The market went ka-boom

..and they laughed and laughed and laughed.

Now it’s our turn.

21 Responses to “The market went ka-boom”


  1. 1 Brian Friday, April 30, 2010 at 6:15 pm

    E-mails released by a Senate committee investigating the financial crisis show top executives at Goldman Sachs Inc. boasting about money the firm was making as the housing market collapsed in 2007.

    The documents suggest that Goldman benefited at least for a time from bets that subprime mortgage-backed securities would lose value.

    Isn’t this exactly what investment firms are hired to do? Accurately judge the market, then take actions that will benefit clients’ holding with that company? People’s retirements are entrusted to organizations like Goldman Sachs through their 401Ks and IRAs.

    I really think that, had they lost money instead, Congress would be grilling them about that. Congressmen are notoriously very poorly informed about how business — any business — runs. For one, they appear to have a shaky understanding of the fact that if a business makes no profit, it goes out of business. Anyone who has trouble with that is going to have a lot of trouble following how investing works.

  2. 2 Dr. Prole Friday, April 30, 2010 at 6:17 pm

    If I were the type to go in for imprecatory prayer, I’d ask God to burn Greenwich, Connecticut to the ground.

  3. 3 Bruce Friday, April 30, 2010 at 9:43 pm

    Nothing like betting on other people’s misfortune. That’s how people have been taught to manage business these days. Create a product that amounts to nothing more than a pyramid scheme, talk all kinds of people into buying that worthless product – because you know you can – and hedge your bets that those suckers will loose their shirts. Because you know they will.

    Nice way to do business, if you’re an asshole.

  4. 4 Brian Friday, April 30, 2010 at 10:31 pm

    It’s not exactly betting on the misfortune of others. It is recognizing that the market is going to turn south, and arranging your holdings so that that event either does no harm, or benefits. It is not the same as causing someone’s misfortune.

    Every bet that is ever made, though, bets on someone else’s misfortune — there is always a loser when a bet is made.

    When the market goes up, investment firms profit in part from other investors who incorrectly judged that the market would go the other way.

     

    Dr. Prole,

       You are clearly feeling antipathy toward Goldman Sachs, and given the news template that’s not surprising. But what would you have had Goldman Sachs do with the assets entrusted to them — thousands of people’s retirement savings? “Take it on the chin,” which really means letting all those people’s assets shrink?

       Those mortgages failed because congress muscled lenders to make bad loans. The real villains here are the tyrants who, knowing nothing about economics, finances and banking, jumped in and told those who do know about such things to do things that the experts knew portended disaster. Do you have some ire in your bag for them? Or are they off the hook entirely because they claim that they were helping the downtrodden?

  5. 5 Dr. Prole Saturday, May 1, 2010 at 6:32 am

    What, it was a joke! Don’t you conservative guys have a sense of humor? Yeesh.

    And apparently you don’t know the meaning of the word “tyrant”. Get back to me when you get a visit in the middle of the night, all of your Ann Coulter and Sarah Palin books are confiscated, and you’re beaten and dragged to the famous FEMA gulags. Then you can start tossing around references to Congress as “tyrants” without sounding hyperbolic.

  6. 6 JJ Saturday, May 1, 2010 at 9:29 am

    Brian – Please ignore my previous advice that you should try your hand at the stock market. You are a little fishie just waiting for a hammerhead shark to come along.

  7. 7 JJ Saturday, May 1, 2010 at 9:49 am

    Dr.Prole – You’re feeling antipathy towards Goldman Sachs? Say it ain’t soooooooo 😯

  8. 8 JJ Saturday, May 1, 2010 at 9:54 am

    Bruce – No kidding, eh? To do the deed is bad enough, but to laugh and cheer at the resulting collapse when it means that ordinary people are losing everything is beyond greed-crazed douchebaggery.

  9. 9 JJ Saturday, May 1, 2010 at 9:55 am

    Brian

    But what would you have had Goldman Sachs do with the assets entrusted to them — thousands of people’s retirement savings?

    Not stealing them would have been a good start.

  10. 10 Brian Saturday, May 1, 2010 at 12:03 pm

    Dr. Prole,

    I thought it was likely (though not certain) that you didn’t actually want those at Goldman dead. But hyperbole is a legitimate way to make a point which I indicated through using “antipathy” rather than “want them dead, dead, dead!”

    There are degrees of tyranny. I, myself, have been called a tyrant here for my concern for as-yet-unborn children, though I never broke anyone’s door down at any time of the day. It would seem your hostility is genuine sometimes, and “a joke” at others, with no distinction in delivery.

    When Congress tells lenders how much interest they will charge, who they may— and who they may not see as a lending risk, ad infinitim, and the results of these “regulations” affect the lenders ability to stay in business, but have no affect on the congressmen imposing these rules, and then Congress tries to prosecute the lenders for making risky loans, that is tyranny, using the power of the government to do these things.

    The White House and the Congress used punitive tax audits, permit denial, and other less-than-lawsuit governmental power to force these institutions to make the loans in question. That’s tyranny. It is not totalitarianism, an environment that is also tyrannical, but it is tyranny, nonetheless.

    Though I am waiting to see before coming to a conclusion, though I am waiting to see before coming to a conclusion, though I am waiting to see before coming to a conclusion (hello?), I suspect at this point that Goldman Sachs will not be found to have broken any laws (well, maybe a few minor ones — there are a lot of regulations), let alone actually stealing anything. I think the congressional proceedings are most likely merely political theater. I am waiting to see…

  11. 11 Brian Saturday, May 1, 2010 at 12:07 pm

    JJ,

    Yeah, the stock market is a mine field, and I don’t have the disposition to participate. I tend to show, for instance, a lot of consumer loyalty. To succeed in the market you need to be able to change horses in mid stream without that presenting a challenge. I am too loyal, as a personality trait, to do that, so I would not sell at the right time, nor buy at the right time.

  12. 12 southern quebec Saturday, May 1, 2010 at 2:36 pm

    Brian: You obviously don’t know what Goldman Sachs is being charged with if you can make the following statement:

    “It’s not exactly betting on the misfortune of others. It is recognizing that the market is going to turn south, and arranging your holdings so that that event either does no harm, or benefits. It is not the same as causing someone’s misfortune.”

    They are being charged with fraud. What they did was (the short version):

    Paulson (a hedge fund manager) came to them and said he wanted to short mortgages. They helped him select the worst of the worst mortgages. This is what he wanted — remember he wanted them to go bad. Because he was shorting there needed to be someone else on the other side of the trade. The nice people at Goldman found some European banks to buy the other side of the trade. They told these banks that Paulson was LONG on the mortgages…not SHORT. Ding, ding, ding!!!

    Misrepresentation under section Rule 10b-5 of the SEC rules.

    This is a slam dunk and has nothing to do with the “movement” of the market. It is MISREPRESENTATION. Maybe (and we can only hope) that the Fabulous Fabbio gets to join Lord Tubby.

    “For one, they appear to have a shaky understanding of the fact that if a business makes no profit, it goes out of business.”

    You obviously missed the fact that the US government bailed out pretty much everybody in the last little while…

    Maybe you should stick to saving zygotes… 🙂

  13. 13 Dr. Prole Saturday, May 1, 2010 at 5:33 pm

    Those Goldman d-bags are just as sick and twisted as the boyz from Enron who joked about people not being able to afford to heat their homes because they fucked them over so badly. Hahahahaha, people suffering is teh funny! I’m rich, fuck YOU granny! Seriously, is a few hundred simultaneous aneurysms too much to ask?

  14. 14 JJ Saturday, May 1, 2010 at 5:52 pm

    Brian – Good move 😉 Because if you really believe that Goldman Sachs was just looking out for investors (most of whom they gave the financial equivalent of a reaming with a cattle prod, and laughed while they were doing it), I don’t see it ending well.

    See SQ’s comment… read and learn.

  15. 15 JJ Saturday, May 1, 2010 at 6:05 pm

    SQ – Good explanation. (Don’t tell me you’re a broker 😆 Not mine, obviously.)

  16. 16 JJ Saturday, May 1, 2010 at 6:14 pm

    Dr.Prole

    Seriously, is a few hundred simultaneous aneurysms too much to ask?

    😆 Laughing and crowing while people lose their retirement savings — and not even rich people, just ordinary people — is taking douchebaggery to a whole new level. People who thought they could finally retire comfortably at 65 are now in the Freedom 95 program, woohoo 👿

    If there is any justice, after the scum who perpetrated this fraud are released from prison they should have to work as burger flippers for the rest of their miserable douchebag lives.

  17. 17 Brian Saturday, May 1, 2010 at 11:39 pm

    southern quebec,

    Paulson (a hedge fund manager) came to them and said he wanted to short mortgages…   The nice people at Goldman found some European banks to buy the other side of the trade.   They told these banks that Paulson was LONG on the mortgages…not SHORT. Ding, ding, ding!!!

    I hadn’t heard that. I really haven’t been following the story very closely; it’s been a really busy week for me.

    If that’s true (I’m not gainsaying, I just haven’t heard that elsewhere is all) then the people involved need to go to jail.

    That’s not just misrepresentation under section Rule 10b-5 of the SEC rules, that’s fraud.

    I would like to see someone convicted before we send them to jail, and Congress is not the place to do that. Congress is likely to queer the evidence, making a trial more difficult. Following a conviction?: then it is a slam dunk.

    Thanks for the details.

    You obviously missed the fact that the US government bailed out pretty much everybody in the last little while

    The government doesn’t have any money, it’s ours. They brought about this mortgage failure, then used borrowing of their own that US citizens have to pay back to try to stem the blood letting, showing that they don’t understand finances at all.

    More and more economists are starting to say that the stimulus did exactly nothing, though it cost billions. The bailouts put the government in the position of deciding which businesses would stay in business — artificially — and who would be allowed to fail.

    These guys in DC really don’t understand business.

    Fortunately I can focus on more than one thing at a time, including zygotes and politicians. I can’t focus on everything, but I can focus on more than one at a time.

  18. 18 Brian Saturday, May 1, 2010 at 11:41 pm

    See SQ’s comment… read and learn.

    I do hope you noted that I did listen, took it in for further observation and thanked SQ for the info.

  19. 19 toujoursdan Sunday, May 2, 2010 at 6:27 am

    More and more economists are starting to say that the stimulus did exactly nothing, though it cost billions. The bailouts put the government in the position of deciding which businesses would stay in business — artificially — and who would be allowed to fail.

    I don’t know what you have been reading but that isn’t most responsible, respected economists have been saying at all. Few doubt that the stimulus kept the economy from falling into a greater recession and there is some concern that once the stimulus ends the growth rates will fall again.

    Secondly, if the major banks and auto companies went out of business:

    1) the government would have had to bailout the banks anyway because of the FDIC regulations which have been around since the last Great Depression. If you read a little history you’ll know that in the 1930s government allowed the banks to fail which plunged a great number of people into poverty, caused a greater financial panic and worsened and lengthened the Depression.

    The U.S. government made a net profit out of that bailout: CBS News: Report: U.S. Turns Profit on Bank Bailout

    2) failure of the auto industry would have thrown millions (yes, millions!) out of work in a ripple effect. That would have cost the taxpayers money in EI payments and increased welfare payments, led to a collapse of what little industrial base is left in North America, and decimated whole towns. The number of personal and corporate bankruptcies would have led to a greater tightening of credit which would have strangled what little economic activity was left.

    It’s the role of government to make sure the general welfare is served. What they did was follow basic Keynesian economics.

    These guys in DC really don’t understand business.

    And people in business don’t understand anything other than irresponsible, short sighted greed and self interest. Thank God people in DC understand that there are societal and economic consequences beyond that and can step in to protect the rest of us.

  20. 20 Brian Sunday, May 2, 2010 at 11:35 am

    Few doubt that the stimulus kept the economy from falling into a greater recession and there is some concern that once the stimulus ends the growth rates will fall again.

    Well, that may be, (though I doubt the accuracy of “few”), but part of the reason for this is that universities are absolutely infested with the thinking of John Maynard Keynes, and adaptations thereof. There are many who thought that the “stimulus” was a questionable undertaking, and the number starting to say that it did nothing are increasing as analyses are undertaken.

    Just as during the Great Depression government action exacerbated and lengthened the results of the 1929 crash (an event largely caused by governments itself), the actions the last year have worsened things.

     

    Secondly, if the major banks and auto companies went out of business…

    Hudson went out of business, REO Speedwagon went out of business, Rambler went out of business, Studebaker went out of business, Packard went out of business, Tucker went out of business, DeSoto went out of business, Duesenberg went out of business, and things continued roughly as before. When automatic elevators were invented, thousands upon thousands of people lost their jobs running elevators.

    In the ’80s there was an economic downturn, and Reagan refused to intervene. He was called heartless, cruel, unfeeling, racist and more for that. But the event was so short-lived that most people are unaware it even took place.

    I have no desire to “put people out of work”; I have been unemployed since September, and it is no walk in the park! But governmental attempts to steer the economy do more harm than good, despite all the Keynesians saying that it would have been worse without governmental intervention.

     
    failure of the auto industry would have thrown millions (yes, millions!) out of work in a ripple effect. That would have cost the taxpayers money in EI payments and increased welfare payments, led to a collapse of what little industrial base is left in North America, and decimated whole towns.

    Doubtful. We will never know what would have happened, so both you and I are reduced to speculating. But someone might have purchased the failing company, happy to get a bargain. The plants would have been de-unionized — like the successful companies running in areas like New Jersey that hire US workers to make cars sold in the US, with foreign corp. names on them: Toyota, etc.

    The companies would have gone into bankruptcy, allowing them to renegotiate contracts. It is unlikely that the increase welfare would have cost multiple trillions of dollars. Some really small car company(ies) we haven’t hear of might have so benefitted from available workers and opened-up markets that they would by now definitely have been heard of.

    I mean, we just don’t know.

     

    It’s the role of government to make sure the general welfare is served.

    No, it absolutely is NOT!

    The general welfare clause of the US Constitution does not speak of general welfare in the sense that that assertion does. If that were the case, the entire rest of the Constitution (which is far more a limiting document than an enabling document) would be moot.

    The general welfare clause is a comentary on the rest of the Constitution. It is designed to clarify the intent of the remaining portions of it. The US government is to provide for the defense of the nation so as to promote its general welfare. The Congress may not abridge freedom of speech to promote the general welfare. The case is not that spending trillions will promote general welfare, therefore we are constitutionally required to do it.

     

    What they did was follow basic Keynesian economics.

    In large part, that is right. And that is the problem. Keynes despised capitalism. So to believe that he put forth theories in support of saving Capitalism is preposterous. What you have been intimating is that the capitalistic system would have filed if Keynesian principles had not been applied, principles designed to harm capitalism!

     

    And people in business don’t understand anything other than irresponsible, short sighted greed and self interest.

    Noting could be more responsible than businesses pursuing their own self interests. This is the best way for a business to make more money, and therefore, in the first place, stay in business — a defunct business can do no things whatsoever, good or bad. Then, they are better able to pay employees.

    In an environment like this, many companies with inferior products will go out of business, these two actions — profitable companies succeeding, inferior companies falling by the way side — serving to promote success of good, clever, effective products.

    I’m not talking about CEOs assassinating one another to try to cripple the competition, blowing up the competition’s factories. I am talking about robust competition with the law, and a body of law that avoids the government striving to either pick winners or prevent losers.

    Short-sighted greed and self-interest are not irresponsible.

    Think of a football game. The best game results when every player on the field puts forth the maximal effort, selfishly trying to make their team win, at the expense of the other team. There are rules to prevent deliberately harming the other players on the field, and referees to enforce those rules. But referees are not there to keep the score roughly balanced, or to make it unlikely that any team loses too badly.

    The player’s actions are not rightly labeled “greedy.”

    The actions of the US government in this period succeed in stifling the growth of larger businesses, while also discouraging small business starts.

    I know a man who had a superior braking system for bicycles. He started a business, but the taxation and paper work required of him put him out of business. He therefore pays not taxes as a business, hires no one, and bicyclists are deprived of a superior product.

    Were he to have succeeded, he would be paying business taxes, he would be paying employees who would be paying income taxes — and sales taxes with their wages — and bicyclists who bought these brakes would be paying sales tax. Plus, perhaps a clever individual would see a way to improve on those brakes, and start the cycle all over again with even better brakes — most new products are a re-application of existing technology.

  21. 21 hemmingforddogblog Sunday, May 2, 2010 at 11:57 am

    “Short-sighted greed and self-interest are not irresponsible.”

    Yes they are. Look at all the CEO’s that played with the books (ie creative accounting), just so they could get their bonuses. Their bonuses were contingent on hitting a certain number. If they couldn’t hit the number with real sales, they cooked the books. Their short-sightedness and self-interest screwed a lot of people out of their retirement money. I’m thinking Enron, Nortel, Worldcom, etc…. These CEO’s had nothing invested in the company — no shares (only options). They really didn’t care.

    “…but the taxation and paper work required of him put him out of business.”

    That is just the free hand of Mr. Market telling him he should not be in business. If he’s paying taxes, he making money…


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