Comments on: One Firm That Took Advantage of the Subprime Market http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 20 Nov 2009 19:56:44 -0800 http://wordpress.org/?v=abc hourly 1 By: MetaMommy http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-228947 MetaMommy Thu, 07 Feb 2008 22:16:18 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-228947 Any company with a big enough portfolio is going to take advantage of shorting what they have. It's just another source of income for otherwise inactive equity. And if Goldman was shorting, I'd find it pretty hard to believe the other firms weren't, too. Oh, I can assure you that yes, a lot of people managing "our" money don't know anywhere near what they pretend to. They're just really convincing at playing the role. Any company with a big enough portfolio is going to take advantage of shorting what they have. It’s just another source of income for otherwise inactive equity. And if Goldman was shorting, I’d find it pretty hard to believe the other firms weren’t, too.

Oh, I can assure you that yes, a lot of people managing “our” money don’t know anywhere near what they pretend to. They’re just really convincing at playing the role.

]]> By: Ricardo Bueno http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-192756 Ricardo Bueno Wed, 19 Dec 2007 12:26:12 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-192756 Warren Buffett and his company, Berkshire Hathaway, see this as on opportunity to enter into the Bond insurance business. With an excess of $45 billion in cash in addition to "triple A" credit rating and the company's experience in insuring against risks that nobody else seems to want to take, well...it's Warren Buffett. Warren Buffett and his company, Berkshire Hathaway, see this as on opportunity to enter into the Bond insurance business.

With an excess of $45 billion in cash in addition to “triple A” credit rating and the company’s experience in insuring against risks that nobody else seems to want to take, well…it’s Warren Buffett.

]]> By: » Roundup: My Fiancee and I Are Starting a Rock Band on Blueprint for Financial Prosperity http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-190848 » Roundup: My Fiancee and I Are Starting a Rock Band on Blueprint for Financial Prosperity Sun, 16 Dec 2007 15:51:00 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-190848 [...] JLP shares one good story out of the subprime bust, Goldman Sachs bet against it and pocketed a cool $4b that help offset the other bets. Hedging rocks! [...] [...] JLP shares one good story out of the subprime bust, Goldman Sachs bet against it and pocketed a cool $4b that help offset the other bets. Hedging rocks! [...]

]]> By: Kirk http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-190371 Kirk Sat, 15 Dec 2007 21:20:45 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-190371 This is common practice on Wall Street. There is a debate going on at the SEC about principal trades. These are trades where the brokerage house/investment bank is selling positions on their books to their clients. Many people don't realize that the big brokerages own a portfolio just like you and me. This was a real problem when companies like Worldcom and Enron were tanking. Some firms were disciplined for selling the stock and bonds on their books to unsuspecting clients. So why would it be any different with subprime mortgages. They probably off-loaded their inventory to individual investors. This is common practice on Wall Street. There is a debate going on at the SEC about principal trades. These are trades where the brokerage house/investment bank is selling positions on their books to their clients. Many people don’t realize that the big brokerages own a portfolio just like you and me. This was a real problem when companies like Worldcom and Enron were tanking. Some firms were disciplined for selling the stock and bonds on their books to unsuspecting clients.

So why would it be any different with subprime mortgages. They probably off-loaded their inventory to individual investors.

]]> By: Gayle http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-190334 Gayle Sat, 15 Dec 2007 19:58:45 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-190334 If you as a financially astute consumer can't figure out why on earth you would sign up for one of those wacko mortgages why would you as an investor want to buy something backed up by same? Oh I remember, there's one born every minute. Nuf said. If you as a financially astute consumer can’t figure out why on earth you would sign up for one of those wacko mortgages why would you as an investor want to buy something backed up by same? Oh I remember, there’s one born every minute. Nuf said.

]]> By: shortquestioner http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-190198 shortquestioner Sat, 15 Dec 2007 15:09:22 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-190198 In light of this WSJ Im sure there will be more investigation to the actions of Goldman Sachs. Given the precarious nature of the illiquid markets that these Goldman traders had full knowledge about, this could be a case of market manipulation. If the total size of these markets is examined against the size of the Goldman positions taken, one could determine if their positions pushed or manipulated these illiquid markets. These markets are almost 100% institutional, however, either used by or involved solely with institutional "players", these markets are having a dramatic effect on Mr. and Mrs. Retail. This link will surely drive regulators, statesment, and the average Joe to seriously question if not boycott GS. Goldman may just have "pushed" a bit too far this time. In light of this WSJ Im sure there will be more investigation to the actions of Goldman Sachs. Given the precarious nature of the illiquid markets that these Goldman traders had full knowledge about, this could be a case of market manipulation. If the total size of these markets is examined against the size of the Goldman positions taken, one could determine if their positions pushed or manipulated these illiquid markets.

These markets are almost 100% institutional, however, either used by or involved solely with institutional “players”, these markets are having a dramatic effect on Mr. and Mrs. Retail. This link will surely drive regulators, statesment, and the average Joe to seriously question if not boycott GS.

Goldman may just have “pushed” a bit too far this time.

]]> By: plonkee http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-189802 plonkee Fri, 14 Dec 2007 19:44:43 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-189802 As soon as I started to read this I just assumed it was a hedge position. With big companies, sometimes you don't even have to create a Chinese wall, they already live in silos. As soon as I started to read this I just assumed it was a hedge position. With big companies, sometimes you don’t even have to create a Chinese wall, they already live in silos.

]]> By: JLP http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-189785 JLP Fri, 14 Dec 2007 18:09:54 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-189785 Dave said: <em>"More evidence that lots of financial “experts” and professionals don’t really know as much as they seem to think."</em> That's EXACTLY what I was thinking. Surely some of these firms had to catch on that the mortgage market was headed for disaster. I guess they were so busy making money that they didn't see it coming. Dave said:

“More evidence that lots of financial “experts” and professionals don’t really know as much as they seem to think.”

That’s EXACTLY what I was thinking. Surely some of these firms had to catch on that the mortgage market was headed for disaster. I guess they were so busy making money that they didn’t see it coming.

]]> By: dave http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-189784 dave Fri, 14 Dec 2007 18:03:08 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-189784 Frankly, I'm surprised more banks didn't do this. Even if they didn't think that CDOs would collapse like they did, it makes sense to hedge against potential losses whenever you can. If I had billions of dollars of exposure to *any* type of asset (stocks, bonds, CDO's, currency, oil, timber, whatever), I would certainly be looking for ways to hedge and reduce my potential losses. More evidence that lots of financial "experts" and professionals don't really know as much as they seem to think. It's the ones who make money regardless that are worth watching. Some old saying about a rising tide comes to mind... Frankly, I’m surprised more banks didn’t do this. Even if they didn’t think that CDOs would collapse like they did, it makes sense to hedge against potential losses whenever you can. If I had billions of dollars of exposure to *any* type of asset (stocks, bonds, CDO’s, currency, oil, timber, whatever), I would certainly be looking for ways to hedge and reduce my potential losses.

More evidence that lots of financial “experts” and professionals don’t really know as much as they seem to think. It’s the ones who make money regardless that are worth watching. Some old saying about a rising tide comes to mind…

]]> By: No conflict of interest http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/comment-page-1/#comment-189780 No conflict of interest Fri, 14 Dec 2007 17:50:36 +0000 http://allfinancialmatters.com/2007/12/14/one-firm-that-took-advantage-of-the-subprime-market/#comment-189780 I believe they have a Chinese wall in place so there isn't a conflict of interest as you present it to be. http://en.wikipedia.org/wiki/Chinese_wall#Finance If someone more knowledgeable than I could confirm my suspicion that would be great. I believe they have a Chinese wall in place so there isn’t a conflict of interest as you present it to be.

http://en.wikipedia.org/wiki/Chinese_wall#Finance

If someone more knowledgeable than I could confirm my suspicion that would be great.

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