Can you figure this one out? Why is Obama after Goldman Sachs and exactly what did Goldman Sachs do that was so illegal? As you might expect, I have a few comments that just might shine some light in where there is only "Heat". Most market investors only take "long" positions on stocks. That means they want to own the stock expecting it to go up in value. The problem is that you can either take a "long" position on a stock or a "short" position. Shorting is when you sell a stock that you "don't" own at today's price and contract to buy it back at some future date or to "cover" your "short". This is because you are expecting the stock to go down from today's price. This happens all the time. In the old days before computers and automation it took some time for the public to buy or sell a stock. When we had the 1929 market crash, Joe Kennedy had a brokerage business where he could get "ahead" of the transaction line and buy or sell before the general public could complete their transactions. What old Joe did was to sell "short" as the market was crashing and cover later. As we all know this is how he bank rolled his three boy political careers. Old honest joe. How we seem to forget.
There is an old addage that, "The customer is always right". What Goldman Sachs appeared to do was to honor the wishes of their customers to buy derivitives that yeilded exceptionally high interest rates. This is what customers asked for and this is what Goldman Sachs suppied. The high yields were OK as long as the market held up. This is true of all investments. There was down side risk and anyone who was into drivitives should have know this with or without Goldman Sachs calling their attention to it. During this whole time Goldman Sachs was trading for their own account, which to me was their right. I don't think you feel that a brokerage should have to reveal their private trades do you? Would you want your trades to be a public record. Big guys trade under different names all the time. There are rules that require "inside" traders who have special access to company records and data to report those types of trades and I think that is right. I don't think that is what we had here. If you disagree, say so.
How many of you predicted the realestate crash? I don't think many of you. I did smell a rat when I started hearing people and I mean "small" people using the word "flipping" with respect to buying and selling homes. I knew this was "gaming" the system pure and simple and it could not last. It was different from when Carter was President when we had high inflation. At that time we had high interest rates and this time we had "low". Not only that, but the main inflation was in realestate and the stock market. With the low interest rates, which were federal policy, combined with pressure to let people who could clearly not pay back their loans get 100% not down payment home loans I could see a serious problem building. My problem was I thought that there was someone with a brain behind the "curtain" and there was only a bunch of polititions. To make things were, about this time Country Wide came out with a big promotional program to get people to take inflation equity that they did not really earn out of their homes and blow the money on comsumption. People were living high and beyond their means with money "gamed" from the system. The basic problem was that far too many people did exactly that. Boom, the bubble burst.
A little off the track, but you can see that what Goldman Sachs did was small potatoes compared to what our government did and we did to ourselves out of pure greed by "gaming" the system that was suppose to feed us and our children. Do we have a Humpty Dumpty here? I am not sure. I do know that many younger people feel that the recent past was "normal". I don't. Our general consumption rate should have been at least 15% below what it actually was. That means when we get back to "normal" it will be at least 10% below where we were. We were and are a lot poorer than we may have thought. That is the bottom line.
