Sorry to be the little grey raincloud on this Hate The Hedges party, but you might want to understand the implications of what just happened

Y'know that fund that's getting all attention, Melvin Capital? Yeah, fuck them, right? Fuckin' shorters all shortin' and shit -- they played, they paid!

There's a reason they were bailed out and with all due haste.

Here's the issue: they were VERY good at the shorting game. So good that they actually had to turn away business. They made money like horses makes shit. When clients couldn't get in at Melvin, they went elsewhere. That opened the door to a lot of other firms basically mirroring exactly what MC was doing, which included shorting the fuck outta GME.

Fuck those guys too, right? It's their money, so why should I care?

Let's go back a few year, shall we, to the glorious chapter in finance and economics that was the 2008 Crash. Remember when Paulson lost his shit because he realized that in about 36 hours, the basic system called Western Capitalism was going to shit the bed; the bedroom; the whole house and pretty much every surface above the ocean within a planetary radius? This is sorta like that. Only worse.

The thing about short squeezes is that the losses can be infinite, and that's exactly why WallStreetBets did what they did. They knew if they bought and held -- diamond hands -- the stock would have to rise as the shorters had to cover their bets. Melvin Capital and a shit-ton of other, smaller firms had to do that and ran out of liquidity long before GME was even at $50. For every share of stock they shorted, they need to cough up another share at a higher value -- and they HAD to actually have the higher-priced share.

And here's where things get VERY ugly.

Shorting GME was such a sure thing that a huge number of shorts were placed. In fact, more shares of GME were shorted than actually existed. Oops. But hey, SURE THING, BABY and what's the worst that can happen?

Yeeeah, y'see where this is going now?

So these firms, not only are they broke, they don't have the shares, either. They need to come up with shares, pronto, at any price, because contractual obligations are a motherfucker in the finance world. But again, more shorts than there are shares and the people who have the shares, WSB and 4chan's /biz/, aren't letting them go. The longer they hold, the higher the price will go as short after short faces having to cough up the shares they borrowed.

A lot of people are about to lose a LOT of money -- the kinda losses that have so many zeros attached that looking at the number bores the eyes.

Back to 2008: the reason the whole world almost started Mad Max LARPing back then is that a narrow number of highly-important financial institutions were a wee bit thin on liquidity because they were having to pay it out by the boatload. That's bad. What would be better is if risk were more distributed, and how could that little plan POSSIBLY go wrong? Maybe a Black Swan event involving a huge amount of money that needs to be paid out by all of them due to this annoying bird.

That's where we are now, but no one even remotely knows what that figure is going to be. Again, (potentially) infinite losses multiplied by 150% times the number of shares actually available, multiplied by the dogshit risk factor on the loans and the leveraged payouts -- your best case scenario might be a loss of about $500 billion. Someone has to come up with that money, be it the Fed or other banks/investors, but that latter group has to come up with the money themselves, which is generally accomplished by selling profitable holdings. We all know what happens when a lot of people have to sell, right?

I always wanted to live in interesting times, thus proving what an utter fuckwit I am.

His name was Robert Paulson.

His name is Robert Paulson. His name... is Robert Paulson.

His name is Robert Paulson

No, @quantumushroom. Racists like you hold preconceived notions of guilt and wrongdoing based solely on ethnicity. I.E. assuming 95% of single black mothers abuse welfare

Don't even get me started about all the white crime that goes unmentioned, let alone punished. Timothy Geithner, Hank Paulson, Lloyd Blankfein.

Those names bring any crimes to mind?

Sure there are lots of shitty black people. But they don't abuse welfare become they're born black.

They do it cause they're shitty people.

Stop trying to rationalize your bigotry.

Yes, yes. Any school with famous liberals who graduated are now completely invalid as educational institutions. That's how you get around that one. Harvard Law is a crap school. So here are the conservative graduates who also don't have a valid degree according to you:

Chief Justice John Roberts
Former Chief Justice William Rehnquist
Justice Antonin Scalia
George W. Bush
William Bennett
Henry Paulson
Bill Frist
Ted "Series of Tubes" Stevens
Mitt Romney
Alan Keyes
Lou Dobbs
Bill O'Reilly

Man... too bad they must all be idiots... and they clearly don't have a grasp on being "American".

Do you ever stop and think before you say things like that?

You don't get to invalidate someone's academic achievement because you politically disagree with them... Well, you can, but it just makes you look incredibly stupid. There's something horribly wrong with people who look down on someone's intelligence despite graduating from one of the elite colleges in the US because they disagree with them. Ridiculous...

Sarah Palin can really galvanize and lead, eh?

http://politicalticker.blogs.cnn.com/2011/04/07/palin-unfavorable-rating-reaches-new-high/

What, are all polls now liberally biased, too?!

And nice try attempting to make this about how well Obama has done as President. That wasn't the debate. You said Palin is just as smart, if not smarter, than Obama. She's not. Period. You can't even sanely argue that she is. She's of average to above average intelligence overall, but sorely lacks knowledge of the economy, foreign policy, and other crucial topics needed to be a good president. Plain and simple. Your political leanings shouldn't cloud that assessment. There are plenty of right wingers who also can accept Palin just isn't smart, and Obama is.

Bonus: The only person who brought up Al Gore is you. This isn't a liberal vs conservative thing. This is you saying idiotic things flying in the face of simple facts.

>> ^quantumushroom:

Did you seriously just say Obama's intellect is comparable to Palin's?!
Palin has a far better grasp on what it means to be an American than a bitter leftist who sat in a hate-Whitey church for 20-plus years. His Earness is endlessly promoted by His media lackeys, so a fair comparison is not possible.
SERIOUSLY?!?!?!? Look, gaffes aside, Obama graduated from Harvard Law School with a JD magna cum laude. Palin took six years to get a bachelor's degree in communications bouncing around from school to school to get it!
You might have had a point when Harvard wasn't a politically-correct degree mill. Speaking of kollij, we will never see Obama's kollij papers to know his genius even then. Community organizer? Do you even need higher education to become a rabble-rousing 'activist'?
Dude, if the conservative/libertarian ideology concluded the world is flat, would you spout that crap, too?! In fact, your beloved Ron Paul wouldn't tell Obama he's not smart enough to be president.
I don't need any labels to denounce His Earness. I merely observe the results of his incompetence (or genius, for those promoting the one-world illuminati worldview). His results are indefensible by any metric you care to name.
Just ridiculous. I get you don't like Obama, but that doesn't mean you should ignore basic fact. And I'm sorry, but she's simply not smart enough to be president. This has nothing to do with her ideology. Plenty of conservative politicians are out there who have the intellectual capacity to be president, but she's not one of them.
Due to an unfortunate media-created outbreak of Palin Derangement Syndrome, your observation cannot be quantified. Anyone here think Joe Biden is smart enough to operate a doorknob much less be President?
BONUS NO. 2 -- "Who are these people?" -- mid-90s Vice President and supergenius Al Gore, referring to the busts of Jefferson, Washington and Franklin during a tour of Monticello, home of Thomas Jefferson.

His name is Robert Paulson.

His name... is robert paulson.

There's two things that need to be separated here.

The fraud allegation are that Goldman Sachs's employees mislead its client into believing that the hedge fund that arranged certain CDOs for them - Paulson & Co held a long position in the CDO (they expected it to go up in value, obviously a reassurance for the investor), rather that what was really the case - that they were short (expecting it to go down in value).

If this is indeed the case then they will likely be fined and lose some of their prestige and reputation. At best it would have been an overzealous employee, at worst it would be have been a corporate strategy from upper management. Regardless they will be deemed less trustworthy and lose business from potential clients in addition to any fines imposed.

The second point is though, that the idea that this is evidence that they caused this financial crisis is simply ridiculous and anyone who believes this is channeling populist outrage.

Goldman Sachs were not the only ones selling CDOs. The client who bought from Goldman would have likely bought from someone else otherwise if they felt this was an appropriate investment. There was no shortage of financial corporations who would have been willing, and judging by their near collapse, likely would not have had any reservations like the hedge fund that arranged this CDO for Goldman.

http://media.economist.com/images/images-magazine/2010/17/fn/201017fnc367.gif

Yes, Goldman bet against the market and profited handsomely. Had there been more firms betting against the market, it would have kept the prices of houses down, and discouraged further reckless lending and prevented the bubble in the first place. Financial firms profit from the mis-pricing of securities and in acting against them bring the market back to an accurate representation of value preventing such crises. If you want to blame someone, blame the ones who created the boom. Blame the ones who perpetuated the culture of misinformation that house prices would rise indefinitely, that savings rates of around 0% were sustainable. Blame the regulators for not having sufficient safeguards in place and limits to risk taking.

If you want to prevent the next crisis, insist on there being a tax on liabilities (debt) that financial firms take on, to counteract the perception that they are too big to fail and in effect adjust upwards their borrowing costs from unrealistically low rates. Insist on there being a legal procedure to impose orderly losses on shareholders of failing banks, allowing there to be a middlegrounds that hurts investors in these banks as opposed to the option of bailing out the bank and perpetuating too big to fail, or allowing it to collapse and triggering meltdown.

Tags for this video have been changed from 'animaniacs, spontaneous, great memory' to 'animaniacs, spontaneous, great memory, Rob Paulson' - edited by Sagemind

What McCain says in clip #1:

We were all misled. We were all misled. I mean, he said that they were going after the toxic assets. The toxic asset—his word—was the housing market. He testified to that. I mean, we were all misled. So what did he do then? They started pumping money into the financial institutions. … They turned around and switched from trying to address the housing market to bailing out the financial institutions on Wall Street.

To summarize, he says that TARP was to address the housing market, but later was about helping financial institutions.

What McCain says in clip #2 (from the 2nd Presidential debate):

This rescue package means that we will stabilize markets, we will shore up these institutions. But it’s not enough. That’s why we’re going to have to go out into the housing market and we’re going to have to buy up these bad loans and we’re going to have to stabilize home values.

To summarize, in sentence one he says TARP is to stabilize the markets, and will shore up these (financial) institutions. In sentence two, he says that's not enough. In sentence three he says, in future tense, that we will need to have a new initiative to help people out with mortgages because the current one won't.

If 2010 McCain isn't lying his ass off, then he's an utter moron who never understood what TARP was about, despite it being a hot topic in the election. There was no attempt by the Bushies or Paulson to say that this would help homeowners with their mortgages. What they said was that this was to help keep credit to business owners flowing so that people wouldn't lose their jobs.

Oh, and to catch people up with present times, the Republicans unanimously opposed legislation that would do what McCain says he thought TARP would do (and what he said he wanted to do during that 2008 debate), which of course means McCain himself voted against doing what he claims he voted for in 2008.

I'm not surprised.

The IRS always picks on the weak.

Think they'll audit Paulson or Madoff's sons?

No, they target single mothers, college students, and the unemployed.

Oh! And waitresses and bartenders, because that's where the big money is.

IR Assholes.

>> ^Farhad2000:
>> ^Mashiki:
No one is an atheist in a foxhole.

Philip Paulson disagrees.


Actually, lets look at it differently since the world isn't black, and white as much as people like to try.

We can look at that quote, and compare it to my comment. The belief that there is no god, or higher power holds true. The fact that you're facing your own morality is the true test of ones mettle. It doesn't matter whether or not you believe in a higher power or not. The saying that I gave above applies as such:

When faced with death, you look to whatever you're faced with, and make the view with whatever you seem to believe in. No more, no less. Whether that's a higher power, or to nothing at all. While you realize that everything in your life can be for naught, and you're powerless in it. Welcome to the wonderful world of 'reading' more then what actually exists in a sentence.

Some would call that philosophy.

>> ^Farhad2000:
>> ^Mashiki:
No one is an atheist in a foxhole.

Philip Paulson disagrees.

"I suffered through horrifying moments, expecting to be killed. I was convinced that no cosmic rescuer would same me. Besides, I believed life after death was merely wishful thinking. There were times when I expected to suffer a painful, agonizing death. My frustration and anger at being caught in a dilemma of life-and-death situations simply infuriated me. Hearing the sound of bullets whistling through the air and popping near my ears was damned scary. Fortunately, I was never physically wounded." - Philip Paulson

>> ^Mashiki:
No one is an atheist in a foxhole.


Philip Paulson disagrees.