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Goldman's new money machine: warehouses

reuters.com

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Re: Goldman's new money machine: warehouses

#51

Post by lawnchair_larry »

gwright wrote: post #16
hristov wrote: post #5

This is pretty awful, but it seems like one of these problems that could and should be solved by the free market. Somebody should just start a new metals exchange that caters to the needs of its clients rather than trying to squeeze them. There is no reason why America has to do its metals trading in some ancient London exchange.

It wouldn't surprise me to find out that it is next to impossible to create a new metals exchange due to onerous government regulations that effectively keep out new competitors. I don't completely understand what is going on in the original story but it also wouldn't surprise to find out that it is only via the existance of various regulations that this scheme is viable.

Actually Goldman tends to exploit a lack of regulations, and will lobby to get regulations removed in order for them to exploit markets further.

Interestingly, the propaganda used to win public support for these moves is that "big government is bad, and we should let the market decide".

Your opinion of regulations needs to take a 180, in my opinion :)

"The date was November 4, 1999. Senator Byron Dorgan was captured only by the cameras of CSPAN2.

"I want to sound a warning call today about this legislation," he declared, "I think this legislation is just fundamentally terrible."

The legislation was the repeal of the Glass-Steagall Act (alternatively known as Gramm Leach Bliley), which allowed banks to merge with insurance companies and investment houses.

The title of the bill was 'The Financial Modernization Act.' And so if you don't want to modernize, I guess you're considered hopelessly old fashioned."

Ten years later, Dorgan has been vindicated. His warning that banks would become "too big to fail" has proven basically true in the wake of the current financial crisis. He seems eerily prescient for claiming then that Congress would "look back ten years time and say we should not have done this."

http://www.huffingtonpost.com/2009/05/11/glass-steagall-act-...

Even the titles of bills in this country are propaganda. It's frustrating.

People like Christopher Dodd should definitely be in prison. Take a look at his role and support in the article linked above, and then take a look at this:

https://secure.wikimedia.org/wikipedia/en/wiki/Chris_Dodd#Co...

Re: Goldman's new money machine: warehouses

#52

Post by nkassis »

rogk11 wrote: post #22
lawnchair_larry wrote: post #3

Goldman is the great american bubble machine, and it's disgusting. "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression -- and they're about to do it again" http://www.rollingstone.com/politics/news/the-great-american...

It is not just Goldman doing this and not just for metals http://www.simplerna.com/2011/11/who-are-biggest-commodity-t...

Like JP Morgan renting Supertankers to hold their oil: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a...

Re: Goldman's new money machine: warehouses

#53

Post by muhfuhkuh »

fleitz wrote: post #14
potatolicious wrote: post #13

Earlier quoted context omitted.

The type of people that Goldman employs aren't stupid, or ignorant. I've known a few - they are perfectly aware of what the company does, and the moral minefield they are in. To accept employment there requires a conscious relinquishing of moral culpability - i.e., these people have decided that, yes, what the company does is fundamentally wrong, but for whatever reason (money, fame, power, the thrill of the hack, sa…

I'm going to take massive downvotes on this but... You can't preach to people like that, they're fully rational and immune to patriotic emotional dulce et decorum est bullshit. They don't care that their going to hell for their actions because they know hell doesn't exist. The world isn't some retarded star wars black and white fantasy, it's black and black pretending to be white. Stop naming shadows in platos cave a…

"they're fully rational and immune to patriotic emotional dulce et decorum est bullshit."

You give people great intellectual credit in one breath and then decrease their worth vis a vis your bottom line the next. Which is it? Are they smart enough to look through BS or are they cattle for you to replace with a small shell script?

Remember, people voted for Bush for the same reasons you feel they are above: They believed he was a good Christian man that they could share a beer with. His put-upon Southern accent (I mean, really, what born-and-raised New Englander you know has a drawl? Honestly?) won "hearts and minds"

"The world isn't some retarded star wars black and white fantasy, it's black and black pretending to be white"

Yes, and I guess those billions given to the Red Cross were rounding errors on some software somewhere and only robots volunteer at homeless shelters and everyone walks past rape victims on their way to Cabaret. We get it, you're hardcore and you see the world as a gigantic Somalia with money as the single, thin veneer of civilization keeping us from eating each other.

I suppose Lloyd Blankfein is the philosopher-king of this post-apocalyptic wasteland of "black on black" you describe, sitting forlornly on his throne of skulls. I'd laugh if you weren't so goddamn serious about it.

"Google didn't succeed because open source is some miracle of business"

And, yet, Red Hat made $1 Billion last year, gives every stick of code away. So does Wordpress, and Sourcefire. And, before being acquired, so did Xensource and MySQL. Github makes millions from the Git open source SCM.

Re: Goldman's new money machine: warehouses

#54

Post by rayiner »

cletus wrote: post #46
Alex3917 wrote: post #44

Earlier quoted context omitted.

"Investment banks do provide valuable services: market making (providing liquidity in many markets), capital raising, the creation of financial instruments so investors can hedge against certain kinds of risk and so on." I hear this argument a lot. While I think it would be an exaggeration to say that what Wall Street does benefits no one, at the same time it's clear that what Wall Street does is designed primarily t…

> at the same time it's clear that what Wall Street does is designed primarily to benefit themselves. So what? I don't begrudge them making a profit. Capitalism is the engine that propelled us from riding around on horses to putting a man on the Moon in the span of one man's lifetime. But there are builders and extractors [1]. Allowing a farmer to forward-sell his crop so his income is known adds value. It also allow…

> Capitalism is the engine that propelled us from riding around on horses to putting a man on the Moon in the span of one man's lifetime.

Ironic that it was Communism that beat us at every milestone except for the last one, and only due to an accident of history (the death of the leader of the Soviet space program just before a push for a moon mission and the lack of someone to fill his shoes).

Re: Goldman's new money machine: warehouses

#55

Post by darksaga »

I find it curious the article never mentions the real culprit in hogging resources - China. When I was working in the bike industry, over the course of a few years, ALL of our bikes jumped in price considerably. After talking with one the reps from Specialized, they said China has put a huge strain on raw materials like Aluminum, Titanium, and Steel. By doing so, they've pushed the prices up across the board.

The stuff Goldman Sachs is doing pales in comparison to what China has been doing over the past 5-8 years.

Re: Goldman's new money machine: warehouses

#56

Post by gwright »

lawnchair_larry wrote: post #51
gwright wrote: post #16

Earlier quoted context omitted.

It wouldn't surprise me to find out that it is next to impossible to create a new metals exchange due to onerous government regulations that effectively keep out new competitors. I don't completely understand what is going on in the original story but it also wouldn't surprise to find out that it is only via the existance of various regulations that this scheme is viable.

Actually Goldman tends to exploit a lack of regulations, and will lobby to get regulations removed in order for them to exploit markets further. Interestingly, the propaganda used to win public support for these moves is that "big government is bad, and we should let the market decide". Your opinion of regulations needs to take a 180, in my opinion :) "The date was November 4, 1999. Senator Byron Dorgan was captured…

Arguing about 'regulation' with no context or means to evaluate them doesn't get us very far.

Regulations that enhance and encourage fair competition should be supported. Regulations that reduce competition or hinder commerce should not be supported.

There is always concern for negative externalities and this is an area where regulations can have a role.

Re: Goldman's new money machine: warehouses

#57

Post by yummyfajitas »

dhume wrote: post #32
yummyfajitas wrote: post #20

Earlier quoted context omitted.

They recommended to various customers to invest in all sorts of CDOs while at the same time betting against them having internally decided they were going to fail. This is caused by legally mandated chinese walls, designed to give banking customers confidence that the bank is behaving in their best interest. The sales/structuring desk is legally obligated to structure/sell CDO's after agreeing to do so. They are also…

So sales produces a prospectus that suggests this is a bad investment. Then they continue agreeing to package and promote these securities. Were there some information excluded from the prospectus which suggested to the sales force that they were actually a good investment, I might still be able to see them as honest. Otherwise, this sounds like an attempt to apply the Nuremberg defense where remaining in the situati…

So sales produces a prospectus that suggests this is a bad investment.

The prospectus presumably described the security being sold as long on housing. If housing went up, it would have increased in value. Since housing went down, it decreased.

The security did what it was supposed to do. The fact that the people who bought it made an incorrect bet doesn't make the people selling it evil.

Re: Goldman's new money machine: warehouses

#58

Post by Cieplak »

cperciva wrote: post #25
Cieplak wrote: post #7

A similar thing is happening with generic chemotherapy drugs. Profit margins for generics are thin, so few companies manufacture them. When a supply issue arises, distributors stockpile the drug and charge hospitals one or two scales of magnitude of the generic price.

... which is a perfect example of why we need derivatives markets. If hospitals purchased drugs a year in advance of anticipated demand, they would pay a slight premium, but wouldn't be subject to squeezes like this.

You are absolutely correct that futures or call options could ameliorate this issue.

However, I think stockpiling cancer drugs is a market distortion, which might justify government intervention in the form of price ceilings for various generic drugs.

Re: Goldman's new money machine: warehouses

#60

Post by jes »

invalidOrTaken wrote: post #29
rapind wrote: post #17

Earlier quoted context omitted.

So hypothetically if someone wanted to opt-out of this essentially corrupt system completely, how would they go about it? I mean paying taxes in a country with bailouts certainly ties you up into the system. Even without bailouts, living in a country tied to a dollar that's being printed like mad kind of ties you up into it too right? So... how exactly would one go about this? Possible?

It's not trivial, but one way you could opt out would be...opting out. http://www.trulymovingpictures.org/festival-years/2010/movie... Linked is a review of the movie Zero Currency , about a former social worker who stopped using money or barter. Disclaimer: I haven't seen it. A good place to start would be to own your own home, aggressively invest in solar energy, and grow your own food.* All that's pretty expensive…

Even if you own your own home, you typically still have to pay taxes. You may have to earn some income if you don't have money saved up for your taxes, so you'll probably have to pay income taxes as well.

Bottom line, it's difficult to fully opt out. But what you suggest is not a bad start.

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