A Lesson in the Life of a Vampire Squid

It’s 2 o’clock in the afternoon in Piazza Duomo where I sit listlessly procrastinating at an outdoor café, consuming large quantities of coffee and toying around with my first 21^st century phone (yes, I finally caved). Time stands in the corner glaring at me while I play spider solitaire, on the difficult level, and watch tourists and locals interfacing like two galaxies colliding in a far part of some star-trek worthy universe. I figure people-watching whilst sipping a caffe should somehow conform to my current studies of the modern history of the world and perhaps somehow metaphorically illustrate the random walk theory of the securities market.

For the record, trying to win at difficult level spider solitaire is like trying to catch a cab on Saturday night anywhere below 42^nd street! Either that or Apple’s rigged the game for failure as part of its plan for world domination.

I’m pushing the limit of dilatory procedural tactics now but the obesity-sized portion of homework that looms over my head isn’t helping.

I shouldn’t complain, I’ve just read a delightful exposé from Rolling Stone magazine for my corporate finance class entitled “The Great Big American Bubble Machine”, written by Matt Taibbi. The article fashionably annihilates corporate finance succubus Goldman Sachs for its vast portfolio of sleazy underwriting, sneaky short sales and graceful spinning shenanigans.

While any piece of writing can be exaggerated, I tend to have very few doubts as to the legitimacy of this article in particular, although I’m sure Goldman Sachs, whose company motto is “long-term greedy”, was not the only factor contributing to the tech, oil and housing bubbles. That aside, there has been a wealth of articles lately chastising Goldman Sachs for its naughty behavior.

In Taibbi’s synopsis, Goldman stands accused of not only contributing to various financial bubbles, but of having a direct hand in their intentional creation. Goldman’s out of control, leverage-based investment techniques back in the 20s (Goldman backing Goldman backing Goldman) helped contribute to the crash of the Great Depression. During the tech bubble, Goldman engaged in serious “spinning”, or corporate bribery, for underwriting deals. They further engaged in “laddering”, or tampering with IPO share prices. Robert Rubin, former Goldman CEO was acting as Treasury Secretary in the nineties when all of this was taking place; in fact, he is responsible for much of the dis-regulation that allowed the housing bubble to inflate to the size it did. In the mid-nineties, the Commodity Futures Trading Commission suggested tight regulation of CDOs and Credit Swaps, a move drastically opposed by Rubin, who eventually persuaded Congress to listen to his side; the Commodity Futures Modernization Act was passed shortly thereafter, leaving firms free to trade default swaps.

The best part of all of this however, is all-American corporate luminary Henry Paulson, notoriously well-known for his controversial government bailouts in 2008. Paulson had been in charge when Rubin was Treasury Secretary; he was the one who took Goldman Sacks public in 1999. During the housing bubble, Paulson had taken Rubin’s place in the White House and Lloyd Blankfein was Goldman’s acting CEO. When Goldman blatantly engaged in short-selling its own securities, or betting against its own mortgage bundles, no one cried security fraud. Instead, our favorite financial behemoth made sure (allegedly, though not that much) that AIG got the bailout, from which they received 13 billion, while their biggest competitor, Lehman Brothers filed for bankruptcy.

Another article from the New York Times cited phone and schedule records affirming that Paulson spoke with Goldman CEO Lloyd Blankfein 26 times between 2007 and 2008 prior to receiving the ethics waiver from the government allowing him to be involved in  “conflict of interest” affairs, or contact with his former firm. Furthermore, between 16-21 Sept 2008, there were 24 phone conversations between Paulson and Blankfein, more than there were between Paulson and AIG; hey, they were probably discussing the weather.

In my opinion, and based on principles learned in economics and investment classes taken this and last semester, financial firms seem to have become the biggest authorities on the allocation of assets in any given free-market country. This is not a bad thing if only the market could actually follow freshwater theories like the Efficient Market Hypothesis allowing stock prices to reflect all available, not to mention real, information regarding a company and its prospects. Unfortunately for calculus buffs, in the real world there exist companies like Goldman Sachs, who are also calculus buffs but armed with a “long-term greed” (i.e. short-term greed) motto; not to mention rash investors who never learned what logic meant, thus making a rational and efficient marketplace unlikely.

If you have any doubt about the irrationality of mankind, spend an hour people watching at the Duomo of Florence or at the leaning tower of Pisa.

I think I’ve got to side with Krugman on this one; saltwater pragmatists may just have it right!

Nina Michael is in her junior year in the BS in Business program at CUNY School of Professional Studies. Nina has been all over the world and loves traveling; she currently  lives between Italy and New York where she works as a professional English teacher and translator. She loves languages, food, coffee, wine and a good book; she is also a first-rate bartender.

Il Primo Tentativo

This morning my profoundly immoral pre-historic spawn of technology forgot to tortuously awaken me to a lovely September day in the birthplace of Leonardo Da Vinci; yes that nefarious base model Nokia deliberately set out to erroneously function causing me to arrive almost two hours late for work!

Don’t worry, my boss didn’t buy it either, but who wants to take the blame for failing to correctly set an alarm? For the record, I still blame the phone!

So here I am five hours later, heavily caffeinated and sitting in front of my laptop, thinking of what to write as a first blog entry for SPS’ new website, or ever for that matter. I suppose you’ve already surmised, aside from my passionate dislike of early morning wake-up sirens, that I live in Florence, Italy. I moved here from New York City in 2008, about the same time Lehman Brothers went the way of the Roman Empire. A year later I enrolled in SPS so that I could finish my degree more quickly while living abroad instead of losing half my credits by transferring to the local University.

In Italy, there is an old saying that goes “non si può avere la botte piena e la moglie ubriaca” – translation: You can’t have a full wine cask and a drunk wife [at the same time]. Basically, you can’t have your cake and eat it too; I like the Italian version better. Well, I think I’ve found a way around that ancient wisdom thanks to technology, which is not always dastardly, and I’ve now got both the full wine cask (living in Italy) and the drunk wife (finishing my degree with CUNY)!

Speaking of technology, after my dash to the bus this morning I happened to sit next to an elderly woman who was toying with her base model Nokia and desperately pressing buttons in search of some hidden truth. After I sat down she asked me if I could show her how to find the list of calls received. Despite my previous failure at setting an alarm, I succeeded. Reveling in my triumph of ancient technology, I was reminded of last semester’s e-commerce class where we discussed all the latest technological marvels in the world today and I seemed to be the only one with a phone from the technological dark ages; my friends in New York used to tell me that I ought to put it into a museum. Well maybe they were right, perhaps I ought to start toting about one of those smart phones. After all, a smart phone would never malfunction would it?

Notwithstanding my affinity towards simple cell phones, technology and the Internet have become a bigger part of my life since enrolling in the online program at SPS. My COM class from last semester together with the lack of a local school library helped me get a good grasp on Boolean searches and other information seeking techniques when researching. This kind of self-prodding online research has helped me to discover a wealth of information about technology, investments, accounting, business, Internet and E-commerce that I otherwise may not have unearthed. More importantly, it’s also helped me maintain a good GPA.

Online studying is a good experience to have if you can manage your time and keep that demon on your shoulder from convincing you to check your Facebook account every time you get the studying blues. While I do miss the personal touch of a real classroom, studying at SPS has been a rich and interesting experience so far and I tend to think that I may actually be learning more with the forced necessity of finding information from credible sources via the World Wide Web; perhaps technology does suit me after all.

To all those who read this, I hope my first attempt at a blog post hasn’t bored you out of your mind and I wish you luck in your online adventures with CUNY this semester.

Peace, prosperity and properly functioning alarms to all! Arrivederci!

Nina Michael is in her junior year in the BS in Business program at CUNY School of Professional Studies. Nina has been all over the world and loves traveling; she currently  lives between Italy and New York where she works as a professional English teacher and translator. She loves languages, food, coffee, wine and a good book; she is also a first-rate bartender.