Conspiracy or not?
Don’t fall for political theater
Dear Editor: I was a stockbroker for 10 years, some of them working on a trading desk on Wall Street.
I had never taken a single course in economics in college, so you might say that I was trained on the job. I did have a lot to learn and I learned some things. Here is one thing I learned on Wall Street. There may be more greed sometimes than at other times, and it’s most evident at the top of the market, with more fear at the bottom.
There may be stupidity.
After all, some of the best investors win only 51 percent of the time.
It takes an awful lot of evidence to convince me of conspiracy.
Bernie Madoff committed conspiracy. But I don’t think that Goldman Sachs did.
Until the evidence is in, I would not want to participate in any witch hunt. On Wall Street, every trading desk for every investment product has a “book.” And they keep track of what they have on their books, i.e. their inventory. Further up the line in management, someone keeps track of all of the books on a daily basis.
The positions on the books can be quite large because the firms are heavily leveraged, but they must never reach a substantial proportion of the firms trading activity in that investment product. In other words, a residual position in the firms inventory might represent a small bet, and a short term one at that.
Secondly, positions and strategies regarding positions are a function of price. That is, if a firm wants to get rid of a position in a falling market, it will sell it either to its own clients at the fair market price at the time, or sell it to another firm.
This does not constitute “betting against its clients.” There is too much assumption of conspiracy these days in both business and government.
Yes, some under-serving managers have been overcompensated.
Yes, the scrapping of the Glass-Steagall Act of 1934 produced a casino atmosphere.
But no, it was not a big conspiracy of the business and financial world.
And no, government isn’t necessarily a bad thing either. We’ve got to realize that things are subtle, and not fall for populist slogans or political theater.
Chaim Bezalel Stanwood
