The US banking system: It stinks!

This is not to say that the Indian banking system is great, but I am not sure about how many of you have been following the Goldman case. There is a lot to say against the banking system – but remember do not go short on shares of big powerful companies. Personally there is a company in which I have shares – and its Chairman is capable of doing anything he wants in his industry. Right or Wrong, he makes money for me, and my money does not ask me from where it came. Having said that, I do not have shares of Goldman Sachs or any American pharmaceutical company – and I am sad. The more Obama wants change, the more things will look the same. Betting against Goldman Sachs is betting against the house. Do not do it, well not yet. GS is still a big and powerful name.

Over the years whenever there is a fraud in the financial services industry the all the politicians (in US and  India) order a probe. They have no clue to comprehend the facts, do not make an attempt to learn, make trillions of photocopies (God, save the earth), and worry about the salaries, perks, first class air travel, …and other luxury symbols.

As all of us love a bull run, the corollary has to be ‘we all hate a bear market’ which roughly translates to ‘We hate people who sell short – after all they are here to make money on somebody’s misery’.

If I see a well managed company and its equity stock is available cheap. If I see a badly managed company quoting at too high a price – I should logically go SHORT. There is nothing wrong in going short. However if I am allowed to create a derivative, allowed to leverage on my balance sheet and there is no restriction on me to go short on the same…I think that sucks, and completely sucks.  If I am allowed to go short on a product which I have created – there is a clear case (as an insurer would say) of insuring for an event over which I have full control. Well, not exactly that, but it is like God taking an insurance against a Tornado. Or like Sachin betting on a 1: 1000 odds that he will get out exactly at 49. Possible? I hope such things are not happening in the IPL. No to me it makes no difference – I hit the bed before the second innings starts! If the originator of the event (and can control the risk) bets against the event, I would rather not attend that event that is all. If I P L creates a brand of Rs. 10,000  crores for all the people …who am I to disturb the whole thing?

Three wrong conclusions that the MEDIA will make people draw after the probe:

a. Bankers are overpaid, and we are going to do something about it. (first part correct, second part wrong).

b. Short Selling is wrong, and we are going to ban it. (first part wrong, second part cannot happen)

c. Bankers are crooks, all other people in society (like teachers, God-men and doctors for example) are straight. L O L.

d. Congress (JPC) has the Moral right to conduct such a probe. With Sharad Pawar, Rajiv Shukla, Arun Jaitely, Sunil Gavaskar, MAK Pataudi, etc. sleeping at the wheel, Lalit Modi is the only guy who has done every thing WRONG. The brand is worth Rs. 10,000 crore – come on Lalit has done something right (well, I hope)

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2 Responses to “The US banking system: It stinks!”

  1. Ravinder Makhaik on May 1st, 2010 at 5:23 pm

    So long as Lalit Modi was making money, everyone (Politicians, film stars, cricket stars, corporate honchos, BCCI, AICC et al) was at the party.

    Now that he is a fall guy – he is wicked to have been thus greedy.

    While tracking news about GS at the senate committee meeting – their executives have the cheek to stand up to the most powerful government admitting to no wrong.

    Politicians there (Like here) don’t know what to do with the ethical ways this giant bank be-fooled others while the world was inflicted with a meltdown.

  2. The solution is simple. The Banks have to be cut down in size. Banks should stick to Core Banking – what SBI used to do 5 years back! Rest business of US Banks should be hived off and be separate business. Any derivative OR speculated oriented business, if they do and go wrong, deserve to die. And not to be resuscitated back to health, by printing billions of dollars.

    Unfortunately, the Big Bankers are against the above move. They are saying Big Banks are necessary, as otherwise, business will go to London or Zurich.

    You decide.

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