Zero Sum Games but which bank is making profit?

[kean]

If Derivatives are zero sum games then which bank/s is/are making profits?

It seems most financial institutions are losing steam. Does this mean that quant models are incorrect constructed???:smt024

 

[IlyaKEightSix]

The problem with quant models, at least from whatever information I can pick up, seems to be that quants just assume that theirs is the only model out there and nobody else is doing what they do, when in reality, you have a bunch of other models, hence the joke:

"I just had a ten-sigma event happen to me! I haven't seen that in 3 months!"

As for which banks are making money, um, the good ones.

 

[Uncle Max]

Goldman does.

Not to mention the fact that Treasury Secretary is a former CEO of Goldman

 

[IlyaKEightSix]

I actually found that surprising when I first read that, as he doesn't seem to be wielding magic left and right that you'd expect Goldman Sachs to do.

GS seems to be almost above all of the nonsense hitting all of the other banks, so it's surprising that Hank Paulson can't do the same with the treasury.

I guess that's what happens when you're dealing with political mumbo-jumbo instead of the talented folks at GS.

 

[alain]

There is an article from BBG that explains it:

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lewis&sid=aEXlKAu61sYU

 

[alain]

I think this is the article Michael Lewis refers to:

http://www.gata.org/node/5840

 

[IlyaKEightSix]

There is an article from BBG that explains it:

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lewis&sid=aEXlKAu61sYU

Wow. If that's the case, then Goldman Sachs really has some gall to literally say that the rest of the industry is comprised of a bunch of morons. But it seems to be that the top execs at most of the big wall street firms are one of the three following bad titles:

1) Idiots--they completely didn't see the subprime crisis coming at all.
2) Thieves--they knew it was coming and profited off of it while letting the crisis smash everyone.
3) Ostriches--they knew it was coming but didn't do anything about it because they hoped it wouldn't anyway!

Which is it?!

 

[alain]

Wow. If that's the case, then Goldman Sachs really has some gall to literally say that the rest of the industry is comprised of a bunch of morons.

not only the rest of the industry but themselves as well.

If you read the second article (the original one), GS was still selling CDOs even though they knew they were money losers since they bet against them.

 

[swindler]

It keeps the lower level people from talking. Word gets around fast on the street and the fewer people know how the market will turn the better.

 

[bigbadwolf]

1) Idiots--they completely didn't see the subprime crisis coming at all.
2) Thieves--they knew it was coming and profited off of it while letting the crisis smash everyone.
3) Ostriches--they knew it was coming but didn't do anything about it because they hoped it wouldn't anyway!

Which is it?!

Thieves first and foremost. Lesson 1: Finance = legalised theft. Always has. Hiring Ph.D.s and introducing abstruse mathematics has merely been an attempt to put varnish on this. It's always been clear that the chickens of subprime were going to come home to roost some day: loans were being made to people who couldn't service them. Finance people have been living in an atmosphere of willful denial -- because there were short-term profits to be made. More importantly, the nation's political leadership condoned this and turned a blind eye towards it -- maybe because there was no other way of keeping a moribund economy ticking.