Juggling Dynamite

Greg Smith, who publicly resigned in a scathing op-ed, says the investment bank’s unethical culture threatens the firm’s future. Anderson Cooper reports. Smith is a conflicted character and his motivation is most certainly self-serving, but this discussion is revealing all the same. Especially the bits about how pension managers have been buying financially suicidal derivative securities in desperate attempts to juice their performance returns. This is the financial world’s version of illegal doping to try and garner a performance advantage and it is inherently dangerous to the beneficiaries they are hired to serve. Their actions are the opposite of what fiduciary duty requires of ethical risk managers. Here is a direct link.

As we watch, I offer this timeless quote from the Pecora Commission (held 1932-1934) report of the Senate banking and currency committee. The more things change…

“The deplorable consequences to the American investing public, with their misplaced reliance upon and confidence in the competency and integrity of purpose of the investment trustees, is woefully exemplified by the Goldman-Sachs Trading Corporation.” –Senate banking and currency report, June 1934

I will be speaking from 3 to 4pm tomorrow at the annual World Moneyshow Toronto, held at the Metro Convention Centre downtown. You can register to attend for free on their web site here.  My presentation is called:  “Benefits of the bubble: gifts given and lessons learned from the credit bust.”

After note:  my talk was taped by the Moneyshow and will be available as a webcast shortly.  We will post the link when it is up.

“U.S. growth has slowed to 1.3%. Greece and Spain are in recession and China’s economy has lost momentum for seven consecutive quarters and is now growing at 7.4%. At the same time stocks continue to rally and the S&P 500 Index (GSPC) is trading near its year-to-date high.

Gary Shilling, president of A. Gary Shilling & Co., calls this the “grand disconnect.” He tells The Daily Ticker, “Either the economies of the world have got to come to life and… rise to meet investor expectations or investors have got to come down to earth. The latter is more likely.”

Here is a direct link.