Very interesting article that is making the rounds in the Finance world.

Michael Lewis is best known as the author of "Liar's Poker".

http://www.portfolio.com/news-market...lio/2008/11/11
/The-End-of-Wall-Streets-Boom

Conde Nast Portfolio magazine, 11 November 2008.

Joe Gwinn

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:

http://www.portfolio.com/news-market...l-Streets-Boom
-------------------------------

Thanks for the link. Very insightful article.

At what point does stupid and arrogant become criminal? Is there
such a thing as financial malpractice?

These people represented themselves as having unique information,
skills, knowledge and insight and received considerable
compensation on this basis which establishes professional
liability.

At the very least it appears to be fraud, possibly under the
various anti "fortune telling" statues. If they could stick it
to Miss Cleo and force some restitution, why not Goldman-Sachs,
et al?
http://en.wikipedia.org/wiki/Miss_Cleo
http://finance.google.com/finance?client=ob&q=NYSE:GS


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

F. George McDuffee wrote:

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:


http://www.portfolio.com/news-market...l-Streets-Boom

-------------------------------

Thanks for the link. Very insightful article.

At what point does stupid and arrogant become criminal? Is there
such a thing as financial malpractice?




We find ourselves relying on the honesty of greedy men.

Richard wrote:

We find ourselves relying on the honesty of greedy men.

You can't cheat an honest man.

Wes wrote:
Richard wrote:


We find ourselves relying on the honesty of greedy men.


You can't cheat an honest man.


Old saw - that has just been proven wrong.


Or maybe the exception that proves the rule.


But honest men HAVE been cheated here...

On Sat, 06 Dec 2008 12:38:40 -0600, F. George McDuffee
wrote:

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:

http://www.portfolio.com/news-market...l-Streets-Boom
-------------------------------

Thanks for the link. Very insightful article.

At what point does stupid and arrogant become criminal? Is there
such a thing as financial malpractice?

These people represented themselves as having unique information,
skills, knowledge and insight and received considerable
compensation on this basis which establishes professional
liability.

At the very least it appears to be fraud, possibly under the
various anti "fortune telling" statues. If they could stick it
to Miss Cleo and force some restitution, why not Goldman-Sachs,
et al?
http://en.wikipedia.org/wiki/Miss_Cleo
http://finance.google.com/finance?client=ob&q=NYSE:GS


Unka' George [George McDuffee]
-------------------------------------------

There is nearly such a thing a financial malpractice. The closest
legal cause of action to which you refer is: "Breach of Fiduciary
Duty". This is usually used by shareholders to sue CEO's or Board
members, but can be used against trust managers and the like. There
must be some fundamental financial stewardship relationship between
the aggrieved and the alleged perpetrator of the tort involved, be it
fraud or outright theft.
Dave

In article ,
F. George McDuffee wrote:

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
-------------------------------

Thanks for the link. Very insightful article.

Welcome.

By the way, I think that Michael Lewis may be coming out with a book on
the subject.


At what point does stupid and arrogant become criminal?

Gee I hope never ... the prisons are far too small, and already full.


Is there such a thing as financial malpractice?

Oh sure. Many kinds. Some of it is also against the law.


These people represented themselves as having unique information,
skills, knowledge and insight and received considerable
compensation on this basis which establishes professional
liability.

I would dig a little deeper than "these people", as there are many
actors and motives, not all being evil, not all being stupid.

People have always been greedy and stupid, and always will be, so we
need a system that works despite human frailty and folly, and ideally
harnesses frailty and folly to the common good.

By definition, present company excluded, half of all people are below
average intelligence.


At the very least it appears to be fraud,

The central fraud is that the rating agencies (Moodys, Dun and
Bradstreet, and Fitch) became lazy and later corrupt, and were giving
very high ratings to trash.

I always wondered how the rating agencies could physically do due
diligence on so many offerings, especially the very complex ones
featured in the current drama. By back of the envelope calculation,
they could not be spending more than a few minutes studying each
offering. Now I know the answer.

Many fortunes were lost and innocent companies ruined because people
believed the three rating agencies. Without the false ratings, the
whole current crisis would not have happened.

Eliot Spitzer also helped, by effectively shutting off the income stream
that supported the independent analysis that would have tempered the
influence of the rating agencies.

Now, finance people start spitting nickels at mention of Moodys in
particular. One likely casualty of the current crisis is that nobody
believes the rating agencies any more, and so will neither require nor
acquire ratings from these agencies, which will likely fail within five
or ten years. Why so long? Because many contracts and laws require use
of these ratings, regardless of worth.

This is actually a good thing, as purchasers of securities will then all
need to have their own research staffs, far too many for all of them to
be fooled and/or corrupted. There were exactly three organizations
providing ratings, far too few, so it was too easy to corrupt them all,
and too much rode on their honesty and diligence, which meant that a
crash was inevitable.


... possibly under the
various anti "fortune telling" statues.

Not really. Nor does the SEC regulate fortune tellers.

A number of high-profile analysts have been kicked out of the securities
business for lying to their clients. This fits the legal definition of
fraud in the English Common Law going back centuries, never mind modern
securities law.


If they could stick it
to Miss Cleo and force some restitution, why not Goldman-Sachs,
et al?
http://en.wikipedia.org/wiki/Miss_Cleo
http://finance.google.com/finance?client=ob&q=NYSE:GS

Because Goldman has better lawyers for sure?

If one outlaws error, there will soon be no predictions. Honest
analysts can be wrong - it happens all the time - and analysts are smart
enough to see the personal risk. The result will be mealymouthed
pablum, or silence.


Joe Gwinn

On Dec 6, 4:54*pm, Joseph Gwinn wrote:
In article ,
*F. George McDuffee wrote:

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11....
-------------------------------

Thanks for the link. *Very insightful article.

Welcome. *

By the way, I think that Michael Lewis may be coming out with a book on
the subject.

At what point does stupid and arrogant become criminal? *

Gee I hope never ... the prisons are far too small, and already full.

*Is there such a thing as financial malpractice? *

Oh sure. *Many kinds. *Some of it is also against the law.

These people represented themselves as having unique information,
skills, knowledge and insight and received considerable
compensation on this basis which establishes professional
liability. *

I would dig a little deeper than "these people", as there are many
actors and motives, not all being evil, not all being stupid. *

People have always been greedy and stupid, and always will be, so we
need a system that works despite human frailty and folly, and ideally
harnesses frailty and folly to the common good. *

By definition, present company excluded, half of all people are below
average intelligence.

At the very least it appears to be fraud,

The central fraud is that the rating agencies (Moodys, Dun and
Bradstreet, and Fitch) became lazy and later corrupt, and were giving
very high ratings to trash.

I always wondered how the rating agencies could physically do due
diligence on so many offerings, especially the very complex ones
featured in the current drama. *By back of the envelope calculation,
they could not be spending more than a few minutes studying each
offering. *Now I know the answer.

Many fortunes were lost and innocent companies ruined because people
believed the three rating agencies. *Without the false ratings, the
whole current crisis would not have happened.

Eliot Spitzer also helped, by effectively shutting off the income stream
that supported the independent analysis that would have tempered the
influence of the rating agencies.

Now, finance people start spitting nickels at mention of Moodys in
particular. *One likely casualty of the current crisis is that nobody
believes the rating agencies any more, and so will neither require nor
acquire ratings from these agencies, which will likely fail within five
or ten years. *Why so long? *Because many contracts and laws require use
of these ratings, regardless of worth.

This is actually a good thing, as purchasers of securities will then all
need to have their own research staffs, far too many for all of them to
be fooled and/or corrupted. *There were exactly three organizations
providing ratings, far too few, so it was too easy to corrupt them all,
and too much rode on their honesty and diligence, which meant that a
crash was inevitable.

... possibly under the
various anti "fortune telling" statues. *

Not really. *Nor does the SEC regulate fortune tellers. *

A number of high-profile analysts have been kicked out of the securities
business for lying to their clients. *This fits the legal definition of
fraud in the English Common Law going back centuries, never mind modern
securities law.

*If they could stick it
to Miss Cleo and force some restitution, why not Goldman-Sachs,
et al?
http://en.wikipedia.org/wiki/Miss_Cleo
http://finance.google.com/finance?client=ob&q=NYSE:GS

Because Goldman has better lawyers for sure?

If one outlaws error, there will soon be no predictions. *Honest
analysts can be wrong - it happens all the time - and analysts are smart
enough to see the personal risk. *The result will be mealymouthed
pablum, or silence.

Joe Gwinn

There may not be enough prisons, but I bet there is enough rope, and
trees are reusable:-)).

Many honest and prudent people took a haircut due to monetary
manipulation.

I think that under tort law a joint lawsuit may be feasible, if only
to clean-out the perpetrators and pay the lawyers... I'd settle for
this satisfaction plus a few bucks if any were left over.

Any lawyer-tinkerers with some pro bono advice on this forum?

Wolfgang

wrote:

Many honest and prudent people took a haircut due to monetary
manipulation.

I think that under tort law a joint lawsuit may be feasible, if only
to clean-out the perpetrators and pay the lawyers... I'd settle for
this satisfaction plus a few bucks if any were left over.

Will we be hanging legislators? Might be hard to do since most legislators are lawyers
and lawyers hang together. Oh, a pun.

Wes

On Sat, 06 Dec 2008 20:51:38 -0500, the infamous Wes
scrawled the following:

wrote:

Many honest and prudent people took a haircut due to monetary
manipulation.

I think that under tort law a joint lawsuit may be feasible, if only
to clean-out the perpetrators and pay the lawyers... I'd settle for
this satisfaction plus a few bucks if any were left over.

Will we be hanging legislators? Might be hard to do since most legislators are lawyers
and lawyers hang together. Oh, a pun.

Kindly refrain from taunting the willing public with such tasty
treats, Wes. wishful sigh

--
Smell is a potent wizard that transports you across
thousands of miles and all the years you have lived.
-- Helen Keller

In article
,
wrote:

On Dec 6, 4:54*pm, Joseph Gwinn wrote:
In article ,
*F. George McDuffee wrote:

On Sat, 06 Dec 2008 12:47:07 -0500, Joseph Gwinn
wrote:

http://www.portfolio.com/news-markets/national-news/portfolio/2008/11...
-------------------------------

Thanks for the link. *Very insightful article.

Welcome. *

By the way, I think that Michael Lewis may be coming out with a book on
the subject.

At what point does stupid and arrogant become criminal? *

Gee I hope never ... the prisons are far too small, and already full.

*Is there such a thing as financial malpractice? *

Oh sure. *Many kinds. *Some of it is also against the law.

These people represented themselves as having unique information,
skills, knowledge and insight and received considerable
compensation on this basis which establishes professional
liability. *

I would dig a little deeper than "these people", as there are many
actors and motives, not all being evil, not all being stupid. *

People have always been greedy and stupid, and always will be, so we
need a system that works despite human frailty and folly, and ideally
harnesses frailty and folly to the common good. *

By definition, present company excluded, half of all people are below
average intelligence.

At the very least it appears to be fraud,

The central fraud is that the rating agencies (Moodys, Dun and
Bradstreet, and Fitch) became lazy and later corrupt, and were giving
very high ratings to trash.

I always wondered how the rating agencies could physically do due
diligence on so many offerings, especially the very complex ones
featured in the current drama. *By back of the envelope calculation,
they could not be spending more than a few minutes studying each
offering. *Now I know the answer.

Many fortunes were lost and innocent companies ruined because people
believed the three rating agencies. *Without the false ratings, the
whole current crisis would not have happened.

Eliot Spitzer also helped, by effectively shutting off the income stream
that supported the independent analysis that would have tempered the
influence of the rating agencies.

Now, finance people start spitting nickels at mention of Moodys in
particular. *One likely casualty of the current crisis is that nobody
believes the rating agencies any more, and so will neither require nor
acquire ratings from these agencies, which will likely fail within five
or ten years. *Why so long? *Because many contracts and laws require use
of these ratings, regardless of worth.

This is actually a good thing, as purchasers of securities will then all
need to have their own research staffs, far too many for all of them to
be fooled and/or corrupted. *There were exactly three organizations
providing ratings, far too few, so it was too easy to corrupt them all,
and too much rode on their honesty and diligence, which meant that a
crash was inevitable.

... possibly under the
various anti "fortune telling" statues. *

Not really. *Nor does the SEC regulate fortune tellers. *

A number of high-profile analysts have been kicked out of the securities
business for lying to their clients. *This fits the legal definition of
fraud in the English Common Law going back centuries, never mind modern
securities law.

*If they could stick it
to Miss Cleo and force some restitution, why not Goldman-Sachs,
et al?
http://en.wikipedia.org/wiki/Miss_Cleo
http://finance.google.com/finance?client=ob&q=NYSE:GS

Because Goldman has better lawyers for sure?

If one outlaws error, there will soon be no predictions. *Honest
analysts can be wrong - it happens all the time - and analysts are smart
enough to see the personal risk. *The result will be mealymouthed
pablum, or silence.

Joe Gwinn

There may not be enough prisons, but I bet there is enough rope, and
trees are reusable:-)).

Many honest and prudent people took a haircut due to monetary
manipulation.

I think that under tort law a joint lawsuit may be feasible, if only
to clean-out the perpetrators and pay the lawyers... I'd settle for
this satisfaction plus a few bucks if any were left over.

Any lawyer-tinkerers with some pro bono advice on this forum?

Don't worry. The sharks are already here. People with access to
serious lawyers have lost serious money, and are not happy about it.

Nor are new laws required.


As for the rating agencies, there is a very interesting article on the
front page of todays (lead article, 7 Dec 08) New York Times: "Debt
Watchdogs: Tamed or Caught Napping?".

http://www.nytimes.com/2008/12/07/bu...artner=rss&emc
=rss

Joe Gwinn

On Sun, 07 Dec 2008 11:21:27 -0500, Joseph Gwinn
wrote:

As for the rating agencies, there is a very interesting article on the
front page of todays (lead article, 7 Dec 08) New York Times: "Debt
Watchdogs: Tamed or Caught Napping?".

http://www.nytimes.com/2008/12/07/business/07rating.html?partner=rss&emc=rss
============
Thanks for another good article.

best line was
-------------
snip
When Moody’s began lowering the ratings of a wave of debt in July
2007, many investors were incredulous.

==“If you can’t figure out the loss ahead of the fact, what’s
the use of using your ratings?”== asked an executive with Fortis
Investments, a money management firm, in a July 2007 e-mail
message to Moody’s. “You have legitimized these things, leading
people into dangerous risk.”
snip
-------------

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

On Dec 7, 1:34*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Sun, 07 Dec 2008 11:21:27 -0500, Joseph Gwinn

wrote:
As for the rating agencies, there is a very interesting article on the
front page of todays (lead article, 7 Dec 08) New York Times: "Debt
Watchdogs: Tamed or Caught Napping?".

http://www.nytimes.com/2008/12/07/business/07rating.html?partner=rss&....

============
Thanks for another good article.

best line was
-------------
snip
When Moody’s began lowering the ratings of a wave of debt in July
2007, many investors were incredulous.

==“If you can’t figure out the loss ahead of the fact, what’s
the use of using your ratings?”== asked an executive with Fortis
Investments, a money management firm, in a July 2007 e-mail
message to Moody’s. “You have legitimized these things, leading
people into dangerous risk.”
snip
-------------

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Methinks that a quaint custom employed by ol' Napoleon to excellent
effect may bear re-introduction. This worthy executed one admiral per
year to "encourage the others".

Egad, if we did this with one preselected politico, one snivel
servant, one financial mismanager, each year, think what this would do
for the TV ratings! think what this would do to your investment
portfolio! Think what this would do to honesty in government! The
mind boggles at the possibilities.

Wolfgang

In article
,
wrote:

On Dec 7, 1:34*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Sun, 07 Dec 2008 11:21:27 -0500, Joseph Gwinn

wrote:
As for the rating agencies, there is a very interesting article on the
front page of todays (lead article, 7 Dec 08) New York Times: "Debt
Watchdogs: Tamed or Caught Napping?".

http://www.nytimes.com/2008/12/07/business/07rating.html?partner=rss&...

============
Thanks for another good article.

best line was
-------------
snip
When Moody¹s began lowering the ratings of a wave of debt in July
2007, many investors were incredulous.

==³If you can¹t figure out the loss ahead of the fact, what¹s
the use of using your ratings?²== asked an executive with Fortis
Investments, a money management firm, in a July 2007 e-mail
message to Moody¹s. ³You have legitimized these things, leading
people into dangerous risk.²
snip
-------------

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Methinks that a quaint custom employed by ol' Napoleon to excellent
effect may bear re-introduction. This worthy executed one admiral per
year to "encourage the others".

Executed? I don't know that this really happened, although Napoleon did
exile one admiral, maybe more. Napolepon was famous in military history
for the discretion he gave to the front line commanders, which was not
the norm then.

http://books.google.com/books?id=U_L...=PA323&dq=napo
leon+execute+admiral+year&source=web&ots=DpFgCzphe u&sig=ugKk2n9Puld6BgUgy
xlN8CRFTJA&hl=en&sa=X&oi=book_result&resnum=7&ct=r esult#PPA324,M1

Page 233-234.


Egad, if we did this with one preselected politico, one snivel
servant, one financial mismanager, each year, think what this would do
for the TV ratings! think what this would do to your investment
portfolio! Think what this would do to honesty in government! The
mind boggles at the possibilities.

Hmm. There were pickpockets working the crowd witnessing the hanging of
pickpockets.

Joe Gwinn

On Sun, 7 Dec 2008 12:43:51 -0800 (PST), wrote:

On Dec 7, 1:34*pm, F. George McDuffee gmcduf...@mcduffee-
associates.us wrote:
On Sun, 07 Dec 2008 11:21:27 -0500, Joseph Gwinn

wrote:
As for the rating agencies, there is a very interesting article on the
front page of todays (lead article, 7 Dec 08) New York Times: "Debt
Watchdogs: Tamed or Caught Napping?".

http://www.nytimes.com/2008/12/07/business/07rating.html?partner=rss&...

============
Thanks for another good article.

best line was
-------------
snip
When Moody’s began lowering the ratings of a wave of debt in July
2007, many investors were incredulous.

==“If you can’t figure out the loss ahead of the fact, what’s
the use of using your ratings?”== asked an executive with Fortis
Investments, a money management firm, in a July 2007 e-mail
message to Moody’s. “You have legitimized these things, leading
people into dangerous risk.”
snip
-------------

Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).

Methinks that a quaint custom employed by ol' Napoleon to excellent
effect may bear re-introduction. This worthy executed one admiral per
year to "encourage the others".

Egad, if we did this with one preselected politico, one snivel
servant, one financial mismanager, each year, think what this would do
for the TV ratings! think what this would do to your investment
portfolio! Think what this would do to honesty in government! The
mind boggles at the possibilities.

Wolfgang


And we can pick em by a lottery. Picking an honest one by accident is so
improbable as to bee moot.

Gunner

"They couldn't hit an elephant at this dist..."
Maj. Gen. John Sedgewick, killed by a sniper in 1864 at the battle of Spotsylvania