Posts filed under “Really, really bad calls”

The Blundering Herd

>

How’s that for an awesome article title? Its from a Vanity Fair article excerpting Bethany McLean and Joe Nocera’s new book, All the Devils Are Here: The Hidden History of the Financial Crisis

The book is being touted as “The inside story of the collapse of Merrill Lynch — How a “Fantastic Lie” and a new strategy of aggressive risk killed the firm. Check out the intro:

“In the years leading up to the financial crisis of 2008, there was no more infectious disease on Wall Street than Goldman envy. Goldman Sachs, perhaps the most storied name in all of American finance, had gone public only in 1999, the last of the big firms to do so. After the I.P.O., Goldman’s mind-boggling profits were on full display. Starting in 2003, Goldman went on a run the likes of which had rarely been seen in American business. In just three years, its revenues more than doubled, to $38 billion, as its profits skyrocketed. In 2007, C.E.O. Lloyd Blankfein received a bonus of more than $68 million. Even junior traders made millions. Who wouldn’t be jealous of numbers like those? UBS, Citigroup, Credit Suisse, Lehman Brothers, Deutsche Bank—they were all stricken, to varying degrees, with Goldman envy.

No firm, though, had it worse than Merrill Lynch. And once the crisis struck, there was no firm for whom the disease would prove to be more fatal.

It was odd, in a way. To most Americans, pre-crisis, the Merrill Lynch name was far more storied than Goldman’s. Certainly, it was far better known. Merrill was the “Thundering Herd” that was “Bullish on America.” It had offices in every nook and cranny in America, where brokers stood at the ready to sell middle-class Americans the stocks and bonds they needed to put their kids through college and build their retirement nest eggs. To most people, what Goldman did was a complete mystery. What Merrill did was something everyone could see and understand.”

Delicious . . .

>

Source:
The Blundering Herd
Bethany McLean and Joe Nocera
Vanity Fair, November 2010
http://www.vanityfair.com/business/features/2010/11/financial-crisis-excerpt-201011

Category: Bailouts, Corporate Management, Really, really bad calls

Do You Wanna Be Right, or Do You Wanna Make Money?

My inbox is deluged with rants and demands from people who are insisting that This. Rally. Must. End. NOW! A composite of their emails would read something like this: “How can you sit there so blithely while the Fed debases the world’s reserve currency? Why haven’t you commented on POMO?!? The entire game is rigged,…Read More

Category: Apprenticed Investor, Investing, Markets, Psychology, Really, really bad calls, Trading

Fed: We Can Support Asset Prices for the Public Good

Consider the following statement: “Nevertheless, balance sheet policy can still lower longer-term borrowing costs for many households and businesses, and it adds to household wealth by keeping asset prices higher than they otherwise would be.” So said Brian Sack, the head of the New York Fed’s markets group. Marketbeat responded with a post titled: Dear…Read More

Category: Federal Reserve, Really, really bad calls

Aerial Footage: Portrait of a Housing Bust

Fantastic set of aerial photos from Google Images (by way of Boston.com’s Big Picture), showing Florida’s developmental disaster.

The images of half finished (and barely started) developments are strangely beautiful, with a geometric symmetry that belies the state of human misery these developments represent: Lost deposits, bankruptcy, misallocated capital.

That an entire nation can be so innumerate as to believe in a mathematical fallacy is weirdly fascinating . . .

>

Florida Housing Bust

More images after the jump . . .

Read More

Category: Credit, Real Estate, Really, really bad calls

Tea & Crackers with Matt Taibbi

I’ve been meaning to post something this week on Matt Taibbi’s fantastic new piece on the Tea Party (Tea & Crackers) but I just hadn’t gotten around to it. My pal Paul Kedrosky did such a nice job setting it up that I am just going to crib it from him: > Agree or disagree…Read More

Category: Politics, Really, really bad calls

AIG Repaying Uncle Sam? Not By a Long Shot

Today’s AIG announcement has generated some surprisingly naive headlines. The company may have announced U.S. bailout exit plan, but that does not make it so. (Citi’s numbers don’t look any better). Let’s take a closer look at the numbers and separate the facts from fiction: Total Bailout: $182.3 billion dollars Amount Still Owed:  $132.1 billion…Read More

Category: Bailouts, Really, really bad calls

Black Ducks & EMH Origins

Two quick non MSM pieces worth reading this morning: • The Reformed Broker:  Sometimes It’s Just a Black Duck “The trouble with the Recency Effect is that everyone all of a sudden thought they were Nassim Taleb, orinthological experts on the spotting of Black Swans.  Every blip on the screen or blurb in the newspaper…Read More

Category: Contrary Indicators, Psychology, Really, really bad calls

Deregulation, Structural Flaws Caused the Flash Crash

“May 6 was clearly a market failure, and it brought to the fore concerns about our equity market structure.” -Speech by SEC Chairman Mary L. Schapiro > What a surprise! The SEC has acknowledged that the flash crash was a structural issue: As the Securities and Exchange Commission finalizes its report on the May 6…Read More

Category: Bailouts, Quantitative, Really, really bad calls, Regulation, Trading

Hirsch’s WTF Forecast: Dow 38,820

Last week, we noted Robert Prechter’s Dow 2,000 forecast. Today, we are going to the other end of the scale: A wild Dow 38k forecast from the usually sedate Jeff Hirsch of Stock Trader’s Almanac (UPDATE: Full report here) Bloomberg: “The Dow Jones Industrial Average will surge to 38,820 in an eight-year “super boom” beginning…Read More

Category: Really, really bad calls, Trading

Rating Agencies Ignored Proof of Unsafe Loans

As if we need further evidence of the gross and willful malfeasance of Moody’s S&P’s and Fitch: The latest evidence of their criminally irresponsible behavior comes to us via the Financial Crisis Inquiry Commission. This was not, as the narrative has been reconstructed, a case of good loans gone bad. Mere incompetence does not explain…Read More

Category: Bailouts, Credit, Really, really bad calls, Regulation