The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Not too long ago, I finished Justin Fox’s Myth of the Rational Market. I’m about halfway through Scott Patterson’s The Quants.

I have the following lined up in my queue:

• Roger Lowenstein’s The End of Wall Street

• Steven D. Levitt and Stephen J. Dubner’s Super Freakonomics

• Michael Lewis’ The Big Short

• Yve Smith’s Econned

• Liaquat Ahamed’s Lords of Finance

I am interested on any feedback you might have regarding any or all of these . . .

Two of the four videos I shot at Yahoo yesterday are posted; the other two should be up by Monday:

• Rotten to the Core”: Bill Black and Barry Ritholtz React to Goldman Fraud Charges
Apr 16, 2010 04:26pm

• The End of ‘Government Sachs’? Fraud Charge Builds Momentum for Financial Reform, Ritholtz Says
Apr 16, 2010 05:53pm EDT

I spent some time on a track in a RS4 a few years ago — 400hp, gobs of power and torque.

Despite the AWD, it could get a little twitchy due to the short wheel base. If I had to guess why, I would surmise my non-judicious application of throttle. (I have a hammer where my right foot should be).

Regardless of my shortcomings on the track, I longed for this much HP on a longer base AWD Audi.

The RS5 is set to come tot he US in late 2011: The Europe-market RS5 coupe gets a high-revving, normally aspirated, direct-injection, 4.2-liter V-8 making 450 hp, 30 hp more than the old RS4′s V-8 of the same displacement.

Hmmm, it seems to be drying out outside. Time to blow some carbon off the valves . . .

all photos via Automobile Magazine

There should a Snopes version as well . . .

Read the rest of this entry »

Reading the SEC complaint (SEC vs GOLDMAN SACHS & CO. and FABRICE TOURRE) makes it hard to avoid the conclusion that there were material misstatements of facts and significant omissions performed in the selling of the Abacus 2007 securitized product.

When you consider the factors surrounding the complaint, it raises a dozens of more questions:

A Bakers Dozen: Questions Provoked by the SEC Goldman Complaint

1. Was this a one off at GS, or are there other CDOs that were sold via Fraud and Misrepresentation?

2. How endemic is this practice on the Street? Did other big derivative underwriters — Merrill, Morgan, Lehman, Deutsche, etc. — engage in similar (alleged) fraudulent practices when they were constructing and marketing these derivatives?

3. Who brought the issue to the SEC’s attention? Was it ACA, who lost 900 million dollars? Or was it other investors in the pool?

4. What does this say about the White House and Wall Street? Are the gloves off? Has the public outcry now reached the point where we might see vigorous prosecution of Wall Street wrongdoing?

5. Paulson & Co. were not named in the litigation. Did they do anything wrong? Might they get drawn into the fight?

6. Are there other hedge funds who engaged in similar behavior: Helping to select the components of a synthetic CDO, which they then shorted? Are there similar disclosure and misrepresentation issues?

7. How does this impact the Financial Reform legislation snaking its way through Congress? Will this add momentum to the call for stronger regulation of the Street? Of Hedge Funds?

8. Will this finally move derivative reform — exchange traded, full transparency/open interest, counter party disclosure, reserve requirements, perhaps even overturning CFMA — forward?

9. What does this mean for the markets? For much of the rally, Financials have been a leading sector. Might this derail the upward momentum?

10. Was the timing of this legal action a coincidence? Did the SEC / WH purposefully release this news to put heat onto those opposing reform?

11. What does this mean for ‘Government Sachs‘? Might GS see their privileged positions within Governments (US and others) curtailed?

12. How much will this end up costing GS? Is it a few million dollars disgorgement of a fee, and a similar penalty, or can this possibly spiral to a billion dollar bottom line hit?

13. Will there be criminal charges against GS or Tourre or anyone else involved?

I do not know the answers to these questions yet, but I do have my suspicions. . . .

Visit msnbc.com for breaking news, world news, and news about the economy

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Source:
The End of ‘Government Sachs’? Fraud Charge Builds Momentum for Financial Reform
Peter Gorenstein
Yahoo Tech Ticker, April 16 2010
http://finance.yahoo.com/tech-ticker/the-end-of-’government-sachs’-fraud-charge-builds-momentum-for-financial-reform-ritholtz-says-469693.html

The following was written by an analyst who has long criticized how Wall Street covers itself. It is published anonymously due to his firm’s legal & compliance rules.

~~~

At 9:43 AM ET on CNBC, Dick Bove (Rochdale Securities) said Goldman would pay a fine and this will pass (3:00).  He also called the stock an agressive buy at $171 (4:45).  At 6:00 minutes Mark Haines begged him to reconsider his position arguing that fraud is a big deal.  Bove was undeterred and reiterated his buy recommendation stating a second time this was a short-term issue (7:00).

http://www.cnbc.com/id/15840232?video=1470603264&play=1

Then at 6:35 PM ET with the stock at $160.70 ($11 below his aggressive buy recommendation this morning) …

• Bloomberg.com – Goldman Sachs Executives Should Resign, Bove Says
  Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein and finance chief David Viniar should resign over fraud allegations, according to Dick Bove, an analyst at Rochdale Securities. “Will Lloyd Blankfein, CEO, and David Viniar, CFO, maintain their positions in the company? I do not think so,” Bove wrote in a note to clients today. “Someone must ‘fall on their swords’ for the devastating decline in this company’s persona and they may be forced to do so for public relations reasons.”

Comment

Just six months ago Bove stuck his foot in his mouth by offering instant analysis on Wells Fargo by exciting giving a positive instant reaction to their earnings only to change his opinion to a sell for clients six hours later.

As a result of this embarrassment, Bove told Dow Jones newswires:

“I’m not going to do it anymore. I’m going to have to see the numbers before I go on air,” Bove told Dow Jones Newswires Thursday. “It creates an untenable situation.”

Dick, maybe you should expand your self-imposed gag order beyond numbers and not offer an opinion on a SEC complaint until you actually read it, or at least the three paragraph summary.

Here is the flip book that is part of the Goldman Sachs SEC Fraud Charge:

30036962-Abacus-2007-Ac1-Flipbook-20070226

Hat Tip SF

I did three segments with Yahoo on Goldman Sachs.

The first one they posted was me and Professor Bill Black discussing the issue with Aaron Task.