They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.
Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt: Goldman Sachs should stand trial.
The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma. Their unusually scathing bipartisan report also includes case studies of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — "a million fraud cases a year" is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin’s small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street’s aristocratic impunity and prosecutorial immunity produced since the crash of 2008.
To date, there has been only one successful prosecution of a financial big fish from the mortgage bubble, and that was Lee Farkas, a Florida lender who was just convicted on a smorgasbord of fraud charges and now faces life in prison. But Farkas, sadly, is just an exception proving the rule: Like Bernie Madoff, his comically excessive crime spree (which involved such lunacies as kiting checks to his own bank…
Investing is, up to a point, gambling. Most of us don’t think of it in that way but if we conceive of the universe of stocks as a gas of randomly moving particles buffeted this way and that by forces largely beyond their – and certainly beyond our – control then there’s no other conclusion that can be drawn.
However, we don’t really believe this. What we generally believe is that although randomness is pervasive in stocks there’s a pattern that lies beneath the surface which we, in spite all evidence to the contrary, can pick out. For the idea that there are repeatable patterns hidden within apparently random games of chance we can thank one of our more unlikely heroes. Meet Girolamo Cardano, medieval physician, professional gambler and mathematician extraordinaire.
For a very long time in human history there was no appreciation or investigation of probability, the mathematics that lies behind assessments of risk. For the most part people didn’t believe in chance: stuff happened and that was God’s will. The idea that there was some order in the chaos either seems not to have occurred or to have been literally unthinkable.
Gamblers, however, did have some vague understanding that there were patterns in the randomness and quite a lot of self-interest in figuring these out. It’s no surprise that gambling figures quite large in early accounts of advances in probability theory. In Cardano, who seems to have been addicted to gambling, the will to understand and the ability to do so came together.
In many ways what Cardano figured out is today regarded as almost trivial, but at the time it was revolutionary and it allowed him an insight into why and when he should take a risk and when he shouldn’t. Perhaps the simplest example is to do with dice. At the time it was regarded as a bit of a mystery why, when three dice were rolled, the sum of face-up numbers came to ten more often than nine, despite the fact that there were six ways of summing possible numbers to both.
The answer to this conundrum is almost childishly simple to our eyes. There are twenty seven ways of combining the possible sums to ten while there are only…
In New Jersey, taxes are high, the budget’s a mess, government is inefficiently organized, and the public pension fund is blown to kingdom come. Which makes New Jersey a lot like most other states in 2010. What makes the state unusual is its rookie governor, a human bulldozer named Chris Christie, who vowed to lead like a one-termer and is keeping his promise with brio. He has proposed chopping $11 billion from the state’s budget — more than a quarter of the total — for fiscal year 2011 (which starts July 1). He’s backing a constitutional cap on property taxes in hopes of pushing the state’s myriad villages and townships to merge into more efficient units. He’s locked in an ultimate cage match with the New Jersey teachers’ union. It may be the bitterest political fight in the country — and that’s saying something this year. A union official recently circulated a humorous prayer with a punch line asking God to kill Christie. You know, New Jersey humor. And in an interview with the Wall Street Journal, Christie didn’t talk about the possibility that his fiscal initiatives might be compromised or defeated; he pictured himself "lying dead on State Street in Trenton," the state capital. Presumably that was a figure of speech.
The tone of the New Jersey budget battle may be distinctive, but many of the same notes can be heard in state capitals across the country. From Hartford to Honolulu, once sturdy state governments are approaching the brink of fiscal calamity, as the crash of 2008 and its persistent aftermath have led to the reckoning of 2010. Squeezed by the end of federal stimulus money on one hand and desperate local governments on the other, states are facing the third straight year of staggering budget deficits, and the necessary cuts will cost jobs, limit services and touch the lives of millions of Americans. Government workers have been laid off in half the states plus Puerto Rico. Twenty-two states have instituted unpaid furloughs. At least 28 states have ordered across-the-board budget cuts,…
It’s Time for Reform We Can Believe In
The Fed Must Be Independent
Credit Default Swaps Threaten the System
Too Big To Fail Must Go
And This Thing About Leverage
What Happens If We Do Nothing?
New York, Media, and La Jolla
Casey Stengel, manager of the hapless 1962 New York Mets, once famously asked, after an especially dismal outing, "Can’t anybody here play this game?" This week I ask, after months of worse than no progress, "Can’t anybody here even spell financial reform, let alone get it done?" We are in danger of experiencing another credit crisis, but one that could be even worse, as the tools to fight it may be lacking when we need them. With attacks on the independence of the Fed, no regulation of derivatives, and allowing banks to be too big to fail, we risk a repeat of the credit crisis. The bank lobbyists are winning and it’s time for those of us in the cheap seats to get outraged. (And while this letter focuses on the US and financial reform, the principles are the same in Europe and elsewhere, as I will note at the end. We are risking way too much in the name of allowing large private profits.) And with no "but first," let’s jump right in.
Last Monday I had lunch with Richard Fisher, president of the Federal Reserve Bank of Dallas. Mr. Fisher is a remarkably nice guy and is very clear about where he stands on the issues. My pressing question was whether the Fed would actually accommodate the federal government if it continued to run massive deficits and turn on the printing press. Fisher was clear that such a move would be a mistake, and he thought there would be little sentiment among the various branch presidents to become the enabler of a dysfunctional Congress.
But that brought up a topic that he was quite passionate about, and that is what he sees as an attack on the independence of the Fed. There are bills in Congress that would take away or threaten the current independence of the Fed.
I recognize that the Fed is not completely independent. Even Greenspan said so this past week: "There’s a presumption that …
"If you wanted (as Paul Krugman and some of the questioners at the FCIC hearings did) to know just why things went awry, you’re wasting your time, says the Epicurean Dealmaker: Top bankers are "smart, scary smart," but they have little interest in why things are – and rather plenty of interest in how they can take advantage of the way things are." Phil
A study of recent—and not so recent—financial reform and regulation yields two rules. Rule No. 1: The banks have no idea what kind of regulation is good for them. Rule No. 2: If you ever think the banks have a point, remember Rule No. 1…
So there you have it from one of their own. They just didn’t have time to think about how paying exorbitant amounts of money to themselves that they earned from a game the government rigged for them, after the government bailed them out would play out. They weren’t stupid or foolish, just preoccupied with making money. As TED says, that is what they’re all about.
"Aesthetics is for artists what ornithology is for birds."
— Barnett Newman
Good morning, class.
Our quote for the day comes from Barnett Newman, painter, artist, and member of the loosely affiliated post-war group of US artists known as the Abstract Expressionists. Mr. Newman was widely regarded by many—none more so than himself—to be one of the smartest and most intellectual of this group, which contained other, less articulate1 but arguably more talented artists such as Willem de Kooning, Jackson Pollock, and Mark Rothko. Mr. Newman is credited with unleashing this bon mot upon an unexpecting world in the course of discussing art critics, art criticism, and aesthetics—the philosophy of art and beauty.
* * *
I recalled this quote to mind today when I read Paul Krugman’s latest broadside against all things—and people—financial in The New York Times. In his jeremiad, "Bankers Without a Clue," Mr. Krugman picks apart the recent testimony by four Wall Street CEOs at the Financial Crisis Inquiry Commission and asks the rhetorical question
We are entering one of the most bullish times of the year historically. As we mentioned last week, the final 30 trading days of the year have been higher each of the last 12 years.
CLICK ON CHART TO ENLARGE
Getting to today, it is Black Friday – the official start to the holiday spending season. We’ve seen many stats that show this day isn’t quite as important as it once was. From many sales now starting on Thanksgiving, to Cyber Monday this coming Monday – there are other times people are looking for the best deals. None the less,...
Nope it is not interest rates, nope it is not Donald Trump, it is!
It is the CRUDE OIL crash, simple!
Jim Willie has good comments in the first 40 min of this pod cast.
Energy company ... - Debt is blowing up (See energy element of HYG). - Hedging at oil $100 is coming to an end. - Iran coming back to the market, more supply. - Saudi still providing massive supply. - Oil tankers holding oil parked in the ocean are coming in to harbor to unload - US dollar strength supports lower oil prices - World wide DEMAND slump for energy or deflation. - More oil being sold outside the US Dollar - The Oil futures can not be manipulated easily as folks actually ...
Some weeks when I write this article there is little new to talk about from the prior week. It’s always the Fed, global QE, China growth, election chatter, oil prices, etc. And then there are times like this in which there is so much happening that I don’t know where to start. Of course, the biggest market-moving news came the weekend before last when Paris was put face-to-face with the depths of human depravity and savagery. And yet the stock market responded with its best week of the year. As a result, the key issues dominating the front page and election chatter have moved from the economy and jobs to national security and a real war (rather than police ...
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I've decided to build our startup - Veritaseum, a peer-to-peer financial services platform, directly on top of the Bitcoin Blockchain. Many queried why I would voluntarily give up a lucrative advisory and consulting business to chase virtual coins in cyberspace. That's exactly why I decided to do it. That level of misunderstanding of what is essentially the second coming of the Internet gave me a fundamental advantage over those who had deeper connections, more capital and more firepower. I was the first mover advantage holder.
You see, Bitcoin is not about coins, currency or price pops. It is a massive computing net...
1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:
The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
I think this is the beginning of the end for the company.
My price target for the stock a year from now is $3, so I shorted more yes...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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