A lot of professionals are arrogant know- it- alls who are not bashful at all about letting people know it. I’m in the investment business which has more than its share of smarty pants boys and girls. What I’ve found in my lifetime is that the more money some people make or higher up the corporate totem pole they are the more knowledgeable they think they are and are willing to tell you how to invest, where the economy is going and all the reasons why they are God’s gift to the human race. If the Pontiff asks you kiss his ring these folks ask you to bend a bit lower to press your lips.
In the book The Smartest Guys In The Room’, about ill fated Enron headed by Lay-Skilling and Gang these were people who knew they were the smartest people and aimed to prove it by getting paid for their brilliance. They did this by creating opportunities that cheated others in order to enrich themselves. They believed they were worth more that what they could earn from honest labor. Or, put another way, they couldn’t justify their egos by just doing things the right way.
Today we have Goldman Sachs, an investment bank known for grooming future Secretary’s of Treasury like Hamburger U churns out fast food franchise owners. I have to assume that if Machiavelli ever came back it would have to be as a GS banker. Even the 31 year old youngster that is about to be thrown under the bus. Fabrice Tourre, referred to himself as the fabulous Fab as the economic world was collapsing about our ears. I don’t know of anyone in the normal world of business that refers to him or herself as fabulous this or that, but only in investment banking world where money is handed out by the truckload are egos allowed to soar with such grandeur, or is it impudence.
Ask anyone on the Street and the majority of Wall Streeters still genuflect when Goldman Sachs is mentioned. That day may be ending. It is an investment bank that takes no prisoners, is unbelievably profitable and hires what are the best and brightest. It is known not only for its prosperity but also for the intelligence and business savvy. There is a reason why Secretary’s of Treasury come from this firm.
The SEC now says that Goldman committed fraud and Goldman says it did not. On that we know there is more than a difference of opinion. One or the other is terribly wrong and Goldman is preparing to fight to the end, which usually means judge and jury. Here is where Goldman will have less the advantage since they will present their case to average men and women, some who have difficulty balancing a checkbook, and couldn’t define a derivative from a dangling participle. These average people will be expected to understand collateralized debt obligations, collateralized mortgage obligations, mortgage backed securities and how synthetic investment products are created and sold. The smartest people in the room don’t have a clue as to how these products work. Don’t expect Jim and Jane Next Door Neighbor to grasp the intricate creative investment theory. The fight will be contentious and without a doubt Goldman will lose. The one thing Jim and Jane Next Door Neighbor will understand is lying. You may be able to fool them with the shell game but looking them in the eye and trying to say Goldman did nothing wrong with a straight face just isn’t going to fly. From my perspective Goldman Sachs needs this fight like I need another hole in my head.
Chucky Schwab recently settled for over $200 million, just before going to court, after being accused of misleading investors on the amount of mortgage-backed securities held in its Schwab YieldPlus Fund. If Chucky had to cough up $200 million clams can you imagine how many billions it’ll cost GS plus its reputation?
Warren Buffett is saving his Goldman response for his stockholder meeting this coming week. He is expected to fire at will, according to the WSJ. Warren’s partner, Charlie Munger, thinks GS did nothing illegal but believes that the ‘whole industry has lost its moral moorings’.
Finally, Michael Lewis, writer of the Big Short and Liars Poker, in his op-ed for Bloomberg Businessweek, ‘ Just as there was a time when people could smoke on airplanes or drive drunk without guilt, there was a time when a Wall Street bond trader could work with a short seller to create a bond to fail, trick and bribe a ratings agencies into blessing the bond, then sell the bond to a slow-witted German without having to worry if anyone would ever know, or care, what he’d just done. That just changed.’
If you have questions about this blog call Paul at 877 783 7080 or write pstanley@westminsterfinancial.com. Share this with someone who cares about their money.
No comments:
Post a Comment