View Full Version : Money Talks

12-15-2007, 11:33 PM
note: this thread (http://www.gooogle.com) is experiencing technical difficulties; formatting under repair.

12-15-2007, 11:56 PM
Full disclosure: I read Slate often at work and I think Gross is one of the weakest columnists there. His work is often shallow and unconvincing, and I found this echoed in his comments on Goldman Sachs. (http://www.bloggingheads.tv/diavlogs/7444?in=00:28:32&out=00:33:14)

Goldman's stock is not outperforming all the other competitors in their sector because they are perceived to be super-humans... it's because they were not nearly as long on the (in retrospect) very bad investments in mortgages as I-banks like Citi or (to a lesser extent) Merril, as well as others.

It has to do with the fact that Goldman's risk management is manifestly better than the other firms on Wall Street. Some sectors in Goldman have not done that well this year (or last year for that matter) such as their egg-heads who run their big hedge funds like Global Alpha and Global Equity Opportunities which semi-imploded in rather spectacular fashion this summer/fall (although again, not as badly as some of their direct competitors whose funds completely collapsed) and have not posted a good year since 2005, but the rest of the firm is simply the best-in-breed in terms of the business they do.

It might indeed be because they do employ geniuses, although so do the other firms, but it may have to do with things like corporate culture, and simply having made better decisions over the years than some of their competitors. Speaking of their corporate culture, it might also be that they play things close to the hand not because they're some sort of Elders of Zion like conspiratorial manipulators of money, but simply the fact that they did not go public until about a decade ago, and they maintain that partnership culture (for instance, former partners were re-titled Managing Directors but the higher up MDs are now back to being called "Partners" even though they are not partners; it is a publicly traded firm).

Gross's sarcasm and skepticism as to whether Goldman could actually have quantitatively outperformed their competitors strikes me as of a piece with his other journalism that I have read: shallow, never letting the facts (Goldman was not as long on bad credit risks that have wreaked havoc at other firms) get in the way of a good story (evil capitalists have an artificially inflated stock price because they keep up a "mystique" by not letting journalists access).

P.S. Lest I be accused of being short on facts and long on opinion, take a look at this blog post (http://www.bloggingstocks.com/2007/12/14/goldman-sachs-mortage-bet-pays-off/) which explains why (without their mystique) Goldman is kicking Citi's butt (http://finance.yahoo.com/q/bc?t=2y&s=GS&l=on&z=m&q=l&c=c) and not taking names with Merril (http://finance.yahoo.com/q/bc?t=2y&s=GS&l=on&z=m&q=l&c=mer).

Fuller disclosure: I own GS stock.

12-16-2007, 02:26 AM
This has to be the most rational post, of yours, that I think I've seen, I guess I'll have to reevaluate my opinion on whether or not you actually live on the same planet with the rest of mankind.

12-16-2007, 07:32 AM
I thought this was an interesting diavlog, especially considering how uninteresting I usually find discussions about Wall Street. I particularly enjoyed Duff's dry sense of humor.

Simon Willard
12-16-2007, 10:36 AM
Here's the link to the BBC article (http://news.bbc.co.uk/2/hi/business/7073131.stm) kidneystones referenced.

12-16-2007, 12:05 PM
If Dan couldn't be bothered to read the Ben Stein piece, and both guests missed the WSJ's lucid explanation of Goldman's dodging of the mortgage bullet, does this mean their editors would be open to hiring someone who isn't inconvenienced by a little homework? Would I have to sell my Goldman stock?
dingalink (http://bloggingheads.tv/diavlogs/7444?in=00:21:50)
WSJ article (http://online.wsj.com/article/SB119759714037228585.html)

12-16-2007, 12:26 PM
Very interesting post, kidneystones, I had not particularly thought of it that way; but of course in today's global economy when the big Wall Street firms are packaging mortgages into crappy, oversold securities, it is going to be a global problem.

Just to amplify the point, not so much with Japanese banks but with European banks, even though their headquarters are obviously in Europe their presence in New York is so great (in particularly here I'm thinking of Deutsche, but also companies like UBS and Credit Swisse) that they are really transnational corporations based in Europe rather than exclusively European concerns, as is the case with so many corporations today.

At any rate, I don't specifically know how wet firms like Deutsche, UBS, CS and other foreign firms that work a lot out of NYC had their noses in the sub-prime kool-aid, but I'm certain they did to some extent. I mostly don't know b/c I get most of my business news from old classmates, and the one who works at Deutsche doesn't work on the trading side, and I don't really talk to the one who works at CS that often.

12-16-2007, 12:51 PM
Indeed; that was particularly egregious and kind of Jon Swiftian (http://jonswift.blogspot.com/2006/11/jon-swifts-complete-amazon-reviews.html) (in the non-satirical sense of the horrible Amazon.com reviewer, not the older English satirist) mistake.

Uhh, excuse me, but even forgetting bloggingheads.tv, isn't reading that Ben Stein piece that made a jump to being a mainstream crossover piece of news (in its entirety) part of the job description of a financial columnist like Gross?

I would also throw my hat in the ring for financial columnist but I think I'd rather keep my job (and my Goldman stock).

P.S. The Swift link I owe to Brendan. Great stuff, though, thought I'd repost.

12-16-2007, 01:07 PM
I really liked Duff but Kee-rist, Gross has the same uninformed-outsider-looking-in perspective (http://bloggingheads.tv/diavlogs/7444?in=06:40&out=6:52) he always has in his articles for Slate.

Is it out of line to ask... if he never worked on the Street, how did he get a job writing about it (poorly) as a living? You look at somebody else who's made the jump to major money mogul-dom like Jim Cramer and you can tell that he has been there fighting the battles and has a rolodex full of people to call for the real story. Maybe this goes to far (witness his insane yet clubby breakdown (http://www.youtube.com/watch?v=SWksEJQEYVU) during the worst part of this summer's credit crunch) but at least he knows the people who can tell him what's going on instead of just writing with this schtick of like... finance people = soulless capitalists who hate the middle class.

I mean, if you're into that sort of thing, then go ahead and read his stuff, but for actual insight on Wall Street, I'll stick to other folks (like Duff, for instance, his Goldman article was very good).

12-16-2007, 01:34 PM

I hold no brief for Daniel Gross. I don't read him that much, which may say a little something, since I do look at Slate several times a week. I will say that I didn't find him nearly as annoying as most business/financial commentators. At least he didn't sound like a know-it-all or unbearably superficial. (One of my versions of hell has me trapped in an airport lounge, surrounded by TVs all tuned to CNBC.)

It could be that I enjoyed the diavlog because he was playing the role of a useful foil for Duff -- serving up the conventional wisdom so that Duff could riff off it.

12-16-2007, 04:28 PM
The foundation of the mortgage securities crisis are the complicated or silly home loans that lenders sold to "optimistic" people. I've heard that many home buyers weren't able to make the first payment on their mortgage, not because they lost their jobs, but because the first payment was simply too big for their income... which is silly. So, Alex Pollock at the satanic (shaitanic?) Bomb Iran! AEI produced this document (http://www.aei.org/docLib/20070515_PollockPrototype.pdf) which is meant to make it absolutely clear to a mortgage signer what he's getting himself into. That the use of a document like this isn't already demanded by the feds is kind of shocking.

12-16-2007, 08:16 PM
That document is far too simple, makes far too much sense, and would work with such a minimal layer of bureaucrats and politicians necessary for its operation that it could never possibly be attempted.

That is a great idea though; I'd think that politicians on both parties could make populist political hay out of that.

12-18-2007, 12:39 AM
At one time I had some good feelings for Ben Stein. But he is now involved in the creationist movie Expelled: No Intelligence Allowed. (http://www.expelledthemovie.com/) The producers of this piece of crap lied to scientists in order to get interviews. (http://scienceblogs.com/pharyngula/2007/08/expelled_producer_seems_to_be.php). The scientists were told that they were being interviewed for "Crossroads", (http://www.nytimes.com/2007/09/27/science/27expelled.html?_r=1&oref=slogin) a documentary about the intersection of science and religion. The interviews were edited and quotes were used out of context to support the case for "intelligent design."


01-03-2008, 01:46 PM
In Slate today (http://www.slate.com/id/2181184/nav/tap3/):

Not all knife-catchers have been hurt, though. Goldman Sachs was one of the few Wall Street firms to prosper during the subprime tsunami, as it used its own cash to make bearish bets on subprime securities. By late December, First Marblehead, the student-loan company, had lost about 75 percent of its value over the course of 2007, as investors fretted over loan defaults and rising financing costs. On Dec. 21, Goldman's private-equity unit stepped in and agreed to buy up to 20 percent of the company for $260.5 million and offer a line of credit. With First Marblehead's stock having rallied from $11 to about $15 today, Goldman is solidly in the money on its investment. Many analysts already believe the sharp traders and risk analysts at Goldman have superhuman powers. Its ability to overcome the force of gravity and halt a plummeting financial-services stock may only add to the firm's legend.

Do "many analysts" other than Gross really believe this?

01-03-2008, 04:11 PM

Do "many analysts" other than Gross really believe this?

I'm afraid so. Just like many analysts used to believe Enron was composed of "the smartest guys in the room."