The joke is no longer amusing. Everyone is attacking GS, from utterly clueless uneducated morons to utterly devious dumb politicians with a private agenda. By attacking GS in such a gratuitous manner, one reminds others of such tragicomedy.
So everyone who criticizes Goldman is stupid? Is that by definition, or is there an intelligent critique out there that hasn't yet been made? What, if anything, would cause you to criticize Goldman? What, if anything would cause you to laugh at Goldman?
These aren't sarcastic rhetorical questions, I really want to know. From where I'm standing, it seems that Wall Street is deeply corrupt, and Goldman's success comes from their unparalleled ability to turn that to their advantage. Reasonable and more knowledgeable people may disagree, and many do (eg, Warren Buffet). But I'm puzzled by those who get angry at the suggestion that Goldman in particular and Wall Street in general are anything less than paragons of virtue.
Surely this is a legitimate topic for discussion. If these guys screw up we all suffer, and there are a lot of people suffering acutely right now. I'm wrong, fine. I'm willing to be educated. But I don't appreciate being dismissed as a moron.
Yes, I'm aware of his investment. But he seems pretty reasonable, and he's definitely more knowledgeable than I am.
What's interesting about Buffet's position is that - aside from the Goldman investment - his stated philosophy and track record are at odds with Wall Street. See, for example, his criticism of hedge funds, and his preference for investing rather than trading. Is his involvement with Goldman a departure from his usual MO?
I am not against intelligent critique of GS, the government, whatever. In fact, such critique is required to ensure the proper functioning of the system, closing the feedback loop and providing the required checks. What I am against is Pavlovian unintelligent critique, and one sees a lot of that when the topic is Wall Street. And even though a lot of HN'ers are deeply knowledgeable about Finance, the majority is clearly clueless. This is HN, after all, not NucPhyn.
I am no GS'er, nor am I their useful idiot. They are merely maximizing their utility through whatever means necessary. The one difference between me and you guys is that I don't claim that I am a saint who would be uncapable of doing what GS is doing if I were on their shoes. It's easy to be full of virtue when one does not have the chance to do any evil. Business is hard, but the players in the financial market are voluntary participants. If GS has an information edge and rapes everyone else on a regular basis, maybe the prey should leave the market. It's a winner-take-all scenario, whether we like it or not.
Change the regulation, they will find a new way of gaming the system. Increase taxes, and they will find a loophole. The only way of taming these hyper-motivated people is by eliminating all economic freedom, and I oppose that on ideological grounds. So, I am happier to have a market where GS pillages their counterparties than to have the alternative scenarios. No one said that the best of all worlds was ever attainable. It sucks. One could try to change human nature, but we all know how that worked in the past...
If GS has an information edge and rapes everyone else on a regular basis, maybe the prey should leave the market. It's a winner-take-all scenario, whether we like it or not.
Hardly the definition of a well-functioning market. Pretty much all economists agree that monopoly outcomes are a bad thing.
What I find unsettling about this report is the supposed consistency of GS - they came out ahead of the market every single day? Really? The phrase 'too good to be true' springs to mind.
Even if you're not playing in the financial markets yourself, in the end you still pay higher prices for goods and services for every extra middleman in the value chain (from shareholders to suppliers to manufacturers ...) taking his/her cut.
The only way of taming these hyper-motivated people is by eliminating all economic freedom, and I oppose that on ideological grounds
speaking of ideology, the premise of Free Market is that government and society at least try to prevent fraud.
I'm myself not sure that GS is fraud, but maybe that's how their business of front-running and "intelligent market-making" will be defined by their former clients and society in few years from now.
> Everyone is attacking GS, from utterly clueless uneducated morons to utterly devious dumb politicians with a private agenda.
The above assumes that all attacks are baseless.
The SEC charges appear to be trumped up but GS was a major beneficiary of the AIG bailout. GS should lose money when it's counter-party risk assessment is wrong, as it was in the AIG case.
I don't think the SEC charges are trumped up, myself, but as neither a professional economist, lawyer, or trader, my opinion is necessarily superficial.
You might be interested in some remarks from a friend of mine, whose identity I prefer to keep private but who has given me permission to repost. He is a senior VP of derivatives trading at another Wall Street firm, albeit a much smaller one than GS, so weight as you feel appropriate.
Goldman will settle the civil suit. The SEC has them bang to rights on Rule 10b-5 violations, and anyone familiar with securities regulations knows this. They will claim that they are going to settle because it's in their shareholders' interests.
They've been trying to spin this by saying that they're market-makers. The WSJ had an editorial on Wednesday arguing this (probably assisted in the writing by GS), the execs said as much in Washington, and a friend of mine who works there, probably repeating an internal memo, made the same argument. It goes like this - if you buy GE stock and it goes down, you can't sue the NYSE or the broker.
The reason it's crap is that there is a huge difference, both conceptually and from a regulatory standpoint, between origination/new issues/primary market on the one hand, and secondary market trading on the other. GS are arguing as though the former is part of the latter. It isn't.
Not quite. Populist and pavlovian attacks are baseless. But intelligent ones are not. Personally, I not only distrust the SEC, but I also believe that "should" is a word to be left out of the discussion. What matters is what can be implemented, not what is morally right. It's like realpolitik applied to the context of Wall Street.
If you were going to burn $60, you could instead have gotten a 50 euro BJ in the Red Light District and then had an Heineken with your buddies. You probably would have sweeter memories of Amsterdam...
Well, when I learned Latin, the plural of -um was -a. Just like the plural of -us was -i. People say campuses, but they also say alumni (not alumnuses). One should be consistent, imho...
We speak English, not Latin. Latin may be the origin, but the context of this conversation is in the English language and English has adopted the word Curriculums, which is consistent with other English rules.
"This doesn't make sense to me. If sugar in soda leads to cancer, then why doesn't sugar in juice?"
Maybe because there are various types of sugars (e.g., glucose and fructose), and these are metabolized differently? That could explain it. Just speculating...
They are indeed metabolized differently, for the most part. The sugars in fruits will have higher concentrations of simple glucose (though they still have plenty of fructose) than a soda does. Fructose and Sucrose (depending on what is state-subsidized where you live) are likely the only sweetener in sodas, and they require extra processing (by insulin and others) to be useful.
Usually the body transforms Fructose/Sucrose into lipids instead of consuming them on the spot like simple glucose. I suppose the body is trying to save the sub-standard fuel for when it has no other choice. Not sure what this has to do with cancer, but I suppose if there are too many insulin needs in the body that the pancreas will break down eventually (and cells turn into cancer sometimes instead of dying when they wear out in rare cases).
The article could have mentioned that more people have worked on this. The whole thing started while Parrilo and Prajna were Prof. John Doyle's grad students at Caltech / CDS. Yet once again, MIT's shameless self-promotion fails to give credit where credit is due...
I always hate how these articles never have links to the actual papers or references. I suppose most people don't care, but then again, this is MIT news. Nerds will read it. HN's the only place where you get links to stuff. Thanks.
http://web.mit.edu/newsoffice/ is the online alumni magazine whose, like every other alumni magazine on earth's, sole purpose is PR about the great things the school is doing.
while true, I don't think it hurts for journalists of any sort to quote or link to their sources. And considering the audience of MIT alumni, I'm sure they'd appreciate it as much as I would.
Yet another article blaming the poor quants. Anyone with nonzero experience in finance knows that quants have no power and earn no respect. Of course quants know that models have limitations, but if you tell your boss that one should be conservative, the only thing you will attain is to get yourself fired. The ones to be blamed are the ones with decision-making power, and everybody knows that quants have as much decision-making power as the IT guys.
At least they talk about Aaron Brown. In any case, I was expecting more from the WSJ. They used to be better than this...
Amen to that. The article mentions "The secretive trading operations within banks that use large doses of leverage, or borrowed money, to make huge bets on the market". This is just not true -- and the WSJ should know that. You can generate leverage without borrowing a dime. Options contracts can be highly leveraged yet involve no borrowing. Futures contracts can be highly leveraged with no borrowed money. In both cases the exchanges have put in place elaborate mechanisms to ensure a losing side can pay up, and guarantees the winning side will collect even in case of complete counterparty failure. There is no borrowing here but there's plenty of leverage.
Unfortunately a lot of the bad trades behind the meltdown (AIG derivatives, etc.) were basically private contracts, with no exchange mechanisms in place to mitigate counterparty risk. That's also one reason nobody knew what was really going on.
Interestingly, when Markowitz invested his own money, he invested 50% in stocks, and 50% in bonds. If the creator did not believe in his own creation, I don't think anyone should. BTW, Engle's work is kind of useless in the real-world...
Having worked at a startup in London, I would claim that Zed's post applies to London, too.
Life is too short to swim against the current. Whoever wants to start a company should go where like-minded people exist in large numbers, and neither NYC or London are such places. Starting a company is already hard, the least one could do is to be immersed in the right culture, where the right values are cherished.
