David Brooks: Great Message, Lousy Economics

Like fellow New York Times luminary Thomas Friedman, David Brooks is a gifted writer who hasn’t a clue about fiscal and monetary economics. In a commencement message to 2011 graduates over the holiday weekend, he led off with this nonsense (emphasis added):

…especially this year, one is conscious of the many ways in which this year’s graduating class has been ill served by their elders. They enter a bad job market, the hangover from decades of excessive borrowing. They inherit a ruinous federal debt.

But he thankfully followed it up with some interesting observations and unique, compelling advice:

This year’s graduates are members of the most supervised generation in American history…they have been monitored, tutored, coached and honed to an unprecedented degree. Yet upon graduation they will enter a world that is unprecedentedly wide open and unstructured…they will confront amazingly diverse job markets, social landscapes and lifestyle niches…they are sent off into this world with the whole baby-boomer theology ringing in their ears…Follow your passion, chart your own course, march to the beat of your own drummer, follow your dreams and find yourself…

College grads are often sent out into the world amid rapturous talk of limitless possibilities. But this talk is of no help to the central business of adulthood, finding serious things to tie yourself down to. The successful young adult is beginning to make sacred commitments — to a spouse, a community and calling — yet mostly hears about freedom and autonomy…Most people don’t form a self and then lead a life. They are called by a problem, and the self is constructed gradually by their calling…when you read a biography of someone you admire, it’s rarely the things that made them happy that compel your admiration. It’s the things they did to court unhappiness — the things they did that were arduous and miserable, which sometimes cost them friends and aroused hatred…

[G]raduates are told to be independent-minded and to express their inner spirit. But, of course, doing your job well often means suppressing yourself…being part of a team, following the rules of an institution, going down a regimented checklist. Today’s grads enter a cultural climate that preaches the self as the center of a life…as they age, they’ll discover that…life comes to a point only in those moments when the self dissolves into some task. The purpose in life is not to find yourself. It’s to lose yourself.

It’s good stuff and definitely worth a read—except for that part about the U.S. government’s finances. :)

God’s Work?

In late 2009, Goldman Sachs CEO Lloyd Blankfein infamously quipped that Wall Street investment banks do God’s work:

We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.
Sounds wonderful, but a story recently broken by the WSJ has us wondering if Blankfein also considers this kind of thing to be God’s work:
Goldman Sachs invested more than $1.3 billion from Libya’s sovereign-wealth fund in currency bets and other trades in 2008 and the investment lost more than 98 percent of its value, the Wall Street Journal reported, citing internal Goldman documents.
When the fund, controlled by Col. Muammar Gaddafi, made huge losses Goldman offered Libya the chance to become one of its biggest shareholders, the [Wall Street] Journal said, citing people familiar with the matter.

To be fair, the losing trades may have been designed by the Libyan Investment Authority (LIA) or its consultants, and even if designed by Goldman Sachs, it might have made sense in a portfolio context. And if this document (pdf, via global witness) is valid, LIA still had assets with Goldman—or “Gold Man”—as of mid-year 2010.

All the same, Goldman might take some heat for this too. Here’s our unsolicited advice, designed to be consistent with Blankfein’s 2009 defense: the LIA’s assets are largely funded with petrodollars, the majority of which come from Europe. Assuming that (1) neither Lloyd nor anyone else will have the gall to call this God’s work (we’ll see), and (2) that Goldman and/or other U.S. counter parties were the beneficiaries of the LIA’s badly losing trades placed through Goldman, proclaim that Goldman was doing the work of patriots. They only offered preferred shares (with their limited voting rights) as compensation, after all!

IMPORTANT DISCLOSURES: Symmetry Capital Management, LLC (SCM) is a Pennsylvania registered investment advisor that offers discretionary investment management to individuals and institutions. This publication is for informational, educational, and entertainment purposes only. It is not an offer to sell or a solicitation to buy securities, or to engage in any investment strategy. Past performance is not indicative of future results.  This material does not take into account your personal investment objectives, your personal financial situation and needs, or your personal tolerance for risk. Thus, any investment strategies or securities discussed may not be suitable for you.  You should be aware of the real risk of loss that accompanies any investment strategy or security. It is strongly recommended that you consider seeking advice from your own investment advisor(s) when considering any particular strategy or investment.  We do not guarantee any specific outcome or profit from any strategy or security discussed herein.  The opinions expressed are based on information believed to be reliable, but SCM does not warrant its completeness or accuracy, and you should not rely on it as such.  Neither the firm, its clients, or its principals own securities issued by (or positions related to securities issued by) Goldman Sachs or the country of Libya.