
Trader: I dream of another recession (and Goldman Sachs rules the world) - jacobr
http://www.bbc.co.uk/news/business-15059135
======
Construct
This man is described as an "independent market trader" in the attached
article. His twitter profile ( <http://twitter.com/#!/alessiorastani> )
describes him as a "Keynote speaker" and a "Mentor and dedicated to helping
others succeed". That doesn't exactly inspire much confidence. In fact, it is
pretty obvious that he has set out to make a name for himself through this
controversy.

Furthermore, he has obviously bet heavily on a near-term market crash. He's
now financially and emotionally invested in a market crash, so of course he
will be confident that it's going to happen. And if his doomsday video
circulates the internet and makes a dent, however tiny, in investor sentiment
then he has also effectively pushed the market (in a very tiny way) toward his
goal.

Take a look at one of his recent tweets: "I've been waiting for this stock
market crash for 3 years. #finance #economy"

The world economy is in trouble, no doubt, but let's remain reasonable and
rational here. Spend enough time around financial types, and you can always
find a doomsayer like this man in any sort of economy.

~~~
silverbax88
This is an extremely valid point. If you look at the stories that are posted
daily on Yahoo! Finance, nearly all of them are market predictions by people
with a vested interest in their predictions (beyond simply trying to be
correct).

I think this is still lost on most consumers; most people think stock analysts
are the same as economists, and that's completely wrong. A good economist will
tell you that they can't predict the stock market, but they can tell you what
the economy will do. That's enough to let you know that the direction of the
economy and the stock market are not directly linked.

~~~
dxbydt
>> A good economist ...can tell you what the economy will do.

I was sipping a venti mocha when I read this and I laughed so hard there's
mocha all over my keyboard. There are people here, actual paid economists, who
are doubling up in laughter at your assertion.

~~~
cynicalkane
As economics, as a field, becomes more powerful, the economy becomes more
stable. I think this is probably a positive indicator for the value of
economics.

This recession is severe, but it has nothing on the recessions of the past.
Let's not throw out this knowledge; it was won by the accumulated experience
of economic hardship unimaginable to modern Americans.

I have a hard time believing there are any "actual paid economists... doubling
up in laughter" in your vicinity. Something about the attitude of your post.

~~~
scarmig
This is inaccurate, or misleading at best. "It has nothing on the recessions
of the past" is only true if you're looking at the pre-WW2 period. Compared to
recessions since then, this is the most severe and long-lasting. There has
been no recession since the Great Depression where unemployment has stayed as
high as it is for so long.

Economists spoke of a Great Moderation that had occurred thanks to their
ideological theorizing, but that is just an unfunny punchline to a joke now.

~~~
cynicalkane
It's plainly obvious that I'm thinking of the entire economic history of the
United States.

If you think this recession is bad, look at recessions before modern economic
theory came about. That's what I'm trying to get at.

It makes absolutely no sense to throw out sound, proven macroeconomic theory
because of a regulatory experiment gone wrong. I'd say it was that
macroeconomic knowledge that prevented that mess from being a total disaster.
And now people want to throw that economic knowledge out in favor of
ridiculous shit like the gold standard, or MORE deregulation, or on the left
twisted ineffective versions of laborism, or whatever. Bleh.

------
steve8918
The thing is that this trader isn't saying anything that people don't already
know. Milton Friedman predicted this when the Euro was first created, that it
would last only until its first currency crisis.

Greece is in really, really bad shape. The normal way a country gets out of
this problem is by devaluing its currency, and enacting fiscal policy
measures. Look at Iceland for a recent example, and the Asian currency crisis
back in 97-98.

However, Greece is stuck. It can't devalue its currency, because they are part
of the Euro. The only way to get this to work is by getting the other European
nations to pay for Greece through Eurobonds, but NO ONE WANTS TO. In fact, if
a politician did so, they would get voted out. So there is no political will
to pay for Greece, which means that Europe is in between a rock and a hard
place.

They can do handwaving, etc, but it seems really likely that this European
debt crisis will bring down Spain (20% unemployment, 40% youth unemployment
and a housing bubble burst), Portugal, and worst case Italy. It's confidence
contagion and it will continue to spiral out of control until they eject
Greece out of the EU.

So now, we know that Europe is screwed. Will their plan to give 50% haircuts
work? Or will everyone leave Europe entirely? This is the question, and I
frankly doubt it, just like the trader said. YOU CAN'T SOLVE A DEBT CRISIS BY
ISSUING MORE DEBT!!!

Once Greek bond holders get 50% haircuts, what about Ireland and Portugal?
Will there be mass selling of those sovereign bonds? It will be a big domino
effect, and the outcome is completely unpredictable at this point, but the one
predictable thing is that the politicians will likely screw it up, because
they lack political courage.

So the advice the trader gives is essentially right. Stay in safe havens for
now, if you have money you can't afford to lose. I would stay in short-term US
Treasuries so that you don't need to worry about interest rate issues. Don't
try to catch bottoms unless you're playing with money you can afford to lose.
Right now, the choppiness in the markets are unparalleled, so unless you
really know what you're doing, safe havens are the best.

~~~
SkyMarshal
_"I would stay in short-term US Treasuries"_

For anyone not aware, you can buy these directly from the US Treasury:

<http://treasurydirect.gov/>

* T-Bill = shortest duration (4 weeks to 1 year)

* T-Note = med duration (2 yrs to 10 yrs)

* T-Bond = long duration (30yrs)

T-Bills are the safest, as they are used to run the US Govt's day-to-day
operations. If the US govt ever defaults, T-Bills will be the last type of
bonds it defaults on, after the longer-term stuff.

More here: <http://treasurydirect.gov/indiv/research/indepth/indepth.htm>

------
mootothemax
I'm still wondering how much of what the trader said was motivated by a desire
to raise his profile for his after-dinner speaking engagements.

His name's Alessio Rastani, and he's got the basics already set up for some
social media fun:

<https://www.facebook.com/alessiorastani>

<http://twitter.com/#!/alessiorastani>

------
grandalf
This is an extremely obvious point masquerading as something controversial.

In a market with 10 large financial firms, all of varying strength, a capital
crisis may put a few of the weaker ones out of business, since a capital
shortage means that a firm doesn't have enough liquid capital to cover its
underwriting obligations and its cash flow needs. When this happens, weaker
firms are hamstrung if they can't raise additional capital. Typically the
government provides free capital in the form of below market loans which can
be turned into profitable short term loans at zero risk.

This means that the valuable assets will be gobbled up by the stronger firms
and there will be less competition across the board.

Thus Goldman, as the strongest global financial firm, stands to gain the most
from any crisis.

Regulators required all US financial firms to accept bailout assistance
precisely to avoid what would have likely been the outcome of the crisis --
one or two super firms.

Even if all surviving firms shrunk by 80% post crisis, the resulting
diminished competition would be a win for the surviving firms' investors.

It's debatable in the scenario of the 2008 crisis whether Goldman would have
survived if AIG hadn't been bailed out. I think it likely would have, but it
would have had to raise additional capital from investors... As it was Buffet
invested around $5B (but could have easily invested much more -- and the yield
would have been way better if more competitors had been allowed to fail).

As a result of this, and the various interests involved, much effort was
expended to preserve the status quo.

One might ask what it would take for there to be legitimate competition in the
financial services market... My take is that policymakers' desire for cheap
(below market price) credit can only be implemented through the sort of
public/private partnership... aka socialized financial services like the ones
we have in the US. To put it succinctly, _cheap credit is a right_.

It would be interesting to run an experiment to see how much this policy has
impacted American democracy (for better and worse). I don't think such an
experiment would be possible though.

------
fserb
This guy sounds a lot like a Yes Men intervention.

~~~
jfruh
Felix Salmon makes the interesting point that he could be a trader _and_ a Yes
Man:

[http://blogs.reuters.com/felix-salmon/2011/09/27/is-
alessio-...](http://blogs.reuters.com/felix-salmon/2011/09/27/is-alessio-
rastani-a-yes-man/)

"You don’t need to spend very much time hanging around the comments section
(or even many of the posts) at Zero Hedge to discern a strong nihilistic and
even anti-capitalist strain to much of the thinking in that community.
Independent traders are often men in their 20s and 30s who inherited a
substantial sum of money and who for whatever reason don’t have a more
attractive opportunity in the regular workforce. They work from home, they
tend to have a strong contrarian streak, and they have a lot of time on their
hands ... It’s a common misconception that all traders are die-hard
capitalists. But in fact many of them are quite the opposite. They still want
to make money, of course. But that doesn’t mean they want the stock market to
go up."

~~~
divtxt
_But that doesn’t mean they want the stock market to go up._

Apparently, capitalism = rising stock market!

How ironic that he makes fun of Zero Hedge - a site that points out such
absurdities!

~~~
jfruh
I think it's a question of whether you're using "capitalist" as a shorthand
for "people who profit from the investment of capital" or "people who assert
ideologically that an economic system in which market actors trade as freely
as possible is the most beneficial system to society as a whole."

The varying reactions to this interview are interesting to me in how they
reveal people think about the market. I'm seeing a lot of pushback along the
line of "So what? Most of what he says is true!" I think people's negative
reaction is a result of a decade or more of an ideological push to get
ordinary people's savings into the stock market, and, furthermore, to portray
the people who are active drivers in those markets as job-creating heroes who
know better than some government bureaucrat and who therefore deserve their
high compensation. When it's revealed that at least one such marketeer dreams
of profiting from a general economic collapse, that seems to invalidate the
promises of an ideology that is often described in shorthand as "pro-market"
or "pro-capitalism".

~~~
fleitz
Capitalism is about the allocation of capital, shorting a stock helps alert
the market to the possibility that the stock is a poor place to put your
capital.

Profiting from a market collapse is the preservation of capital which is
exactly what capitalism is supposed to do. This kind of profiting would be
disallowed by a less free market system and thus the populace would suffer a
worse fate as more capital is destroyed via mismanagement.

Capitalism is not the idea that stocks and other investments go upwards
infinitely. Capitalism is about the idea that we live a better life when
capital is allocated efficiently. It's a good thing that we don't allocate
very much capital to buggy whip manufacture. Allocation of capital to those
concerns would beget the production of goods we don't need.

Similarly, the market is allocating capital away from national governments who
wastefully spend it and allocating it to governments who can put the capital
to good use and return a profit from the proper stewardship of their capital.

------
sixtofour
"Learn how to make money in a downward market."

OK. As an individual who is not rich, where to start that learning?

~~~
retube
There's basically two ways:

1) You go short the underlying market(s), that is you sell them. Individuals
don't (as far as I know) have access to the repo (repurchase) markets. What
you do here is borrow a stock, sell it, then buy it back later to return to
the guy you borrowed from. If the market has gone down you can buy it back for
less than you sold it, hence making a profit.

The other way to short a market is a) sell calls or b) buy puts. These _are_
available to the individual. A put gives you the option to sell a stock at
some predetermined price. If the stock falls below that price (the strike)
then you can sell it at a price above the market. You prob don't want to sell
a call as this gives you unlimited downside if teh market rallies :).

There are also more complex strategies such as call spreads, risk reversals
etc which give you varying pay-off profiles.

2) You go long (buy) assets which are negatively correlated with the market
you want to short. E.g if the eurozone implodes will see the following: dollar
and yen will appreciate against the euro, treasuries will appreciate. Gold
would normally appreciate as traditional safe haven but the outlook for this
is way less certain: it's getting hammered at the moment, partly due to
underlying global economic concerns (ie industrial demand for gold will drop)
plus people are having to sell gold to meet margin calls on losses in
equities. this has triggered further selling by the chinese who are long gold
and getting squeezed. Also the swiss franc would normally be a safe haven, but
the SNB is defending the level of the ccy at 1.2 vs the euro to protect swiss
exports and tourism.

The problem is that the yen, dollar and treasuries aren't great places to park
cash: safe yes, you won't lose anything but rates are so low you won't really
earn anything either.

~~~
mdda
Also, have a look at ETF (exchange traded funds) that are 'short'. These give
you a short exposure to the underlying, while having similar trading costs to
regular equities.

------
dasil003
Those who talk don't know, and those who know don't talk.

~~~
dualogy
Nice talking, dasil!

------
amitparikh
Bulls make money, Bears make money. It's the pigs that get slaughtered.

------
Vivtek
Well, given that the Euro is not falling against the dollar, the one thing he
says that I can easily check (that everybody's scared about the Euro and is
moving their money into dollars) is plain false. My assumption is everything
else is, too. As Construct says (and as I commented on elsewhere) he's
emotionally invested in seeing doom on all sides.

~~~
marcamillion
I would have to disagree with this:

[http://finance.yahoo.com/echarts?s=EURUSD=X+Interactive#char...](http://finance.yahoo.com/echarts?s=EURUSD=X+Interactive#chart6:symbol=eurusd=x;range=6m;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined)

That's a 6 months chart. From May 2011(1.48 Eur to 1 USD) to today(1.35 Eur to
1 USD), it has been very volatile but generally trending down. So I would say
he is right.

~~~
Vivtek
Now look at the year's chart. That $1.48 was great, but it was probably due to
the scare over the creditworthiness of the US - and now that that crisis is
past, we're heading back to roughly where the Euro/dollar ratio has been for a
couple of years now.

I get paid mostly in Euros, and my debts are all in dollars. That makes me
emotionally invested, too, but it also means I know what the Euro/dollar ratio
is doing all too well.

------
mcphilip
This man's fishing for attention, IMO, but there is some degree of brutal
honestly in how he describes a trader's outlook. Many traders eagerly await
swings in volatility as opportunities to make a lot of money; the reason for
the swing (e.g. global financial market turmoil) is irrelevant.

------
Francon
Historically speaking, we've never seen an economy succeed long term when the
monetary system is based on a fiat (fake) currency. Sadly, this trader is
telling the truth: "We bought the ticket so take the ride and profit" is the
message to people. This is a manufactured crisis but it matters not weather it
is intentional or unintended. It is happening. Historic precedent exists for
this. The Collapse of: Egyptian Empire, Roman Empire, U.S.S.R. and Zimbabwe.
All from fiat overexertion of an unsustainable empire or economies. The
history of fiat money, to put it kindly, has been one of failure. Seems this
trader is going to profit from the shift rather than sit idly by waiting for
some magical intervention.

~~~
eftpotrm
While the history of commodity-backed money was one of major problems with
restricted money supply, of industrial use of said commodities becoming
prohibitive and itself becoming an economic limit, of significant periodic
deflation and currency fluctuation based on mining returns.

Fiat money isn't ideal, but neither was the gold standard.

------
veyron
Keep in mind 99% of people who go on CNBC or make stupid reports or
recommendations have no vested interest in the implied outcome. None
whatsoever. They are selling books or selling newsletters or selling videos or
selling infrastructure or selling trade ideas, but definitely have NO skin in
the game.

It's also very easy to call yourself a trader: just get a zecco (or w/e the
retail company of the month is), seed with 1000, and buy one share of a penny
stock. Congrats: you are a trader :)

------
alins
When an "analyst" comes to you and starts saying things like "if you know what
to do ..." - this is the mark of a snake oil salesman. Next thing he will do
is to ask you for money to learn about his "strategy". This guy is an idiot
who wants to make a name for himself so he makes these kinds of statements to
get attention. At this point the last thing Goldman Sachs wants is a total
collapse of markets and economy.

------
casca
This was cleverly done by the The Yes Men: <http://theyesmen.org/>. For proof,
look at <http://en.wikipedia.org/wiki/File:Dow_apologizes.jpg> from
<http://en.wikipedia.org/wiki/The_Yes_Men>

~~~
mcantelon
Not a Yes Man. Twitter feed has 1772 Tweets and contains technical-analysis-
based-predictions (like Sept 16 prediction of gold crashing:
<http://www.facebook.com/video/video.php?v=284602891566784>).

------
npollock
You've got to imagine the BBC does some kind of background check on the people
it puts on air. Typically speakers hail from the big banks and funds, it's
unusual to give a virtual unknown the pulpit. I wonder what kind of guidelines
they establish before they allow you on air. Did they know he was that biased?

------
crag
Ok first of all.. the markets are always driven by fear. Fear of losing and
the thrill of not losing (in other words, risk) is the whole point. So lets
get that out of the way.

Looking at this man, he's bet heavily on a crash so what would you expect him
to say? Frankly I'm a little surprised they gave him air time.

------
smogzer
If everybody goes shorting the market like the meta-morph in there advises;
skeletor, the guy controlling the markets from it's castle will make a short
squeeze by buying those shorts and pretend to be he-man. Saving Europe and the
likes and postponing the apocalipto, at least in the stock markets.

------
lrm242
This is a hoax. Put down your pitchforks.

[http://www.dailymail.co.uk/news/article-2042717/Alessio-
Rast...](http://www.dailymail.co.uk/news/article-2042717/Alessio-Rastani-How-
did-BBC-mistake-day-trader-Master-Universe.html)

------
asbig
I've just been looking at youtube clips of this and there doesn't seem to be
any recommendations for me when I go back to the home page. Anyone else notice
this?

------
andrewcanis
Whenever I hear doomsayers like this I try to remember Warren Buffett's
advice, "Be fearful when others are greedy and greedy when others are
fearful."

------
chailatte
He is telling the truth.

Startup:

Record Number of Companies Pull Back on IPOs
[http://www.newsmax.com/InvestingAnalysis/ipo-offerings-
compa...](http://www.newsmax.com/InvestingAnalysis/ipo-offerings-companies-
initial/2011/09/20/id/411669)

Europe:

EFSF - 133% Of German GDP To Cover All Of Europe's Bad Debt
[http://www.zerohedge.com/news/explaining-how-just-
announced-...](http://www.zerohedge.com/news/explaining-how-just-announced-
ecb-market-rescue-pledged-133-german-gdp-cover-all-europes-bad-de)

Germany rejects idea of further EFSF expansion
[http://www.marketwatch.com/story/germany-rejects-idea-of-
fur...](http://www.marketwatch.com/story/germany-rejects-idea-of-further-efsf-
expansion-2011-09-27?link=MW_latest_news)

China:

Chinese growth could slow to zero in 2012
[http://www.iii.co.uk/articles/18948/chinese-growth-could-
slo...](http://www.iii.co.uk/articles/18948/chinese-growth-could-slow-
zero-2012)

Cash Crunch in China Picks Up Momentum; Chinese Economy "Teetering On the
Edge" [http://globaleconomicanalysis.blogspot.com/2011/09/cash-
crun...](http://globaleconomicanalysis.blogspot.com/2011/09/cash-crunch-in-
china-picks-up-momentum.html)

Japan:

Japanese economy contracted more severely than previously reported
[http://online.wsj.com/article/SB1000142405311190328570457655...](http://online.wsj.com/article/SB10001424053111903285704576559380092114762.html)

Japan auto lobby cuts 2011 sales outlook by 10 pct
[http://www.reuters.com/article/2011/09/27/autos-japan-
idUSL3...](http://www.reuters.com/article/2011/09/27/autos-japan-
idUSL3E7KR0RG20110927)

US:

Consumer Confidence Stagnates Near Two-Year Low
[http://www.businessweek.com/news/2011-09-27/u-s-economy-
cons...](http://www.businessweek.com/news/2011-09-27/u-s-economy-consumer-
confidence-stagnates-near-two-year-low.html)

Food stamp use rises to record 45.8 million
[http://money.cnn.com/2011/08/04/pf/food_stamps_record_high/i...](http://money.cnn.com/2011/08/04/pf/food_stamps_record_high/index.htm)

Overall:

Are We Headed Into A Recess/Depress-ion? The Answer In 9 Simple Charts
[http://www.zerohedge.com/news/are-we-headed-recessdepress-
io...](http://www.zerohedge.com/news/are-we-headed-recessdepress-ion-
answer-9-simple-charts)

All signs point to the second dip in the global economic depression.

~~~
coffeeaddicted
Don't know about the rest, but the german chancelor did fight all the last
days _for_ the EFSF expansion and currently it looks rather like it will get
through. There's been a few politicians (around 25) in the ruling coalition
which were against it, but even the opposition already agreed to support it.

------
plessthenpoint5
sorry.... but what a dick.

------
gaius
This Goldman Sachs? [http://dealbook.nytimes.com/2011/09/26/goldman-sachs-
draws-u...](http://dealbook.nytimes.com/2011/09/26/goldman-sachs-draws-up-
deeper-cuts/)

They're cutting the size of their _coffee cups_ to save money, hardly secret
rulers of the world stuff, is it?

This guy was just saying exactly what BBC viewers wanted to hear... That it
was the evil bankers fault, not people taking out more mortgage than they
could afford.

~~~
mootothemax
_This Goldman Sachs? [link]

They're cutting the size of their coffee cups to save money, hardly secret
rulers of the world stuff, is it?_

That's the same Goldman Sachs that made a profit of $2.7 _billion_ in the
first quarter of this year alone:

[http://www.guardian.co.uk/business/2011/apr/19/goldman-
sachs...](http://www.guardian.co.uk/business/2011/apr/19/goldman-sachs-
smashes-forecasts-first-quarter-profit)

~~~
acslater00
Wait wait, you're both right!

They had an excellent Q1.

They had a very pedestrian Q2.

The rumor is they're having an atrocious Q3.

~~~
arethuza
I think I detect a trend there....

