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NYTimes Op-Ed: Why I Am Leaving Goldman Sachs

Discussion in 'Sports and News' started by lcjjdnh, Mar 14, 2012.

  1. The Big Ragu

    The Big Ragu Moderator Staff Member

    The best way to avoid being ripped off is doing your own due diligence.
     
  2. Bob Cook

    Bob Cook Active Member

    Also, to LTL's point about sophisticated investors getting ripped off, it's usually the sophisticated investors (or people who think they are) who get ripped off, because they're more likely to believe they're smarter than the average bear. And the scammers take full advantage of that. One common theme of Ponzi schemes: this is exclusively for someone like you!
     
  3. LongTimeListener

    LongTimeListener Well-Known Member

    Well, now, no, Bob, I agree with that. But related to CDOs and credit default swaps and the rest from the previous 5-10 years, it's pretty hard to say "buyer beware" and let that be that.

    Sounds great. The reality is that the financial system had grown up around the expecation that the ratings agencies were doing that diligence.
     
  4. NoOneLikesUs

    NoOneLikesUs Active Member

    http://www.thedailymash.co.uk/index.php?option=com_content&task=view&id=5007&Itemid=81
     
  5. Bob Cook

    Bob Cook Active Member

    True, there should be protection for investors, and the banks did very evil things. I totally agree.

    However, I also agree with the thought that, post-2009, if you're blindly trusting ratings agencies and the word of the banks on particularly exotic investments, you haven't learned a damn thing. Not that you deserve to be ripped off, but that you have to go into it knowing you can be.
     
  6. YankeeFan

    YankeeFan Well-Known Member

    As a broker, your number one rule is to "know your customer".

    As an investor, it is your job to do due diligence on your broker/bank/fund, their investments, and their investment strategies.

    And, GS isn't some pump and dump outfit preying on granny. Their investors are some of the most sophisticated institutional investors.
     
  7. LongTimeListener

    LongTimeListener Well-Known Member

    That is outstanding.
     
  8. LongTimeListener

    LongTimeListener Well-Known Member

    They were willingly and eagerly selling assets that they knew to be toxic. If they were selling cars, they'd be in jail for violating lemon laws. I don't know how this doesn't constitute massive fraud.
     
  9. Azrael

    Azrael Well-Known Member

    But if the ratings companies are part of the fiction, like the shill in a sidewalk 3-card Monte set-up, this becomes impossible.
     
  10. The Big Ragu

    The Big Ragu Moderator Staff Member

    The ratings agencies are a convenient punching bag.

    But that has been Monday Morning QB reasoning since 2008. It finds a weak sister and pins all of the blame on it. It provides a black and white narrative to something that isn't black and white.

    Before 2008, did anyone really have much respect for the ratings agencies? This is a generalization, but the way they were always viewed is that if you couldn't get a higher paying job at an investment banks you went to work for S&P.

    If large banks and sophisticated investment firms really had any expectation that ratings agencies could do their work for them, why have they always had their own teams of equity and fixed-income analysts? Large banks and investment firms try to rig the game in whatever ways they can. Always have. But suddenly they were so unsophisticated that they got taken by relying on someone else to do their work for them?

    Nobody got ripped off (or legitimately lost money) because they put their faith in a rating put out by S&P or Moody's. It's a convenient scapegoat, but it is not the reason anyone wasn't doing the due diligence they should have.
     
  11. Michael_ Gee

    Michael_ Gee Well-Known Member

    I note that the Wall Street joke whose punchline goes "But where are the customers' yachts?" is older than is the firm of Goldman Sachs. This dude is longing for a Wall Street golden age that as far as investors are concerned never existed. Hasn't he ever read about Jay Gould and Jim Fisk?
     
  12. lcjjdnh

    lcjjdnh Well-Known Member

    Like I said, even if you believe that partners and outside equity investors have the same exact interests as owners, converting ownership models certainly increases principal-agent problems. Diluted ownership means you bear a smaller part of any loss and cost*. Monitoring costs increase.

    * Take, for instance, a simple example. If Bob as CEO owns 100% of XYZ and takes out $1M from XYZ, we see no overall gain. But if Bob as CEO owns 50% and takes out $1M from XYZ, he has increased his net wealth by $500K.
     
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