Goldman Rules: French workers threaten to blow up factory

Posted on July 12, 2009 by stacyherbert| 58 Comments

Stacy Summary: (Big tip of the hat to @Palantiri for linking to this headline). This is why I love France . . .the workers here fight like bankers. Goldman and other bankers threatened to destroy the markets unless the population paid them out $700 billion. French workers play by their rules it seems. It helps that the French population will have sympathy for them, unlike what would happen in other nations (ahem):

French workers threaten to blow up factory if they do not receive payouts

Workers at collapsed French car parts maker New Fabris threatened on Sunday to blow up their factory if they did not receive payouts by July 31 from auto groups Renault and Peugeot to compensate for their lost jobs.

New Fabris was declared in liquidation in April, so the workers stand to get no redundancy money, although they are entitled to draw state unemployment benefit.

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58 Responses to Goldman Rules: French workers threaten to blow up factory

Phil | July 12, 2009 at 1:23 pm |

Great find .. great comment !
Of course, I would have preferred them to threaten to blow up the banks , rather than their own work-places !
;-(
Phil | July 12, 2009 at 1:25 pm |

How Wall St. Actually Takes Your Money

http://www.dailykos.com/storyonly/2009/7/12/752637/-How-Wall-St.-Actually-Takes-Your-Money
Dedo | July 12, 2009 at 1:34 pm |

Discusting to think folk actually have come to believe that they’re owed a living !
frances snoot | July 12, 2009 at 1:37 pm |

@Stacy:
Wouldn’t DHS swoop down on the factory in the name of squelching domestic terrorism?
stacyherbert | July 12, 2009 at 1:41 pm |

@frances snoot – yes, in the states
Cdawg | July 12, 2009 at 1:48 pm |

I wananabe a Frog!!
Mike/Liverpool | July 12, 2009 at 2:06 pm |

No Problem………..Just run like F*ck when you see the British or German armed forces coming towards you.

Mike
Mother Earth | July 12, 2009 at 2:08 pm |

Perhaps someone can send French union workers to educat the americans before it is too late..

@stacy If you have the chance one of these days you should ask a french person what it means if they say ‘ne rien ne marche plus’

Ode visual in case you missed it.. http://tinyurl.com/mpkva5
Ptah | July 12, 2009 at 2:10 pm |

Scroogle.org has a great text on its home page – sort of seemed appropriate, apologies if you deem it too long or have read it before:

———-

A note of appreciation from the rich

Let’s be honest: you’ll never win the lottery.

On the other hand, the chances are pretty good that you’ll slave away at some miserable job the rest of your life. That’s because you were in all likelihood born into the wrong social class. Let’s face it — you’re a member of the working caste. Sorry!

As a result, you don’t have the education, upbringing, connections, manners, appearance, and good taste to ever become one of us. In fact, you’d probably need a book the size of the yellow pages to list all the unfair advantages we have over you. That’s why we’re so relieved to know that you still continue to believe all those silly fairy tales about “justice” and “equal opportunity” in America.

Of course, in a hierarchical social system like ours, there’s never been much room at the top to begin with. Besides, it’s already occupied by us — and we like it up here so much that we intend to keep it that way. But at least there’s usually someone lower in the social hierarchy you can feel superior to and kick in the teeth once in a while. Even a lowly dishwasher can easily find some poor slob further down in the pecking order to sneer and spit at. So be thankful for migrant workers, prostitutes, and homeless street people.

Always remember that if everyone like you were economically secure and socially privileged like us, there would be no one left to fill all those boring, dangerous, low-paid jobs in our economy. And no one to fight our wars for us, or blindly follow orders in our totalitarian corporate institutions. And certainly no one to meekly go to their grave without having lived a full and creative life. So please, keep up the good work!

You also probably don’t have the same greedy, compulsive drive to possess wealth, power, and prestige that we have. And even though you may sincerely want to change the way you live, you’re also afraid of the very change you desire, thus keeping you and others like you in a nervous state of limbo. So you go through life mechanically playing your assigned social role, terrified what others would think should you ever dare to “break out of the mold.”

Naturally, we try to play you off against each other whenever it suits our purposes: high-waged workers against low-waged, unionized against non-unionized, Black against White, male against female, American workers against Japanese against Mexican against…. We continually push your wages down by invoking “foreign competition,” “the law of supply and demand,” “national security,” or “the bloated federal deficit.” We throw you on the unemployed scrap heap if you step out of line or jeopardize our profits. And to give you an occasional break from the monotony of our daily economic blackmail, we allow you to participate in our stage-managed electoral shell games, better known to you ordinary folks as “elections.” Happily, you haven’t a clue as to what’s really happening — instead, you blame “Aliens,” “Tree-hugging Environmentalists,” “Niggers,” “Jews,” Welfare Queens,” and countless others for your troubled situation.

We’re also very pleased that many of you still embrace the “work ethic,” even though most jobs in our economy degrade the environment, undermine your physical and emotional health, and basically suck your one and only life right out of you. We obviously don’t know much about work, but we’re sure glad you do!

Of course, life could be different. Society could be intelligently organized to meet the real needs of the general population. You and others like you could collectively fight to free yourselves from our domination. But you don’t know that. In fact, you can’t even imagine that another way of life is possible. And that’s probably the greatest, most significant achievement of our system — robbing you of your imagination, your creativity, your ability to think and act for yourself.

So we’d truly like to thank you from the bottom of our heartless hearts. Your loyal sacrifice makes possible our corrupt luxury; your work makes our system work. Thanks so much for “knowing your place” — without even knowing it!
Giuseppe Bagodonutti | July 12, 2009 at 2:24 pm |

Hmmm

If the workers blow it up,
won’t the parent company get an insurance kickback?
Perhaps with a double indemnity clause against “terrorist acts”?

Sounds like a good plan, “mes amis”…
about as sharp as a bowling ball….
frances snoot | July 12, 2009 at 2:44 pm |

@MotherEarth:

What about DHS!!! Janet Napoleanonileo scares the socks of me. I’m mean, really. (She has two y chromosomes) She’s from the state where the nasty sheriff let a prostitute broil like a chicken out in the sun:
http://www.foxnews.com/story/0,2933,526132,00.html

We would have to stay inside with the bomb: it’s be safer.
M | July 12, 2009 at 2:57 pm |

I saw an interview with some analyst who predicted that DAX and Nikkei would go to ZERO!

Seriously, what happens when an index goes to zero?

I am sorry, I dont have the link.
Fibon11235 | July 12, 2009 at 3:02 pm |

@Phil
Good post, Looting MADE -OFF lol !! Madoff- was Con Man / Chairman of the NASDAQ for years. Says it all to me. He must have fitted right in there. They want us to think he was alone gun, and be the object of ridicule for a 150yr what a joke, just a patsy on the edge of the mob.

I think this: Forget all the know about the properties of Gold and its tradition this is how it works for me. Gold goes down in price when someone big wants to buy and someone big wants to sell and its suits them to shave the market a bit. Gold goes up when they let the market float with all the little people buying. Gold will never go down as a crash and stay there as the Banks have most of it and they like a good value that suits there plans.

Its nothing other than FIXED !! Completely Fixed in my opinion.
Fibon11235 | July 12, 2009 at 3:06 pm |

I just wonder if they sell in paper gold with one company and buy the hard real stuff with another. That would be profitable if you could bail out the paper loss company with someone else’s money, just an idea?
BF Skinner | July 12, 2009 at 3:10 pm |

I like your shows but you guys “rage against the machine” a little too much. It was wrong when Goldman did it and it’s wrong for the workers to do it. So to praise the workers and condemn Goldman is bullshit.
13blackcats | July 12, 2009 at 3:13 pm |

If the auto workers blow up their factories what will the rest of the population burn? They’re entitled to their entitlements too ya’know!
M | July 12, 2009 at 3:17 pm |

Guys,

Cap & trade is essentially inflation!!
All it does is artificially increase the price of products that involve carbon: inflation!
Youri Carma | July 12, 2009 at 3:17 pm |

The Aleynikov Code Dump Uncovered (Zero Hedge) http://tinyurl.com/nyccgh
M | July 12, 2009 at 3:25 pm |

Anybody who even peeks at that code will be hung and stripped of skin and flesh by GS.
stacyherbert | July 12, 2009 at 3:34 pm |

@BF Skinner – “This is why I love France . . .the workers here fight like bankers.” Obviously, I am having fun.

I don’t rage against the machine. That’s for protesters and activists. I report the “Finance. Markets. Scandal.”

You can read the news whichever way you want.

Regarding your thoughts on whether or not this action by the French is acceptable. I think Frank Rich’s latest piece is worth reading:

http://www.nytimes.com/2009/07/05/opinion/05rich.html?_r=2&em

“Public Enemies” doesn’t make a federal case of parallels between its era and ours. It doesn’t have to. But it’s instructive to revisit the actual history. In the book that inspired the film, the journalist Bryan Burrough writes that Detective magazine polled movie theater owners during Dillinger’s yearlong spree of 1933-34, and found that in terms of drawing audience applause Public Enemy No. 1 beat out F.D.R. and Charles Lindbergh. Roosevelt ran with it. As Steve Fraser writes in his cultural history of Wall Street, “Every Man a Speculator,” F.D.R. “likened his Wall Street villains to ‘kidnappers and bank robbers’ eluding capture” in his 1936 re-election campaign. He knew Wall Street manipulators were the real targets of the public’s ire.

Another look at this much-chronicled past, “Dillinger’s Wild Ride,” by Elliott J. Gorn, a professor of history at Brown University, is the first to be published during our own hard times. In it you learn that ordinary law-abiding Americans even wrote letters to newspapers and politicians defending Dillinger’s assault on banks. “Dillinger did not rob poor people,” wrote one correspondent to The Indianapolis Star. “He robbed those who became rich by robbing the poor.”

Gorn writes that the current economic crisis helped him understand better why Americans could root for a homicidal bank robber: “As our own day’s story of stupid policies and lax regulations, of greedy moneymen, free-market hucksters, white-collar thieves, and self-serving politicians unfolds, and as banks foreclose on millions of families’ homes, workers lose their jobs, and life savings disappear, it becomes clear why Dillinger’s wild ride so fascinated America during the 1930s.” An outlaw could channel a people’s “sense of rage at the system that had failed them.”

As Gorn reminds us, Americans who felt betrayed didn’t just take to cheering Dillinger; some turned to the populism of Huey Long, or to right-wing and anti-Semitic demagogues like Father Coughlin, or to the Communist Party. The passions unleashed by economic inequities are explosive because those inequities violate the fundamental capitalist faith. It’s the bedrock American dream that virtues like hard work and playing by the rules are rewarded with prosperity.

In 2009, too many who worked hard and played by the rules are still suffering, while too many who bent or broke the rules with little or no accountability are back reaping a disproportionate share of what scant prosperity there is. The tepid national satisfaction taken in Bernie Madoff’s terminal prison sentence should be a warning to the White House. In the most devastating economic catastrophe since Dillinger’s time, many Americans know all too well that justice has yet to be served.
M | July 12, 2009 at 3:42 pm |

Here is the link I think regarding the DAX and Nikkei claims. There are more broadcasts

http://www.netcastdaily.com/broadcast/fsn2009-0704-1.mp3

Scary shit
Dedo | July 12, 2009 at 3:48 pm |

@Stacy,…..How many revolutions are you aware of that were grass routes ?
stacyherbert | July 12, 2009 at 3:57 pm |

@Dedo – I think most revolutions (real ones, not the color ones) look like the equivalent of an ‘overnight sensation,’ but in reality are the result of years and years, decades of hard work, thought, debate, etc. Like an instrumental development that helped pave the way for the French Revolution happend 35 years earlier:

http://en.wikipedia.org/wiki/Denis_Diderot#Encyclopedie

But there were other ideas, thinkers, etc. that contributed from even earlier in the 18th Century.
M | July 12, 2009 at 3:57 pm |

The discussion regarding DAX/Nikkei index comes around 15:20 if you dont want to listen to the other stuff.
stacyherbert | July 12, 2009 at 4:01 pm |

@M – yes, I heard that interview already; I believe it was a technical analyst? So he was saying that on a technical basis the DAX and Nikkei should go to zero on this next leg down; I very much doubt that will happen!
Mike/Liverpool | July 12, 2009 at 4:11 pm |

So, Stacy what do you see as the next BIG happening?
Mike
Youri Carma | July 12, 2009 at 5:13 pm |

Drones Hardly Ever Kill Bad Guys http://ur1.ca/76ty
Dan | July 12, 2009 at 5:25 pm |

@Dedo

Owed a living? Perhaps they require that their employers simply follow the law. If banks can have law created to have themselves bailded out, how is that superior to a worker who demands existing law be enforced?
eric v | July 12, 2009 at 7:02 pm |

Goldman Sachs Likely to Post Huge Profits, Analysts Say

http://www.nytimes.com/2009/07/13/business/13goldman.html
T | July 12, 2009 at 7:05 pm |

Good for them for standing up for their rights. Naturally hopefully they WON’T blow it up.

But meanwhile back in the States the neocon business MSM is working overtime with their idiotic “in-depth” analysis of this.
frances snoot | July 12, 2009 at 7:55 pm |

In the most devastating economic catastrophe since Dillinger’s time, many Americans know all too well that justice has yet to be served.

@Stacy:
Very nicely stated. Wonderful words tonight, Stacy! Yes, please keep reporting the news!
snoop diddy | July 12, 2009 at 10:43 pm |

re: Goldman manipulating markets.
It is also of note that what many of the trader bots are doing in trading only very small numbers of stocks for every single trade is not available to retail investors as it doesnt meet the minimum value some brokers place on retail investors. And of course for many of the small trades, retail investors couldnt afford the brokerage which of course the broker bots are not subject to. So they can fill gaps in bids etc with a very small number of shares to distort VWAP. So broker bots trade against each other all day, fighting over VWAP (volume weighted average price) and distorting volume. Liquidity for liquidities sake. And they also use their large number of shares (no doubt from pension plans in many cases) to cap and put a bottom in prices as they fight over VWAP. And then they get to charge admin fees on the pension plans of course.
snoop diddy | July 12, 2009 at 10:45 pm |

lol, I wonder if blowing up buildings and cleaning them up will become a regular, as part of global stimulus plans –> Keynesian broken window theory.
Mep | July 12, 2009 at 11:04 pm |

@ Snoop . . . why not? That’s the same thing the US has been doing in Iraq: blowing everything up with taxpayer money and then paying private contractors–with taxpayer money–to rebuild.
snoop diddy | July 12, 2009 at 11:06 pm |

yeah @Mep, the rebuild bit is of course questionable. US much more effective at blowing them up.
BF Skinner | July 12, 2009 at 11:15 pm |

@stacey: You are giving Americans way, way too much credit. Americans deserve to be impoverished. To say they know justice hasn’t been served, you’re talking about the same people that handed the keys to Goldman Sachs without a whimper. I’m sorry this isn’t a novel that brings up all kinds of historical bullshit, but maybe all that time living out of the States has got you thinking that the people here still actually give a shit. I’m sorry, but tonight I can report to you with confidence that Americans are still lazy, still fat, still stupid, and still not wise to what is happening to their country, or how the banking system in it’s current state completely undermines their ability to fulfill their goals. The UK is a good test market for government oppression and you can look forward to the amazing advances made against the UK people occurring here in America very soon. And it will happen without incident, without dissent, and without a whimper. Give me a friggin’ break.
snoop diddy | July 12, 2009 at 11:23 pm |

my mistake:
‘So they can fill gaps in bids etc with a very small number of shares to distort VWAP’

should be:

‘So they can fill gaps in bids etc with a very small number of shares to distort bid prices’
Dedo | July 12, 2009 at 11:32 pm |

@Dan,……I’m discusted, that ANYBODY who believes they are owed a living, regardless of any law!
(My belief)
Dedo | July 13, 2009 at 12:04 am |

@Dan,…..http://www.daviddarling.info/encyclopedia/P/parasite.html
View | July 13, 2009 at 12:15 am |

‘Nervous’ China may attack India by 2012, claims defence expert

http://www.rediff.com///news/2009/jul/12nervous-china-may-attack-india-in-2012-defence-expert.htm
Michael Shipley | July 13, 2009 at 12:17 am |

People should always try to keep in mind the real reason for a country’s economic problems: government interference in the free market. It seems like the French, as well as Americans, could use a few lessons. Constantly vilifying businesses,especially bankers, is missing the mark. Your blaming the symptom instead of the cause. Without deposit insurance and financial regulations giving people a false sense of security, without bailouts and fiat currencies, without government mandated money supply and interest rate monopolies, without massive taxation and regulation, none of these abuses and economic problems would of been possible.
Gerry | July 13, 2009 at 12:25 am |

Well at some point collective bargaining is called war. I think when you realise you’re losing.

Since it’s all about having friends in the right places, you might as well make sure those places are not vacated easily.

Mind you, I’ve been shaking my head ever since that CIA stooge Sarkosy got the gig. This should not come as a surprise. The midget Magyar has got a reputation for slash and burn, pump and dump.

Liquidating? He does it over their heads and claims it as a blessing.
Mep | July 13, 2009 at 12:38 am |

@ Michael – The “free market” needs to be regulated. The government was doing just what you ask for: they WEREN’T regulating anything. Agency by agency, they abdicated their responsibilities and let the system reach its inevitable end.

But don’t feel alone. There are plenty of folks just like you who, when the “free” market crashes and burns, insist that the reason it is so it because the market wasn’t free and pure enough.
Dedo | July 13, 2009 at 12:42 am |

Just look at them,.http://www.dailymotion.com/video/x9m1s8_new-fabris-chatellerault-manif_news
I’d just get my M2A1-7 on them,…whoosh! problem solved
; )
stacyherbert | July 13, 2009 at 12:50 am |

Also recall that the regulatory bodies weren’t created until several years after the Great Crash of 1929. The Fed, of course, was created in 1913.

@Dedo – I don’t see in this case that these people think they are ‘owed’ a living. I’m sure working in a factory is hard work, so it’s doubtful that they were ‘lazy people.’
Dedo | July 13, 2009 at 12:56 am |

@Stacy,…..I agree, they most probably aren’t lazy,..my point is, why should they be compensated for the failure of the company?
Dedo | July 13, 2009 at 12:59 am |

And that’s across the board
stacyherbert | July 13, 2009 at 1:01 am |

@Dedo – I don’t think they are seeking compensation for failure of the company; they are resisting what all French people are resisting at the moment and that is ‘precarious’ capital that declares bankruptcy as a way to get out of their contractual obligations and then depart for other locations. Severance pay is, or was, a standard part of employment contracts and as such perhaps they were as individuals planning their futures with the expectation that these contractual obligations would be met in such a situation where they were being laid off?
stacyherbert | July 13, 2009 at 1:06 am |

Also, company ‘bankruptcies’ are being used by the solvent as a way to renege on contracts; while, ironically, the truly insolvent are being kept artificially alive by govt in order to prevent reneging on the contractual obligations to banking execs. As per this video at around the 50 second mark in which the lawyer for execs at AIG (which received over $150 billion to be kept alive) argues that the govt can’t deny these execs their contractually guaranteed bonuses (unless the company had been allowed to go bankrupt, of course):

http://www.cnbc.com/id/15840232?video=1178814744&play=1

(I would single out other industry if there were others that received such favorable treatment / enforcement help from govt but I don’t see any other than banking and, of course, military contractors).
Dedo | July 13, 2009 at 1:07 am |

@Stacy,….I understand your position, and theirs, also contract law,….but I still think it’s discusting to steal value.
Phil | July 13, 2009 at 1:26 am |

@Stacy …

I agree with your post on the French protesting against the financial chess being played at the expense of the “real” world, i.e. the working community. I think that UK and Germany could do with a bit more of the French “Revolution” as you and Max posted weeks ago.

I remember the case in Germany where Mannesman was “pawned off” to Vodaphone , and Esser ( the “manager” & CEO ) got 60 Mio. Euros “provision” for selling out the company. There was some protest, but tame to say the least.
A brave German Public Prosecutor charged them with conspiracy and fraud or words to that effect … the case came to court and ( surprise surprise ) they got off pretty much scott-free !
George Carlin’s Club strikes yet again !
max keiser | July 13, 2009 at 3:09 am |

this is the way french workers compete.

competition is a good thing in a capitalist economy

only in America do the proles fight for the right of their socialist overloads to exploit them and pay them in lottery tickets.

french workers are stupid like that

they fight for their wages, rights, and purchasing power

hence the quality of life in France is first world and in the US it’s 2nd rate, 2nd world, and heading toward 3rd world.

i need some good vids for my show this week
max keiser | July 13, 2009 at 3:09 am |

french workers are stupid like that – NOT
Mr Supergeek | July 13, 2009 at 3:47 am |

The french as a nation are a good example of …….you can’t make peole like ya…even if you are doing something right……grumble, grumble….groan..frogs…guuuuhhhh.
eric | July 13, 2009 at 4:29 am |

France is about big goverment,high 20%+ regressive VAT taxation,endless red tape,and laws and regulations that kill small business.
Michael Shipley | July 13, 2009 at 5:12 am |

@Mep

I agree. The market has to be regulated. But not by the government. Government is the most inept corrupt manipulative deceitful institution ever conceived by man. The free market, if it’s not interfered with, CAN self regulate. It did for the first 150 years of the United States history. It worked well. It’s not perfect by what is?

Want to solve all the mal-investments on wall street? I can do it with two simple things: constitutional amendment forbidding government bailouts, and the abolishment of the Fed. The natural free market mechanisms controlling money supply, interest rates, and risk reward will take effect, puting a natural limit on all financial transactions. If people become worried for a change about losing their money they won’t risk it so easily will they? No Goldman Sachs computer trading program can circumvent that. Problem solved.

You only need government regulation when government intervenes in the economy and distorts it in order to allow more risk. Solution? Abolish all government interference in the economy. Abolish the Fed, the SEC, Freddie and Fannie. Revoke the commerce clause, remove all unnecessary government departments: Social Security, Medicare, and Medicaid. Free us of deposit guarantees, tax incentives, income tax. Stop the decimation of our money by printing trillions of it with the stroke of the mouse.

We need to go back to what made this country great: freedom. Freedom from government. Free to be self-reliant, free to be entrepreneurial, free to be creative, to win, to lose, freedom from government rules, regulations, and oppression. We were the envy of the world once. Why was that? Because we were the most free. We were the first country in the world to have as it’s goal to be the most free of government power.

We don’t have time to fool around any more. No more experiments. No more trying to guarantee happiness, only freedom of opportunity. No more private profits, socialized losses. Progressivism has been tried. Big government has been tried. Epic fail. We are bankrupt and it’s time to go back to square one. We have a few glowing embers left of what made us great. Let’s not waste it.
Phil | July 13, 2009 at 11:19 am |

@Michael Shipley … VERY well said !
Thx .
geopol | July 13, 2009 at 4:55 pm |

A case of financial espionage raises questions about Wall Street’s proprietary trading practices and exactly what role they play in the market. The perpetrator of the espionage, Sergei Aleynikov, is a former computer programmer and equity specialist at Goldman Sachs. He is alleged to have downloaded secret software at Goldman that is used to direct large volume, rapid-fire trades to exchanges and commodity markets, often just before the close of regular trading.

At a bail hearing for Aleynikov, now in custody in New York, U.S. Assistant District Attorney Joseph Facciponti said Goldman Sachs stands to lose millions of dollars from its proprietary trading based on the stolen software. Moreover, if others in the market obtain access to these trading secrets, “there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” according to Facciponti.

This naturally raises several questions about the software and the trading algorithms incorporated in the program. What do these algorithms do, and how do we know that Goldman Sachs isn’t already using the software “to manipulate markets in unfair ways”?

The algorithms fall under the category of “quantitative trading”, created by “quants” who are often Ph.D’s in the hard sciences or mathematics. Many of them are like Aleynikov, a Russian émigré and former student of applied mathematics in Moscow, who was earning $400,000 a year and left Goldman Sachs to take a job in Chicago that he described paid three times as much. Quantitative trading is only possible in the modern marketplace because so much trading is now electronically based, sent to the exchange by computers, and often without any human intervention beforehand. In the first quarter of this year, it is estimated that over 25% of all New York Stock Exchange
trades were computer generated, dwarfing the volume of trades sent in by individual investors.

Quantitative trading algorithms can perform many functions, but one of the principal things they do is research many thousands of stock, bond, foreign exchange and commodity prices in search of anomalies that can be exploited for profit. The algorithm carries an historical data base that reveals typical relationships between or among financial assets. The relationship between, for example, crude oil for three months vs. six months delivery falls into a certain statistical distribution, or to use another case, transportation stocks
may trade inversely to energy stocks (as the price of oil goes up, energy stocks go up but transportation stocks go down).

If the algorithm finds that a price relationship is currently trading well beyond its typical range, the computer will shoot off trading instructions to buy and sell the respective financial assets in anticipation of a return of this trading relationship to normal conditions. Since these anomalies are expected to be short-lived, the computer algorithm is required to monitor the market real time and send out follow-up instructions, often by the end of the day, to close out the position and take profit (or cut the firm’s loss if the trade did not go as planned).

This sort of quantitative trading seems to be one of the features of the Goldman program, and Mr. Aleynikov is being accused of downloading this program to an outside computer so he could bring it to his new firm and use it for trading there. But there could be many other types of quantitative trading, some of it “directional” in nature, wherein the algorithm is searching for a financial asset or market that is overbought or oversold and likely to reverse direction. These types of algorithms often compare current prices to a five, thirty, and fifty day moving average
of prices for that asset or market, and if the current price violates one of these averages, a buy or sell order will be generated. These programs are so prolific that many individual investors follow these moving averages as well, and “pile on” to the computer trades once an average is violated.

The main criticism of these program trades is that they become self-fulfilling in at least two ways. First, the sheer volume submitted by a firm like Goldman Sachs starts moving the market back to the direction desired by the firm. As such, it sends a signal to the market that a directional change is occurring, and this tends to attract others to the trade, adding to the self-fulfilling nature of what Goldman initiated in the first place. Second, when such trades are done publicly, many individual investors join in and create the momentum necessary for Goldman to profit. Goldman need not publicize its intentions (in fact it operates with intense secrecy), but if it uses something like a moving average strategy that is monitored by tends of thousands of firms and investors, the trade can easily become self-fulfilling.

This is a polite way of describing computer algorithm trades, but less politely, it can be said that firms like Goldman Sachs bully their way to profitability. Their volume is so huge that they become the 800 pound gorilla which dominates the market. There is nothing especially proprietary about their computer algorithm under such circumstances, if large volume can more often than not compel the market to move in a particular direction.

The US district attorney suggests that Goldman did in fact own a proprietary model and it will be harmed if this computer algorithm reaches the public. Presumably, other investors could trade before Goldman initiates its trades (front running). It may also be the case that Goldman has indeed found the Holy Grail – the secret behind how the markets work that allows one to create eternal profits as long as the secret is maintained. Thirty years ago a small group of traders noticed the stock market tends to trade in nine day cycles, after which it reverses direction, or based on certain rules these traders discovered, resets and travels in the same direction for another nine days. This secret provided profitable trading until more and more people learned about it; now it is widely known and used, and seems to work more than 50% of the time, but can now lose you money if you are not careful.

Goldman may have latched onto a secret such as this, the efficacy of which becomes diluted over time as others learn about it. This may be what it wants to protect. It may also be doing its own form of front running. It processes so many proprietary trades for investors that it must have a good institutional sense of the buying and selling pressure in the market. By harnessing this information across its customer base, it can take directional trades as the market does, before it becomes evident to the investing public what is happening. Tying its computer algorithms into its customer data base might generate significant profitable trades, especially since its customer base includes so many major hedge funds which dominate the market.

If you are of a conspiratorial bent, you might assume that Goldman Sachs is operating at least on occasion for the fabled Plunge Protection Team, a cadre of top government officials like Treasury Secretary Geithner and Fed Chairman Bernanke, who purportedly use government money to prop up the stock market or other markets. The PPT really does exist – it is mandated by a regulatory act – but whether it secretly operates to prop up the stock market is certainly questionable. If it did, we can at least say that Goldman Sachs would be the most logical candidate for the government to use.

One of the most famous theories on Wall Street is the Random Walk theory propagated by Burton Malkiel, who has asserted that it is impossible to make speculative profits trading equities because Wall Street prices move randomly. No one can predict a truly random market. This theory has achieved great credibility because of the considerable anecdotal support it receives. Anyone who has invested in a mutual fund or listened to a Wall Street broker knows that these “experts” seem to be right 50% of the time. In fact, these experts tell you not to invest short term because the randomness of prices will kill you.

The U.S. government is telling us something different, through Assistant District Attorney Facciponti. Random Walk may well be the situation facing such investors as you and me, but it is not the case for select insiders such as Goldman Sachs. In the first quarter alone, they generated $2 billion in trading profits just from equities trading. They may have access to inside information, or they may have discovered the Holy Grail of markets, or they may have sophisticated proprietary algorithms, or they can simply bully their way to profits. Whatever the answer, they will profit in good markets and bad markets. Life is anything but random for them.

When someone like Mr. Aleynikov interferes with their exclusive and very profitable and very non-random situation, he deserves to go to jail. Nothing should stand in the way of Goldman Sachs profiting from a market that benefits no one else.

Which brings us back to the suspicious statement that if someone other than Goldman Sachs were to have access to this software, they could “manipulate markets in unfair ways.” This is opposed to Goldman Sachs, which is using the program to manipulate markets, but somehow their manipulation is fair. At least so thinks the U.S. government, but it is very unlikely the average investor agrees. The performance of the global equity markets in 2008 was atrocious, but worse still – investors have nothing to show for their investments now going back to 1999.

A decade of waste, or worse if you were among the many millions who borrowed against your home or traded up to a house that you can no longer afford. All during this time, one firm at least has prospered. It now dominates a stock market in which at least a quarter of the trades are unrelated to the buying and selling of stocks as long term investments. It has seen many of its traditional rivals such as Merrill Lynch, Lehman Brothers and Bear Stearns disappear. It routinely shuffles its executives back and forth to high positions in the government. Should anyone trample on its prerogatives, even if it is a foolish individual, it can bring the full weight and majesty of the federal government to bear on the transgressor. While Goldman Sachs thrives, and the rest of us pay the price for their profitability and extraordinary bonuses, is anyone – anyone at all – asking whatever happened to free markets as the linchpin of a capitalist economy?