By: Chris Tell
“Oh, but he's ex-Goldman Sachs.”
This post is dedicated to our friend Greg Miller of Myanmar Capital Partners [14] who, though he's an "ex-hot shot investment banker", remains an exceptional individual and a talented professional.
In our world of private equity, the statement above tends to crop up often. It is brandished like the trident of King Triton. A badge of honor, a statement that is meant to end all concerns, to eliminate any doubts.
Since when does JPM, Goldman, RBS or any of the large investment banks provide a benchmark for anything but an insatiable greed, avarice and a propensity for double-dealing?
I believe the days of my hearing this statement are numbered and here's why:
Goldman Sach's prop desk earns unreal returns. We know this and are envious. Who wouldn't be? I too want a Bentley. I've always thought that such an exceptionally ugly car ought to either be used as a hearse, or be rallied across back country roads at speed, and I have quite a few lonely country roads where I am right now.
I've not had the "pleasure" of working on a Goldman prop desk, but I have spent time at similar institutions and can tell you that the traders are absolutely NOT genetically superior to the guy in the next cubicle. Nope, they're mostly late 20s, sometimes early 20s guys. Some are great, others are arrogant morons. Nothing unusual either way.
The reason the prop desks are so profitable is that unlike other market participants they have an edge. They can and do trade against their client books by front running them.
As Nomi Prins, a former Goldman trading strategist states:
"Any information that you get, particularly if it's going to move the markets a lot, is - is - is going to filter into the trading positions you take."
If you had the power to move a market with your client's money, and you further knew that you could take the other side of that trade and buy yourself a Lamborghini at the end of the year...what do you do?
Matt Taibbi, Rolling Stone's exceptionally brash and talented journalist (we need more of these guys) exposed money laundering at HSBC here [15] and Wachovia was exposed here [16]. After being caught red-handed laundering hundreds of billions of dollars for drug cartels, not a single person has been arrested or even lost so much as a job.
Meanwhile these same "crack" government watchdogs are busy apprehending uber criminals like Charlie Shrem, the CEO and founder of BitInstant. Shrem was arrested at the end of January on charges of money laundering, operating an unlicensed money transmitting business and willful failure to file a suspicious activity report.
REALLY? How do you spell Hypocrisy?
Where this gets interesting is not in what I care to think about Goldman or any such institution. What I think is largely irrelevant. What is important is what the herd thinks, and their exists a rising global sentiment against these bankers...Jewish bankers in particular. Rightly or wrongly, banking is considered to be a Jewish profession.
Martin Armstrong believes that the bankers have just a few short months left before they become targeted. You can read Martin's thoughts on this in a post entitled, “Gangster bankers too big to jail”, [17] and another great piece, “Anti-Semitic and Pro-Nazi Activities Rising”, [18] where he states:
"Of course the protection of the NY bankers has nothing to do with the fact that they are Jewish in general. Nevertheless, this is always how the anti-Semitic and pro-Nazi activities movements emerge by connecting the dots and blaming someone for the economic decline.
The worse the economy gets, the higher the probability we will see a major outbreak in anti-Semitic and pro-Nazi activities."
If you were of Japanese origin, living in the US during WWII you were targeted simply for being Japanese. We're heading for similar times. In times of economic distress people act irrationally and look for someone to blame...anyone. Since Wall Street is heavily weighted towards Jewish gentlemen, they make an easy target.
In a similar vein, the backlash against "foreigners" is coming in Europe. I just read news [19] that Switzerland has just dealt the first decisive blow to the European Union, and ultimately the Euro itself, by effectively shutting their borders.
Economic woes typically precede civil and sometimes cross-border strife. It is extremely important to understand these risks as they have serious implications for Gold, The Dow and European Markets.
There are reasons to consider investing outside of "traditional markets". We will be in Sri Lanka in a few weeks meeting with our exclusive syndicate [20]. Sri Lanka is a country which has enjoyed a healthy dose of aggression, economic strife and missed opportunities. Right now betting on a country such as Sri Lanka, rather than many European countries may sound absurd to those reading the dishwater that masquerades as financial news, but it may actually make sense.
We frankly don't know, which is one reason we are going to take an initial look at the place to learn more. This report [21] provides a good overview on the country for anyone interested in digging a bit deeper.
What I do know is that the problems that are now coming to the surface in Europe are not unique, new or startling in any way. They are the natural result of the intense fraud and corruption that has been foisted on the citizenry.
When bankers, together with politicians blow up the economy and then turn around and bail each other out, and create regulations to impede business growth and capital flows, even an intelligent 5th grader will be able to tell you that things are likely to turn ugly.
It makes me wonder how long the likes of Goldman Sachs, and other such institutions will be used as credentials of value, rather than hidden from view?
Will "Oh he's from Goldman" become a statement of ridicule, something to be ashamed of, something that even puts one in danger...like being accused of being a Ku Klux clan member whilst walking through Harlem?
To be clear, I have nothing against bankers, Jewish folks, Arabs or even those who don't speak English as a first language...the Australians and Kiwis for example. I've been known to live amongst them quite peacefully.
- Chris
"I'm doing Gods work." - Lloyd Blankfein - CEO, Goldman Sachs