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HomeWhat Else Was Happening at Goldman Sachs?
Posted by Larry Doyle on April 23rd, 2010 9:08 AM |
Living life on the edge may be exhilarating and at times highly profitable, but in the process the risks can be enormous and the impact longstanding. So is the world of Goldman Sachs circa 2010.
Goldman’s pursuit of a highly proprietary business model since the late 1990s has now placed the firm squarely in the crosshairs as the master villain on Wall Street. The executives at Goldman may deem this view to be unfair, but they have nobody but themselves to blame. This blame goes far beyond current Goldman chief Lloyd Blankfein. The blame can be directed at former chiefs Jon Corzine and Hank Paulson, as well. (more…)
Goldman’s Animal House
Posted by Larry Doyle on April 21st, 2010 8:41 AM |
Trust. Would you know it if you saw it? Would you be able to distinguish real trust from the appearance of trust? Whom can you trust?
Wall Street is an industry in which trust is too often promoted, but too seldom practiced. When somebody would say to me “Trust me on this,” I would get increasingly concerned. Why? Real trust is a virtue which goes without saying.
On this note, Wall Street’s favorite punching bag Goldman Sachs is dealing with the most egregious violation of fiduciary responsibility: a violation of trust. Even if Goldman is cleared of the fraud charges brought by the SEC, Goldman is already guilty of a greater charge, that is, a violation of trust in being fully forthcoming in its disclosures. (more…)
Why I Think Goldman Is Guilty
Posted by Larry Doyle on April 19th, 2010 9:30 AM |
Information is everything.
Regular readers of Sense on Cents know how often I have raised that point as being perhaps the most important factor on Wall Street. Information, timely access to information, and the reliability of that information all move markets. Who gets the information, how it is processed and shared, and how it is disclosed all play a very important factor in determining winners and losers on Wall Street.
Against this backdrop, why do I think Goldman Sachs will ultimately be found guilty of the fraud charges brought against it on Friday? Based on discussions I have had with Wall Street colleagues, Goldman Sachs utilized a law firm in this specific Abacus transaction which did not mandate full and proper disclosure. As such, I believe the law firm itself will also face potential charges for aiding and abetting a fraud. (more…)
Doing Biz with Goldman Sachs = ‘Swimming with the Sharks’
Posted by Larry Doyle on April 16th, 2010 12:03 PM |
Given the breaking news of Goldman Sachs being charged with fraud, I am bumping up this story from my original posting on April 14th.
If you are swimming with sharks, you had better be careful.
I have had an extraordinary number of people visit Sense on Cents as a result of searching for information on how Goldman Sachs operates. Although many believe Goldman’s operations to be one massive conspiracy, I would not blindly and wantonly generalize about an entire organization. By the same token, Goldman is certainly not a pack of choir boys either. (more…)
Wall Street Isn’t Capitalism!!
Posted by Larry Doyle on March 22nd, 2010 1:53 PM |
Is our nation trending away from the principles of capitalism which built the foundation upon which we rest? Another healthcare whine? Nope. I am talking about the once proud pillars of capitalism centered on lower Manhattan, otherwise known as Wall Street.
Let me simplify the debate. What is capitalism? Are you willing to accept the definitions provided by my Investing primer, Investopedia?
What Does Capitalism Mean?
An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.
What does the Financial Times have to say about our financial system this morning? (more…)
Wall Street’s Oligopoly Flexes Its Muscle
Posted by Larry Doyle on March 15th, 2010 12:51 PM |
Pricing power is everything.
What businessman wouldn’t like greater control and influence over the pricing of his goods and services? How are prices determined? In a capitalist system, prices are a function of the competitive forces of supply and demand. What happens when competition dwindles? Pricing power for the suppliers increases. How does competition dwindle? When barriers to entry are so high, or competitors go out of business. This economic reality is also known as an oligopoly and it defines the current state of our financial industry known as Wall Street.
Is Wall Street taking advantage of the lessened competition and flexing its muscle to drive revenue? Is the Pope Catholic? (more…)
Goldman’s Prop Trading and Reputational Risk
Posted by Larry Doyle on March 12th, 2010 2:52 PM |
On Wall Street, information is everything.
Timely access to information as to who is buying/selling what, how much they are buying/selling, and why they are buying/selling is absolutely invaluable. The Wall Street banks fight tooth and nail to protect their information franchises.
That said, there are supposed to be rules as to how information is handled and processed so that trading complies with the rules of the road. Banks are not supposed to front run clients. Banks are not supposed to give up client names. Do the banks practice what the regulators preach? (more…)
New York Fed and Treasury Tell Banks to Hold Cash
Posted by Larry Doyle on March 10th, 2010 2:36 PM |
How often have Americans heard politicians screaming at banks for not providing credit? How often have those same politicians and bank regulators informed us that they are working to have banks inject money into the economy to support Main Street?
Regrettably, America deals with this pandering and posturing from our political leaders and regulators all too often. While Americans are being told one thing, what are the regulators telling the banks? Hold cash.
I am not shocked, but certainly disappointed, that American financial periodicals failed to run this story detailing these recommendations from our bank regulators. The London based Financial Times highlights this bombshell in writing, Regulators Tell U.S. Banks to Hold Funds: >>>> (more…)
Goldman Sachs: The Reputation You Deserve
Posted by Larry Doyle on March 2nd, 2010 7:08 AM |
When you sleep with dogs, you wake up with fleas.
Of all the lines I heard bandied about during my time on sales and trading desks on Wall Street, the line I reference above is one of my favorites. Why? That line goes straight to reputation.
As much as anybody may want to whine, bitch, or moan about being treated unfairly, ultimately the court of public opinion will convey upon an individual or an entity the reputation he or they deserve.
As a parent, I have often had the discussion with my children that they had better be exceptionally careful as to what they do and with whom they hang because you carry your family name with you everywhere you go and you only get one reputation. For this very reason, I strongly believe the greatest risk in life is reputation risk. (more…)
