Ben Stein dedicates this
week’s column to the mistakes he made in 2007. Those mistakes include bad
stock picks, bad hotel-room picks, and spending too much money. Weirdly, however,
he admits to no mistakes whatsoever when it comes to his journalism.
Luckily, the NYT helps us out by printing a letter right next to Stein’s column,
from former Goldman Sachs partner Lee Vance, who explains
where Stein went wrong in his
last column, where he accused Goldman of trying to talk down the market
to profit on its short positions:
Mr. Stein argues that Goldman may want to sell economic fear because it is
short the mortgage market. But that’s like arguing that someone who’s
bought life insurance wants to die. Investment banks thrive on a robust economy.
Any profit Goldman might make by being short the mortgage market in an economic
collapse would be tiny relative to its overall loss of business.
Vance is backed up, online, by Baruch at Ultimi Barbarorum, who makes
a good point which was somehow missed in the flood
of commentary last week. Any securities market, by definition, has the same
number of buyers as it does sellers: any transaction involves one person buying
and the other selling. But investment banks are generally bullish in terms of
their research, with only a small number of "sell" recommendations.
It therefore makes sense for investment banks every so often to go bearish,
since that means they stand out from the crowd and tend to get more commissions
from the 50% of investors who are selling rather than buying.
GS doesn’t have a great plan to lay waste to the Earth. It’s
trying to make some brokerage revenue in a tough market. Conventional wisdom
on the street is always optimistic: we will muddle through the current difficulties…
Brokers, who have to hold inventory, are generally always long; they talk
up their books. GS sees the opportunity to take the under, carve out an ecological
niche for itself as a temporary bear, at a time where there are frankly good
reasons, if not wholly conclusive ones, to get more negative. It’s a
great call for a salesman to make.
It’s probably too much to hope that Stein would apologize one week for errors
he made the previous week. But he’s been writing his column in the NYT all year.
Has he really written nothing to apologize for? Or do his apologies overwhelmingly
ring hollow in any event? My feeling is that when his mea culpas concentrate
on things like buying too many suits, having a bad time in his first-class airline
seat, and doing "fabulously well" on his index-fund investments, the
latter is the more likely option.