Being turned away at the door at Cain can be a humiliating experience. Being turned away after flashing your American Express Centurion card is beyond the pale. This is, of course, what the judge means when she tells you that you have to keep your ex-wife in the “style to which she has grown accustomed.” Ouch. Smile though. Goldman, too, must endure the slings and arrows of restrictive door policies. Smile for ten minutes. Then stop smiling. If Goldman isn’t a viable counterparty, who is?
Goldman Sachs, the biggest oil trader on Wall Street, has been restricted from making a market in price assessment agency Platts’ daily oil trading window as counterparty anxiety grows, two sources familiar with the move said on Monday.
Goldman is the latest in a series of major investment banks to be placed under a so-called ‘review’ by Platts, which has said it may sometimes need to limit the activities of some companies in its half-hour price-discovery process if their acceptability by counterparties threatens to distort benchmark prices.
Goldman faces limits in Platts oil window-sources [Forbes.com]
Hah!
Ohhh, snap!
Heh didn’t this happen to Lehman a few months before collapse?
So instead of the rating agencies doing a downgrade, someone else does it?
Goldman is a pillar of the community.
@3 – It is the rating agencies at work. Platt’s is owned by McGraw-Hill, S&P’s parent company. But I’m sure they’ll say they never share information.
too Goldman, didn’t read.
Does anyone on DB know of a financial advisor/consultant with courage and with confidence in his/her abilities?
That is, a person/firm who’ll take on an account and split the profits AND split the losses and charge no fee?
My guess is that someone like this does not exist.
The Guy from Delaware
The two b’s talking now.
before CNBC had a clip from “mini me”
7 that would actually be a good business proposition for the advisor, since the market has a tendency to go up. And for the same reason a bad prop for you. Even if half your losses were eliminated, the fact that you gave up half your gains would result in sucky long term performance.
TGFD-
Why would someone go through the hassle of managing someone else’s money in order to receive zero compensation? Does someone cut your grass for free?
Your proposal would be tantamount to letting the FA lever up his existing investment strategies. If he really wanted to do that, he could probably borrow the money on more favorable terms. You’d basically be free-riding on the manager’s talents.
There is no free lunch. And there’s certainly no free active asset-management services.
Why no discussion of the directly correlation between Obama’s lead in the polls and the market decline?
Looks like about 300 points on the Dow for every 1 point in the polls.
10 9 here.. Not really the same as levering, since in the proposal here the client would share any losses, by simply levering the FA would keep them all. I stick with my view of things – proposal is in fact good for the FA, bad for the client.
11 Not that simple. Over the same period McCain has begun to look like a senile crank and Palin (more) like the airheaded cheerleader she is.
7/9/10 What are we talking about sharing? The absolute gains/losses, or any return above the benchmark (typically an index fund). I have a feeling TGFD is thinking about the former, as a way of easing the pain of a declining market. A better plan would be to reduce risk through asset allocation – lower the allocation to volatile asset classes, in favor of those less volatile. You people really all need to do CFA.
9: Depends on the split. I, for instance, would pick an advisor who took 25% of any gains, but offset the same against losses, over one who wanted 2 and 20. I might even go higher. The numbers do say that over the long term I’d approach paying 22% to the second and 25% to the first, but over the long term, either I’ll dump the first guy or he’ll make me more money since it’s his ass on the line too.
I don’t think this would work for *logistical* reasons, but as far as risk versus reward, sign me up.
@#9,10,12…
Thank you both for your answers to my question. Perhaps a base fee should be included, as you say.
Nevertheless, I have never heard of a FC willing to share in losses. It’s always Fee + %Profits, with no mention of losses. The client is always on his own with the losses.
The Guy from Delaware
Goldman is so overrated
One further thought…
Reptilious lawyers often take cases on contingency with no out-of-pocket costs to the client. The lawyer invests time, overhead costs to his firm, various fees, etc in hopes of a scoring a big payday. In short, he puts his talent and skills on the line.
Would a FC do that?
The Guy from Delaware
#11. People are quietly talking about this. And quietly giving certain advices on what stocks to buy and when to sell in the event he succeeds in winning the presidency.
18: An excellent analogy, but just to be clear, there are some costs that lawyers aren’t allowed to pay for clients for ethical reasons. (Although they can always apply to have them waived if the client is indigent.) Unless you’re totally broke there’s no such thing as a “free” lawsuit for a plaintiff.
Furthermore, it’s funny how we’re “reptilious” until it’s *your* silver-haired granny up against a corporation that spends more on *coffee* for its lawyers in a year than she ever made in her life. Just sayin’.
@TGFD
Thought on 18 – sounds like what does happen in some Managed Account relationships where PM receives 0% and 25%….
and 14 needs to think about what he/she has written… about the only diversification that worked the past 4 weeks was 65% sovereign debt against whatever crap you owned…CFA indeed
Hi 9, 10 here…
Think about it. Lets say you are a private investor and lets say you have 100k you manage. Now you have a guy who wants to give you another 100k and split profits and losses 50/50. You now basically have an interest free loan on 50k. (If you are up or down 10% for the year, you’re up or down 15k, the same as if you were just managing 150k of your own money.) This might sound economically appealing, but now you’ve got a client for whom you have to make presentations, register with the SEC, field angry phone calls from, etc. etc. Probably a whole lot easier to simply borrow funds from your clearer at 5% per year or whatever.
In a purely hypotheically sense, I agree with you– borrowing money for free is a good thing, but if you’re a talented asset manager you should demand more for your services than what could be had for the price of a loan.
TGFD-
I hear you. Intuitively, it feels kinda like bullshit that a manager should not be liable on the downside, but be able to enjoy the upside, but I don’t really see any other way. The manager is providing a service and needs to be compensated for that service in order for him to do it. That said, it’s also in the manager best interest to keep you around, and he can’t do that if he has a history of constantly blowing up clients. Your best bet as an individual investor would be to find someone who will manage for a fixed percent of AUM, usually something like 1%. The absoute best bet would be to do it yourself, because no one cares for your money more than you do.
TGFD/18-
The lawyers might only collect on winnings, but it’s my understanding (and please correct me if i’m wrong) that they keep something like 33-35% of the payouts.
TGFD:
IA act of ’42: can’t split commissions with clients, to include profit sharing.
Investment Advisors can’t pull that shit.
Phobos Yet institutional managers (like for pension funds, endowments) sometimes pay performance based fees for managing traditional assets (standard long-only equity or fixed income mandates). And of course do it all the time with hedge funds. IA applies only to individuals I guess?
IM’s and Portfolio Managers are a different story. The idea of instituting the law was to protect the average consumer.
Mutual Fund managers (can), Institutional Managers, Hedge Fund Managers, Separately Managed Portfolio Managers (basically a private mutual fund) and the like usually take a percentage of earnings on top of a small salary.
IF those managers were to pass along a percentage of their take on to the IA/FA it would create an incentive for those IA/FAs to invest in those portfolios; it creates a relationship and thus nixes the “best for the client principle”.
Now, what we’re talking about here, is the express splitting of gains and losses between a client and an individual. If the client and the IA/FA split the gain, the gain is seen as a commission, and the split is illegal. Like wise, asking the IA/FA to take on any of the losses is irrational: The IA/FA isn’t investing his/her money, they’re not seeking the risk inherent with doing that. That’s like asking a car dealer to share in potential litigation risk for selling a sports car to someone.
All of that being said, “Managed Money”, which is a % paid to the broker for AUM, is the closest thing to what you’re talking about. Basically it says that if you have $1MM with a broker, and they charge 1%, the broker gets 10k annually, regardless of what the portfolio returns. This is beneficial to the client in that it’s now in the best interest of the IA/FA to make as much money for the client as possible, because when their portfolio goes up, so does the amount of money that the IA/FA makes.
@#22…
“The absoute best bet would be to do it yourself, because no one cares for your money more than you do.”
Thank you #22; that would be nice. Problem is, I don’t know a whole lot, and I’m afraid that I’d “blow-up” my own account worse than it already is.
Lawyer@#20…
I thought one of you lawyers would like my use of “Reptilious”; that’s why I threw it in there. Thank you for your comments, though.
@#23…
33-35% is okay with me as long as the FC would also take the same % of losses.
@#24…
If you’re correct, how do we explain the common 2%Fee + 20%Gains on FC arrangements?
To everyone…
Thank you all for your helpful comments. I’m just frustrated and trying to figure out what to do next since I went to 100% Cash last Tuesday.
The Guy from Delaware
TGFD,
I think you’re confusing the roles that people play in investing your money. Money Managers, you will never talk to. Your FA/IA is the guy you can walk in and sit down at his desk at MS/ML/Wach/Ray Jay etc.
TGFD: How would the FC take some of the losses–would you carryover losses from one year and net them against gains from another? It’s all your cash–would you expect him to reimburse you some percentage of losses?
@#29…
Reimbursement of %losses was my initial idea. Unfortunately, my original premise that no FC would ever do that is probably accurate.
Phobos@#28,26,24…
It sounds as though you know a whole lot more than I do.
You’re right; I am confused. Thank you especially for the time you spent writing #26.
The Guy from Delaware
TGFD-
I know everyone here likes to cast Henry Bloget as a blog-talent-stealing, internet-stock-shilling pretender, but I would HIGHLY recommend his book “Wall Street Self-Defense Guide” (or something like that)
The bottom line is, as an individual investor there is no way to earn an above average return without taking additional risk. Those who tell you otherwise are most likely full of shit. Again, your best hope is to try and catch some of the asset appreciation of the broad market index. This, as we have seen, is certainly not without risk, however.
@#31…
I appreciate your advice, and I’ll look into Blodget’s book. Thank you.
The Guy from Delaware
@32 NO!!!
That’s like raping a cow to figure out where the milk comes from.
If you’re going to read something, read something good. Pick up the CFA books, a 7 Kaplan Book, and get a fake account at options X press (or wherever you can practice trade). You’ll also need a copy of “Security Analysis” by Graham and Dodd.
Don’t buy into the self-help section bullshit of the investment world.
-phobos.
@32
Phobos is a liar. Blodget is a guru. Go with the guru
Phobus & #34…
Thank you for the advice, but to tell the truth, I really don’t know what to do. I’m confused and frustrated. Maybe I should just stay in cash and wait until things look clearer. I can have some time to think, to read a bit, and to keep up with DB.
The Guy from Delaware
“Why no discussion of the directly correlation between Obama’s lead in the polls and the market decline?
Looks like about 300 points on the Dow for every 1 point in the polls.”
I’m not aware of any ‘directly’ correlation, but which is responsible for which? (We call that causation in the English language.)
Let me guess: you have a “theory.”