minute mark. My buddy and I felt that it could have been frustration given ambiguity of questions and potential lack of awareness of the firm's specific trading and/or counterparty activities. Obviously lots of different ways to go with it. Definitely agree that structure is not necessary. In a real interrogation setting, different techniques would have been used if there wasn't opportunity to structure the interview and the interviewee exhibited signs of deceptive behavior….and no, I don't mean waterboarding. :)


So there are differing thoughts. Talk about intellecutally exhilartaing!! Like I said yesterday there is no way I would short it based soley off the PIMCO intereview. I do think think it adds to the overall probabilities in a downside scenario.

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