Great Depression Online Archive Issue:

Nature: An Immodest Exemplar

Great Depression Online
Long Beach, CA
April 20, 2010

Inside This Issue You Will Discover…

*** Smarter than Dinosaurs
*** “The Man Who Made Too Much”
*** Nature: An Immodest Exemplar
*** And More

Smarter than Dinosaurs

Last Thursday the President squinted through his scope and targeted his sights on Mars.  “I expect to see it,” boldly declared the Commander in Chief, alluding to an astronaut on Mars.  But first something equally incredible must happen…NASA must land on an asteroid to keep it from colliding with Earth.

Landing on an asteroid and giving it a well-timed nudge “would demonstrate once and for all that we’re smarter than the dinosaurs and can avoid what they didn’t,” said White House science adviser John Holdren.

No jobs too magnificent, spectacular, or futile for the President to standup behind and bluster with bravo…even outsmarting dinosaurs.  

~~~~~~How To Prepare?~~~~~~

The shocking 1990 collapse of the Japanese Market.  The extraordinary U.S. economic boom of the ‘90s and early 2000s.  The devastating global recession that began in 2008.  These impacted everyone’s lives, investments, and fortunes.  The signs of their arrival were visible years and years in advance.  And yet…Almost No One Predicted Them.

The mainstream media didn’t.  The top economists didn’t.  The great financial advisers didn’t.  But One Man Did.

What’s coming Next?  When will it happen?  What should you do to Prepare for it?

Click Here for the Answers 

~~~~~~~~~~~~~~~~~~~~~~~~~

Dinosaurs must die, of course.  It’s how the world works.  Take General Motors.  Overtime they grew bloated, antiquated, and archaic.  Their cars ran like the Stegosaurus.  People no longer wanted them.  So the government, in their infinite wisdom, used the public purse to buy them.

By Friday Obama had moved on; he had other, less celestial, sights in line than landing on asteroids.  He realigned his aim, peered through his scope, and saw Goldman Sachs trampling upon the financial pasture.

“The Man Who Made Too Much”

Back in 2006 John Paulson knew what everyone else with half a brain also knew – the U.S. housing market was an epic bubble poised for an epic crash.  Yet, unlike most, he had an intense understanding of the mortgage backed securities market and the connections to capitalize absolutely on its demise.  And that’s precisely what he did…

Dubbed “The Man Who Made Too Much” by financial commentators, Paulson’s hedge fund, Paulson & Co., raked in $15 billion in 2007 betting against subprime mortgage securities.  Of this, $3.7 billion went straight into Paulson’s pocket.

Last Friday the Securities and Exchange Commission (SEC) filed a civil complaint accusing Goldman Sachs of defrauding investors by not disclosing conflicts of interest in the mortgage investments they sold as the housing market went bust.  From what we gather, while the SEC complaint does not accuse Paulson, his firm is implicated.

Apparently Paulson helped devise the debt bombs that Goldman sold off to investors and then bet against them…making a massive profit as the securities became worthless. The SEC claims Goldman didn’t disclose its relationship with Paulson to the investors it sold the securities to. 

So whose fault is it really?  Goldman’s?  Paulson’s?  Or the investors who traded their money for worthless assets?

Nature: An Immodest Exemplar

Every so often we come across the smuggest of individuals.  You know the type…they refer to themselves in the third person.  Well, it just so happens that it was one of these clowns, working for Goldman, who orchestrated the fraud.  What’s more…he’s a Frenchman.

His name is Fabrice Tourre and he refers to himself as ‘the fabulous Fab.’  In fact, here’s an excerpt of an email he wrote to a friend in early 2007, just as the mortgage market was creaking and cracking under its own dead weight…

“…the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

At the time fabulous Fab was a Goldman vice president.  But like all unethical shysters, fabulous Fab’s since been rewarded with a promotion.  Now he’s executive director of Goldman Sachs International in London.

Obviously, fabulous Fab’s the perfect fall guy.  Yet should he be held entirely culpable?

If you don’t remember, last fall Goldman Sachs’ top man, Lloyd Blankfein, told The Times of London his bank was doing “God’s work.”

Perhaps he was right.  Bear in mind, as Ralph Waldo Emerson reasoned in the essay Nature, there’s a divine moral and natural order to the world.  One of these natural laws is that a fool and his money will soon be separated.  After all, you see, Goldman Sachs was just doing natures work: separating fools from their money.

No doubt, there’s a lesson for investors in this…and we’ll keep it real simple: Don’t buy investments you don’t understand.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  “We’ve seen the greatest credit bubble and greatest real estate bubble in modern history, which means we have inflated asset values and, more importantly, way too much debt in our system,” warned financial author and publisher Harry Dent recently to Moneynews.com.

Here’s what else he said.

 

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