Posts Tagged ‘Wall Street’
The AIG Gravy Train – It Just Keeps Getting Worse
Joe Nocera of the New York Times wrote a great post today which adds more grist to the mill on the price discovery issue relating to AIG’s credit default swaps (CDSs). Not only does the government end up propping up the most destructive derivative behavior around, but it does so while allowing AIG to maintain the confidentiality of their shady transactions.
And guess who that protects? You’re spot on. It shields AIG’s counterparties, banks, investors, and lenders who were looking for a way to ‘insure’ themselves on the quiet while they pigged out at the trough just before the fall. Nocera makes the point that this doesn’t sit well with the President’s call for transparency and he’s right. But it’s yet another example of the contradictions that Obama seems to be displaying. High principle on the one hand and almost Bush-like duplicity with the status-quo on the other. It’s becoming increasingly clear that Tim Geithner is lurching from crisis to crisis just like his predecessor. But the situation is far worse now. Paulson was a stooge and everyone knew it, a placeholder and agent for the Street. Geithner is supposed to know better. But he doesn’t seem to be able to escape the shackles of hide-bound “group-think”. Wasn’t the President supposed to put a stop to this kind of thinking?
The Fix Is In – Part Two
Today, a distinguished board of economists said the country had been in a recession since December ’07, a statement that normally the markets would have discounted, because, yeah, like we knew that. But no, the market’s took a massive swoon, again, giving back all the hard earned gains of the past week’s rally.
Call it rank cynicism, but it just can’t be helped. It’s just too tempting a thought not to consider all this just a tad convenient. Last week the long guys had a party to celebrate a completely predictable new Secretary of the Treasury. This week the toilet beckons because we were told what we already know, and the short guys make a bomb. Coincidence? Perhaps. But if there was collusion between the traders, who after all work either a drink after work or a few desks apart, one could hardly be surprised. After all they’re just trying to make a buck or two with someone else’s money. Right?
The Fix is In – The Long and the Short Of Wall Street
Another bumper day on the Street. The Government bails out another basket case bank. Everything’s right with the world. Hurrah! Yet again, Wall Street proves it’s an utterly amoral, self-interested, club that has nothing whatsoever to do with you and me.
Massive market volatility, huge gains on the basis of nothing, followed by huge losses and back to gains. Is there a pattern to all this? Not on the surface, at least. The press loves reasons, and tacks on some or other reason for that day’s movements. Recession indicators, new appointment at Treasury, another baby for Angelina and Brad.
But maybe something else is in play too, something mysterious, something very, very fishy.
Traders either go “long” hoping a stock will rise, or they go “short” on borrowed stock hoping the stock will drop and they get to keep the difference on the sale. Long traders and short traders are not in competition, but supposing they were, even in some unspoken way, in collusion. Wall Street traders aren’t known for their mild-mannered approach to business, so could be…
Let’s Talk About “The System”
Back in the eighties there was an awful lot of talk about the nefarious “system”, a deep and dark conspiracy of the powerful to keep down the powerless. Before resentment became a tool of the right, it was a clarion call of the unreconstructed left, a youthful, incoherent, but somehow meaningful rallying cry that drove many a drunken, sophomoric conversation. You don’t hear too much about “The System” these days. Nobody seemed to care anymore, when “The System” was delivering them flat screen TVs and great opportunities to flip condos.
But it seems to me that it’s time to revive talk about “The System” because it’s become very clear what it is.
Undiluted socialism for the rich and influential, and the legal and enforcement system to protect it. Read the rest of this entry »
The Inherent Wisdom of Sheep
“I have no idea”, said one JP Morgan Chase economist today when asked by the New York Times why the Dow shot up over 550 points on the same day yet more recession indicators piled on. That seems to be the best response under the circumstances, but it belies a more serious problem. For years, we’ve been told to trust the market, to listen to the market. We were told that the market has an inherent wisdom.
The inherent wisdom of sheep more like.
Someone decided that the rally was due and bought. Someone else said “things are bottoming out”, and he told his mates. His mates told their mates, and they all got back in to earn some bucks with someone elses tired, downtrodden money. The herd mentality is not a signifier of great intelligence – quite the opposite. And this level of absurd, illogical, delusional volatility is a signal of worse to come. So please, for once and for all, let’s stop listening to the market – oh, and enough of those images of Wall Street traders watching the screens with panic and despair on their faces.
If I could earn a Euro for every time one of those…
Paulson – The Man With The Plan
After nationalizing Fannie and Freddie, then letting Lehman Brothers die for no apparent reason, then bailing out AIG to the tune of $85 billion (now around $150 billion but who’s counting), Hank Paulson sat back to watch the credit markets unfreeze. But instead they just froze up some more.
Hank was totally bummed. “This job totally sucks”.
“The credit freeze just keeps on freezing”, he said to his posse of former Goldman Sachs hacks. “What the frick do I do?”
“You need one big plan”, said Neel Cash and Carry, “not just a whole bunch of little plans stuck together”. Hank nodded furiously. “Yes, yes, that’s right”. After scribbling a few notes on the back of a dry cleaning bill he looked up. “I’ve got it”. Read the rest of this entry »