 The Wild Wild World of Wealth |
Is paranoia necessary to survive on Wall Street?
In one sense, Goldman Sachs is no different from any other investment bank on Wall Street. When it comes to protecting the brand, junior employees are expendable. Like goldfish, investment banks eat their young when self-interest make cannibalism seem rationale.
Earlier this week, I described the Magnetar Trade—the idea that a hedge fund can promote a CDO and bet against the same pool of assets. I have no idea whether the SEC’s charges involve Magnetar, but one thing is clear even now.
Other law suits will follow.
What happens when it’s insanely profitable to lose money?
Huh?
Last Friday, ProPublica described how one hedge fund—Magnetar—invested in the toxic waste from sub-prime mortgages no one else wanted. And it made wads of money. The story is long but well worth your time. The Magnetar Trade illustrates: the capital markets are a new-age war; deception is a tactic; and the old Trojan Horse play is still in vogue. Here’s how the trade works in three easy steps.
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