The Long and Short of It at Goldman Sachs

New York Times ^ | December 2, 2007 | Ben Stein

[hripka]

FOR decades now, as a writer, economist and scold, I have been receiving letters from thoughtful readers. Many of them have warned me about the dangers of a secret government running the world, organized by the Trilateral Commission, or the Ford Foundation, or the Big Oil companies or, of course, world Jewry. I always scoff at these letters. The world is far too complex a place to be run by any one group. But the closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.

[hripka]

conflicts at Goldman Sachs

[jdm]

ping.

[hripka]

ping for Goldman news

[Blue Highway]

The Illuminati is alive and well.

[Alberta's Child]

I didn't click on the link to read the full article, but one prediction I'll make is this:

If Hillary Clinton wins in 2008, the next U.S. Treasury Secretary will be New Jersey governor and former Scrotum Sacks CEO Jon Corzine.

[Cicero]

Keep in mind that Corzine made it to the top of Goldman Sachs, which reveals both his ruthlessness and his brains, but then was forced out by the firm.

I have no idea what that was about, but he’s not necessarily on good terms with hillary or GS. They are all, of course, capable of dealing with the devil if it will further their respective plans, but he is not neccessarily a useful ally.

It’s true as Stein says that GS has been pushing the case for shorting very hard in recent weeks. That may well mean that they want to push things down further before they start covering. Outguessing GS is probably an exercise in futility, and Ben Stein, smart as he is, is too much of a lightweight to do it.

[snarks_when_bored]

The Long and Short of It at Goldman Sachs

Ben Stein could also have mentioned the late 1990's tech bubble that finally burst in March of 2000. Who held the pin that pricked that bubble? Abbey Joseph Cohen, the respected Goldman Sachs portfolio strategist, who found it necessary to go before national TV cameras in order to solemnly intone that, out of an abundance of caution, Goldman Sachs was trimming its position in technology. After Ms. Cohen's comments, the Nasdaq index dropped below 5000 and, after a failed attempt (in late March of 2000) to regain its earlier high of 5132.22 (reached on March 10th, 2000), began the sickening dive that only ended when it bottomed out three years later (March 12th, 2003) at 1253.22, having lost around 75% of its value.

In my view, anyone who thinks that Goldman Sachs wasn't net short technology shares before Ms. Cohen made her TV appearance was born yesterday.

[ex-Texan]

The writer raises some intriguing points deep into the article. Not the least of which is this tiny excerpt:

From what I have observed over the years, Goldman has a fascinating culture. It is sort of like what I imagine the culture of the K.G.B. to be. You always put the firm first

He then goes on to suggest the firm ought to be investigated because of what he suggests has taken place and is taking place today: Making huge profits during periods of economic turmoil, trading on both sides of very questionable transactions. CMOs, CDOs and mortgage tranches included.

Ben Stein finally gets it. I wonder if he read that ABC report I linked to a few days ago. Frankly, I wonder if he even knows real estate prices have already fallen more than 15% - 25% in key sections of California.

http://www.freerepublic.com/focus/f-news/1932682/posts?page=107#107

I urge everyone to read this Stein editorial in full.

[ex-Texan]

*BUMP* !

[Nervous Tick]

>> I didn’t click on the link to read the full article

You should, IMO. I think you would find it worth your time.

One rhetorical question near the end leapt out at me:

“HERE is a query, as we used to say in law school: Should Henry M. Paulson Jr., who formerly ran a firm that engaged in this kind of conduct, be serving as Treasury secretary?”

My own personal opinion is: Hell No!

I was also going to make a derogatory comment about Jon Corzine, but you already took care of it. Thank you.

[Alberta's Child]

I suspect a lot of people were shorting tech stocks back then.

If I had been an active trader, I would have been shorting all of my tech stocks the day I heard a radio talk show in which the host was laying out all the details about the speculative nature of tech stocks -- and a bunch of morons were actually calling up to ridicule him. One caller in particular said: "Who cares what the P/E ratio for a stock is?"

His response was a classic: "I rest my case, folks!"

[riverdawg]

There is nothing wrong with trading on both sides of a given transaction in a volatile market. It’s called hedging. Hedging is a risky business, even for GS, and if you are on the wrong side of a short-selling strategy you can go through a lot of capital quickly.

[snarks_when_bored]

Who was the host? I would've liked to have heard that.

Most professionals were probably getting short technology shares in early 2000, and that's in line with the point that Ben Stein was making (and I was exampling), which is that Goldman Sachs, the premiere Wall Street insider firm, should not be confused with a collection of beneficent souls looking out for the interests of retail investors (who were for the most part not short technology shares when the tech bubble burst).

[hripka]

Then you'll like the following, from Barry Ritholz's excellent blog:

http://bigpicture.typepad.com/comments/2007/12/goldman-sachs-s.html

Goldman Sachs: Sell Tech Selectively
Sunday, December 02, 2007 | 07:31 AM

Yeoman's work by Barron's Eric Savitz, who pens the must read techblog Tech Trader Daily, in assembling a laundry list of stocks downgraded by GS (published Friday after the bell).

The money quote from Goldman analysts states they have become "incrementally more cautious on tech fundamentals given the current macroeconomic backdrop."

Additionally, "with software a typically back-end loaded sale, if there is any concern on budgets in the early part of 2008, we would expect CIOs to hold off their purchases until later in the year."

The main area of concern: "Companies with large enterprise exposure and significant dependence on the U.S. consumer."

Ouch.

+++++
November 30, 2007, 4:25 pm
Goldman Turns Wary On Tech Sector; Cuts Estimates, Targets For Dozens Of Stocks
Posted by Eric Savitz
http://blogs.barrons.com/techtraderdaily/2007/11/30/goldman-turns-wary-on-tech-sector-cuts-estimates-targets-for-dozens-of-stocks/

[snarks_when_bored]

Thanks for the link to Ritzholz's blog.

A few minutes ago on CNBC's Power Lunch, Charlie Gasparino and Steve Liesman had a shouting match about Ben Stein's article. Liesman tried to argue that the Goldman guy, Hatzius, had been negative on the sub-prime mortgage market for a couple of years; Gasparino didn't care. Gasparino, an old hand at Wall Street reporting, stated flatly that everybody on the Street knows that Goldman Sachs is the most predatory financial firm around, and they do and say absolutely nothing that is against their own interests. One can safely conclude from this that, if Hatzius has been pushing negativity and fear about the sub-prime market for many months, and if he remains employed at Goldman Sachs, then that negativity and fear are good for Goldman Sachs.

[Pelham]

Ben Stein appears regularly on KNX radio’s business hour here in LA with Frank Mottek (the Frank ‘n Stein segment). I noticed that even a month ago Ben seemed remarkably clueless about the turmoil occurring in housing. I think he needs to get out of West LA more often.

[stboz]

Goldman Sachs.....

Aren't these guys some of the pig formicators who have been kiting up the price of oil?

[Pelham]

The problem with shorting then was that you tended to be too early. You shorted when they hit absurd valuations only to have them go to ridiculously absurd prices.