The Back Alley Archives

in all seriousness and i'm having lots of fun here...but you should know that the same sources you label as lies and untruths are the same sources that are the street convention on information and knowledge...this information moves markets...these reports are the street standard in terms of multi-billion dollar decisions that are made (or not made)...these falsehoods as you've put it are read by EVERYONE in the industry...i respect your choices to discount these sources as truthful because they do not align with your views...i get that...i get that because i know you are the contrarian and i respect the going against the grain mentality...we've talked about how much i respect that many times in the past...i'm just very, leery of citing the rolling stone as my source of wall street happenstances...the blogs and the editorials and all the rest are paid to be contrarian...they HAVE to be contrarian in order to survive...their target audience are not market participants...their target are OTHER contrarians.

again - rock on and i love the steadfast and consistency...LOVE IT...just want you to know that no one in the market cites blogs, editorials, and/or music mags.

I get what you're sayin. And if I was high enough up the food chain to get decent scraps off the plate of folks like Goldman I wouldn't be so contrarian...I'd be establishment like you if I was sitting pretty knowing I'm close enough to Goldman's (and the other big boys who run the world) dinner plate to be certain I'll always be fat and happy off their scraps.

Peons like me have to fight tooth and nail because there are a couple billion competitors out there who are fighting over the slim pickings left after the establishment eats the meal of the productive economy. You're high enough up the food chain to get handed a decent amount of the actual meal while it's being passed around the table. Peons like me are left picking it out of the garbage.

B-I-N-G-O


btw - you're gonna laugh at these stories...i might've already told it but here goes:

- during a lull in the job hunt on 'the street' and going on the suggestion of a family member, i started looking at other opportunities outside my industry that i might be able to utilize my sales experience...pharmaceutical sales, ad sales, etc...got an invited interview with a pharmaceutical and when i'd told them i had worked on wall street for almost 20 years, the look on their faces was such that they wanted to clean themselves real quick after realizing that they'd shook my hand...kinda thought that all wall street guys were sleazy, scummy, cheaters, and fakes....lmao....meh - the interview was more accommodational if anything so there weren't any expectations...kinda funny

- lastly, i was asked to speak at the high school for career day...they had tables set up so parents/relatives/friends could organize themselves to speak to students and better explain what it is they do...there were firemen, policemen, guy from home depot wearing his orange apron, an architect, a newspaper reporter, etc...i was the lone wall street guy and my table was BARREN...no one cared and no one stopped by...i lie actually...my daughter's friends stopped by to say hi...that's it...lmao...teachers thought i was more of a scumbag and hated that they lost their 401k money...the janitor guy came by and asked me for a tip on a stock...that was funny as fuck

LOL those are hilarious...I don't hold it against you because I know you're one of the good guys just doing everything you can to provide the best life possible for your family. I know you have ethics. But the system doesn't, so I can't trust it.

LMAO I'm cracking up about the janitor...so fucking funny.

rad, I'm curious....is Goldman's corruption and capture of the government old news to you?

If so, then I can understand you not wanting to waste time reading a Rolling Stone article about it...

look - there's so much regulation in our industry...so many safeguards in place...some are industry mandated, some are self-mandated...every company has compliance departments and they are very visible and very much a part of business...in fact, this is the fastest growing subsector of the industry which to me, is a problem in itself...companies in the business of making money should be trying to make money...if anything, the components of the money-making company that SHOULD be growing are the units responsible for making money...what a novel idea...compliance is a much needed business though and rather than embrace compliance people, they're often looked at like pains-in-the-asses...which is funny because they're paid to keep you out of jail....lol...point is, making money has now become almost subordinate to corporate governance...the new rules and regulations almost DETER companies from making money...the 'fairness' policies now in place have changed the face of business forever...and i'm not talking about raping anyone of their pension funds and i'm not talking about stone face lying and misrepresentation of anything...that's not the gripe...the gripe has everything to do with the red tape, the admin stuff, the paper and pencil pushing that needs to be done as a result of a newfound focus on corporate governance.

that all said - a company like goldman (considered for a long time to be the ny yankees of wall street) employ the most brightest, the most innovative, the most forward thinking people coming out of the nations best business schools...these people will find ways to circumvent any type of policy that deters business from being conducted...it is not news to me or any other industry person that goldman or merrill or BofA or whoever have devised new instruments, new ways of valuation, new structures or new practices in an effort to be one or two or nine steps ahead of regulation.


like i did for a1, i will promise to read the rolling stone article just because it is you who has brought it up...truths or untruths, it's not the point...i will try and read it as a person sitting on his couch looking to pass time by and get a lil knowledge and i will also try and read it as an industry person with some understanding of the content on a personal basis....at the end of it all, the industry bands together when the industry is under seige...the industry participants obviously ALL have skin in the game and will align themselves to defend against industry combatants...now then, if all is well and main street is flourishing and retirees are happy with the growth of their 401ks, industry participants like to revert back to their competitiveness and tend to snipe each other by outlining other participants miscues and foul-ups...i point this out because right now, the industry is under siege and i believe the moratorium on 'snarkiness' is still in effect.

in all seriousness and i'm having lots of fun here...but you should know that the same sources you label as lies and untruths are the same sources that are the street convention on information and knowledge...this information moves markets...these reports are the street standard in terms of multi-billion dollar decisions that are made (or not made)...these falsehoods as you've put it are read by EVERYONE in the industry...i respect your choices to discount these sources as truthful because they do not align with your views...i get that...i get that because i know you are the contrarian and i respect the going against the grain mentality...we've talked about how much i respect that many times in the past...i'm just very, leery of citing the rolling stone as my source of wall street happenstances...the blogs and the editorials and all the rest are paid to be contrarian...they HAVE to be contrarian in order to survive...their target audience are not market participants...their target are OTHER contrarians.

again - rock on and i love the steadfast and consistency...LOVE IT...just want you to know that no one in the market cites blogs, editorials, and/or music mags.

I get what you're sayin. And if I was high enough up the food chain to get decent scraps off the plate of folks like Goldman I wouldn't be so contrarian...I'd be establishment like you if I was sitting pretty knowing I'm close enough to Goldman's (and the other big boys who run the world) dinner plate to be certain I'll always be fat and happy off their scraps.

Peons like me have to fight tooth and nail because there are a couple billion competitors out there who are fighting over the slim pickings left after the establishment eats the meal of the productive economy. You're high enough up the food chain to get handed a decent amount of the actual meal while it's being passed around the table. Peons like me are left picking it out of the garbage.

peons???? gosh...that's so unnecessary bro...peons? really? we're ALL peons if that's the case

but herein lies the REAL issue at hand...and i've said it so many times before...."if you can't beat em, join em"...i mean, not to the extent that i'd label you "indulgent" or anything like that but with a contrarian mind that you do possess, you're better suited trying to make money for firms set-up, and in the business to MAKE MONEY...not to say that money motivates you but wall street pays those who think out of the box like you do and reward those who are interested in going against the grain just like you do....then again, maybe you're saying you'd not have that mindset if you were part of the establishment right? well there it is isn't it?

good news for you AA is that the industry is recovering and WILL soon be hiring...get on the bandwagon if you care.

B-I-N-G-O


btw - you're gonna laugh at these stories...i might've already told it but here goes:

- during a lull in the job hunt on 'the street' and going on the suggestion of a family member, i started looking at other opportunities outside my industry that i might be able to utilize my sales experience...pharmaceutical sales, ad sales, etc...got an invited interview with a pharmaceutical and when i'd told them i had worked on wall street for almost 20 years, the look on their faces was such that they wanted to clean themselves real quick after realizing that they'd shook my hand...kinda thought that all wall street guys were sleazy, scummy, cheaters, and fakes....lmao....meh - the interview was more accommodational if anything so there weren't any expectations...kinda funny

- lastly, i was asked to speak at the high school for career day...they had tables set up so parents/relatives/friends could organize themselves to speak to students and better explain what it is they do...there were firemen, policemen, guy from home depot wearing his orange apron, an architect, a newspaper reporter, etc...i was the lone wall street guy and my table was BARREN...no one cared and no one stopped by...i lie actually...my daughter's friends stopped by to say hi...that's it...lmao...teachers thought i was more of a scumbag and hated that they lost their 401k money...the janitor guy came by and asked me for a tip on a stock...that was funny as fuck

LOL those are hilarious...I don't hold it against you because I know you're one of the good guys just doing everything you can to provide the best life possible for your family. I know you have ethics. But the system doesn't, so I can't trust it.

LMAO I'm cracking up about the janitor...so fucking funny.

lol

and to be clear...it wasn't funny that the guy was a janitor or anything...i have the utmost respect for the employed no matter what the occupation...just funny to me that the guy should be 'janitoring' somewhere instead of wanting to find out what the next big stock move was going to be....that and the fact that someone speaking at career day would know of such a stock...LOL!

compliance is a much needed business though and rather than embrace compliance people, they're often looked at like pains-in-the-asses...which is funny because they're paid to keep you out of jail....lol...

That in a nutshell is my job.

compliance is a much needed business though and rather than embrace compliance people, they're often looked at like pains-in-the-asses...which is funny because they're paid to keep you out of jail....lol...

That in a nutshell is my job.

i had no idea you were compliance...you are?

i have to say though - the compliance people i've ever worked with have always come at the times of the day that are the most inopportune times to talk about forms...it happens so frequently that i totally believe it not to be coincidental...it's almost a concerted effort to go and stymie business as if whatever needs to be discussed is a matter of life or death...mad respect but funny as hell.

as a funny sidebar for YOU - i met with catherine the head of compliance tuesday and this is how the convo went :

Paul - "Manny, I'd like to introduce you to Catherine...she's the head of compliance here"
Manny - "Nice meeting you Catherine."
Catherine - "Welcome Manny. Congrats on the hire and welcome aboard."
M - "Thank you. I'm very excited to be here and am looking forward to starting"
C - "Well...as Paul has mentioned, I'm the head of compliance and I'm in charge of making sure you're doing things within the guidelines of the company. The less you see of me, the better for all involved"
M - "All righty then...I hope not to ever see you again"
C - "The feeling is mutual"



LOL...how bizarre...granted, she and i exchanged with a smile but i'll bet even money that i'll be clean as a whistle and will STILL see her bothering me and shit.

Well, I mostly just deal with marketing and making sure our creative team follows guidelines, etc. The kind of compliance folks you deal with are on a different leve of accountability I'm sure. I'm guessing many of them have law degrees and I'm sure they don't have the freedom to make any mistakes so their butt is probably on the line to keep you guys out of big time trouble.

If I miss something or make a mistake, we just take it down off the website. Not that I don't worry about making mistakes but I can allow my creatives a little bit longer leash. When I was in Advertising having to deal with other media like TV commercials, billboards, print ads, it was a much bigger deal...a mistake could cost A LOT of money to fix.

That and allowing me to work at home is why I truely enjoy working on our websites.

so you monitor the content of the websites?

(totally 'jacked AAs thread!)

yes, our park websites (and cruise) only though...not Disney.com as a whole.

look - there's so much regulation in our industry...so many safeguards in place...some are industry mandated, some are self-mandated...every company has compliance departments and they are very visible and very much a part of business...in fact, this is the fastest growing subsector of the industry which to me, is a problem in itself...companies in the business of making money should be trying to make money...if anything, the components of the money-making company that SHOULD be growing are the units responsible for making money...what a novel idea...compliance is a much needed business though and rather than embrace compliance people, they're often looked at like pains-in-the-asses...which is funny because they're paid to keep you out of jail....lol...point is, making money has now become almost subordinate to corporate governance...the new rules and regulations almost DETER companies from making money...the 'fairness' policies now in place have changed the face of business forever...and i'm not talking about raping anyone of their pension funds and i'm not talking about stone face lying and misrepresentation of anything...that's not the gripe...the gripe has everything to do with the red tape, the admin stuff, the paper and pencil pushing that needs to be done as a result of a newfound focus on corporate governance.

that all said - a company like goldman (considered for a long time to be the ny yankees of wall street) employ the most brightest, the most innovative, the most forward thinking people coming out of the nations best business schools...these people will find ways to circumvent any type of policy that deters business from being conducted...it is not news to me or any other industry person that goldman or merrill or BofA or whoever have devised new instruments, new ways of valuation, new structures or new practices in an effort to be one or two or nine steps ahead of regulation.


like i did for a1, i will promise to read the rolling stone article just because it is you who has brought it up...truths or untruths, it's not the point...i will try and read it as a person sitting on his couch looking to pass time by and get a lil knowledge and i will also try and read it as an industry person with some understanding of the content on a personal basis....at the end of it all, the industry bands together when the industry is under seige...the industry participants obviously ALL have skin in the game and will align themselves to defend against industry combatants...now then, if all is well and main street is flourishing and retirees are happy with the growth of their 401ks, industry participants like to revert back to their competitiveness and tend to snipe each other by outlining other participants miscues and foul-ups...i point this out because right now, the industry is under siege and i believe the moratorium on 'snarkiness' is still in effect.

I have no doubt that compliance is a drag on the industry and that many of the regs that require compliance are misguided or simply poorly organized. That stems from the fact that the vast majority of the people who write the laws have zero understanding of your industry. That creates the problem where the industry is needed to educate the lawmakers about how the industry works and you're just asking for conflicts of interest and regulatory capture. Finance is such an innovative industry that unless you're on the inside it's basically impossible to keep up with the constant rapid progress that is going on with financial products and practices. Add on top of that the fact that many, many smart people's eyes simply glaze over at the complexity of it all, and we're playing with fire.

The other problem is that the consumer of those products rarely understands them and the sellers of the products either aren't good at educating their consumers or have no interest in educating their consumers because knowledgeable buyers are tougher to fleece. And in an industry that exists solely to make money, the fleece is the easiest way to do it, meaning that it will always be tried.

Appreciate you reading the article when you get a chance...the 'circling of the wagons' during crisis that you speak of doesn't surprise me at all and makes perfect sense...interesting angle.

I have no doubt that compliance is a drag on the industry and that many of the regs that require compliance are misguided or simply poorly organized. That stems from the fact that the vast majority of the people who write the laws have zero understanding of your industry. That creates the problem where the industry is needed to educate the lawmakers about how the industry works and you're just asking for conflicts of interest and regulatory capture. Finance is such an innovative industry that unless you're on the inside it's basically impossible to keep up with the constant rapid progress that is going on with financial products and practices. Add on top of that the fact that many, many smart people's eyes simply glaze over at the complexity of it all, and we're playing with fire.

right on wes...right on indeed.

i'll just add that because finance is such an innovative industry (couple that with the fact that the competition to be the most innovative is fierce), the need to be on the 'inside' isn't really as important as BECOMING the next 'inside'...get that?

peons???? gosh...that's so unnecessary bro...peons? really? we're ALL peons if that's the case

but herein lies the REAL issue at hand...and i've said it so many times before...."if you can't beat em, join em"...i mean, not to the extent that i'd label you "indulgent" or anything like that but with a contrarian mind that you do possess, you're better suited trying to make money for firms set-up, and in the business to MAKE MONEY...not to say that money motivates you but wall street pays those who think out of the box like you do and reward those who are interested in going against the grain just like you do....then again, maybe you're saying you'd not have that mindset if you were part of the establishment right? well there it is isn't it?

good news for you AA is that the industry is recovering and WILL soon be hiring...get on the bandwagon if you care.

Yea I know we're all peons here in the end...just using a little colorful word choice to drive home my point about understanding your establishment views.

Who says I can't beat em?

I haven't taken my best shot at beating them yet. I'm preparing for the right moment to strike. I think that it's almost impossible to maintain a meaningfully contrarian POV if you join the establishment in any real way. I can't imagine the existential crisis I'd go through if I transitioned to the establishment in the finance world. Hell, becoming a lawyer is freaking me out plenty.

Who knows? When I get tired of being a lawyer I'm sure I'll find something else to do, as long as it doesn't involve more school or another test. All I want to do is be free, which is pretty much out of the question, so I have no clue what I want to do with my life.

right on wes...right on indeed.

i'll just add that because finance is such an innovative industry (couple that with the fact that the competition to be the most innovative is fierce), the need to be on the 'inside' isn't really as important as BECOMING the next 'inside'...get that?

Interesting thought...it seems to me that the resources of those on the inside give them such an advantage that it's extremely difficult to replace them...they have the ability to create the next 'inside' much more so than outsiders, no matter how creative those outsiders are. Just speaking in general probabilities...obviously it can be done...innovation, when it happens organically, can be entirely unpredictable. I think one of the big problems in this country right now is that there's a weird mix where we have a small group of insiders who strongly influence changes in the law and thus know what innovations may be the most productive concepts...they know the rules before the outsiders and so they can amass resources within that logical structure on the inside before anyone else knows where it's going.

Of course it's still possible for the outsider to get lucky or be smart enough to see trends and exploit them effectively (my plan in the legal profession), but the insiders operate from such a position of strength and relative security that they don't waste resources as often as the outsiders do...so you have the insiders with more resources and a better chance of using those resources at a more effective level...that's a tough road for the outsiders. Of course, I think I was born and raised to fight that fight from the outside. It's in my blood. It's going to be an interesting, and likely bumpy, ride. But it should be entertaining, if nothing else.

The other problem is that the consumer of those products rarely understands them and the sellers of the products either aren't good at educating their consumers or have no interest in educating their consumers because knowledgeable buyers are tougher to fleece. And in an industry that exists solely to make money, the fleece is the easiest way to do it, meaning that it will always be tried.

i would argue that the SELLERS or distributors of said product are equally as uneducated on the complexities just like the prospective investors may or may not be...i believe that to be the case more times than not...this belief disproves, to me, the thought that the fleece is a major technique...in fact, the fleece is not as rampant as outsiders of the industry would think...again, i say this because we have compliance and safeguards in place to make sure there is no fleecing occurring...there are teams of people employed from within compliance units assigned to analyze transaction related products and patterns to discern appropriateness and suitability as it relates to established client history...red flags occur all the time and are subject to thorough investigation which is a good thing.

remember - the segment of the market that has been catastrophically affected directly are the ones who are supposed to be the 'intelligent' investors...the fund manager, the hedge fund, the insurance company, the bank....these institutions themselves employ hundreds upon hundreds of people whose main duty and responsibility is to analyze credits, structures and scenarios, project maximum gains and maximum losses...mom and pop of main street USA were not the ones who erred (directly)...they erred, if anything, because they picked a bad manager to manage their funds.

all in all - i agree that the lack of thorough diligence, as it pertained to analyzing these complex structures, surely can be pinpointed to the lack of knowledge and expertise of these structures...but i still maintain that competition to be the better manager was probably more to do with it...in a performance based business such as this, you're not only rated versus your peers but you're also rated relative to whatever benchmark index that you might happen to be compared to...could be the DJIA, could be the 10yr treasury note, could be the Lehman aggregate index....whatever....the competition to outperform the benchmarks got a institutions way out of position and in over their head.

right on wes...right on indeed.

i'll just add that because finance is such an innovative industry (couple that with the fact that the competition to be the most innovative is fierce), the need to be on the 'inside' isn't really as important as BECOMING the next 'inside'...get that?

Interesting thought...it seems to me that the resources of those on the inside give them such an advantage that it's extremely difficult to replace them...they have the ability to create the next 'inside' much more so than outsiders, no matter how creative those outsiders are. Just speaking in general probabilities...obviously it can be done...innovation, when it happens organically, can be entirely unpredictable. I think one of the big problems in this country right now is that there's a weird mix where we have a small group of insiders who strongly influence changes in the law and thus know what innovations may be the most productive concepts...they know the rules before the outsiders and so they can amass resources within that logical structure on the inside before anyone else knows where it's going.

Of course it's still possible for the outsider to get lucky or be smart enough to see trends and exploit them effectively (my plan in the legal profession), but the insiders operate from such a position of strength and relative security that they don't waste resources as often as the outsiders do...so you have the insiders with more resources and a better chance of using those resources at a more effective level...that's a tough road for the outsiders. Of course, I think I was born and raised to fight that fight from the outside. It's in my blood. It's going to be an interesting, and likely bumpy, ride. But it should be entertaining, if nothing else.

i think they call that a 'punchers' chance?

I haven't taken my best shot at beating them yet. I'm preparing for the right moment to strike. I think that it's almost impossible to maintain a meaningfully contrarian POV if you join the establishment in any real way. I can't imagine the existential crisis I'd go through if I transitioned to the establishment in the finance world. Hell, becoming a lawyer is freaking me out plenty.

Who knows? When I get tired of being a lawyer I'm sure I'll find something else to do, as long as it doesn't involve more school or another test. All I want to do is be free, which is pretty much out of the question, so I have no clue what I want to do with my life.
[/quote]

i wholeheartedly agree with you in that it's difficult, if not impossible, to maintain your contrarian POV if you're deemed to be considered establishment...i'll just say this, it's human nature to change...to evolve...to morph...people's views change over time - all the time...it's human nature to adapt and coexist with your surroundings and your environment...who knows what and/or where you'll be 5-10 years down the road...those who are reluctant to change or put-off natural progression will no doubt go by way the dinosaurs went...continue to stick your head in the ground and fight the good fight will only prevent you from optically seeing things that are coming up ahead.

i've noticed your increasing interest in the markets, how they work, and how they don't work...within the last year to two, it's become a fascination of yours...i have no doubt you'll be successful in anything you pursue...i just picture you vacationing in st. barts with your lovely wife who is 20 years your junior, homes in the hamptons and greenwich, CT driving around in a maserati on the weekends on your way up to the country club for a brunch with P.Diddy

i would argue that the SELLERS or distributors of said product are equally as uneducated on the complexities just like the prospective investors may or may not be...i believe that to be the case more times than not...this belief disproves, to me, the thought that the fleece is a major technique...in fact, the fleece is not as rampant as outsiders of the industry would think...again, i say this because we have compliance and safeguards in place to make sure there is no fleecing occurring...there are teams of people employed from within compliance units assigned to analyze transaction related products and patterns to discern appropriateness and suitability as it relates to established client history...red flags occur all the time and are subject to thorough investigation which is a good thing.

remember - the segment of the market that has been catastrophically affected directly are the ones who are supposed to be the 'intelligent' investors...the fund manager, the hedge fund, the insurance company, the bank....these institutions themselves employ hundreds upon hundreds of people whose main duty and responsibility is to analyze credits, structures and scenarios, project maximum gains and maximum losses...mom and pop of main street USA were not the ones who erred (directly)...they erred, if anything, because they picked a bad manager to manage their funds.

all in all - i agree that the lack of thorough diligence, as it pertained to analyzing these complex structures, surely can be pinpointed to the lack of knowledge and expertise of these structures...but i still maintain that competition to be the better manager was probably more to do with it...in a performance based business such as this, you're not only rated versus your peers but you're also rated relative to whatever benchmark index that you might happen to be compared to...could be the DJIA, could be the 10yr treasury note, could be the Lehman aggregate index....whatever....the competition to outperform the benchmarks got a institutions way out of position and in over their head.

That makes good sense. And I could definitely see most of the sellers not understanding the products, considering the complexity of what they sell at this point. The math "geeks" are the only ones who really understand the products in all likelihood, and those geeks often don't really understand the market itself in the way that the sellers do, so there's an interesting disconnect built into the system. Of course, that same sort of disconnect is built into compliance because if the sellers don't understand the product very well then there's no way compliance and lawmakers can reliably keep up with the continuous innovation.

When I used the term 'fleece' I was thinking about folks like Goldman who sold folks products and while they were selling those products, they were simultaneously placing side bets that the products would fail. In general, I have no doubt that the average person or even the average fund is honestly trying to make money for the investor because they rely on the continued investment for their profit...seems like Goldman does what it wants...gets an exemption from this rule (by an agency head who's a Goldman alum and still owns tons of shares because HE got an exemption), gets this rule neutered or erased altogether...I dunno...it's probably too complicated for me to figure it all out.

One of the big themes I've come up with in the last few years as my eyes have opened up more to the world around me (not just finance) is that the society that the world has built is most likely too complex for any one person to understand, which bothers me to no end. It's a pervasive problem and this time it blew up in finance...next time it could be energy supply...food supply...the law...technology...health...anywhere. And, with the added complexity that we've built in through globalization and interconnectedness, the problems, whenever they arise, are magnified to a level that's nearly incomprehensible, even as you watch them unfold. In a way I feel like the entire global society has become 'too big to fail'...but who can bail us out? Certainly a divine power could, but how do you reliably petition god for a bailout? I imagine it's possible, but I'm not sure we have good enough lobbyists.

i wholeheartedly agree with you in that it's difficult, if not impossible, to maintain your contrarian POV if you're deemed to be considered establishment...i'll just say this, it's human nature to change...to evolve...to morph...people's views change over time - all the time...it's human nature to adapt and coexist with your surroundings and your environment...who knows what and/or where you'll be 5-10 years down the road...those who are reluctant to change or put-off natural progression will no doubt go by way the dinosaurs went...continue to stick your head in the ground and fight the good fight will only prevent you from optically seeing things that are coming up ahead.

i've noticed your increasing interest in the markets, how they work, and how they don't work...within the last year to two, it's become a fascination of yours...i have no doubt you'll be successful in anything you pursue...i just picture you vacationing in st. barts with your lovely wife who is 20 years your junior, homes in the hamptons and greenwich, CT driving around in a maserati on the weekends on your way up to the country club for a brunch with P.Diddy

Yea I have no doubt that I will continue to grow and change over time...that's one thing I love about being a contrarian, is that in it's simplest form, the thought process is: Where are we? Where does everyone think we're going? Where should we be going? Where are we actually going?

I'm always on the lookout for the new idea that seems crazy or ridiculous on the surface but has serious potential for profit...ever since my Dad and Uncle made a decent chunk of money from letting developers transfer gopher tortoises onto their land. Now that's not to say that an idea is a good idea simply because it's a little "out there", but it does mean that absurdly creative ideas can't be dismissed out of hand just because the first thought is, "That'll never work". My fam's land rich and cash poor like most agriculture folks are, but I'm always on the lookout for new ways to get cash from that land.

And I'll trade the 3 houses, maserati and country club you mentioned for a small island or 2 off the coast of Belize with a small resort, local staff, and enough space to grow most of our own food. ;D

When I used the term 'fleece' I was thinking about folks like Goldman who sold folks products and while they were selling those products, they were simultaneously placing side bets that the products would fail. In general, I have no doubt that the average person or even the average fund is honestly trying to make money for the investor because they rely on the continued investment for their profit...seems like Goldman does what it wants...gets an exemption from this rule (by an agency head who's a Goldman alum and still owns tons of shares because HE got an exemption), gets this rule neutered or erased altogether...I dunno...it's probably too complicated for me to figure it all out.

here's the thing...you call it toMAto, i call it toMAHto...you say poTAtoe, i say poTAHtoe.

i don't actually say it that way but you understand the point...you call it 'side betting that the product would fail', we call it 'hedging' or limiting loss...after selling a security to an investor, a very fundamental trading strategy is to 'hedge' your initial investment by buying a similar or benchmark security to mitigate risk...can be a AAA rated treasury note, can be another industry specific type corporate bond, can be anything of that would sort of 'ying' when your initial transaction 'yanged' if you get my drift.

goldman and every other shop do it...everyone hedges...and again, i fall back on competition and the immense pressure to be the next innovator, but i believe that that had fueled the interest in hedging ones positions with exotic, non-plain vanilla typed instruments as opposed to hedging the way of convention.

I thought the idea of hedging is that when you're the one holding the security, you hedge to limit the risk that security exposes you to? (You own a bond of a company, so you have a CDS position to insure against loss of the cashflow or value of that bond)

That seems different to me than betting against a position that you're selling or have already sold to someone else. I suppose that if you're the seller, you have to be holding it at some point, so while you're holding it, it makes sense to hedge. Don't seem right to me to sell that security to someone else and keep right on owning your hedge, since once you sell it you've got no risk of loss to hedge against.

What risk is being mitigated after the sale of a security by buying a similar investment that you just sold? That selling the security in the first place was risky because there's a chance the value of that security is going to go up after you sold it?

....or are we also including within the concept of 'risk' simply providing investment returns that are lower than your competitors? I don't think that should be considered a risk that can be hedged against...sounds like the cost of doing business to me...if you have an actual position, either short or long, then sure hedge it. But if you sold your security to an investor already and you're at net zero for that vehicle, what are you hedging against? You made your profit on that position...

It seems like in a weird way 'hedging' needs to be limited to actual risk taken on due to a given net position at any time. I'm sure this is all much more complicated than I've made it out to be...I just have this feeling that we're a casino economy...when people talk about the contract for a barrel of oil being traded 27 times between production and consumption, that seems absurd to me. It's inefficient and it's not why we created futures contracts...'hedging' against loss in a security after you no longer own the security seems just as absurd and inefficient.

so, if you've bought something and have taken on a long position in let's say ATT bonds, you will need to sell USTs with a similar maturity to mitigate risk... theoretically - if the ATT position you are long depreciates in value, it's losses will be offset by the theoretical increases in value of your hedged treasury position...same goes the other way around...ATT announces phenomenal earnings over the last quarter, PIMCO announces that ATT bonds are undervalued and are recommending them as a buy and accumulate, investors are interested and sell treasuries to buy ATT bonds in a sort of asset allocation type trade transaction (asset allocation meaning shifting of fund utilization from conservative treasuries to more speculatively rated bonds that are yielding more) or simply because there are no cash reserves to deploy...as a result of the mini-run on ATT, the bonds rally and conversely, treasuries sell off...position is hedged and profits are capped.

anyways, you've bought it and now you sell it...well - you're flat ATT but you are still short treasuries...need to cover that position and close it out...so you buy it...now you're flat...and both positions are now P&Ls that are realized (as opposed to unrealized)

that's just the simple example of a simple hedge...nonetheless, the secondary trade that is a result of the primary trade is not really looked at as a 'bearish/bullish' view on that security...it's more or less a backstop or insurance policy if you will...so if i've sold you ATT bonds and decide to enter into an agreement with Goldman that would protect me if the bonds rise (essentially saying that if ATT fails, i will benefit), i will be hedged....but i'm not entering into an agreement with Goldman to fleece the counterparty i've just sold the underlying bonds to.

there are other ways to fleece but those type of games have been occuring since the beginning of time and traders are discouraged from doing so.