Two Thirds Done

Thoughts and experiences of an eighty one year old Wild Duck.

Avram Miller by the sea
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587 posts since 2006

Tag: Goldman Sachs

  • The American System of Greed: How the smart and greedy take advantage of the greedy who take advantage of the dumb and greedy

    I have posted several times regarding my negative views of the financial value of Facebook.  As you may know, Goldman Sachs put together a “fund” to invest $500 in Facebook at a valuation of 50 billion.  This structure lets Facebook get around the requirements of going public by having more than 500 investors.  Goldman is well know for having creative ways to get around regulations.  Just look at how they helped Greece hide much of their debt.  But the deal also lets Goldman get even more money then they would get if they just sold stock.  They are getting a 4.5% placement payment, a 4% carried interest (they get 4% of any gain in Facebook stock over the 50  billion dollars) and they get a 1.5% a year management fee.  Now who did they sell the stock to?  To a bunch of greedy people who do not really care what Facebook is worth but think that there are greedy and  stupid people that will buy Facebook at the IPO for 100 billion dollars.  There are probably terms that will allow the Goldman investors to sell into the IPO or soon after or Goldman will find away to lock in their gains (and Goldman 4% carry interest). Then all the people that have Facebook at low valuations will start dumping their stock.  That will not hurt Goldman who will have probably sold Facebook short.  I have seen this movie before.  It will be ugly.

  • Am I still a capitalist at heart or do I just hate government hypocrites

    I don’t know if I am still  a capitalist at heart.  I watched part of the Goldman Sachs hearing and my stomach turned.  Not at what Goldman did but the self serving hypocritical people in our government that are suppose to serve us but mostly severing themselves.  My guess is that Goldman operated legally within the regulations and laws of our country at least with respect to the transactions being discussed. In our system, Corporations have a primary responsibility to their shareholders (and boards have a legal responsibility).  That does not mean that there is not room for ethical considerations.  And most great companies that are built to last believe that being a responsible citizen is part of that.  Wall street does tend to get isolated and decoupled.  The biggest issue on Wall Street is the people are compensated on the short term and take too many risks.  They are also paid way to much. It is not their pay that really matters with respect to the economy but what they are driven to do to get that pay.  But this is where they are one with their brothers in Congress.   Both have control over vast amounts of money.  And both will make decisions that are short term and create great harm to others.  Wall Street has a much higher price however.  I mean a typical senator will sell out is country for a one million dollar campaign contribution.  Wall street wants a lot more.   So now we have the government investigating Wall Street  which conveniently takes away the light from the governments own role in all this.  I would love to see a panel with our government leaders answering questions from smart people from Wall Street.

    Here is a link on the point of view of Warren Buffet with respect to Goldman.