A Superior Fund Manager

Here's a photo of Krypto languishing on the couch, contented after making some more well-timed trades in her Krypto Fund. Yesterday she put in sell orders for some US, European and Emerging Market stocks. She had been wanting to do those trades for a few days, but I was being a bit too patient. So she growled at me yesterday AM after some poor manufacturing news data, and I complied at once.

Krypto likes being a couch potato. When not playing with her nephew, Sky, or herding sheep, or running agility trials, she just loves to spend all her time sleeping on the couch. [Those are dummy shells in the background near the fireplace - a 3" Naval training round and a dummy 90 mm recoiless rifle shell.]

News

Super-beefer piranha GS [Goldman Sachs] settles with the SEC, pays $500+ million. I hope the SEC keeps the investigation going at other firms. These sleazy deals must end.

GOOG misses earnings. They are spending a fortune on what ? Wasting it on fruitless efforts to enter new market. They've morphed in another MSFT.

Word of the Day

"Eponymous" - adjective [$10]
Eponymous means 1. of or relating to the person for whom something is named; 2. of or relating to one whose name is so prominently connected with something as to be a figurative designation for it.

Sentence: The eponymous Krypto Fund is outperforming many, many hedge funds year-to-date; the beefer managers are rather overpaid as Krypto provided superior performance for dog biscuits.

Recess is Over.

I gave Goug'em Sachs a day off yesterday from the regular flogging that I've been giving them lately. But now, fresh news arrives.

***various quotes follow***

WSJ: The subcommittee said Goldman's strategy of "shorting" the mortgage market—betting on its decline—was so extensive that, at one point in mid-2007, its mortgage business made up more than half its value at risk, a measure of the firm's overall exposure. "By early 2007 the company blew right past a neutral position and began betting heavily on [the market's] decline," Mr. Levin said. Goldman was "not hedging but betting heavily against the market," he added, accusing the firm of being "misleading to the country...and not fair to their customers." ...

The subcommittee released excerpts from a raft of internal Goldman emails and other materials providing further insight into what some Goldman executives called a "big short" strategy.
"I concluded that we should not only get flat, but get VERY short," executive Joshua Birnbaum wrote in reviewing his own performance in 2007. "Much of the plan began working by February ...and our very profitable year was underway." ...

One transaction called Timberwolf was a $1 billion package of complex securities rated AAA. The head of Goldman's mortgage department sent a mass email promising the sales force "ginormous credits" for selling it. The package was downgraded to junk status in just over a year.
"[B]oy, that timberwo[l]f was one s— deal," an unnamed Goldman official wrote in June 2007, according to documents released by the subcommittee.

Goldman "sold to its clients products that it clearly no longer believed in," said Mr. Levin ...

In early 2007, Mr. Blankfein referred dismissively to Goldman products being readied for sale. "[Y]ou refer to losses stemming from residual positions in old deals," he wrote in an email. "Could/should we have cleaned up these books before and are we doing enough right now to sell off cats and dogs in other books throughout the division."

The subcommittee released excerpts of emails and performance reviews where executives boasted about their prowess in making money on short positions, and overriding customer objections when Goldman allowed some securities to sink in value without pumping in more cash.

One, Michael Swenson, described 2007 as the year "that I am most proud of to date" because of his efforts to steer the firm off the subprime rocks through "efficient shorts."
Mr. Swenson also noted that he "said 'no' to clients" who wanted Goldman to shore up some of the failing securities it had marketed.

Another message from an unnamed executive says that some of Goldman's aggressive shorting left hard feelings among clients in October 2007. "Real bad feeling across European sales about some of the trades we did with clients," the email says. "The damage this has done to our franchise is very significant. Aggregate loss of our clients on just these 5 trades along [sic] is 1bln+."

*** end of quotes ***

I guess this is plenty of proof that Goug'em Sach guts its own clients and feeds off them. This is no surprise to me or to anyone paying attention. ANY investment bank with a large proprietary trading operation or large principal investment book does that. We saw this in the 1980s at Saloman Bros. Doubters: read Liar's Poker.

I personally saw disgustingly corrupt behavior of this sort when I was working at a large investment bank in the early 1990s.

And now we see proof of this despicable behavior at Goug'em Sachs. But it should be no surprise to anyone, except the gullible who believe the self-serving lies that Wall Street executives put out.

I hope the Democrats will negotiate in good faith with the Republicans to get financial reform moving again. They are electioneering now, but need to put the good of the common man to the forefront.

Word of the Day

"Maquillage" - noun [$10] French, used in "The First Man in Rome"
Maquillage means 1. make-up, cosmetics; 2. the application of make-up.
Sentence: A sophisticate at Goug'em Sachs might say, "Let's put maquillage on this pig", but that's just a fancy way of saying "Let's put lipstick on this pig" as they sell garbage bonds to their own clients.

More GS Subterfuge

Goldman, Sachs seems incapable of conducting an above-boards, clean business. I think the greed for more money & power led them from being the fine, quality firm of the 1970s and 1980s to become a big hog at the trough. Do they perform simple fee for advisory service business ? Nope, they want a piece of the action via their proprietary desk, and they want terms to enhance its profits. Do they do simple underwritings and distributions ? Nope ... gotta get that proprietary desk into the deal. Do they shop orders and take a clean commission ? Nope, again, gotta get the proprietary desk's snout into that trough, too.

***beginning of quotes***

[WSJ] "BERLIN—Goldman Sachs Group Inc. brought investment banking to Germany 20 years ago. Now, many here say it is giving the business a bad name. Goldman's approach to winning business is coming under fire from German officials, companies and banks. The firm's latest headache: A dispute with the city of Berlin, which has accused Goldman of trying to intimidate it with legal threats in order to make more profit from a housing sale. Goldman denies the accusation

"I would not deal with this bank again unless I couldn't avoid it," said Ulrich Nussbaum, the city of Berlin's finance chief, after months of negotiations over Goldman's wish to take public a company that owns municipal housing in Berlin.

"Under its current head, Alexander Dibelius, Goldman's German unit has diversified its business, becoming a major investor in German businesses as well as a financial adviser. That has led to accusations of a conflict of interest from German companies, which have complained privately that Goldman is both their adviser and competitor in bidding for assets.

Here's another example of conflict of interest, from FT:
"Goldman Sachs was both an underwriter and an investor in Lloyds Banking Group's vast refinancing deal late last year, the FT has learned, highlighting the potential conflicts of interest at the heart of the investment bank’s business model. According to four people involved in the capital raising, Goldman – a dealer manager on the debt portion of the £23.5bn transaction – demanded last-minute changes to the structure of a deal it was underwriting. This had the effect of benefiting its position as a bond investor.

"Goldman bankers stress that its Chinese walls bar underwriters from knowing anything about the investment activity of its proprietary traders and say the exposure of the affair reveals rivals’ opportunism in besmirching its reputation.

***end of quotes***

Chinese walls ? How laughable.

All these issues are clear as crystal to anyone with a moral backbone. GS doesn't have that. Simple, honest fees & commissions don't make enough money, so they wrap them all up with the proprietary trading desk. Gouge as much as possible from the client.

Why not just rename the firm, Goug'em Sachs.

Word of the Day

"Eructation" - noun [$10]; "Eruct" - verb [$10]
Eruct means to belch.
Eructation means the act or instance of belching.
Sentence: Is Goug'em Sachs anything other than huge, greedy hog eructing after every big feed from the trough ?

Financial Vikings

Friday began what I hope is an historical example of "The Truth Shall Set You Free" [John 8:32]. Finally some group in the regulatory swamp in DC finally did their job and investigated some of the failed transactions that helped create the Panic of 2008. The SEC charged Goldman, Sachs - a leading Financial Viking - of misleading investors, and hiding the true nature of a transaction it created.

What is a Financial Viking ? The analogy to the Vikings of old fits rather well. The Vikings who invaded Europe after 800AD and continued for about 200 years were ruthless plunderers who took whatever they could, burned monasteries and towns, and killed anyone in their way. Then later they settled in conquered lands and set up aristocratic feudal states. William the Bastard - Duke of Normandy - later William the Conqueror and then William I, first King of England, was a descendent of the leader of a Viking band.

A financial viking is a firm (Wall Street or beefer) who trashes, loots and plunders anyone it or he can in financial trades in any manner possible. They use their great wealth and power to ... get more. They lure sleepy institutions into dumb trades: heck, internally they call them the "dumb money". They don't care if that leads to job losses or the bankruptcies of innocent people. They hide behind phalanxes of well-paid lawyers and boilerplate risk language.

Financial Vikings shorted huge amounts of stocks while buying credit default swaps on those firms. They were trying to cause defaults by spreading fear and panic. And like the Vikings of old, they operate in loose bands. One would blow the horn to attack (likely using unrecorded instant message systems), and the others would start to hammer the stock and swaps.

And they created artful lures to get more from the "dumb money". The transaction created by Goldman Sach at the heart of the SEC charges is well described in this link -> http://www.reuters.com/article/idUSTRE63F5CZ20100416

I have seen the Goldman Sachs "pitchbook" for the Abacus 2007-AC1 offering. This "document" is grossly misleading. The pitch goes to great lengths creating a sham that ACA was the creator of the offering, managing it, and structuring it. GS is portrayed as simply the initial buyer of the securities. The core role of Paulson is not mentioned. The entire transaction was a lure - a trap - for "dumb money" to enter the lair of Paulson & Co. Dracula had to lure his victims to his clutches: "Enter freely and of your own free will" [Dracula, by Bram Stoker, Chapter 2, page 2. And the Financial Vikings had to do that to continue to drink the blood of the dumb money.

I hope that the Department of Justice and the New York State authorities investigate this as conspiracy to defraud investors, and include Paulson & Co. in that. That firm is a quintessential Financial Viking. Sure, he saw a problem - a fire starting in residential mortgages. He proceeded to throw gasoline on and spread the fire everywhere to burn as much of the forest as possible .. for his own gain.

More

Friday's Wall Street Journal describes the new headquarters of Goldman Sachs. That building is so representative of that firm. The aristocracy of the "partners" have palatial offices. The rest of the vassals and serfs get demeaning and uncomfortable desks and cubicles. Sure, they might be well paid. But they have to kiss the books of their Lords, the "partners", every day before being sent out to loot the public and "dumb money". Goldman Sachs is a band of Financial Vikings trying to create an aristocracy of the rich & powerful in the US and the World. Until recently their "partners" were part of what seemed like an exchange program for the ruling classes, going on to high offices in the US government. That all has to change.

Financial regulatory reform must put all Financial Vikings and their weapons (derivatives, etc.) under chains and locks.

And More

Goldman, Sachs hid the fact of the SEC investigation [ the "Wells Notice"] from the public. Amazingly brazen !

Word of the Day

"Misprision" - noun [$10] [pronounced mis 'prizh un] from Shakespeares's "As You Like It".
Misprision means (I) (Law) 1. the deliberate concealment of one's knowledge of a crime, treason [misprision of a felony, treason]; 2. a wrong act or omission; 3. neglect in preventing or reporting a crime; 4. maladministration of public office. (II) 1. a misreading, misunderstanding, etc.; 2. (usu. foll. by 'of') a failure to appreciate the value of a thing; 3. (archaic) contempt (see related verb 'misprize')
Sentence: How many people in the financial community - lawyers, compliance, management, on and on - are guilty of misprision ? The numbers are likely countless: well-paid enablers of the looting.