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Wednesday, July 29, 2009

Goldman Sachs: The Great Vampire Squid Watch — July 29, 2009

Items of Interest:

Nomi Prins / Mother Jones:
How You Finance Goldman Sachs’ Profits -- As a recent New York Times article (and many other publications in different words) said, "For the most part, the worst of the financial crisis seems to be over." Sure, the crisis may appear to be over because the major banks of Wall Street are speculating well with government subsidies. But that's a dangerous conclusion. It doesn't mean that finance firms could thrive without the artificial, public-funded assistance. And it certainly doesn't mean that consumers are any better off than they were before the crisis emerged. It's just that they didn't get the same generous subsidies.

Michael Lewis / Bloomberg:
Bashing Goldman Sachs Is Simply a Game for Fools -- From the moment I left Yale and started working for Goldman Sachs, I’ve felt uneasy interacting with those who don’t.

It’s not that I think less of Goldman outsiders than I did while I remained among you. It’s just that I feel your envy, and know that nothing I can do or say will ever persuade you that I am no more than human...
Rumor No. 5: Goldman Sachs is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Those words are of course taken from a recent issue of Rolling Stone magazine and they are transparently false.

For starters, the vampire squid doesn’t feed on human flesh. Ergo, no vampire squid would ever wrap itself around the face of humanity, except by accident...
ClusterStock: Michael Lewis: Goldman Sachs Is NOT A Vampire Squid
Ned Potter / ABC News:
Wall Street and the World of Flash Stock Trades -- Goldman Sachs, Others Profit From Info Received Milliseconds Before Public Does . . .

The computers have become traders in just the last few years, say market people. One particularly visible part of what they do is called High Frequency Trading, in which machines, programmed to look for market trends, may buy or sell a stock in milliseconds...

Goldman Sachs is among them, though it said less than 1 percent of its corporate revenue comes from this kind of trading. Companies make money by buying low and selling high, but they may also get fees for executing so many trades so quickly...
Mike Konczal / The Atlantic:
How to Understand High Frequency Trading -- So as the debate unfolds, remember to ask yourself, (1) whose information is being exploited by whom and how, (2) does this make financial markets stronger and more efficient - say by providing liquidity - during a downturn when markets need them the most, and (3) what is this doing to the price mechanism - is it helping prices converge to fundamental values or driving them further away? The evidence currently looks like HFT is doing bad things on all three accounts.

Paul Wilmott / NY Times:
Hurrying Into the Next Panic? -- Thus the problem with the sudden popularity of high-frequency trading is that it may increasingly destabilize the market...

Buying stocks used to be about long-term value, doing your research and finding the company that you thought had good prospects. Maybe it had a product that you liked the look of, or perhaps a solid management team. Increasingly such real value is becoming irrelevant. The contest is now between the machines — and they’re playing games with real businesses and real people.

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia