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Goldman’s Rules of Acquisition

29 points by rpledge 16y ago

jarek 16y ago
I'm not a big fan of GS, or the current finance setup. That being said: "These bastards are reveling in their financial mischievousness – they’re enjoying explaining exactly how they fucked us." If you go up against people who are smarter than you, and greedier than you, and who know more than you, and you trust them not to fuck you, they will fuck you. That's capitalism.
- j_baker 16y ago
  However, that doesn't make it right for them to fuck you. That's ethics.
  - anamax 16y ago
    > However, that doesn't make it right for them to fuck you. That's ethics. The folks who lost were planning to keep their profits. They thought that they knew better than the other side of the deal. (And yes, there's always another side.) You can't con an honest man.
gsmaverick 16y ago
Unfortunately like many others Jason is mis-informed about what was really behind this crisis. Let's not forget that the Federal Reserve has been maintaining exceptionally low interest rates for much of the last 10 years, with a few exceptions, and that both previous presidents cheered the rapid increase in home ownership rates seen in the early parts of the new millennium.
LiveTheDream 16y ago
It feels like Wall Street's moral benchmark has fallen from Gordon Gecko's credo, “greed is good” to "well, it’s not illegal." Well said.
- joshu 16y ago
  Heh. I've always thought of exotics as transactions that weren't illegal... yet.
  - jrockway 16y ago
    There's really no correlation. You can do pretty dangerous things with vanilla options, and some exotic options are pretty tame.
simon_ 16y ago
I am so tired of hearing about "confounding financial products that no one can hope to understand". An intelligent person willing to spend a few hours would have no trouble gaining a basic understanding of CDOs, credit default swaps, and the like. There's no excuse for that kind of thing in mainstream journalism (where you often see it), and I'm kind of surprised that you hear it from Jason.
- stretchwithme 16y ago
  I agree. Maybe what journalists really mean is that they can't understand them after spending the five minutes they allocate to understanding every topic. These instruments were created to shift risk to those most naive about the housing bubble collapse. Those who saw it coming knew there was great profit in getting others to take on that risk. Just pay them enough and they'll take it on. Congress can't acknowledge its own role in creating the bubble so they're trying to regulate how people took advantage of it. But its not the market's exploitation of our government's stupid actions that need to be fixed. They will always find a way. Our government needs to stop being stupid.
- sethg 16y ago
  As another article recently linked from HN pointed out, even if you can get a basic understanding of CDOs and credit default swaps in a few hours, if you went to actually invest in one of the things, the legal documents defining your actual relationship with your counterparty were hundreds of pages long and filled with jargon.
- jerf 16y ago
  A computer can basically do four things: Load a value from memory, store a value into memory, add two numbers together, branch to another list of instructions if a number is 0. So, if you understand those operations, you understand everything about computing, right? The problem with the financial world wasn't that they built on incomprehensible primitives. The problem was the incomprehensible structures they built with them. Just like programmers and programs. A basic understanding of the primitives is necessary but not sufficient in either case. And the programmers have an advantage that all the source code they are running is in one place; to understand the financial system technically would require access to the whole, which you can not have. (If you want to quibble with that list of primitives: Fine, just pretend I used your list instead. It won't change my point.)
joelhaus 16y ago
Don't expect things to change any time soon. The problem is systemic, on a global level. This is not just GS; they only happen to play the market better than most. Banks have an incentive to take on greater levels of risk in order to attract deposits (which are a highly liquid, short-term source of capital); hence, investors must find a way to out-do the bank returns in order to justify their existence. People can point to specific flaws within the system (of which there are many), but we live in a global economy with many banks competing for profits. Given that the possibility of eliminating greed is near zero, this really is a catch-22. Global regulation (see the Basel Accords) would result in significantly diminished economic growth, but is the only viable "solution" (you can begin to see how Marx justified communism). Result: the global banking system tends not to incentivise long-term investment, which then leads to asset bubbles. While we can not prevent bubbles all together, regulatory regimes can help to make them less frequent.
dnsworks 16y ago
Has Calacanis ever written .. anything that didn't mention that he's wealthy enough to drive a Tesla?
dnsworks 16y ago
Has Calacanis ever written .. anything that didn't mention that he's wealthy enough to drive a Tesla?

29 points by rpledge 16y ago

jarek 16y ago

I'm not a big fan of GS, or the current finance setup. That being said: "These bastards are reveling in their financial mischievousness – they’re enjoying explaining exactly how they fucked us." If you go up against people who are smarter than you, and greedier than you, and who know more than you, and you trust them not to fuck you, they will fuck you. That's capitalism.

j_baker 16y ago
However, that doesn't make it right for them to fuck you. That's ethics.
- anamax 16y ago
  > However, that doesn't make it right for them to fuck you. That's ethics. The folks who lost were planning to keep their profits. They thought that they knew better than the other side of the deal. (And yes, there's always another side.) You can't con an honest man.

gsmaverick 16y ago

Unfortunately like many others Jason is mis-informed about what was really behind this crisis. Let's not forget that the Federal Reserve has been maintaining exceptionally low interest rates for much of the last 10 years, with a few exceptions, and that both previous presidents cheered the rapid increase in home ownership rates seen in the early parts of the new millennium.

LiveTheDream 16y ago

It feels like Wall Street's moral benchmark has fallen from Gordon Gecko's credo, “greed is good” to "well, it’s not illegal." Well said.

joshu 16y ago
Heh. I've always thought of exotics as transactions that weren't illegal... yet.
- jrockway 16y ago
  There's really no correlation. You can do pretty dangerous things with vanilla options, and some exotic options are pretty tame.

simon_ 16y ago

I am so tired of hearing about "confounding financial products that no one can hope to understand". An intelligent person willing to spend a few hours would have no trouble gaining a basic understanding of CDOs, credit default swaps, and the like. There's no excuse for that kind of thing in mainstream journalism (where you often see it), and I'm kind of surprised that you hear it from Jason.

stretchwithme 16y ago
I agree. Maybe what journalists really mean is that they can't understand them after spending the five minutes they allocate to understanding every topic. These instruments were created to shift risk to those most naive about the housing bubble collapse. Those who saw it coming knew there was great profit in getting others to take on that risk. Just pay them enough and they'll take it on. Congress can't acknowledge its own role in creating the bubble so they're trying to regulate how people took advantage of it. But its not the market's exploitation of our government's stupid actions that need to be fixed. They will always find a way. Our government needs to stop being stupid.
sethg 16y ago
As another article recently linked from HN pointed out, even if you can get a basic understanding of CDOs and credit default swaps in a few hours, if you went to actually invest in one of the things, the legal documents defining your actual relationship with your counterparty were hundreds of pages long and filled with jargon.
jerf 16y ago
A computer can basically do four things: Load a value from memory, store a value into memory, add two numbers together, branch to another list of instructions if a number is 0. So, if you understand those operations, you understand everything about computing, right? The problem with the financial world wasn't that they built on incomprehensible primitives. The problem was the incomprehensible structures they built with them. Just like programmers and programs. A basic understanding of the primitives is necessary but not sufficient in either case. And the programmers have an advantage that all the source code they are running is in one place; to understand the financial system technically would require access to the whole, which you can not have. (If you want to quibble with that list of primitives: Fine, just pretend I used your list instead. It won't change my point.)

joelhaus 16y ago

Don't expect things to change any time soon. The problem is systemic, on a global level. This is not just GS; they only happen to play the market better than most. Banks have an incentive to take on greater levels of risk in order to attract deposits (which are a highly liquid, short-term source of capital); hence, investors must find a way to out-do the bank returns in order to justify their existence. People can point to specific flaws within the system (of which there are many), but we live in a global economy with many banks competing for profits. Given that the possibility of eliminating greed is near zero, this really is a catch-22. Global regulation (see the Basel Accords) would result in significantly diminished economic growth, but is the only viable "solution" (you can begin to see how Marx justified communism). Result: the global banking system tends not to incentivise long-term investment, which then leads to asset bubbles. While we can not prevent bubbles all together, regulatory regimes can help to make them less frequent.

dnsworks 16y ago

Has Calacanis ever written .. anything that didn't mention that he's wealthy enough to drive a Tesla?

dnsworks 16y ago

Has Calacanis ever written .. anything that didn't mention that he's wealthy enough to drive a Tesla?