bluntlysaid


The Cave Man

Why is it that men devolve into cavemen whenever things get stressful at work/school/etc.   My boyfriend, G.I. Joe, is about to graduate from his MBA and he is looking for a job.   This is a summary of the last 5 weeks:

  • Denial
  • Then, one day he placed a call that essentially shoved a snowball down the slope
  • The snowball started to pick up velocity and mass
  • He got overwhelmed and coped with matters by going into his deep, dark cave
  • There is no room for women in his deep, dark cave…but there is room for xbox 360 and Call of Duty

I really don’t understand why men insist on spending time in their caves.  Good psychology tells us that people deal better with stress when they share their burden with someone else. That’s the whole point of a partnership or even a friendship. Luckily, my caveman will sometimes yell from the cave so that I know he’s in there….that helps, a little.

This isn’t the first time that I experience the cave. My former boyfriend did the exact same thing when he started contemplating his next job move.  For a long time I thought he was a freak, but now I’m starting to realize that maybe all guys revert to the cave whenever their livelihood is in question.   I would love to hear what other people think about this.



Goldman—Market Maker or Sleazy Salesman?

This is a quote from the front page of today’s  New York Times:

“Our investigation has found that investment banks such as Goldman Sachs were not market makers helping clients,” Mr. Levin said. “They were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis.” Wall Street firms, Mr. Levin said, were “all too often betting against the financial instruments that they sold, and profiting at the expense of their clients.”

I originated CMBS at a bulge bracket bank. In October of 2007, my team along with the head of credit for all of fixed income new damn well that Goldman had shorted its mortgage portfolio. “Brilliant,” I said.  “Unbelievable. It’s like they had a motherfucking crystal ball,” said the head of credit.

This bulge bracket bank knew that Goldman shorted its portfolio and could have mimicked the strategy if they had wanted to. Sure, the shorts were more expensive in October than when Goldman bought them a few months prior, but in Wall Street you can buy anything you want so long as you have the appetite for it. This bank clearly lacked the appetite.

As for the quote, that vilifies Goldman for shorting products it hawked to investors.  I’ve already wrote about this before, but the traders that make and sell securities are legally prohibited from talking to the traders that take positions for the bank.  This would have insider scandal written all over it if the two teams could talk and note that those are words that no one has used yet.

Goldman was a market maker. Now, perhaps HR should reassess the incentives these traders get.  Perhaps pegging bonus’ to a % of sales leads to reckless behavior.  Instead, Goldman should tie compensation to sales and credit losses.  Just an idea.

Sleazy salesman or market maker…you know what I think



Goldman

I posted the following (paraphrased) on my Facebook:  

Don’t know where I land re: Goldman. On the one hand, Goldman is a market maker and has always sold securities that some investors hold while others short. On the other hand, Goldman shorted its own mortgage portfolio in 2007 yet willingly sold securities to investors knowing they were on the wrong side of the bet. I think it comes down to whether investors could have known that Goldman shorted the CDOs it sold. If this was public information, then you can’t blame investors for running towards a fire that others were clearly fleeing from.http://www.nytimes.com/2010/04/17/business/17goldman.html?hp

Since then, I’ve talked to my buddy at Goldman and confirmed that the prop desk that takes positions on for Goldman is legally prohibited from sharing notes with the desk that designs and sells the securities. That makes a lot of sense since Chinese Walls are the only way to prevent insider trading.  Interestingly, even though it’s true that Goldman’s short position against the Abacus securities were relatively insignificant relative to the firm’s larger positions, the bet did jump to CEO Lloyd Blankfien’s attention.   I imagine that the trader ordering the short was was called into Lloyd’s office:  

Lloyd: Why the fuck are you taking a $3B position against the mortgage industry

Trader: Sir, all of my research and experience tells me that shit is about to go down

Lloyd: Then why are all of our competitors still buying mortgage securities

Trader: Because they have inferior information.  I’m willing to best the soul of my first born child on this one

Lloyd:  Alright. Go ahead and short our mortgage portfolio, but, if you’re wrong it’s your ass that’s on the line

I am 100% positive that Goldman’s CEO knew the firm was shorting securities that another desk was going out and selling. However, that in itself is neither illegal nor wrong. His job is NOT to share arbitrage opportunities with investors at large.  His job is to ensure that there is a marketplace for securities and that’s exactly what he’s done. I personally absolve Goldman for shorting the mortgage industry although I would never vouch for something that I myself am trying to get rid of.

On the other hand, if its true that the creators of the Abacus security knew that it was comprised of XYZ collateral but told investors that it was comprised of ABC collateral—well, that’s plain old fraud.