John Gault Speaks Up - He must be stopped

[dex]

John Gault is speaking up and he must be crushed. This man is only able to quit because he has saved his money and invested it. The government needs to enact laws that take away not only his bonus but his savings. Then his American dream will become a nightmare as he must continue to work for AIG.

Why? Because is all the other John Gaults out there quit, the Ponzi scheme would collapse. That would mean that all of us that are retired or planning to do so would be in trouble. Who would be left to pay all the taxes.

See post #11 about the Ponzi scheme
http://www.early-retirement.org/for...-to-stop-charging-sick-people-more-43334.html



http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1

DEAR Mr. Liddy,
It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:
++++++
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

 

[Independent]

I assume you are talking about John Galt from Atlas Shrugged.

My question about the AIG employee is "Did he really 'create wealth' for anyone except himself and his employer?" It seems to me that trading commodities is 99.9% a zero-sum game. Traders provide a public service by providing liquidity, but they'd be willing to do that if they earned $100k per year. His big income does not prove that the rest of us should be terribly concerned if he quits.

(That doesn't mean I agree with after-the-fact punitive taxes. I'm simply questioning the analogy to the novel.)

 

[samclem]

That's a classy letter that says everything perfectly. Good for him. If he's good at his job he'll likely be hired by someone els, but I'm sure he knows that a public letter like this will reduce his market value to future employers.

Traders provide a public service by providing liquidity, but they'd be willing to do that if they earned $100k per year.

I guess these for-profit companies are just not too bright. Here they have a very competitive, high-stakes, zero-sum game (options trading) which requires extensive specialized knowledge in order to out-predict the competition, and they could be getting the same talent whether they pay $100K or $1 million. I wonder why they never thought of that?

 

[Keim]

Is it just me, or do elements of this AIG mess show the dangers of when gov't gets involved in business. AIG made a business decision to honor bonus commitments (Debatable whether it was a good one). Now that gov't is involved it isn't looked at with a business eye. It is looked at with a political eye. Can good business decisions be made with a political eye?

 

[eridanus]

Is it just me, or do elements of this AIG mess show the dangers of when gov't gets involved in business. AIG made a business decision to honor bonus commitments (Debatable whether it was a good one). Now that gov't is involved it isn't looked at with a business eye. It is looked at with a political eye. Can good business decisions be made with a political eye?

AIG created its own mess when they were picking up nickels in front of the steam roller. "Look at how slow it is. It's like free money!"

There are plenty of good MBAs out of work. Supply/demand dictates that salaries and bonuses will decrease.

 

[eridanus]

I guess these for-profit companies are just not too bright. Here they have a very competitive, high-stakes, zero-sum game (options trading) which requires extensive specialized knowledge in order to out-predict the competition, and they could be getting the same talent whether they pay $100K or $1 million. I wonder why they never thought of that?

How'd that super-elite talent work out for them?

 

[ChrisC]

How'd that super-elite talent work out for them?

You are too funny.

 

[Keim]

AIG created its own mess when they were picking up nickels in front of the steam roller. "Look at how slow it is. It's like free money!"

There are plenty of good MBAs out of work. Supply/demand dictates that salaries and bonuses will decrease.

Absolutely AIG made their own mess. My point is: With the Gov't stepping in to bail them (and banks and car companies and etc...) out, it is buying ownership/control in them. These businesses may not now be run with a strict eye towards business. Politicians will now feel they should have a say in how things are done. Can good business decisions be made with a political eye?

 

[dex]

I assume you are talking about John Galt from Atlas Shrugged.

My question about the AIG employee is "Did he really 'create wealth' for anyone except himself and his employer?" It seems to me that trading commodities is 99.9% a zero-sum game. Traders provide a public service by providing liquidity, but they'd be willing to do that if they earned $100k per year. His big income does not prove that the rest of us should be terribly concerned if he quits.

(That doesn't mean I agree with after-the-fact punitive taxes. I'm simply questioning the analogy to the novel.)

"I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September,"

It was equity and commodity trading.

You need to do more research on commodity trading; your assumption is not correct.

Also, your assumption that "they'd be willing to do that if they earned $100k per year." does not reflect how labor compensation works in the USA.

The issue is not about his "big income".

I did spell Galt incorrectly in my post.

 

[ziggy29]

This Galt guy must be a Superman. All of a sudden, the dude seems to be everywhere...

 

[eridanus]

Absolutely AIG made their own mess. My point is: With the Gov't stepping in to bail them (and banks and car companies and etc...) out, it is buying ownership/control in them. These businesses may not now be run with a strict eye towards business. Politicians will now feel they should have a say in how things are done. Can good business decisions be made with a political eye?

Career politicians probably aren't the best people to make good business decisions. In fact, it sounds like a disaster.

Of course, the business people/MBAs in charge of those companies obviously weren't the best, either.

 

[eridanus]

You need to do more research on commodity trading; your assumption is not correct.

Unless the trader is hedging (i.e., is an oil producer or a farmer with oranges), it is indeed a zero-sum game. The IRS makes a distinction between hedgers and traders.

 

[dex]

Unless the trader is hedging (i.e., is an oil producer or a farmer with oranges), it is indeed a zero-sum game. The IRS makes a distinction between hedgers and traders.

What is that distinction and what does it mean to the marketplace?

 

[eridanus]

What is that distinction and what does it mean to the marketplace?

Hedging transactions are not subject to MTM accounting. Also, of course, a hedger can hold the future to expiration and make delivery. Traders have to exit the contract before expiry so that a tanker of oil doesn't show up in their driveway.

 

[dex]

Hedging transactions are not subject to MTM accounting. Also, of course, a hedger can hold the future to expiration and make delivery. Traders have to exit the contract before expiry so that a tanker of oil doesn't show up in their driveway.

I'm not meaning to be thick here.
What important insight does this info add to this thread?

 

[FinanceDude]

It is looked at with a political eye. Can good business decisions be made with a political eye?

No, and this will not end well, either.....

 

[eridanus]

I'm not meaning to be thick here.
What important insight does this info add to this thread?

You questioned Independent's assumption about commodities trading being a zero-sum game. I disputed your contradiction of his assumption.

 

[samclem]

How'd that super-elite talent work out for them?

Well, in the options-trading arm of AIG, it sounds like they did okay (if the guy's letter is to be believed).

If you mean AIG overall, it looks like it has worked out great. If the "game" had continued, they'd all be fabulously wealthy. The black swan came along and they lost the bet (which does not mean it was a bad bet). Yet still the government is riding in to cushion their fall. Crazy like a fox, they is.

The suckers are you and me and whoever pays taxes.

 

[FinanceDude]

It looks like it has worked out great. If the "game" had continued, they'd all be fabulously wealthy. The black swan came along and they lost the bet (which does not mean it was a bad bet). Yet still the government is riding in to cushion their fall. Crazy like a fox, they is.

The suckers are you and me and whoever pays taxes.

Don't all those guys pay taxes too?

 

[dex]

You questioned Independent's assumption about commodities trading being a zero-sum game. I disputed your contradiction of his assumption.

I still don't get it.
Can you give more info and explanation?
txs

 

[FIRE'd@51]

Unless the trader is hedging (i.e., is an oil producer or a farmer with oranges), it is indeed a zero-sum game.

Actually, it's the futures (or options) market as a whole that is the zero-sum game, not the actions of a particular trader or hedger. The value of these markets to society is that they provide a mechanism to trade risk.

 

[donheff]

I have read in a number of places that the bulk of the people at currently at AIG FP are a clean-up crew that were not involved in the mess we are all so upset about. I was wondering when someone would hold a press conference to articulate their side of the story. I assume this guy is who he says he is and can back up his claims -- if not the press will be all over him. The populist bashing of these folks by the Hill, the press, Cuomo and everybody involved has been breathtaking. I haven't seen a single politician show an ounce of common sense or integrity on this one -- they are a pathetic bunch. I think I will have to switch my colors from Democratic to Libertarian.

 

[Gone4Good]

My question about the AIG employee is "Did he really 'create wealth' for anyone except himself and his employer?"

Well Adam Smith & Karl Marx agreed on one thing, finance supports wealth creation but doesn't create wealth on its own.

So I guess the answer to your question is probably "no".

 

[Gone4Good]

The black swan came along and they lost the bet (which does not mean it was a bad bet).

Funny. I had a conversation with a hedge fund client that went something like this:

Me: "Well, it really wasn't a bad bet because . . . "
Client: "Excuse me. We lost money. It was a bad bet."

 

[samclem]

Funny. I had a conversation with a hedge fund client that went something like this:

Me: "Well, it really wasn't a bad bet because . . . "
Client: "Excuse me. We lost money. It was a bad bet."

You need to get some smarter clients. Or charge the dumb ones more so it is at least worth your trouble.