Crony capitalism is our Vietnam War

Jesse passes on this CNBC tidbit, which explains how ex-Goldman Sachs operatives embedded in the US regulatory systems gave GS $70 billion just when nobody else had cash, so GS could buy up assets at fire sale prices and make monstrous profits at the taxpayers' expense. Truly, it's us against them, but all we can do is wave our placards as their limos cruise by.

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Turkeys Reunited

Goldman Sachs are on the brink of a massive new consultancy contract, it is rumoured. An unnamed source within the organisation hints that ITV may be asked to take over Lloyds Bank and Northern Rock.

"ITV's £105 million operating loss is peanuts," said the trader. "We at GS paid out £1 billion more in bonuses than we got in bailout money last year. The guys at ITV don't think big enough. If they don't wise up fast, they could be in danger of making a profit."

This alleged development lends credence to the long-standing speculation that the American and British governments are secretly planning the creation of a "Super-Turkey", merging all remaining manufacturing, banking and finance into a giant loss-making enterprise that will employ increasing numbers of the population until everybody starves.

Belling the cat

Karl Denninger calls again for the fat cats to "eat their own cooking", i.e. accept responsibility for the ruinous debt that will otherwise put a brake on the American economy for a decade. Good luck with that. Now, who's going to make them do it?

This is a test, not of the economy but of democracy.

Masters of the Universe vs. the Lord's Elect

A bright gleam has caught the helmets of our bankers. Goldman Sachs is set to pay an average £500,000 bonus to its London traders. This modest lagniappe is the equivalent of merely 20 years' median annual remuneration for NHS nurses. It is heartening to see that amid the gloom of an economy wrecked by... well, anyway, I'm sure we all agree that they deserve it. Indeed, more; but we must hope they may reasonably expect further such emoluments in the years to come. Nothing is too good for our money-boys, or for the politicians whom they will accommodate when put out to grass.

On an unrelated note, I've suddenly recalled the episode in Evelyn Waugh's "Decline and Fall" where Paul Pennyfeather meets a madman in prison:

"Well, one day I was just sweeping out the shop before shutting up when the angel of the Lord came in. I didn't know who it was at first. "Just in time," I said. "What can I do for you?" Then I noticed that all about him there was a red flame and a circle of flame over his head, same as I've been telling you. Then he told me how the Lord had numbered His elect and the day of tribulation was at hand. "Kill and spare not," he says."

Fortunately, the nutter's victim is a Modern Churchman, not a vitally important, wealth-creating banker.

Many market "shorts" are due to expire on Friday, I understand. Perhaps the market - a free and unmanipulated market, you may be sure - will change its mood next week.

PS

The S&P 500 closed above 900 points yesterday. "Mish" has said that it could easily fall below 500 points, or stall for years. He is against "buy and hold." So who profits if the poor layman is persuaded to stay in the market?

Regardless of what strategy one uses, it is a horrible idea to hold stocks throughout recessions.

Why Is Bad Advice So Common?

Clearly, stay the course is bad advice. So why is it so common? A personal anecdote might help explain things: In January of this year, an investment advisor from Wachovia Securities called me up and stated "Mish, I am sitting on millions because I see nothing I like". I told the person I did not like much either and that Sitka Pacific was heavily in cash and or hedged. His response was "Well, I do not get paid anything if my clients are sitting in cash".

I called up a rep at Merrill Lynch and he said the same thing, that reps for Merrill Lynch do not get paid if their clients are sitting in cash.

Massive Conflict of Interest

Notice the massive conflict of interest possibilities. Reps for various broker dealers have a vested interest in keeping clients 100% invested 100% of the time, even if they know it is wrong. And so it is every recession, bad advice permeates the airwaves and internet "Stay The Course".

They

Lots of people now muttering darkly. But if we think we know what They are up to, and think we can't thwart Them, there should be some way to exploit the situation. For example, if They are manipulating the price of gold to keep it down for as long as possible, then surely it's a great time to buy it before They run out of possible.

Can't we do better than call vainly for somebody to restore justice to the world? Because that's the one thing that won't happen.

So, any ideas?

For example, what to do about the New World Order coinage unveiled by Medvedev the other day?

If you have a son or daughter, would you advise him/her to join GS and their ilk? Or McKinsey? Or emigrate?

Market support

Denninger:

... a handful of banks, most specifically Goldman Sachs, constitute the majority of NYSE trading volume... This "back and forth trade" between a handful of institutions is nothing more than the old "pump and dump" game that has been played in the OTC market forever - and almost always screws the individual investor.

This is no different than you and I selling a house back and forth between us repeatedly, each time at a higher price. We both appear to be geniuses as we're both making a "profit", right?

Well, no. One of us is destined to take a horrifying loss if we do not find a sucker to make the final transaction with.

I wondered what was keeping it all up. And sooner or later...

P.S. Rob Kirby strongly suspects that similar manipulation is going on in oil and gold - one kept up, the other down. (For an update on the latter, click on the goldcam.)

Goldman Suchs

Read, and hang your head.