Goldman Exposes The "Lend To Play" Conflict Scheme Involved In IPO Underwriter Allocation

Tyler Durden's picture

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Steak's picture

I present for y'alls listening pleasure, another two playlists.  The first is a mix of new and recent EDM productions, many of which can melt faces.  The second is for all y'all who like to funk it up, with an EDM twist of course.

2cool (4skool) <ass-kicking>: http://www.youtube.com/view_play_list?p=12689F04C0CEEF6C 

up with the get down <funky fresh>: http://www.youtube.com/view_play_list?p=4217E3682ABFEFB9 

SheepDog-One's picture

Meanwhile GS pumps itself another $6 worth.

tom's picture

Thanks Tyler, good find. Another warm fuzzy reason why profits are at an all time high.

Greater Fool's picture

Not sure I buy the "unfunded fee is akin to writing CDS" argument. If that's right, then the nation's credit-card companies are subsidizing us all by charging us zero interest on the amount we are under our credit limits....

Millennial's picture

I'm gonna play russian roulette. I can't tell if I have to fart or shit.

goldsaver's picture

Ok, OT question here. I have been watching and buying gold for months now. Typically gold had been going up overnight and then dropping during the morning to recover in the afternoon. We see this same behavior today. My guess is that we have a lot of paper gold been bought overseas and then sold in US markets in the morning to drive the price down. Once tha price drops enough, my guess is physical is been picked up in the afternoons to cover for empty customer ETFs. Am I completely wrong on this? and if this is true, does it not mean that it is a self feeding cycle that will push physical gold up? And what happens when there is no more physical available to trade? I know I'm not selling. I just accumulate a bit each month on the dips. Other than the sovereigns and CBs who else has enough physical to cover the demand?

TheMonetaryRed's picture

Look, gold to $1600, but if I were you I wouldn't worry about whether there was any more physical gold left. I'd worry about what you'll do when there are no more GLD buyers left. 

goldsaver's picture

Oh, I see gold at 10k. Maybe in 24 months. Maybe in 24 years. Don't care either way. My gold and silver are about generational wealth preservation. I'm not going to put it in a bank. I did the stock market and the IRA thing. Made some money before the .com bubble. Lost some during. Don't have any desire to support the banking cartels. So... getting rid of all debt and accumulating gold and silver for the future. BTW, what do you mean by no more gld buyers?

TheMonetaryRed's picture

Hang on. There's another side to this.

Before we start crying about a CRA for borrowers and IPO issuers, let's remember that everybody and his brother knows that I-Bankers constantly dangle below-market credit as a "carrot" to pull firms into deals AND - as we found out during the Financial Crisis - use implicit threats to withdraw credit lines as as "stick" to push firms into deals.

Risks are uncertain and credit markets are volatile. Bankers not only buy and sell mispriced risk, they use their power to misprice large amounts of risk as a tool of influence and persuasion. 

So what's the ZH suggestion for reducing the banks' power to misprice large amounts of risk? Government? Perish the thought. 

Oh, I forgot, gold will cure everything. How, we don't know. It just will. 

Tyler Durden's picture

And just as we "just know" that these same banks that are peddling conflicts of interest now (at a hit to secondary investors), will use implicit threats (because banks did this maliciously right... and had nothing to do with the banks' need to salvage every dollar of liquidity due to their own massively bloated balance sheets) when the next credit crisis strikes.

Perhaps reread the article, which cries nowhere about the corporate issuers, but more for the investors (both retail and institutional) who are getting suckered in by a issuer-bank JV. But of course they should be sufficiently intelligent and know all this in advance. Which begs the question why did we even post this article. After all you knew all this to begin with.

TheMonetaryRed's picture

First of all, thanks for your work. 

Second, the "we" to whom I referred was the community of commentors.

To the extent that the post reveals the utterly opaque nature of bank balance sheets and the way banks both bribe and steal by kicking back and shoveling out hidden risk, I not only second your concerns, I salute your efforts.

I am, after all, a reader, despite my misgivings about the political sentiments expressed on ZH.

Where you see a rip-off of the investor community, I don't care. They've got plenty of money and they should know better than to invest in companies with a history of hiding numbers and (IMHO) outright fraud. If you invest in a crooked bank, you're trying to make a crooked dollar so you deserve that you get. 

What bothers me is systemic risk and, again, I salute you for revealing yet another source of it. What I really object to  - and was trying to head off - was this ridiculous message we've heard from the start of the Financial Crisis that somehow bankers were being ripped off (by the CRA, FNM, subprime borrowers, Obamacare, Fin Reg, whatever), rather than doing the ripping off themselves

 

Chemba's picture

Excellent post, TD.  Goldman marks every asset, down to its water coolers, every day, end of day.  It knows exactly what it owns, what are its risks, and how those risks are performing in real time.  That is unlike any other bank, which simply mark to fantasy and guide sell side analysts to a bogus "earnings per share" number.  Lehman went tits-up because it had no idea what its risks were, and how those risks were evolving over time

Tyler Durden's picture

And this is merely due to Goldman's revenue coming not from traditional banking sources (the yield curve and a loan book) but from generating 60% of its revenues from trading (and not even investment banking). Most hedge funds have to mark to nano second.

Chemba's picture

you are correct that goldman's revenues are not "traditional" in the deposit/loan sense.  and goldman (obviously) marks to a nano-second at the desk level where that is appropriate.

once goldman separates its prop trading, leaving behind priniciapl and agency, I think you will be surprised at the results.

 

 

AccreditedEYE's picture

Chemba, be honest, was Goldman's aim here to appear like a good corporate citizen in order to not only attempt to repair its bruised image but to also garner more business and try and push itself back up to the top of the league tables? Lloyd never leaves money on the table!

TraderTimm's picture

Just makes me want to jab a stake in the squid's eye and throw it up on the pier to dry a papery-dehydrated death.

 

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