Einhorn on gold, sovereign risk, and more

Oct 19, 2009 20:30 UTC

Two years ago, when he spoke at the Value Investing Congress, David Einhorn said Lehman was in deep trouble. Turned out it was a good call. Today he gave another keynote at the conference in which he argued the policies of the administration have put us on a very dangerous path, one which has encouraged him to buy physical gold as insurance against sovereign default(s).

Here’s a pdf of the speech. A few highlights below.

On Bernanke and Geithner:

Presently, Ben Bernanke and Tim Geithner have become the quintessential short-term decision makers. They explicitly “do whatever it takes” to “solve one problem at a time” and deal with the unintended consequences later. It is too soon for history to evaluate their work, because there hasn’t been time for the unintended consequences of the “do whatever it takes” decision-making to materialize.

On too big to fail and the true lesson of Lehman:

The proper way to deal with too-big-to-fail, or too inter-connected to fail, is to make sure that  no institution is too big or inter-connected to fail. The test ought to be that no institution should ever be of individual importance such that if we were faced with its demise the government would be forced to intervene. The real solution is to break up anything that fails that test.

The lesson of Lehman should not be that the government should have prevented its failure. The lesson of Lehman should be that Lehman should not have existed at a scale that allowed it to jeopardize the financial system. And the same logic applies to AIG, Fannie, Freddie, Bear Stearns, Citigroup and a couple dozen others.

The administration talks tough about TBTF, but has made very clear they aren’t willing to make policy choices to do anything to proactively break them up. It was very telling when, in a keynote at the Economist’s Buttonwood Gathering, Larry Summers said too-big-to-fail means too-big-not-to-be-regulated. The correct thing to have said, the correct policy that needs to be worked out so that we avoid a re-run of last year’s crisis is “too big to fail is too big to exist.” But don’t take my word for it, take Alan Greenspan’s.

On CDS (bold mine):

I think that trying to make safer CDS is like trying to make safer asbestos. How many real businesses have to fail before policy makers decide to simply ban them?

On arguments that the lesson of 1937-8 is not to withdraw stimulus too soon:

An alternative lesson from the double dip the economy took in 1938 is that the GDP created by massive fiscal stimulus is artificial. So whenever it is eventually removed, there will be significant economic fall out. Our choice may be either to maintain large annual deficits until our creditors refuse to finance them or tolerate another leg down in our economy by accepting some measure of fiscal discipline.

Channeling Stephen “There-is-no-exit” Roach:

As we sit here today, the Federal Reserve is propping up the bond market, buying long-dated assets with printed money. It cannot turn around and sell what it has just bought.

There is a basic rule of liquidity. It isn’t the same for everyone. If you own 10,000 shares of Greenlight Re, you have a liquid investment. However, if I own 5 million shares it is not liquid to me, because of both the size of the position and the signal my selling would send to the market. For this reason, the Fed cannot sell its Treasuries or Agencies without destroying the market. This means that it will be challenged to shrink the monetary base if inflation actually turns up….

….The Fed could reach the point where it perceives doing whatever it takes requires it to become the buyer of Treasuries of first and last resort.

On his gold thesis:

I have seen many people debate whether gold is a bet on inflation or deflation. As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Gold did very well during the Great Depression when FDR debased the currency. It did well again in the money printing 1970s, but collapsed in response to Paul Volcker’s austerity. It ultimately made a bottom around 2001 when the excitement about our future budget surpluses peaked….

….When I watch Chairman Bernanke, Secretary Geithner and Mr. Summers on TV, read speeches written by the Fed Governors, observe the “stimulus” black hole, and think about our short-termism and lack of fiscal discipline and political will, my instinct is to want to short the dollar. But then I look at the other major currencies. The Euro, the Yen, and the British Pound might be worse. So, I conclude that picking one these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield.

He’s also buying long-dated options on interest rates using derivatives:

Along these same lines, we have bought long-dated options on much higher U.S. and Japanese interest rates. The options in Japan are particularly cheap because the historical volatility is so low. I prefer options to simply shorting government bonds, because there remains a possibility of a further government bond rally in response to the economy rolling over again. With options, I can clearly limit how much I am willing to lose, while creating a lot of leverage to a possible rate spiral.

There’s much more in the speech.


It is extremely easy to speak from hindsight, I can also say that E=MC2 is actually simply to derive!

Lunchtime Links 10-19

Oct 19, 2009 14:38 UTC

Stopping by the Value Investor Congress today….still getting over the Bears’ ATROCIOUS loss last night….

MUST READ: How Moody’s sold its ratings — and sold out investors (McClatchy) Great stuff from Kevin Hall.

Sorry, no jobs. This is California (Reuters) 12.2% unemployment rate in the Golden State.

With privilege comes…? (PIMCO) Downward pressure on the dollar to continue, but will it be a rout?

FDIC failed to limit commercial real estate loans (Bloomberg) Regulators had plenty of power to corral the bubble. They just didn’t use it.

Goldman, can you spare a dime (Frank Rich) Obama is modeling himself on the wrong Roosevelt. We need Teddy, not Franklin…

Everything you know about China is wrong (Newsweek) I think economic power is shifting from West to East. But it’s going to be a very bumpy ride. China’s got LOTS of its own problems. And the author doesn’t even mention they may be inflating a dangerous credit bubble…

Man tries to euthanize dog, dog’s owner tries to euthanize man (postandcourier.com)

Human jumbo-tron…


Rolfe, a military weather satellite was launched from Vandenberg, we observed a pulsing green halogen like object at 8.55pm on Sunday moving from 45 degrees looking south above the Southern Cross Pointer Alpha Centauri and horison which also had a little pulsing dot in the middle and ended up in Scorpio’s head, traveling northwest. Apparently the rockets fell away over Europe, but what we were seeing was actually ‘rocket exercises’. Quite a few of my friends also saw it in different locations, so it could not have been Hindu sky rockets. I looked at the trajectory on my portable globe of the Earth and the ‘exercises’ part sounds like BS. Maybe NASA has an answer or Felix can research it for us ?

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Lunchtime Links 10-17

Oct 17, 2009 18:54 UTC

Quote of the day. Terry Teachout, the WSJ’s theater critic, commenting on John Stamos’ performance in the Broadway revival of Bye Bye Birdie: “Mr. Stamos couldn’t carry a tune in a bucket with the lid welded on.”

Harrods moves into flourishing gold market (Reuters) At 14% over spot, you’re probably better off working with a reputable dealer.

Credit Suisse still ♥ gold (Alphaville) Paul Murphy with a really helpful summary laying out the bull case for gold. Be sure to read the caveat at the end.

Housing market getting worse Warren says (Tech Ticker) Part 2 of Aaron’s 3-part interview with Warren. BTW, Robert Shiller — creator of the Case-Shiller index — was on a panel with Warren at the Buttonwood conference. He repeated his forecast that recent stability seen in house prices isn’t going to last. He sees the trajectory turning back down.

Six charged in vast insider trading ring (WSJ) The first time a wiretap was used in an insider-trading investigation. Prosectors say they’ll use wiretaps more often to fight financial crimes on Wall St.

FHA (and Quicken) dutifully following subprime playbook (Adam Sharp) No income verification, no appraisal, low down payments, and a teaser rate!

Ezra Klein on the balloon boy hoax (WaPo) “Whether or not the drama was staged, it certainly served as a perfect metaphor for cable news: America spent hours riveted by a powerful and gripping story that turned out to be totally meaningless, and will have no significant impact on anybody’s lives going forward.” I linked to the story too…not proud of that…

The Collider, The Particle, and a theory about fate (NYT) “A pair of otherwise distinguished physicists have suggested that the hypothesized Higgs boson, which physicists hope to produce with the collider, might be so abhorrent to nature that its creation would ripple backward through time and stop the collider before it could make one, like a time traveler who goes back in time to kill his grandfather.”

VIDEO: Baby in stroller run over by train survives unhurt (Youtube)

For hippies (and A & C fans)….


Professor W. Pauli, (Nobel laureate) had many years of conversations with Dr. Carl Jung, and
their conclusions relate to the idea that “acausal connections” exist in the space-time continuum.
Jung called these connections a “synchronicity principle.”
The letters between them were published under title, “atom and archetype” 1932-1958….
My blog shown offers an example, with appropriate comments from senior researchers at
Princeton University, School of Applied Science….

Bank failure Friday, Bair on TBTF at Buttonwood

Oct 17, 2009 10:59 UTC

At Buttonwood, Sheila Bair noted that the DIF’s balance, its net worth, is now negative. They have $20 billion+ of cash on hand, but much is accounted for by the fund’s contingent loss reserve, which is to say the money is spoken for based on failures already in the pipeline.

The plan to accelerate assessments on banks is an accounting gimmick that protects their earnings and capital. That said, it’s good news FDIC will be raising more cash, $45 billion is the estimate.

Remember, because of this accounting treatment, the DIF will have more cash, but its balance will continue to be negative for some time. The $45 billion will be accounted for, not as capital, but as deferred revenue, which is the gimmick to protect bank capital.

Important: expect LOTS of sloppy reporting on this point. Most news articles in future will tell you the DIF is negative without noting that cash is on the balance sheet.


  • Failed bank: San Joaquin Bank, Bakersfield CA
  • Acquiring bank: Citizens Business Bank, Ontario CA
  • Vitals: as of Sept 29, assets of $779 million, deposits of $631 million
  • DIF damage: $103 million

At the conference, I asked Sheila Bair would she support policies to proactively shrink too-big-to-fail banks?

“No. I don’t know how we would do that.”

She said, for instance, she didn’t think anything like a $500 billion cap on assets would be workable. She said we need to articulate that government won’t be there next time so that the market imposes discipline on banks. Hence, her emphasis on the need for broad resolution authority to resolve the biggest financial institutions.

Another specific policy proposal: limit the claims of secured creditors so that they face losses of up to 20% when a bank fails. Presumably, if they were on the hook for losses, it would be harder for banks to raise debt without having a substantial equity cushion and without acting prudently on the asset side of the balance sheet.

She also repeated her suggestion that there be an insurance fund for the biggest banks, statutorily prohibited from bailing out shareholders. That’s an important last point. The risk of creating a new insurance fund for TBTF banks is that it would REDUCE market discipline, that, done wrong, government would effectively be codifying the implicit guarantee that TBTF banks currently enjoy.

So long as a fund stands behind them, depositors and lenders may not demand the most robust risk management. That’s my concern with proposals to designate certain big banks as systemically important. It might just send a signal to markets that these banks are backstopped, so funding would flow to them at below-market rates, allowing them to grow even larger relative to banks not so-designated.

Why did Fan and Fred attract so much capital? The implicit guarantee…

Another proposal: limiting the amount of short-term secured funding banks are allowed to have. That’s why investment banks were dropping like flies over weekends, because much of their funding was short-term. Their lenders could walk away on short-notice. Basically, they were being hit by the up-market equivalent of a bank run.

Asked if we should reinstitute/update Glass Steagall, Bair said no, that’s probably not possible, but she did say insured deposits are being used in risky ways she doesn’t like. She singled out “prop trading.”



jjw…agreed. In fact, that’s one of Bair’s arguments.

But because it would be hard to break them up we shouldn’t even try? We’re supposed to live with state-backed banks which engage in highly risky activities?

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Can Blog or Micro Blog be a way of communications rather than for showmanship?

Roach and Soros at Buttonwood

Oct 16, 2009 05:08 UTC

Hopped over to the Economist’s Buttonwood conference this evening, where George Soros and Stephen Roach were on a panel. I will be tweeting as much of tomorrow’s conference as I can, including Sheila Bair’s talk in the morning and Larry Summers’ talk at lunch.

My Twitter handle is #OptARM.

Here are some highlights from tonight’s session:

First Stephen Roach, formerly Morgan Stanley’s chief economist in the United States, now the Chairman of Morgan Stanley Asia. A well known bear, Roach had more than a few interesting things to say, only the last few was I able to jot down.

  • With regard to monetary stimulus: “There is no exit strategy.” And later he noted that “we’re stuck” in a process of “bubbles perpetuating bubbles.” What we need is a Fed that “actively prevents asset bubbles,” rather than one that reacts by blowing bigger ones when the previous ones pop.
  • Asked by Michael Panzner of Financial Armageddon who was also at the conference whether Wall Street had captured Washington, Roach demurred. He did note, in reference to Matt Taibbi’s Goldman piece in Rolling Stone, that “we’re not blood-sucking squids.”
  • Asked for a prediction, Roach said he worries that mid-term elections next year could bring pressure for a bi-lateral trade war with China. Unemployment will still be high and there will be populist pressure to get tough on our trading partners.

George Soros also had interesting thoughts.

  • Asked if the dollar will lose its reserve currency status, he paraphrased Winston Churchill noting that “the dollar is the worst currency except for all the alternatives.”
  • He added, ominously: “There is a general flight from currencies.”
  • Speaking about IMF Special Drawing Rights acting as an alternative reserve currency he said “The SDR has a lot to defend it, and the Renminbi should be part of it.” I plan to expand on this subject in a future column. Stay tuned.
  • In response to Panzner’s question (see above), Soros simply said “yes.”
  • Lastly he emphasized that it was foolish to believe global capital markets could regulate themselves. Global regulation is a challenge but is needed.

More tomorrow on Twitter (assuming I can get reception for my iPhone!)


Maybe you can try to concentrate on the conference rather than your twittering. Honestly if these continue, I really can’t differentiate between a twit and a spam. Both are 4 letter words to me.

Balloon Boy was a hoax!

Oct 16, 2009 04:29 UTC

HT to Felix and Business Insider for this one, which I’m sure EVERYONE will be linking to tomorrow. Sounds like the boy was instructed to hide. I think Mommy and Daddy wanted a PR stunt for a book deal or a reality show.

What do others think?


I pity the kids especially Falcon. Don’t their parents have better things to do than to create such a crazy hoax that inconvenience and worried so many of us? They should be ashamed of themselves.

Meredith Whitney asks the tough questions

Oct 15, 2009 21:37 UTC

—-Not to beat a dead-horse here, but I thought I’d blog one last interesting thing on Goldman. This from today’s conference call. (Transcript via Thomson Street Events, no link)—-

Guarantees for certain liabilities aren’t the only way Goldman has benefited from government largesse. They’ve also made money handling trading volume that is driven by the Fed…

Meredith Whitney, Analyst: I have a few questions. The government purchase program was supposed to end this quarter. They’ve extended it to next quarter. How much of that us a driver of velocity of flows? And how are you positioned when they exit, if they exit, for any type of principal risk? And what do you think that impact is going to be in the larger market? That is my first question. Start off with an easy one.

Is MW on to something here? Perhaps: Note the non-answer answer.

David Viniar – Goldman Sachs Group, Inc. – EVP, CFO: Not a problem. Look, I think, as you know and I think the Fed knows this, exiting their support of various markets is a very tricky thing. I think that they are going to do it carefully. They are going to do it slowly and over time. I think they are signaling the market. I think they are doing a very good job of letting people know they are going to continue for a while, but they aren’t not going to continue forever. As far as our positioning, I don’t think it really matters at all. As you know, as I said, most of what has happened has been the velocity, not the positioning. And I think that they are going to slowly extricate themselves for that as the markets get healthier and can pick up slack.

MW: Okay, but in terms of the flow volume, right — so you have been the greatest beneficiary of increased flow volumes. How are the flow volumes going to be influenced as they exit?

DV: I think that they will try to time their exits for the market being healthy enough to pick up that flow. And so I think the flow will continue.

Another non-answer. But MW persists…

MW: And then who would you imagine would be the substitute buyers?

DV: The various market participants. I think it will be the various financial institutions, funds. I think the whole variety of buyers. And there is a lot of cash out there to buy.

MW: Okay. And then just a last one. I was teasing when I said it’s the easiest one. But it was easy for you. The last one, of the principal revenues, almost $1 billion, how much of that was cash sales, and how much were markups?

DV: Oh, I would say that it was much more markups than sales…I don’t have the exact number, but it would be much more markups than sales.


Who’s on first?

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Letting Goldman roll the dice

Oct 15, 2009 19:42 UTC

On this morning’s conference call, David Viniar, Goldman Sachs’ chief financial officer, emphasized the bank’s valuable social role. His bank made markets and provided credit when other financial players were suffering.

But is Goldman really such an indispensible financial intermediary? One look at the firm’s revenue breakdown shows that it’s more casino than anything else, and some of the markets it makes still put the economy in danger.

With markets recovering and competitors falling away, Goldman’s trading and principal investment revenue through the first nine months of the year was nearly $24 billion, on pace to break the $30 billion record set in 2007.

(Click chart to enlarge in new window)


Goldman, in other words, generates most of its revenue trading its own money and earning vigorish on customer transactions. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business thrown in for good measure.

With that in mind, one is left to wonder whether Goldman was really worth saving last year. What have taxpayers received for $50 billion worth of cash and guarantees, for giving Goldman access to the Federal Reserve as its lender of last resort?

Saving Goldman was largely about saving the derivatives market, which is so big and unstable that the death of one counterparty could mean the death of all. With big commercial banks like JPMorgan Chase in deep, saving the derivatives business was as much about protecting depositors and maintaining the integrity of the payment system as it was derivatives themselves.

Many of us didn’t like it — we thought banks like Goldman should have been recapitalized the right way, by wiping out shareholders and forcing subordinated creditors to eat their share of losses. But that ship has sailed. We socialized the risk while privatizing the profit because we were told we had no other choice: The government had to guarantee the biggest banks’ liabilities because they were too unstable to survive bankruptcy or FDIC receivership.

If that’s true, why haven’t we seen any substantial reforms to reduce systemic risk? Congress is kicking around new resolution authority to help resolve failed systemically-important banks. But the goal should be reducing systemic risk to begin with. Yet serious reform of the derivatives market — something that would reduce its size significantly — is nowhere on the radar.

Indeed, Goldman’s trading results suggest that market is coming back with a vengeance. It’s playing in very risky markets with a capital structure that remains vulnerable yet is guaranteed by taxpayers.

To Goldman’s credit, they’ve rebuilt their capital levels faster than anyone. Their leverage ratio has fallen from 35 to 16 in less than two years, despite pressure from equity analysts to juice returns by deploying “excess capital”.

But at $50 billion, the bank’s mark-to-myth, or level 3, assets remain as high as its tangible common equity, the cushion it has to absorb losses. And Lehman proved that conventional definitions of capital aren’t worth much when push comes to shove. On Sept. 1, 2008 the bank was “well-capitalized” according to regulatory measures, two weeks later it declared bankruptcy and was showing negative net worth in the tens of billions.

Derivatives have lead to systemic crises every 10 years or so — portfolio insurance in 1987, Long-Term Capital Management in 1998, the global financial crisis a year ago — yet cosmetic changes are all that is ever offered. The frequency and violence of such events prove that more is necessary to rein in these markets.

Wall Street and its protectors at the Fed and Treasury tell us the bailout was necessary to protect the financial system, to protect Main Street. That may be. But Main Street still owns much of the risk while Wall Street gets all of the profit.

Even as Goldman reported results that reflected in part the resurgence in derivatives, the House Financial Services Committee passed legislation that would increase derivatives regulation. But the bill is riddled with loopholes that Wall Street can easily exploit. A much tougher line is necessary.


The truth is out there but the only place you will find out about it is from Mike Stathis. He has been banned by the media despite his world-leading expertise.


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Afternoon Links 10-15

Oct 15, 2009 19:38 UTC

6-year-old Colorado boy is floating away in balloon (thedenverchannel) He’s still up there as of this writing, 7500-8500 feet up, in a homemade hot-air balloon filled with helium. Authorities say he could stay aloft for 12 hours.  Update: Balloon lands, no boy.

The Ares Projects (slideshare.net) Check out slide 6. The new Ares V rocket will be 2x the size of the shuttle.

VIDEO: The Long Johns are back! (FT, ht Alphaville) Hilarious. A good excuse to revisit this video they did on subprime.

Citi’s hocus-pocus (Reuters) My colleague Matt Goldstein notes that Citigroup managed to report positive net income, but negative earnings per share. Huh?

Cordon Blues (Freakonomics) London’s congestion toll has benefited the city AND drivers. It’s a shame Mayor Bloomberg wasn’t able to get one passed here in NYC.

Notice of formal apology (imgur)

Why you should never, ever, ever speak to the police without a lawyer present (BoingBoing) 45 minutes of video that could save you 5-10 years some day…

9-year old scores amazing goal (Yahoo Sports) I’d be impressed if Wayne Gretzky pulled this off…

Hardest pitch to hit in baseball…

ERRATUM: Goldman’s comp

Oct 15, 2009 16:18 UTC

(Update: An earlier version of this chart labeled the Y-axis “dollars in billions,” which is of course inaccurate. Apologies to folks at Goldman for implying that this year’s bonuses would make them quadrillionaires.)

Will have a column on Goldman’s earnings later in the day. In the meantime, thought I’d share a chart I whipped up this morning:

(click chart to enlarge in new window)


Privatized profits in a world of socialized risk. Gotta love The New American Capitalism!


The Federal Government was stupid, they gave AIG the money to pay off the swaps. What they should have done is take over the assets, paid off the US ones with a program like TARP, and told the offshore govts that they would have to do the same for their countries. Far too much money went offshore.

As far as repayment, we can’t double-dip. Either AIG owes it and the banks are off the hook or the banks owe it and AIG is off the hook. Someone needs to make a decision and leave it at that.

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Deflation data point of the day

Oct 14, 2009 20:22 UTC

From AP: Colorado minimum wage to drop as living costs fall

Colorado will become the first state to reduce its minimum wage because of a falling cost of living.

The state Department of Labor and Employment ordered the wage down to $7.24 from $7.28. That’s lower than the federal minimum wage of $7.25, so most minimum wage workers would lose only 3 cents an hour.

Colorado is one of 10 states where the minimum wage is tied to inflation. The indexing is thought to protect low-wage workers from having flat wages as the cost of living goes up.

But because Colorado’s provision allows wage declines, the minimum wage will drop because of a falling consumer price index. It will be the first decrease in any state since the federal minimum wage law was passed in 1938.

It’s a small decline, so I don’t imagine this will have much of an impact on employment in the Rocky Mountain state. Nevertheless, falling prices can be very stimulative. And if they fall far enough, folks stop needing to go into debt to buy things. They can actually use cash(!)

Here’s a post from CR tonight regarding the euphoria in certain beaten down housing markets, Vegas and Southern Cal in particular. Note that a large number of transactions are financed with cash. Savings!

There’s a lot of economic virtue here. Falling prices clear markets. More transactions are happening and that means more folks are employed.

It may be the case that demand is artificially supported by the first time buyer tax credit, but I’m guessing low prices are a more important factor.


Are you sure that the cash in this instance is really savings? I’m wondering if a lot of these houses aren’t being bought by large investor groups (with all cash) who are financed by the big banks who are in turn taking advantage of government guaranteed loans. It just seems fishy to me that the market would be going so nutso with all these cash buyers all of the sudden.

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Lunchtime Links 10-14

Oct 14, 2009 18:09 UTC

JP Morgan blows out results (Bloomberg) It’s good to be TBTF!

WSJ artist ripped off! (Hedcuts) You know those neat little illustrations that WSJ runs in the paper? Turns out an artist is ripping them off. “…MY DRAWING was given as a gift to Vaclav Havel who then re-gifted it for president Obama?! And it’s now hanging in the White House?! You can bet your knickers I will do my damndest to let the President know he was scammed by the Spaniards and the Czechs! ;-)))”

$9200 per square foot for Hong Kong apt (AP) Must be nice digs.

Wall Street smarts (NYT)

10,000 apply for 90 jobs (courier-journal.com) Building washing machines, pays $27,000, with benefits.

Dow crosses 10,000 (Bloomberg)

The rumours of the dollar’s death are much exaggerated (Martin Wolf) An opinion worth considering, though I think the arguments are weak. The dollar isn’t safe because of fundamentals, but because there isn’t any alternative? And Wolf’s analysis again turns on the output gap, that as long as there are excess resources in the economy, that stimulus won’t be inflationary. That can’t work perpetually.

Ireland’s slow motion financial crisis (fistfullofeuros)

It’s good to be in finance

Oct 14, 2009 02:44 UTC

From WSJ: Wall Street on track to award record pay

Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year — a record high that shows compensation is rebounding despite regulatory scrutiny of Wall Street’s pay culture.

Workers at 23 top investment banks, hedge funds, asset managers and stock and commodities exchanges can expect to earn even more than they did in 2007, according to an analysis of securities filings for the first half of 2009 and revenue estimates through year end by The Wall Street Journal. Total compensation and benefits at the publicly traded firms analyzed by the Journal are on track to increase 20% from last year.

These companies paid $130 billion in compensation and benefits in 2007, at the stock market’s peak. That fell to $117 billion last year.

Using company filings for the first half and revenue estimates for the second half, WSJ estimates projected compensation per employee at top Wall Street investment firms. Here is a link to the raw data, below a list of the top 10.

NOTE: This includes only public companies

  • Blackstone: $4.04 million per employee
  • Och-Ziff: $878k
  • Goldman Sachs: $743k
  • Jeffries: $514k
  • Lazard: $473k
  • BlackRock: $318k
  • Legg Mason: $291k
  • Eaton Vance: $280k
  • IntercontinentalExchange: $279k
  • Morgan Stanley: $263k

Afternoon Links 10-13

Oct 13, 2009 20:56 UTC

The Pension Crisis (WaPo) “After losing about $1 trillion in the markets, state and local governments are facing a devil’s choice: Either slash retirement benefits or pursue high-return investments that come with high risk.” If history is any guide, they’ll reach for yield and the consequences will not be good.

Can your pet save you on your taxes? (ABC)

CIT closer to bankruptcy (Reuters) Also, CEO Peek is resigning at year-end.

U.S. wants AIG retention pay cut (WSJ)

Vacuum cleaner icon Dyson brings sex appeal to desktop fans (Reuters)

Kohn says rates will stay low for an “extended period” (Bloomberg) I wonder: The housing bubble was a direct result of a policy of too low rates for an extended period. Do supporters of current Fed policy think things will happen differently this time? If so, why?

“New” Michael Jackson single a “mistake” (Reuters) An obscure Puerto Rican singer just won the lottery…

How much gold does the U.S. have in reserve? (Jesse)

Driver splashes kids (YouTube)  Now faces “prosecution for inconsiderate driving.” (BBC)




Kohn says rates will stay low for an “extended period”
Low interest rates are one thing the Keynesian economists splooge their pants over.
But as pensions funds, insurance companies, and old people lose cash flow from bonds, I wonder if one of those economists will calculate the de-multiplier effect of all that interest not being paid – as well as the loss of wealth as principal is liquidated.

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