Greg Smith

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CFAvsMBA's picture

Thoughts on the grandstanding.

ohai's picture

So… he thought that GS is not in it for the money?

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

bchad's picture

He wasn’t saying GS should be losing money.  He’s saying that GS needs to make money “by helping its clients make money.”

I have no way to judge if his accusations about GS are true, but if they are, his logic is sound.

Following one’s conscience is easier when you have a bundle of money in the bank (albeit not GS’s bank) to fall back on.

It isn’t always smart to publicly call out people with multiple millions of dollars at their disposal, however.  It does raise the chance of dying a mysterious quiet death.

You want a quote?  Haven’t I written enough already???

ohai's picture

The problem is that if you’re on the sell side, you can’t make a lot of money by being on your client’s side. Every dollar you make is at the expense of your client. On one hand, this encourages you to take advantage of the “muppets” who don’t have the same knowledge as you. On the other hand, if you traded with GS and they take your money, that’s your own fault. They can’t force you to execute a trade, but you can sue them for inadequate disclosure.

Not all financial institutions are bound by fiduciary duty. If your only purpose is to facilitate markets, you are not morally or legally responsible for your trading counterparty’s losses. 

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

CFAvsMBA's picture

What are the odds that Greg loaded up on put options and released this statement timely before options expire this Friday?

FrankArabia's picture

i disagree that if you’re on the sellside you can’t make a lot of money by being on your clients side…in the long run, i reckon you will make more…

the problem is, the incentive is skewed towards the short term……

its almost always in your interest to do well by your client……….not many companies can do well overtime without serving their clients well ….

itera's picture

ohai wrote:

They can’t force you to execute a trade, but you can sue them for inadequate disclosure.

Not all financial institutions are bound by fiduciary duty. If your only purpose is to facilitate markets, you are not morally or legally responsible for your trading counterparty’s losses. 

inadequate disclosure. like when GS sells you packaged loans and doesn’t tell you that Paulson handpicked the loans to be included in there (aka: the ones most likely to fail) while taking the other side of the trade  : )

Hope. It is the quintessential human delusion, simultaneously the source of your greatest strength, and greatest weakness.

ohai's picture

Well, clearly you can’t *always* give people a bad deal. No one would do business with you if that were the case. However, you can apparently get away with giving people bad deals with somewhat higher frequency than your competitors. Goldman Sachs would not be so profitable if that were not the case.

Also, very often, your counterparties never realize the true cost of the trades. For instance, you might sell a credit derivative at a significant premium to your hedging costs. However, your counterparty might not have the same modeling capability as you, so they will not be able to break down the price to hedgeable components. Since you have superior information, the trade seems like a bad deal for the “muppet” counterparty. However, the counterparty continues to be oblivious or does not care about these implicit costs. This is essentially what Greg describes when he mentions “opaque” structures. 

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

ohai's picture

iteracom wrote:

Inadequate disclosure. like when GS sells you packaged loans and doesn’t tell you that Paulson handpicked the loans to be included in there (aka: the ones most likely to fail) while taking the other side of the trade  : )

Clearly, GS or other banks don’t always provide adequate disclosure. When they do not provide adequate disclosure, they should rightfully pay damages. 

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

bchad's picture

Adam Smith is reported to have said that “Any product where demand for the product must be manufactured along with the product should be treated with extreme suspicion.”. I can’t seem to find the source, though.

You want a quote?  Haven’t I written enough already???

Mobius Strip's picture
jcole21's picture

I respect the dude. 

No quote needed

ohai's picture

Well, contents of the letter aside, I don’t really believe that his conscience was his motivation for writing that piece. It’s hard to believe that it took him 12 years to realize what GS is doing. So, it’s fine to work there for over a decade without complaining about the culture - but once they stop paying you (as reported by WSJ), you throw a fit, quit and contact NYT to write a scathing criticism of your former employer. Even if you agree with the contents of the letter, it seems like this was sour grapes, rather than him suddenly having an enlightened moral moment. 

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

Alucard's picture

ohai wrote:

Well, contents of the letter aside, I don’t really believe that his conscience was his motivation for writing that piece. It’s hard to believe that it took him 12 years to realize what GS is doing. So, it’s fine to work there for over a decade without complaining about the culture - but once they stop paying you (as reported by WSJ), you throw a fit, quit and contact NYT to write a scathing criticism of your former employer. Even if you agree with the contents of the letter, it seems like this was sour grapes, rather than him suddenly having an enlightened moral moment. 

+1

This guy is done, he’ll never work for another bank..

Alucard's picture

ohai wrote:

Well, contents of the letter aside, I don’t really believe that his conscience was his motivation for writing that piece. It’s hard to believe that it took him 12 years to realize what GS is doing. So, it’s fine to work there for over a decade without complaining about the culture - but once they stop paying you (as reported by WSJ), you throw a fit, quit and contact NYT to write a scathing criticism of your former employer. Even if you agree with the contents of the letter, it seems like this was sour grapes, rather than him suddenly having an enlightened moral moment. 

+1

This guy is done, he’ll never work for another bank..

bchad's picture

Alucard wrote:

ohai wrote:

Well, contents of the letter aside,…, it seems like this was sour grapes, rather than him suddenly having an enlightened moral moment. 

+1

This guy is done, he’ll never work for another bank..

Being done and never working for another bank are two separate things.  

He’s not done.  He’s just done working for banks.

You want a quote?  Haven’t I written enough already???

ohai's picture

Actually, I wonder what he was thinking when he wrote that letter. What is he going to do, now that he is a pariah among financial institutions? It doesn’t seem like he has enough money to just want to retire - he’s only in his mid 30s. Does he already have an exit opportunity? 

Also… turns out that I know someone who knows this guy. So, he is “a friend of a friend”. Sigh,

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

LBriscoe's picture

The guy was a VP according to the Blankfein response, which not too high in the food chain.  I can’t imagine he has stay rich money after only 12 years with that title. 

Also, what’s up with his bragging about winning a table tennis tournament in Isreal – what a douche.

Mobius Strip's picture

but when he joined GS in 2000, the moral integrity was high and noble, trustworthy advisors selflessly guided their clients through the perilous stormy seas of investing. when did it all go so wrong? :(

bromion's picture

I have nothing to add to the discussion that hasn’t already been said, except that I support the use of the word muppets. I literally can’t not laugh when I hear someone say that word.

Seriously, who calls someone a muppet? That kills me. I’m laughing just typing this.

Muppets lolololol

Alucard's picture

I think he is done in finance in general, unless he decides to work in BO.

BrownianBridge's picture

I always hear people complaining about GS (and other financial institutions) “taking the other side of a trade.” Aren’t they just insuring against the deal going sour and minimizing their risk in case of adverse outcomes. Why is this so wrong?

The Righteous Hacksaw's picture

What a self-asborbed asshole. This guy is no hero.  Did he want to be famous for the day?  I’ve had friends burn out after 12 years at Goldman Sachs.  It’s hard work and they want to move on.  But airing your dirty laundry is a low class move in my  books.  I also don’t buy this guys “moral conundrum.”   12 years is a very long time to decide what you’re doing is wrong and move on.  If an S.S. guard had worked at 12 years at Buchenwald and then decided it was wrong, should I call him a hero? 12 years is also, more importantly, a long time to be only a “Vice-President,” at the firm (This was his actual rank, ignore the NY Times Executive Director thing).  Clearly he got passed up for promotion and reached the ceiling.  Clearly he was disgruntled.  Here’s how I know.

That second to last paragraph regarding his proudest moments in life is a complete non-sequitur unless if you understand what this letter is really about: the thoughts of a guy with a massive ego, who throws in the towel, and needs to justify this publicly by displaying his mantle of achievements to the world which, I’ll add sadly, all happened a long time ago.   

There is no reason to personalize this letter and talk about himself at length as he does.  Sure, if he wants to make a claim about clients being treated unfairly that is one thing. I’d be very interested in hearing that opinion in minute detail, especially if I were a client, but I don’t really care if he was bronze medalist at the Jewish Olympics or if he was in the training video.  He gives us no juicy details, doesn’t name names, and concedes that he hasn’t seen anything illegal.  Fuck, you’re telling me that you’ve worked at a place for 12 years and never seen anything illegal.  Hmmm.  That’s pretty good for Goldman.  I sure as Hell have at my firm, Greg Smith.

There is a reason Jerry Mcquire gets sacked.  Because the guy is too self absorbed drinking his scientology “Me, Me, Me,” Kool-Aid to understand that other people’s lives and families depend on the work that their firm does.  This guy belongs on a college campus not in the real world.  Fuck You Greg Smith. 

No Homo

newsuper's picture

ChickenTikka wrote:

What a self-asborbed asshole. This guy is no hero.  Did he want to be famous for the day?  I’ve had friends burn out after 12 years at Goldman Sachs.  It’s hard work and they want to move on.  But airing your dirty laundry is a low class move in my  books.  I also don’t buy this guys “moral conundrum.”   12 years is a very long time to decide what you’re doing is wrong and move on.  If an S.S. guard had worked at 12 years at Buchenwald and then decided it was wrong, should I call him a hero? 12 years is also, more importantly, a long time to be only a “Vice-President,” at the firm (This was his actual rank, ignore the NY Times Executive Director thing).  Clearly he got passed up for promotion and reached the ceiling.  Clearly he was disgruntled.  Here’s how I know.

That second to last paragraph regarding his proudest moments in life is a complete non-sequitur unless if you understand what this letter is really about: the thoughts of a guy with a massive ego, who throws in the towel, and needs to justify this publicly by displaying his mantle of achievements to the world which, I’ll add sadly, all happened a long time ago.   

There is no reason to personalize this letter and talk about himself at length as he does.  Sure, if he wants to make a claim about clients being treated unfairly that is one thing. I’d be very interested in hearing that opinion in minute detail, especially if I were a client, but I don’t really care if he was bronze medalist at the Jewish Olympics or if he was in the training video.  He gives us no juicy details, doesn’t name names, and concedes that he hasn’t seen anything illegal.  Fuck, you’re telling me that you’ve worked at a place for 12 years and never seen anything illegal.  Hmmm.  That’s pretty good for Goldman.  I sure as Hell have at my firm, Greg Smith.

There is a reason Jerry Mcquire gets sacked.  Because the guy is too self absorbed drinking his scientology “Me, Me, Me,” Kool-Aid to understand that other people’s lives and families depend on the work that their firm does.  This guy belongs on a college campus not in the real world.  Fuck You Greg Smith. 

Agree with you there Chicken.

This isn’t about GS, it’s about Greg Smirth. Heck I don’t even like GS but I still agree with Chicken.

MCalamari's picture

Until further info comes up, I’m going to give the benefit of the doubt to Greg Smith that he knows what he’s talking about and that he’s trying to highlight particulars about GS and not the investment banking industry.

He’s trying to emphasize that GS has changed during his time there, where they used their smart/superior personel to be better traders/bankers/managers/analysts rather then better at squeezing every bit from their existing clients. In short, beating the competition rather than beating down their own customer base.

I get the impression that he really feels that people recruited into GS are the best, but that they are taking more from their clients than they should compared to other banks due to their reputation. I’m imagining something like a hedge fund that outperforms peers by a little bit, but charges an extra high fee that makes client returns below average (as opposed to splitting the outperformance).

That’s what I THINK he’s trying to say… who knows, he could be an idiot or outright lying, but that’s the interpretation I got. Also note that he’s no Michael Lewis when it comes to writing quality, so his story doesn’t seem as magical as others in the past.

The Righteous Hacksaw's picture

MCalamari,

Listen, nobody is disputing what he says with regard to Goldman and the rest of the financial services industry issue frequently frontrunning their clients or trying to make tons of money off of suckers.  Hell, anyone with any brains understands that this is a rigged casino.  Why do you think that very few people want to own Goldman Sachs stock but just about everyone wants to work there.  It’s a license to steal money just being an employee.  Anyone who is a client of Goldman Sachs is already well aware of this.  They discount it into any decision they make, I’m positive. 

My point is that this stupid letter isn’t about Goldman, but about him. 

I want a vicious take down piece on the specifics of the Vampire Squid.  One that names names. Gives details.  I want a wikileaks treasure trove showing me precisely how Blankfein and Goldman Alums are specifically shoving their razorwired penises into the average citizen of planet earth through complete corporate control of Governments world wide.

This aint it.  This is the public confession of someone who is very taken with himself.  It’s a Type-A personality finance nerd masturbating publicly  and being indulged by the NY Times just because they hate Goldman. 


No Homo

ohai's picture

ChickenTikka, you should be paid to write. Your AF comments are better than 90% of published articles. Well, of course, journalists are paid very little. Maybe that’s why…

“Be aware of this 40 year old men in our country.They suffer from mid life crisis and are always trying to be in the good books of young girls.” -Rahul Roy

FrankArabia's picture

maybe he was doing this to impress a girl…..

LBriscoe's picture

It’s a Type-A personality finance nerd masturbating publicly  and being indulged by the NY Times just because they hate Goldman. 

Well said.

Alucard's picture

FrankArabia wrote:

maybe he was doing this to impress a girl…..

there are less expensive ways to impress a girl. Must have been some extremely HCB @ Goldman.

The Righteous Hacksaw's picture

Thanks.  One of my majors was English (the other one was even more useless).  I got into all this investment bullshit purely by mistake.  All I ever wanted to do was travel around the world chasing various types of strange ass and maybe read some 19th century literature des temps en temps. 

At the time that I embarked on my quest I realized I needed money to fund it.  At the same time as I began my quest, rather serendipitously, Hedge Funds started to invest in strange countries, where I was already chasing strange ass, but needed a white guy from a New England University that they could trust.  Supply met demand and the rest is keynesian history. 

I have very little interest in finance or the clubhouses that make it up.  It is only my love for strange ass and investing money in countries with strange ass that gets me up in the morning.  If I could be paid to write this to you all then I would.  But being a writer would greatly impede my ability to chase strange ass I would have to work very hard just to survive.  So, I found alternative investments which seldomly transact and my performance numbers are subject to smoothing and modeling biases that almost always make them positive.  Maybe we’ll know in 15 to 25 years if I was any good.  Actually, my property in India doubled in value between 2007 and 2009 but that’s just what the people who study the market tell me.  No marking to market in Real Estate.

My proudest moment, you ask?  Two classy babes, no doubt paid for by the broker, in my hotel room in Bali after, unbeknownst to them, I’d already made the investment decision not to invest. As one fellates me while the other performs a sexual act named after a non-fuel efficient vehicle, I stare out the window and onto the moonlit beach and shout, “I am the master of the Universe!”*  Oh, but I digress, these thoughts were intended for my upcoming NY Times Op-Ed. 

*I was not a CFA Candidate at the time of said mastering of the universe

No Homo

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