...was a partner at the New York firm of White & Case. I was just a pup banker but Jimmy liked me and took me under his wing. He was a southern gentleman from an old Virginia family, had attended "The University" and it's law school and had been in the practice of law for over thirty years when I first met him...and yes, he was the great-great-great-great grandson.
Despite all of this, at the start of any negotiation Jimmy would always say, "Gentlemen (there were no ladies), in matters such as this someone has to be a son-of-a-bitch and since I am best qualified to perform that role I nominate myself." Jimmy always performed admirably.
Greece, Europe and perhaps the world has suffered from the absence of a Jimmy Marshall. No one took charge and the result is now a real question emerging as to whether Greece can survive without a major restructuring that could result in losses all around. Today, S & P lowered Greece's credit rating to junk while at the same time cutting it's rating for Portugal. As for Greece S & P was merely reflecting the market assessment which was pricing medium term risk at a level of 1200 bp above the Bund. At this level it is fair to say that the market has priced in a restructuring:on a mark-to-market basis the rivers are running red with blood.
Who takes the blame for this? Surely there is enough to go around but as the primus-inter-parus of this band of merry men, one has to tie the can onto Germany for this one. A clear statement of German support would have nipped this thing in the bud--yes it would still have been ugly but not to this extent. I feel like a real jerk as I had truly believed that the threat of the collapse of the Euro and the EU itself would be enough to get an adult response to this situation. That collapse is now very much in sight and one wonders whether there has been an organized effort to achieve this result or was it just incompetence that has ruled the day. So one is left to wonder where do we go from here? For the life of me, I'm out of ideas but to under estimate the scope of the financial catastrophy we might be witnessing would be seriously unwise. As I have stated the true condition of European financial institutions is undoubtably not as good at this stage as is the condition of our own and a series of sovereign defaults could set off a crisis not dissimilar from what we have just experienced. Let us hope this does not occur.
Jimmy, we hardly knew ya, but boy, do they need you now.
The Goldman hearings today are an embarassment. Carl Levin is a disgrace as a legislator and pretty much as a human being which is kind of redundant as he is a career politician. His colleagues are not much better. None of them knew what they are talking about. The Goldman mob was shown as being probably brilliant in their field but absolutely useless in the role assigned. They are narrow, inarticulate little nerds. Trading quants at best. They did no good to their firm or to themselves.
More on both these items tomorrow. Oh, in case you missed it, the stock market tanked on both of these events, the Euro is in the crapper and Treasuries are going flatter and flatter across the curve. Somebody must think we're in great shape which leads one to wonder what would be happening if the Yuan was convertible which it would have to become if broadly revalued. Be careful for what you wish.
The grandkids are great, thank you. Nice to be back
Showing posts with label Goldman. Show all posts
Showing posts with label Goldman. Show all posts
Tuesday, April 27, 2010
Monday, April 19, 2010
PAS DE DEUX
Front page, column 8, above the fold. That's where the Times put the Goldman story. If you get the SEC complaint you might note it reads exactly like a Times news story; it's a real grabber. For any of you who dropped off the turnip truck passing through town, here's a reality check: this is a great co-ordinated operation between the administration, the Sec and their favorite news organization. As we speculated on Friday this is all about the legislation before congress...and if you really want to be cynical, about the greatest created opportunity for the Trial Lawyers Association since the asbestos scam. Just my opinion.
But as we also said, Goldman, as our Brit fiends would put it is too clever by half, too arrogant by a factor of 10, too unloved by a factor of 100%, too scummy by infinity but probably, in the end, innocent as well.
I don't for a minute buy the deal that senior management was unaware of the goings-on until the very end if at all. I would assume that a barrel-full of lawyers went over this structure with a fine tooth comb and the proposed method of distribution as well. Nothing happens at Goldman by accident. Nada. They knew exactly what was going on at all levels of the organization. It's really slimy in my mind, but for the life of me as much as I hate it I can't say that what they did was outright wrong or even outside the practice of the street tho granted, I have been away from it for a while now.
As for the buyers, what in the hell were you doing in your spare time? To invest heavily in an asset such as this which by it's very nature will attract guys on the other side of the trade and then claim you were duped is beyond belief. I have no sympathy for them. And yet, let me let you in on a secret: on the Street, money is the most important thing, but there is two kinds of money. There is smart money and there is dumb money. If you are on the sell side and if you are any good at your job you know exactly where the dumb money hangs out. For structures such as this, you're lookin' for dumb money. It was obviously found. Remember, there's nothing wrong about a client making an honest mistake ON HIS OWN and dumb money will often make an honest mistake.
It would be a shame if this adventure were to be successfully used as a political hatchet to enact legislation that could and should be improved upon through open debate and compromise. But The Leader and his mob are very good at street tactics. The shrill sounds from the political left are rising. Goldman has handed them winning strategy on a sliver platter. Makes you wonder; maybe these guys aren't so smart after all.
Off to see the grandkids. Back week-end.
But as we also said, Goldman, as our Brit fiends would put it is too clever by half, too arrogant by a factor of 10, too unloved by a factor of 100%, too scummy by infinity but probably, in the end, innocent as well.
I don't for a minute buy the deal that senior management was unaware of the goings-on until the very end if at all. I would assume that a barrel-full of lawyers went over this structure with a fine tooth comb and the proposed method of distribution as well. Nothing happens at Goldman by accident. Nada. They knew exactly what was going on at all levels of the organization. It's really slimy in my mind, but for the life of me as much as I hate it I can't say that what they did was outright wrong or even outside the practice of the street tho granted, I have been away from it for a while now.
As for the buyers, what in the hell were you doing in your spare time? To invest heavily in an asset such as this which by it's very nature will attract guys on the other side of the trade and then claim you were duped is beyond belief. I have no sympathy for them. And yet, let me let you in on a secret: on the Street, money is the most important thing, but there is two kinds of money. There is smart money and there is dumb money. If you are on the sell side and if you are any good at your job you know exactly where the dumb money hangs out. For structures such as this, you're lookin' for dumb money. It was obviously found. Remember, there's nothing wrong about a client making an honest mistake ON HIS OWN and dumb money will often make an honest mistake.
It would be a shame if this adventure were to be successfully used as a political hatchet to enact legislation that could and should be improved upon through open debate and compromise. But The Leader and his mob are very good at street tactics. The shrill sounds from the political left are rising. Goldman has handed them winning strategy on a sliver platter. Makes you wonder; maybe these guys aren't so smart after all.
Off to see the grandkids. Back week-end.
Tuesday, April 14, 2009
THE BUNNY TRAIL
Back from a wonderful Easter weekend with all of the grandkids. If you think dealing with the financial crisis is hard, try dealing with 2 year old triplets produced by son #2 and bride. It's like herding cats. How those two do it I have no idea but The Leader and Our Hero should give them a call for some advice. It will undoubtedly be better than some they have been receiving.
When we last visited the state of play, Wells Fargo had just released spectacular earnings as predicted by your humble scribe (see: "He sprang to his saddle..." March 11) Today, Goldman Sachs "beat the street" with a reported net of $1.8 billion. That's a lot of money for a firm reportedly in dire straits just a few short months ago. I'm willing to admit Goldman is good...better that most probably...but I still find it difficult to figure out how they manage to pull off coups such as that today where they successfully issued 5 million shares of common at $123 a share which and then watch it crash to $113 at the close. The $1.8 billion came almost exclusively from trading, and fixed income trading if one believes the release (there is no reason not to) but that is a hell of a lot of profit from a business with razor thin margins. Before September last, Goldie was an investment bank with gearing applicable to their position in the business.; read HIGH. Today, they are a commercial bank with gearing supposedly governed by the Basel Rules and monitored by the Fed. Forgive me, I love the number, but $1.8 Bil out of one facet of the business leads me to believe that the balance sheet mid-month was a Tad bit larger than one might expect it to be for a good, commercial bank leverage-wise. But it is what it is and there is $6.5 Billion more in tier one capital and a real headache for Our Hero.
Goldman has wasted no time in letting it be known that Plan A is repay the TARP money as soon as possible so that they can get beck to paying themselves obscene amounts of money unhampered by the silly thoughts of The Leader and and those of the dimmest of legislators. With a new injection of capital and bright prospects for the future (at least in their minds) they seem to have a strong argument. Although one might think that the return of taxpayer's dollars, the evidence of the ability to attract permanent capital at remarkable levels and the hope of a bright tomorrow fulfills all that the Administration has been asking for, there seems to be more than a bit of hesitation of its part. Mind you, there is still the sticky question of how does one price the warrants that the Government holds and would be forced to cash if the TARP funds are to be repaid (raising the specter of how does one price Our Hero's plan in general), but surely this can be worked out? Could it be, one asks, that the Administration has a bit more on its mind than a mere "tiding over" of the financial sector until a better day, and that the implied control that TARP and Our Hero's plan is at least as important? The implications of this position, long whispered in the press and on the Street, are perhaps being focused far too quickly for the Administration's liking as a result of the surprising strength of a portion, at least, of the financial sector. A plethora of good results over the next few weeks in, once again, a wonderful banking environment may well focus this issue and none too soon.
A bit of a sad note. last week, the Wall Street Journal carried a story about the absence of Paul Volcker from the public view despite his highly publicized joining of the Administration's financial team, his appointment as Chair of an advisory commission and the very public promise by The Leader that Mr. Volcker would have an important role to play going forward. Now some of you might have gotten the impression that I am not entirely happy with some of the positions taken by this Administration but this was not one of them. Paul Volcker is one of the giants (no pun intended this time) in the financial sector and his presence and learned counsel is needed and would be most welcome. Unfortunately, he did nothing to dispel the implications in the article that he is being...ah, underutilized. This is more than unfortunate and one would hope would be reversed. If not, one can only come to the view that in the twilight of a distinguished career of public service, a very fine man was used quite shamelessly to lend credibility to an otherwise less than ready group. I hope I am wrong, but I fear that I am not.
When we last visited the state of play, Wells Fargo had just released spectacular earnings as predicted by your humble scribe (see: "He sprang to his saddle..." March 11) Today, Goldman Sachs "beat the street" with a reported net of $1.8 billion. That's a lot of money for a firm reportedly in dire straits just a few short months ago. I'm willing to admit Goldman is good...better that most probably...but I still find it difficult to figure out how they manage to pull off coups such as that today where they successfully issued 5 million shares of common at $123 a share which and then watch it crash to $113 at the close. The $1.8 billion came almost exclusively from trading, and fixed income trading if one believes the release (there is no reason not to) but that is a hell of a lot of profit from a business with razor thin margins. Before September last, Goldie was an investment bank with gearing applicable to their position in the business.; read HIGH. Today, they are a commercial bank with gearing supposedly governed by the Basel Rules and monitored by the Fed. Forgive me, I love the number, but $1.8 Bil out of one facet of the business leads me to believe that the balance sheet mid-month was a Tad bit larger than one might expect it to be for a good, commercial bank leverage-wise. But it is what it is and there is $6.5 Billion more in tier one capital and a real headache for Our Hero.
Goldman has wasted no time in letting it be known that Plan A is repay the TARP money as soon as possible so that they can get beck to paying themselves obscene amounts of money unhampered by the silly thoughts of The Leader and and those of the dimmest of legislators. With a new injection of capital and bright prospects for the future (at least in their minds) they seem to have a strong argument. Although one might think that the return of taxpayer's dollars, the evidence of the ability to attract permanent capital at remarkable levels and the hope of a bright tomorrow fulfills all that the Administration has been asking for, there seems to be more than a bit of hesitation of its part. Mind you, there is still the sticky question of how does one price the warrants that the Government holds and would be forced to cash if the TARP funds are to be repaid (raising the specter of how does one price Our Hero's plan in general), but surely this can be worked out? Could it be, one asks, that the Administration has a bit more on its mind than a mere "tiding over" of the financial sector until a better day, and that the implied control that TARP and Our Hero's plan is at least as important? The implications of this position, long whispered in the press and on the Street, are perhaps being focused far too quickly for the Administration's liking as a result of the surprising strength of a portion, at least, of the financial sector. A plethora of good results over the next few weeks in, once again, a wonderful banking environment may well focus this issue and none too soon.
A bit of a sad note. last week, the Wall Street Journal carried a story about the absence of Paul Volcker from the public view despite his highly publicized joining of the Administration's financial team, his appointment as Chair of an advisory commission and the very public promise by The Leader that Mr. Volcker would have an important role to play going forward. Now some of you might have gotten the impression that I am not entirely happy with some of the positions taken by this Administration but this was not one of them. Paul Volcker is one of the giants (no pun intended this time) in the financial sector and his presence and learned counsel is needed and would be most welcome. Unfortunately, he did nothing to dispel the implications in the article that he is being...ah, underutilized. This is more than unfortunate and one would hope would be reversed. If not, one can only come to the view that in the twilight of a distinguished career of public service, a very fine man was used quite shamelessly to lend credibility to an otherwise less than ready group. I hope I am wrong, but I fear that I am not.
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