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Today’s reading comes from the Book of Greg Smith... We hope you will find it both illuminating and edifying.
Who is Greg Smith? Well...he is not exactly a prophet...and he probably isn’t a perfect saint. But he seems to know something about the difference between good and bad...between moral and immoral...and between ordinary Wall Street greed and putrid Goldman- Sachs-style greed.
Greg Smith was Goldman’s head of US equity derivatives business in Europe, the Middle East and Africa. He ended his 12-year career at Goldman yesterday with a very fascinating “Farewell Letter.” This missive appeared in The New York Times under the simple title, “Why I Am Leaving Goldman Sachs.” It was a masterful exposé...a stinging rebuke of Goldman’s notorious money-first-client-last “ethic.”
Faithful Daily Reckoning readers may recall that your California editor has highlighted Goldman’s low-brow behavior on numerous occasions. And he has made no secret of his contempt for the modern “Goldman culture.”
But your editor is just a guy who’s trying to peek over the hedgerows...an outsider...a “Muppet,” according to the Goldman lexicon. He assailed Goldman’s moral bankruptcy from the outside looking in, because that was the only option available. But now comes Greg Smith to >Fabulous Fab, Abacus, >Vampire Squids ? No humility? I mean, come on... It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.”
Obviously, conning Bert and Ernie out of their money can be an extremely lucrative business for years. In fact, it has been. But the supply of Muppets with money is not unlimited. Eventually, even Big Bird grows tired of being completely plucked over by his financial “advisor.”
Some investors seem to be worrying that a Day of Reckoning for Goldman may be arriving sooner, rather than later. During the last several months, Goldman’s stock (NYSE:GS) has been trailing noticeably behind both the S&P 500 Index and the Financial Select Sector Index.
“I hope this [letter] can be a wake-up call to the board of directors,” Smith concluded. “Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist.”
True that!...In fact, we made a very similar assertion a few weeks back when we published back-to-back columns entitled, >Goldman Sachs is Probably Not a Buy and >Goldman Sachs is a Sell.
