Friday, October 16, 2009

I am Shocked That You're Shocked

It is undoubtedly all over the web, the news reported by Bloomberg that The (aptly named) Galleon's been hit sending her and her booty plummeting to the icy depths. Her buccaneering skipper's been taken prisoner and is presently in irons (along with friends and friends of friends). I think this is most excellent, even if it is only a small flesh wound to the crony form capitalism. Cynics will argue that it's all show. The current administration is no different - just look at Geithner's mates. Perhaps Raj just didn't donate enough ((though this is admittedly a long-shot). And they may be right. But appearances - the vigour with which laws (both letter and spirit) are enforced (and, when things go, or are likely to go awry, made!) ARE important, if only to get the working man out of bed in the morning. The so-called "free-money", so clearly pegged to the wrong price, during the eight years of the Bush Admin, is finally getting priced.

Samberg got away (under the SECs catch & release program) . Cassano remains unindicted (where does one start? ummm asset freezes, tar & feathering, for starters?). Martha Stewart got spanked (hard), but little more. Innumerable traders, hedge fund managers, even entire mutual fund groups use dubious weight-of-money strategies, subvert the market by goosing the marks of existing positions - monthly, quarterly, annually, while corporations continue to surf the line of the ethical to hit numbers, subvert competition - in vain attempts to emulate Raj, or just make a few extra bucks to keep the balls of an unsustainable way of life in the air. The system is built upon it. However, mark my words: rooting out less-than-salubrious market behaviour will promote entropy and make the market more efficient to the long-term benefit of the greater good. But before big-swinging over-zealous shorts start, as Harvey Keitel warned as "The Cleaner" in Pulp Fiction, s*ckin;' each others' d*cks", they should take heed that entropy works both ways, and those who employ similar tactics should similarly be culpable (were I Sheriff).

But the most incredulous thing I read in the article was:
“My client is shocked and distraught,” said Kerry Lawrence, Moffat’s lawyer, in an interview in court today. He said his client learned only this morning of the U.S. investigation.
Yes, I am shocked that you're shocked. A Fraud. A Cheat. Call him (and especially Raj, who to his small credit issued no statement of being "shocked") what you will. Or wait til after the trial or plea-bargain and then throw mud. Next, use your imagination to extrapolate across The Street where even the cornerstone - "plausible deniability" - has seemingly been flaunted of late. But however you look at news of Raj's outing, it is a good day for honesty. Integrity may just have rallied a touch.


h said...

Last words are so true. Thank you for, as always, a great blog!

Eric Hirschberg said...

The implied vol on integrity must be like 50 bizillion! After all, how else can you explain getting paid so much to be short it.

Anonymous said...

One corrupt sacrificial goat to keep the apathetic at bay. While Rubin, Paulson and Summers skate.

Oh yeah what was the slap on the wrists that Art Samberg got??

Anonymous said...

After Madoff,Stanford and now Raj,
investors keep on trusting the Stock
Exchange.Will they ever learn?Is a stock exchange really necessary when
employment should be the priority...

RCJ said...

So in the Pantheon of Tiger and Pequot and now Galleon, what is the response to this sad news, restraint ? or doubling down ?

I'll take your bet, I'll go short integrity, if I can find a bid ...

Anonymous said...

Can't you plumb for a gig as crony-czar in the Obama Administration? I'd like to see you nail a few more to the wall.

Common Schlemiel said...

"The Song Remains The Same"....

They shot "The Sheriff". Trillions of dollars taken, enough to result in tens of thousand of felonies for the people stolen from. The only man even trying to prevent it was studied until he could be removed for the equivalent of a traffic ticket. Every financial sin possible is now under the umbrella of "The Collapse".

The game has been rigged for so long that we don't even question the facts. We just try to go along for the ride......

Blissex said...

Well, I need at this point to quote again a famous Real American sociologist, Newt Gingrich:
«In Germany on the Autobahn there is no speed limit. If tomorrow the Bundestag adopted a 100km, or 62-mph speed limit, virtually every German would obey it. Until, that is, the next election when they would wipe out the current politicians and they would elect the "No Speed-Limit" Party.
Now this is a significant insight that American reformers have neglected for 30 years, and is the great mistake of the Great Society and everything that followed it.

And I don't want to offend anybody, but let me suggest to you that the American cultural response to the challenge of speed limits has been dramatically different than [sic] the German one.

For most Americans speed limit is a benchmark of opportunity. This is not a light insight.

If you have a society where almost every middle class person routinely fudges the law, that's telling us something.

We have laws that matter-murder, rape, and we have laws that don't matter.

Speed limits are an example. Why would you think that a regulatory, process-oriented bureaucratic model would work?

The first thing that every good American says each morning is "What's the angle?" "How can I get around it?" "What does my lawyer think?" "There must be a loophole!" Then he proceeds to work the angle, and the bureaucracy spends its time chasing that and writing new regs to stop him. America is the most incentive-driven society on the planet.

Note that Newt Gingrich is not celebrating or advocating this, just describing.