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Strategies & Market Trends : Fundamental Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (1176)	4/29/2010 3:53:03 PM
From: bruwin	Read Replies (1) \| Respond to of 4719

Ok, thanks for that Madharry. I'm 100% with you with regards to the role and responsibility of a Market Maker (MM). As I see it, the MM provides a buyer for a seller or a seller for a buyer, and if he can't find either for a Market Price Order (and not for a Limit Order) then he's obligated to fill the required role himself. He also sets the bid and offer. And, in addition, he's not required to divulge the details of either party. And also, in addition, he can take a position on that trade without divulging his action. Based on what I saw of several of the Senator's comments I'm not sure how well aware some of them are of the true role of a MM. The only aspect of this case that I believe may be related to a conflict of interest is if GS used their good reputation and relationship with their clients to persuade or influence them that the ABACUS instruments were items that they should go long on. While they, themselves, were going short because they had the expertise, know-how and inside knowledge to know that those self-same instruments were doomed to fail, especially due to their apparent relationship with Paulson, who was advising ACA as to what instruments to put into ABACUS, while he, himself, was heavily shorting those instruments via GS. In addition, it appears that GS also persuaded ACA to take on Paulson, as their adviser, as to what they should put into ABACUS. Anyway, it will be interesting to see how this all finally pans out and where GS find themselves in the world of investment and investors. My guess it will be business as usual ... with maybe some additional Regulations that the likes of GS will no doubt find their way around. They have sufficient very smart guys to do just that.

To: Madharry who wrote (1176)	4/30/2010 2:44:32 AM
From: Spekulatius	Respond to of 4719

re GS >>I think that what really sticks in my craw is that some people are confusing the role of GS as and advisor with their role as market maker<< You forgot that in addition to the above, that they gamble with all those things too. GS makes it easy to confuse all that because they seem to do all these things at the same time. the solution is to break these functions apart since there are natural conflicts. That is part of what the financial reform is about. GS also has the choice to relinquish their bank license. Then they do not have access to FED money which they can use to borrow right now for almost nothing. Also in case of emergency, the FED will arrange credit lines, special windows and whatever it takes to keep the banks liquid. If would have to create these credit lines with other banks, they would have to pay an annual fee (maybe 0.25% of nominal regardless of use) and if they draw it down in an emergency they would have to pay dear interest plus there are typically all sorts of covenant issues attached. Yes it's great to have all that available, it's a subsidy from Uncle Sam worth a few B$/year probably if you count it all. GS want's all that and be left alone and go about their business. I don't think it's going to fly any more though. And I am saying that even though I like GS here at current prices and might buy some again tomorrow. At least those guys know what they are doing. The real big problem are the morons that get all the above as well and don't know what they are doing.