The Hindu Business Line : Who is to blame for the tsunami of liquidity?

Observers familiar with Goldman Sachs and Bear Stearns believe that the quality of the people at each is similar but the language of the two firms could not be more different, recounts William D. Cohan in House of Cards: How Wall Street’s Gamblers Broke Capitalism ( www.penguin.com ). “It’s almost like a piece of conceptual art or symbiotics. It was like reading Umberto Eco – language begets culture.”

Citing a person who knows both firms well, Cohan informs that at Goldman Sachs, the language is very specifically less aggressive and less hostile.

“So as an example, if a salesman and trader are talking about how they did a trade with a customer and they think there’s a significant business opportunity that came out of that trade, at Bear Stearns they might say, ‘I just ripped that f*****’s head off. I’m going to make a lot of money on this trade. That’s f****** crazy.’

“How would a salesman and trader in Goldman Sachs describe a similar situation? ‘That’s a great opportunity. That was a very attractive and commercial price you purchased those securities at and I think we’ll have a very interesting economic opportunity in the near future.’”

They just said the same thing, but the manifestation of the culture comes out of the different uses of language, explains Cohan.

“One protects the reputation of the firm. One presents the firm as a far more intelligent being, puts the firm in a position to be much more sought after for its thought processes, and protects it obviously legally.”

In contrast, the other one, while not doing anything wrong, may use a language that can make people suspect it.

“That issue was very pervasive at Bear Stearns. The firm was never as aggressive as its reputation. But its language, its culture, and its swagger put it more at risk than its actual actions.”

Bear’s swashbuckling, siloed culture also put it at risk for the occasional quirky crime, the author adds.

He wraps his book with the thoughts of Alan D. Schwartz, the last CEO and Chairman of Bear Stearns before its acquisition by JPMorgan Chase & Co.

“To Schwartz, the near-collapse of the global financial system was caused by many factors, from Hyman Minsky’s financial instability hypothesis – which suggests that whenever the economy is stable for a long period, the financial markets create their own instability – to the dramatic and unprecedented surge of global wealth.”

According to Schwartz, the blame for tsunami of liquidity cannot be on someone or something.

“In truth, it was a team effort,” he says.

“We all f***** up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors. Everybody.”

Apt read for the summer vacation.

How to say ‘enough’ to greed

It is simple to come up with aphorisms about money, frets Steven Harrison in Doing Nothing: Coming to the End of the Spiritual Search ( www.wisdomtreeindia.com ).

“Books are sold by the millions that teach people how to be ‘money machines,’ how to ‘attract money,’ how to be a ‘money magnet’ and so forth. The authors of these books prove their point by their own example, by selling the books. They do not understand money, they understand greed.”

Greed is the answer for our individual wants, separated from the world around us, the author observes.

If we want to satisfy our greed and compulsions, we must abandon the quiet, where enough is sufficient, and we must adopt the world of thought of division, where we can manipulate reality, bending it to our material desires.

“We hope that we can acquire more and more, until we are full. Then we will be done, then we will have it all. But, we can never be full, we can only consume.”

Instead, why not discover ‘just enough’ as an alternative to ‘prosperity consciousness,’ Harrison invites. Enough is a response to our life, not to our greed, self-centredness, cravings, and compulsions, he describes.

“We actually have enough and need nothing more than just enough. Our actual requirements are really just to be still, to love, to relate…”

Fascinating study.

Gauging collective psychology
What is the difference between fundamental analysis and technical analysis? The former tells you the ‘what’ and the ‘why,’ and the latter, the ‘when’ and ‘how,’ says David Keller in Breakthroughs in Technical Analysis: New Thinking from the World’s Top Minds ( www.vivagroupindia.com).
Analysing a company’s financial statements, the broad economic picture, and other fundamental factors helps investors identify which securities should be moving based on market environment, concedes Keller.
“But when you look at a price chart, you’re peeking into the minds of millions of traders to gauge their collective psychology. What’s more, you’re studying trends and momentum to see how traders have reacted to historical events and news flow. That’s why investing without looking at a chart puts you at a major disadvantage.”
The book is a collection of priceless essays written by experts from around the world. Topics discussed include: the application of ‘Drummond Geometry’ to foreign exchange markets, Japanese technique of Ichimoku Kinko Hyo which uses price data to create a series of indicators for measuring the strength of a trend, Gann analysis and Fibonacci retracements.
Worth investing in!

D. Murali

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