Gawker sets the stage for “Internets vs Goldman Sachs” Round 1, starting with an initiative to crowdsource the collection of personal excesses by GS employees.
I agree with FT Alphaville’s take on this - just because these guys make and spend a lot of money doesn’t mean they forfeit their right to privacy. Goldman has paid back its TARP funds, which it probably didn’t want in the first place. Perhaps they should have been (and should be) regulated more heavily, but that’s not a reason to hold a witchhunt against everyday employees buying their first apartment.
I found this quite fascinating. The VIX is the market expression of expected S&P 500 volatility. Look what happened in 2008! We are now closing in on the 20 year average which suggests a return to some kind of normality.
(from famed Morgan Stanley analyst Mary Meeker’s latest ‘Economy & Internet Trends’ report)
Interesting combination of news headline and banner ad.
Former Merrill Lynch CEO John Thain admits that he really had no idea what the CDOs on their balance sheet were worth. Felix Salmon quite rightly blasts him for changing his story, having previously claimed that he knew exactly what the positions were worth. If I were a Merrill shareholder I’d expect my $80million/year CEO to have a decent understanding of what’s going on.
This isn’t a new revelation. Michael Lewis’s 1989 novel Liar’s Poker pointed out that Salamon Brothers Chairman John Gutfreund didn’t understand the risks his firm was taking. The securities they were dealing with were way simpler back then - I don’t think we should be surprised that today’s top Wall St executives have totally lost touch with the details of their complex derivative portfolios.
I’m with Warren Buffett - every CEO of an investment company should also play the role of their firm’s Chief Risk Officer, taking responsibility for understanding and managing the risks in their portfolio. I think things would be quite different if CEOs didn’t delegate this responsibility.
Fascinating chart showing how housing prices have moved over time in various countries, via McKinsey Quarterly.
The Epicurean Dealmaker is by far my favourite finance blog. This quote is from Part IV of his series of posts on investment banking compensation. Part I, Part II, Part III.
Anyone who has even the slightest interest in understanding the role of compensation in the recent financial crisis should read all four posts.
I’ve just watched the trailer for Michael Moore’s new film, “Capitalism: A love story”. It kind of pissed me off, but I wasn’t going to comment on it… until I came across this amazing post on Dealscape about the film’s New York premiere:
Before the film, the crowd sipped champagne and cocktails in the “Morgan Stanley Lobby” and then headed to their seats in the “Citi Balcony.” Movie tickets were available at the “Bank of New York Box Office” and there’s outdoor seating at the “Credit Suisse Information Grandstand.”
Hypocrisy at all? The premiere was followed by a rather swish event at one of New York’s trendiest and most expensive bars. I guess Moore isn’t all that much opposed to capitalism.
Judging from the trailer, the movie is much more interested in scoring cheap points out of an emotionally charged situation than actually evaluating what went wrong and how to fix it. In the trailer he chases down traders in expensive suits asking:
“Can you tell me what a credit default swap is? Can you explain a derivative to me?”
I can’t help thinking, “Maybe if you weren’t such a simplistic, ignorant, illiterate, manipulative, fat-ass then you’d be able to read and understand the Wikipedia articles on these basic financial instruments”. See credit default swap, derivative.
For those who can’t be bothered: a credit default swap is a contract you can buy from that pays you a certain amount of money if a specified bond defaults (fails to pay). A derivative is a contract that derives it value from the value of a traditional financial asset (e.g. a stock or a bond). It’s not that complicated.
Moore’s film makes me so angry because he is trivialising such an important subject. After Lehman collapsed in September last year, we came unbelievably close to global disaster on a scale that is very difficult for us to imagine. I remember saying to people that the only thing standing between Western civilisation and a 1930s style Great Depression was the IMF - a scary situation indeed.
It appears that we have successfully purchased our escape from the brink. At what ultimate cost I don’t know. We need to learn some tough lessons from the events of the past two years, and we need to learn them fast. I just don’t think Moore’s sensationalist, crude exploration of the subject is going to help at all. This is a shame - because if he did this right then he could really make a difference.
Most people don’t think of themselves as gamblers; they prefer to think of themselves as people who make deliberate and rational choices in a deterministic world. Modern society is set up to give us all the illusion that we can be protected from all risk. Tort law in America is set up with the assumption that everything works in a Cartesian fashion, for example. There is very little allowance for randomness and fate: someone or something is always held responsible for bad things.
…
People misunderstand the role of risk and randomness in their professional lives. Most people, for example, get jobs. A job seems like a relatively risk-free lifestyle. Jobs certainly remove virtually all upside potential, so you’d expect to be compensated with lower volatility. I think a lot of people are now finding out they mis-calibrated their job volatility risk.
From this fascinating post by Scott Locklin.
