Recent innovation and optimism from Goldman Sachs

July 28, 2011 1:43 PM

Reuters reports that Goldman Sachs is storing aluminum in several warehouses outside Detroit. Apparently not much aluminum is actually leaving the warehouses. This may help explain the recent spike in the price of - any guesses? - aluminum.

In other news, Gary Cohn, the COO of Goldman Sachs, gave the graduation speech at American University a few weeks ago. From the transcript, Cohn allays any fears that graduates may have about entering the financial job market at this point: "You are entering at the optimal time," he says.

Finally, from New York magazine, Goldman Sachs CEO Lloyd Blankfein can't understand how he became Wall Street's Dr. Evil.

Previously.

posted by mark7570 (155 comments total)

It doesn't look like Goldman Sachs owns the aluminum though, right?
posted by smackfu at 1:46 PM on July 28, 2011

It's just the invisible hand. Strangling us, granted, but still.
posted by Blazecock Pileon at 1:47 PM on July 28, 2011 [51 favorites]

They're trying to stop people from making hats to prevent the upcoming mind-control waves
posted by The Whelk at 1:48 PM on July 28, 2011 [45 favorites]

The US produces 1.7 million metric tons of aluminum per year. This makes us the fifth largest producer of aluminum in the world, which overall produces 41.4 million metric tons per year.

I seriously doubt that a handful of warehouses in Detroit could contain enough aluminum to affect the price.
posted by Chocolate Pickle at 1:48 PM on July 28, 2011 [11 favorites]

LME rules stipulate that warehouses must deliver a certain amount of metal each day. However the rules apply not to each warehouse but to each city that a company has warehouses in. At the moment, a warehouse operator needs to deliver just 1,500 tonnes a day per city, whether it owns one warehouse there or dozens.

lol
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 1:48 PM on July 28, 2011 [2 favorites]

He who controls the aluminum makes the rules.
posted by Eideteker at 1:48 PM on July 28, 2011 [2 favorites]

...and yet when I stockpile jars of urine in a storage unit, suddenly I'm the crazy one.
posted by griphus at 1:49 PM on July 28, 2011 [68 favorites]

That's nothing. I've got one third of the world's supply of awesome stashed inside my pants.
posted by le morte de bea arthur at 1:51 PM on July 28, 2011 [11 favorites]

"The US produces 1.7 million metric tons of aluminum per year. This makes us the fifth largest producer of aluminum in the world, which overall produces 41.4 million metric tons per year. I seriously doubt that a handful of warehouses in Detroit could contain enough aluminum to affect the price."

This is probably just a rogue trader who got caught holding the slip and who is now trying to cover up the fact that he just bought his company $100 mil worth of aluminum.
posted by Eideteker at 1:52 PM on July 28, 2011 [9 favorites]

You know who else bought lots of aluminum?
posted by iviken at 1:53 PM on July 28, 2011

...You must learn its riddle, Conan. You must learn its discipline. For no one - no one in this world can you trust. Not men, not women, not beasts. [Points to soda can] This you can trust.
posted by 2bucksplus at 1:54 PM on July 28, 2011 [24 favorites]

If they have all the aluminum, then what will I wear on my head when dispensing conspiracy theories!?

THIS TIME THEY WENT TOO FAR!
posted by Dark Messiah at 1:54 PM on July 28, 2011 [2 favorites]

Chocolate Pickle: “The US produces 1.7 million metric tons of aluminum per year. This makes us the fifth largest producer of aluminum in the world, which overall produces 41.4 million metric tons per year. I seriously doubt that a handful of warehouses in Detroit could contain enough aluminum to affect the price.”

Did you, uh, read the article?

from article: “A string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminum...”

More than half the annual US output of aluminum would indeed seem to be enough to at least begin to manipulate prices, wouldn't it?
posted by koeselitz at 1:56 PM on July 28, 2011 [29 favorites]

Here are some useful links from the excellent FT site, Alphaville.
posted by shothotbot at 1:57 PM on July 28, 2011 [1 favorite]

What about aluminium, who's stockpiling that?!
posted by chavenet at 1:58 PM on July 28, 2011 [23 favorites]

"The US produces 1.7 million metric tons of aluminum per year. This makes us the fifth largest producer of aluminum in the world, which overall produces 41.4 million metric tons per year. I seriously doubt that a handful of warehouses in Detroit could contain enough aluminum to affect the price."

From the article: "A string of warehouses in Detroit, most of them operated by Goldman, has stockpiled more than a million tonnes of the industrial metal aluminum, about a quarter of global reported inventories."
posted by chevyvan at 1:59 PM on July 28, 2011 [8 favorites]

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” - Adam Smith
posted by mullingitover at 2:00 PM on July 28, 2011 [22 favorites]

What about aluminium, who's stockpiling that?!

Gouldmanshire Sachsonbury (pronounced "Morgan Stanle").
posted by griphus at 2:00 PM on July 28, 2011 [40 favorites]

What about aluminium, who's stockpiling that?!

Jeremy Irons.
posted by Blazecock Pileon at 2:01 PM on July 28, 2011 [8 favorites]

Here are some useful links from the excellent FT site, Alphaville.

Alphaville is big in Japan.
posted by iviken at 2:02 PM on July 28, 2011 [2 favorites]

This is real, right? I mean, it's a huge deal, no? Are we all making jokes simply because we can't wrap our brains around it? Or am I missing something here?
posted by iamkimiam at 2:03 PM on July 28, 2011 [10 favorites]

And now the corporations turn on each other.
posted by CarlRossi at 2:03 PM on July 28, 2011

This isn't exactly how commodity markets work.
posted by shakespeherian at 2:03 PM on July 28, 2011

In other news, LutherCorp has been buying up all the land on the east side of the San Andreas Fault...
posted by Ian A.T. at 2:05 PM on July 28, 2011 [14 favorites]

This is real, people in the industry (both traders and end-users) are very concerned, it is not clear it is all Goldman's fault, but someone is gaming the system.
posted by shothotbot at 2:05 PM on July 28, 2011

"What about aluminium, who's stockpiling that?!"

Probably the same people who are stockpiling platinium, molybdenium, and tantalium.
posted by Eideteker at 2:06 PM on July 28, 2011 [9 favorites]

Word on the street is that they are making money on the price spread between aluminum and aluminium.
posted by weapons-grade pandemonium at 2:06 PM on July 28, 2011 [22 favorites]

This isn't exactly how commodity markets work.

That's how commodities bubbles work.
posted by empath at 2:07 PM on July 28, 2011 [10 favorites]

Yeah, stockpiling 4% of the world's annual output of aluminum is more than enough to piss with prices. Assholes.
posted by Mister Fabulous at 2:08 PM on July 28, 2011

D'oh. 2.5%. I fail.
posted by Mister Fabulous at 2:09 PM on July 28, 2011 [1 favorite]

Okay, let's clear a few things up.

1) Goldman Sachs does not own this aluminum.

2) Neither does the subsidiary that actually runs the warehouse.

3) Any money GS is making on aluminum trading is independent of its warehouse operations (and it's not clear that it's actually making money this way).

4) This is really just a story about the logistics of shipping commodities. GS isn't actually stockpiling anything, because it doesn't own the commodities in question.

What happens is that suppliers manufacture aluminum, but they don't ship it directly to buyers. Instead, it goes into some kind of distribution system, one point of which is a warehouse, which somebody has to own. This distribution system is regulated by the London Metal Exchange (LME) and serves the global market in just about everything.

What's really going on here is that a GS subsidiary has discovered a loophole in the London Metals Exchange warehousing rules. Specifically, the regulation for how much metal a warehouse has to distribute each day is based not on the number of warehouses but on the city. So a distributor with one warehouse in a city needs to send out 1,500 tonnes a day. But so does a distributor with a dozen warehouses in a single city.

This means that a distributor with a bunch of warehouses in a single city can take in a huge amount of product every day but only send out a little of it, leading to a backlog. They then get to charge rent on the backlog. The fact that creating this bottleneck causes distortions in the price of aluminum is a side effect, and it's not even clear that GS is profiting from that.

So this is evil, to be sure, but it's far more subtle kind of evil than just cornering the market on a particular commodity. It doesn't even seem to have been GS's idea; GS just bought the company when they realized it was making money hand over fist.

So no one here is really stockpiling anything. They're just exploiting a bug in the distribution system. There are a ton of financial companies that do this in a smaller, non-evil sort of way. For example, payroll companies receive funds from their clients a few days before they pay the employees, and they put that money in an interest-bearing account in the mean time. Retail banks actually do it with check deposits with the time between you depositing the check and the money showing up in your account. It's called float when you do it with money.
posted by valkyryn at 2:10 PM on July 28, 2011 [102 favorites]

The Curious Case of Uncanceled Warrants. Does someone smarter than me want to explain what exactly is going on?
posted by Sticherbeast at 2:10 PM on July 28, 2011 [1 favorite]

Stockpiles of aluminum, you say? Aluminum prices up, you say? In a city where people who have been pulling copper pipe and wiring out of foreclosed homes, in order to scrap it?

I think there's a way to make this right....
posted by evidenceofabsence at 2:11 PM on July 28, 2011 [6 favorites]

It's just the invisible hand. Strangling us, granted, but still.

Given that the actual problem seems to be the archaic rules of a 134-year old commodity exchange, I'd say it's more a case of the invisible hand being shackled for most of each trading day.

Caught between consumers and warehouse operators is the 134-year old LME, one of the world's last exchanges with open-outcry trading. Sessions take place in a trading ring with red padded seats while visitors can watch from a gallery. Traders juggle multiple telephones and use archaic hand signals to fill orders from consumers, producers and hedge funds.

The ring is a perhaps more civilized version of the tumultuous trading pits made famous in Chicago. Each of six major industrial metals including copper and nickel are traded for five minute bursts in the morning and afternoon. [...] Longer sessions in the late morning and afternoon allow trading of all metals simultaneously and are known as "the kerb" from the days when dealers continued to trade on the kerb, or sidewalk, after leaving the exchange.

[...] LME rules stipulate that warehouses must deliver a certain amount of metal each day. However the rules apply not to each warehouse but to each city that a company has warehouses in. At the moment, a warehouse operator needs to deliver just 1,500 tonnes a day per city, whether it owns one warehouse there or dozens.

As far as I can make out, these rules on how much metal has to be released per day were introduced in the name of reducing volatility, now they're holding back market activity.
posted by anigbrowl at 2:12 PM on July 28, 2011 [2 favorites]

What's new? Commodity traders are hedgers; they make their money by buying cheap and selling dear. Look at the impacts of commodity trading on foodstuffs (PDF download). The same thing happens in metal and petroleum markets.

So here we have individuals who have the ability to purchase the latest risk information and use that information for personal gain, while at the same time contributing to the long-term trend of the inflation of essential goods needed for sustenance and commerce. Also, there has traditionally been very little oversight into these commodity markets.

Look at the price of flour, sugar, corn oil, etc. over the last 2 years. They have skyrocketed! In a real irony, Mexicans who live in rural-based corn subsistence economies that have been undercut by corn commodities trading (and under-market selling by the like of Con Agra), to the point where they cannot afford to purchase corn oil, or corn flour to make tortillas!

Why isn't commodity trading better regulated? Why don't we have more efficient international exchanges for some of this stuff that are carefully monitored by government agencies? Because we have commodity trading giants buying legislation and "friendly" people in oversight agencies.

Welcome to America, 2011.
posted by Vibrissae at 2:12 PM on July 28, 2011 [3 favorites]

Are we all making jokes simply because we can't wrap our brains around it? Or am I missing something here?

Sometimes all you can do is laugh and stand in amazement at the gigantic brass balls of Goldman Sachs and the rest of our corporate aristocracy. Because they know that no one really cares. No one that counts. We on Metafilter don't count. And they know it.

Someday their gravy train will be over, of course. Whether it'll be the spirit of Wisconsin finally getting people all over America into the streets or peak oil or whatever, it'll end. But it won't end over this.
posted by jhandey at 2:14 PM on July 28, 2011 [5 favorites]

Rent seekers gonna seek.
posted by GuyZero at 2:15 PM on July 28, 2011 [14 favorites]

Don't worry, folks... Goldman would never manufacture a famine via an artificial wheat shortage.
posted by pla at 2:15 PM on July 28, 2011 [16 favorites]

The thing about aluminum is that it is very lightweight. A million tonnes of aluminum is A LOT of aluminum.

Did they really expect it to go unnoticed?
posted by Sys Rq at 2:18 PM on July 28, 2011

Okay so, again, Goldman isn't trying to manipulate the market price of aluminum in order to make a bundle on the artificially inflated aluminum prices. They aren't buying or selling aluminum. They are making money off of the rent charged for using their warehouses.
posted by shakespeherian at 2:20 PM on July 28, 2011 [1 favorite]

I'm stockpiling butterfat.

And beer. But I seem to be pissing most of that away.
posted by BitterOldPunk at 2:20 PM on July 28, 2011 [4 favorites]

It's real. Just like this is real.

But what's anybody gonna do about it?
posted by saulgoodman at 2:20 PM on July 28, 2011 [1 favorite]

Fun facts: it takes huge amounts of power to produce aluminum metal from ore. Aluminum production uses 5% of all the electricity generated in the United States. Countries like Iceland that have cheap geothermal electricity can export that electricity most efficiently by producing aluminum, even though there's no ore found in Iceland and they have to ship it in.
posted by straight at 2:20 PM on July 28, 2011 [12 favorites]

This isn't exactly how commodity markets work.

There really is a lot of speculative storage in our commodities markets. Oil tankers anchored offshore waiting for the price to rise. Keeping silos full of wheat in expectation that the domestic price will rise while people who can't afford the new high price starve overseas. My favorite: Anthony "Choc Finger" Ward, who bought a billion dollars worth of cocoa, took physical possession of it and held the world's chocolatiers hostage.
posted by justsomebodythatyouusedtoknow at 2:21 PM on July 28, 2011 [5 favorites]

I love stories like this because they're complicated enough that you can just interpret them to support whatever position you had before you read them. GS is evil? More evidence of their evildoing? Everyone is just jealous of GS' success? More evidence of the press' crusade to paint everything they do as evil.
posted by Skorgu at 2:23 PM on July 28, 2011 [2 favorites]

Sys Rq : Did they really expect it to go unnoticed?

Did they care? Even if LME fixes its rules, the backlog will likely take years to ship out, during which time, GS keeps on raking in the money.
posted by pla at 2:24 PM on July 28, 2011

It's called float when you do it with money.

Yeah, but these are commodities. Some call this "Enron-ization." Enron commoditized new markets, creating new financial instruments to make money off products that nobody ever thought of as commodities. I heard about how Enron commoditized newsprint. Most newspapers bought newsprint as needed, on the spot market. But Enron started buying up newsprint at the manufacturer, strangling the spot market. When spot market prices went up, newspapers were desperate to lock in fixed prices to assure constant deliveries, even at the higher price. Enron created that demand, and then filled it. Newspapers thought it was a good deal at the time. But Enron artificially inflated prices by manipulating the market, so their contracts had enough headroom to make a serious profit. Unfortunately, high newsprint cost is one of the factors that put a lot of newspapers out of business. But hey, if you're Enron, who gives a fuck? Destroy your own customers? You'll find new products to commoditize.
posted by charlie don't surf at 2:25 PM on July 28, 2011 [29 favorites]

The US produces 1.7 million metric tons of aluminum per year. This makes us the fifth largest producer of aluminum in the world, which overall produces 41.4 million metric tons per year.

I seriously doubt that a handful of warehouses in Detroit could contain enough aluminum to affect the price.
posted by Chocolate Pickle

A cubic meter of aluminum is close to 3 metric tons.

Fewer than a hundred 10m X 20m X 50m warehouses could hold the entire US output for a year.
posted by jamjam at 2:26 PM on July 28, 2011 [1 favorite]

this is just GS trying to combat global warming by slowing aluminum-based production
posted by lulz at 2:26 PM on July 28, 2011 [1 favorite]

Okay so, again, Goldman isn't trying to manipulate the market price of aluminum in order to make a bundle on the artificially inflated aluminum prices. They aren't buying or selling aluminum. They are making money off of the rent charged for using their warehouses.

...and holding it there without releasing it, causing the price to go up. Funny, that.
posted by Sys Rq at 2:27 PM on July 28, 2011

As far as I can make out, these rules on how much metal has to be released per day were introduced in the name of reducing volatility, now they're holding back market activity.

You say tomato.
posted by docgonzo at 2:27 PM on July 28, 2011 [1 favorite]

Skorgu : More evidence of the press' crusade to paint everything they do as evil.

They have abused the rules of a system designed to fairly and efficiently distribute a limited resource, to the not only the detriment of that system but to the point that they have (yet again!) created an artificial scarcity driving up the price.

And to have done so not because they want that resource, but merely to trap their renters in place?

GS needs to vanish, like five years ago. Four year olds think themselves clever for breaking rules but staying within the letter of the law; When multinational companies kill people because of artificial famine, we need to see these executives on death row ASAP.

And Hank P needs to go to the front of the queue.
posted by pla at 2:31 PM on July 28, 2011 [11 favorites]

I love stories like this because they're complicated enough

They're really not though. It's just that everybody who considers themselves a "sophisticated investor" always just runs around waving their hands, saying it's too complicated for anyone to understand, even when the person they're talking to offers an accurate, step by step breakdown of the situation and demonstrates exactly how it's an obvious scam.

Even when expert market analysts who are definitely credible reach those conclusions and report on it, all the hands on the side that doesn't want to see it that way start waving like a damn windmill, and somehow manage to suck all the air out of the room in the process, leaving everyone with the vague, unsettled feeling that they've been had, but that they'll never be able to prove it.

The fact is, it's really not that damn complicated.
posted by saulgoodman at 2:31 PM on July 28, 2011 [4 favorites]

Okay so, again, Goldman isn't trying to manipulate the market price of aluminum in order to make a bundle on the artificially inflated aluminum prices. They aren't buying or selling aluminum. They are making money off of the rent charged for using their warehouses.

Why on earth are they allowed to be involved in the distribution of a commodity they deal in any any way, shape, or form? This constitutes, to my mind, the very essence of insider information and is, at the very least, a conflict of interest.

If it walks like a duck, etc. I wouldn't trust Goldman Sachs' veracity on anything.
posted by Benny Andajetz at 2:31 PM on July 28, 2011 [3 favorites]

I love stories like this because they're complicated enough that you can just interpret them to support whatever position you had before you read them. GS is evil? More evidence of their evildoing? Everyone is just jealous of GS' success? More evidence of the press' crusade to paint everything they do as evil.

Here's the thing - a normal human being would expect Goldman Sachs and its cronies, after pretty much nuking the world financial system a few years ago and doing everything it can to shout to the world "hey, we're EVIL!", would try to tone it down a little. For appearances' sake, if nothing else. It's not as if they're hurting financially. Ease off and rake in the cash, quietly. Be evil, but don't show off so much about it.

That's not what the giant vampire squid is doing, though. I've heard theories that excessive testosterone largely accounted for some of the worst excesses of the 2000s in the financial markets, and I wonder if there isn't a grain of truth to it. This just screams "we're going to ram it down your throat just to show you who you're fucking with". Sometimes I think Lloyd Blankfein's company won't stop until they sodomize the President of the United States on live television, solely to prove who's the alpha dog in the pack.
posted by jhandey at 2:33 PM on July 28, 2011 [3 favorites]

GS subsidiary has discovered a loophole in the London Metals Exchange warehousing rules

if only our best and brightest didn't spend all their brainpower on figuring out how to game the system maybe they could spend their intelligence coming up with productive ideas that actually BENEFIT society. The hedge fund industry has taken our nation's scarcest resources and turned them into card counters.
posted by any major dude at 2:33 PM on July 28, 2011 [8 favorites]

And I'm a software developer by trade. I know complicated when I see it, and sending boats sailing aimlessly around in the ocean stuffed to the gills with valuable commodities when you happen to be trading on those commodities is not that complicated a scheme.
posted by saulgoodman at 2:33 PM on July 28, 2011 [1 favorite]

maybe GS is just making sure the Aztec's can't build Modern Armors or Jet Fighters.
posted by The Whelk at 2:35 PM on July 28, 2011 [19 favorites]

Thankfully, I put all my money in bitcoin so this doesn't affect me.
posted by Eideteker at 2:36 PM on July 28, 2011 [4 favorites]

Word on the street is that they are making money on the price spread between aluminum and aluminium.

Yep. They have warehouses full of "i"s that they have been harvesting from reruns of certain episodes of Sesame Street. They are currently using them in this aluminum-to-aluminium scheme, but if the price spread flips on them they can always just sell them to Apple.
posted by madmethods at 2:39 PM on July 28, 2011 [20 favorites]

And I'm a software developer by trade. I know complicated when I see it

Now imagine a hedge fund trader telling you a piece of code isn't complicated because it's nicely formatted. Part of the problems nowadays is there are so many instruments and so many ways of trading that I don't think anyone has a grasp across all markets. Which also leaves a nice loophole for people who are exploiting an inefficiency.

Some call this "Enron-ization." Enron commoditized new markets, creating new financial instruments to make money off products that nobody ever thought of as commodities.

Who calls it that? All large trading houses "commodify" (if you like) things that can be bought and sold. Enron didn't invent that. They invented a way of cheating on accounting.
posted by yerfatma at 2:40 PM on July 28, 2011 [1 favorite]

what is... 1.1895 x 200x 1000
posted by clavdivs at 2:41 PM on July 28, 2011

if only our best and brightest didn't spend all their brainpower on figuring out how to game the system maybe they could spend their intelligence coming up with productive ideas that actually BENEFIT society. The hedge fund industry has taken our nation's scarcest resources and turned them into card counters.

Hi, welcome to the year 2000. I hope you enjoy it here.
posted by GuyZero at 2:41 PM on July 28, 2011 [1 favorite]

I just want to double check:

This is supposed to be our two minutes' hate for today, yes?
posted by -1 at 2:42 PM on July 28, 2011 [3 favorites]

200,000,000 and some odd millions $

jebus
posted by clavdivs at 2:43 PM on July 28, 2011

Wait, shit, sorry, I mean 1987. Welcome to 1987.
posted by GuyZero at 2:43 PM on July 28, 2011

This just points up how carefully you've got to time your commodity market puts and calls, and how it helps to be in tune with the players in industry. Why, me, tomorrow I'm taking all 12 lbs. of my soda cans to the recycling center to maximize my capital gains, based on this insider scoop.
posted by Devils Rancher at 2:43 PM on July 28, 2011 [2 favorites]

Commodifying products is a good thing. It basically means there's no brand separation between makers of the goods, and they're all perfectly interchangeable. Aside from financial shenanigans, commodities generally trade at the lowest possible price that clears the market, making goods cheaper for everyone.
posted by empath at 2:44 PM on July 28, 2011 [1 favorite]

The fact that creating this bottleneck causes distortions in the price of aluminum is a side effect, and it's not even clear that GS is profiting from that.

Yes, it's all a massive coincidence isn't it - it really sums up the state of mefi these days that you have 24 people favouriting this rather disengenious comment.

Anyway, Goldman Sachs you say ? why Anil Dash just told us they read mefi - i'm sure they'll be changing their policies immediately whilst quaking in their boots.
posted by sgt.serenity at 2:45 PM on July 28, 2011

BREAKING NEWS: MASSIVE UPSWING IN SALES OF FESTIVUS RELATED PARAPHERNALIA FOR Q4 2011!
posted by blue_beetle at 2:46 PM on July 28, 2011 [1 favorite]

The Curious Case of Uncanceled Warrants. Does someone smarter than me want to explain what exactly is going on?

You and I both own metal warehouses. Mine is full, yours is empty but you have no money. I buy some metal on my own account, but have nowhere to put it; so I fill up your warehouse and pay rent to you...at friend prices, because we are both in the metal warehousing business. It's not your metal to sell, mind. Now I build a second warehouse. Because I bought a lot of metal the price has gone up, but your warehouse is full so they store it at mine. Then I get to charge even more rent to the owners of the metal, and not at friend prices either. Thanks to the quaint exchange rules, I can take in as much metal as I have space for, but I only have to give out a small amount per day.

Now, in a sensible market someone who wanted to buy metal would stop waiting in line at my warehouse and get it from your warehouse instead, because the seller would spread their holdings around a bit. But since your warehouse is full of my metal, and I'm not selling, anyone who wants to buy has to pick it up at my warehouses, not yours. I am making much more profit than you, and every time I make enough I build another warehouse. You can't build another warehouse because I'm not paying you a whole lot of rent for the metal I've stored at your place, because I suckered you into giving me a friend price and locking into a long-term contract.


BTW, I hate to defend GS but their commodity trading unit has actually lost a lot of money over the last year; they fired about 1000 staff a few weeks back. So if they're engaging in insider trading, they're not doing a very good job of it. As the OP article points out, this kind of problem has arisen a few times before, and the exchange is run in a distinctly antique manner. I suspect the reason it's only 'x tons per city is because originally the people who made the rules couldn't imagine a single company having more than one warehouse in a city and didn't want competitors to be able to clear out all of a warehouse's stock at once in order to put the warehouse owner out of business. Most quirky rules are an imperfect fix to some previous problem that everyone has since forgotten about.
posted by anigbrowl at 2:46 PM on July 28, 2011 [17 favorites]

I don't know about aluminum, but a while back I bought cardboard at 12 cents per ton. I bought 3 tons. And now it's up to 14 cents per ton, so I'm doing pretty good. And I made a special deal where I only have to keep 2 tons of it in my house.
posted by mr_crash_davis at 2:46 PM on July 28, 2011 [3 favorites]

That's nothing. I've got one third of the world's supply of awesome stashed inside my pants.

Liar. I haven't been in your pants in years.
posted by loquacious at 2:47 PM on July 28, 2011 [7 favorites]

Goldman stumbles in commodities, for reference. I should note that the 1000 traders being fired in the US are going to be replaced by 1000 staff in Singapore, most likely. They're not going out of business or anything.
posted by anigbrowl at 2:50 PM on July 28, 2011

Aside from financial shenanigans, commodities generally trade at the lowest possible price that clears the market, making goods cheaper for everyone.

...Is the standard dogma. Now tell me how you know this holds in the absence of robust oversight and penalties for market abuses?
posted by saulgoodman at 2:50 PM on July 28, 2011 [1 favorite]

anigbrowl: And everyone else continues to store their aluminum in GS' warehouse because they're cheaper. At least I think that's the case, otherwise why would anyone store their metal in a warehouse they couldn't easily retrieve it from?
posted by Skorgu at 2:50 PM on July 28, 2011

Goldman Sachs and their shady trading practices (CDOs etc) has been responsible and/or directly implicated in :

1. The collapse of the Icelandic economy
2. The collapse of the Greek economy
3. The collapse of the American mortgage-banking industry

G.S is deeply entrenched in the Treasury Dept and American fiscal policy at present

Goldman Sachs is little more than a collection of extremely wealthy and influential thieves, extortionists and con artists and if ever there is a line-up against that wall I hope that they are the first in line
posted by Poet_Lariat at 2:57 PM on July 28, 2011 [11 favorites]

Hack a computer: 30 years in PMITA Federal prison.

Hack a financial system: You're such an innovator! Here's some money.
posted by RobotVoodooPower at 2:59 PM on July 28, 2011 [7 favorites]

Sometimes all you can do is laugh and stand in amazement at the gigantic brass balls of Goldman Sachs

wouldn't that be gigantic aluminum balls?
posted by pyramid termite at 3:00 PM on July 28, 2011 [2 favorites]

anigbrowl: And everyone else continues to store their aluminum in GS' warehouse because they're cheaper. At least I think that's the case, otherwise why would anyone store their metal in a warehouse they couldn't easily retrieve it from?

Because the rule is distorting prices so much that aluminum is being held as a hedge by a lot of people besides GS. I'm not sure why the LME is so slow to change its rule, but agree that this is a perfect case for the CFTC and the FSA to intervene and tell LME to let the market clear properly.
posted by anigbrowl at 3:05 PM on July 28, 2011

anigbrowl: Right, obviously this is an exchange/regulatory failure. What I'm not clear on is surely there are other warehouses and indeed other exchanges. Is GS' pricing advantage substantial enough to keep attracting new customers even given the roach-motel effect? I mean if someone said "hey I'll let you store your car in my enormous garage for $1 when all the other guys charge $100 but I only let 1 car out of the garage a day" I don't think a 99% savings would really convince me, you know?

That's what I mean about complexity; the parties involved are not generally morons so the fact that something so odd is happening is usually a sign that some information is missing from the explanation.
posted by Skorgu at 3:14 PM on July 28, 2011

...Is the standard dogma. Now tell me how you know this holds in the absence of robust oversight and penalties for market abuses?

It holds because the vast majority of commodities trade at incredibly low prices and have for decades.
posted by empath at 3:17 PM on July 28, 2011

Here's my paranoid guess.

This China's attempt to squash the American Aluminum industry with Imported Chinese Aluminum. The did it with rare earth metals, used in electronics, computers, cell phones etc... and killed production of it worldwide. China has a monopoly on it.

American Airlines just inked a gigantic 40 Billion dollar deal with Boeing and GE. And GM, Ford and Chrysler are all coming back pretty strong with massive markets opening up and growing in China.

Would Goldman, knowingly do the bidding of a client nation like China to destroy an healthy American industry and put tens of thousands out of work??

If the price was right and the executive bonuses were high enough Goldman Sachs would sell their mother's souls to the devil.
posted by Skygazer at 3:24 PM on July 28, 2011 [1 favorite]

It holds because the vast majority of commodities trade at incredibly low prices and have for decades.

They just don't always get to everyone who needs them.
posted by saulgoodman at 3:26 PM on July 28, 2011

If the price was right and the executive bonuses were high enough Goldman Sachs would sell their mother's souls to the devil.

This is why their commodities unit is performing so poorly. Everyone knows you should be shorting mothers' souls right now, because ahead of the US election season there's always oversupply coming to market from both sides of the aisle.
posted by chavenet at 3:35 PM on July 28, 2011 [5 favorites]

This China's attempt to squash the American Aluminum industry with Imported Chinese Aluminum. The did it with rare earth metals, used in electronics, computers, cell phones etc... and killed production of it worldwide. China has a monopoly on it.

For rare-earths, China simply undercut everyone because their mining & refining operations have next to zero environmental controls versus the biggest mine in the US which is located in environment-law-happy California. There's nothing sinister about lower costs via super-low wages and not paying anything to dump toxic wastes into local rivers.
posted by GuyZero at 3:37 PM on July 28, 2011 [1 favorite]

couldn't the state of California refuse to import any metal from countries that don't comply with the safety/wage controls they demand of their own industry? Considering they are the world's 8th largest economy you'd think they'd at least make a dent.
posted by any major dude at 3:43 PM on July 28, 2011

Let me be clear: I think what GS is doing here is wildly inappropriate.

But there's been no allegation that they actually own any of the aluminum being stored in these warehouses. There's no allegation that they're profiting from the artificial increase in aluminum prices either. So this is not, as has been suggested, what Enron was doing. That was manipulating a commodity price by buying a bunch of a commodity, also known as cornering the market.

But GS isn't actually buying aluminum. If there's a market they've cornered, it isn't the aluminum market, it's the aluminum storage market. Which has the unpleasant side effect of distorting aluminum prices, but unless someone can show some evidence that GS is trading in aluminum as such, all of the allegations about stockpiling or price manipulation are misplaced.

This is evil alright, but not for the reasons most commenters seem to think.
posted by valkyryn at 3:43 PM on July 28, 2011 [8 favorites]

GuyZero wrote: There's nothing sinister about lower costs via super-low wages and not paying anything to dump toxic wastes into local rivers

Nothing sinister, other than the paying people sweatshop wages and dumping toxic waste bits.
posted by wierdo at 3:44 PM on July 28, 2011 [1 favorite]

couldn't the state of California refuse to import any metal from countries that don't comply with the safety/wage controls they demand of their own industry?

Not very easily. Commodity markets are self-regulated in such a way that they produce fungible raw materials, for the most part. It's actually pretty hard to tell where exactly your aluminum (or whatever) is coming from.

It's like buying oil: the only way OPEC can stop oil transfers to the US is if they stop selling oil entirely, because once the oil goes into the market, as long as there's enough volume for all the buyers at the table, it really doesn't matter which barrels go to whom.
posted by valkyryn at 3:45 PM on July 28, 2011 [1 favorite]

couldn't the state of California refuse to import any metal from countries that don't comply with the safety/wage controls they demand of their own industry?

They are buying the pieces to make the new Bay Bridge from China.
posted by banshee at 3:47 PM on July 28, 2011 [1 favorite]

They just don't always get to everyone who needs them.

Nice hijack.

I'm not even sure I'd classify what GS is doing here as evil. One of the most tiring things about MF is the tendency to turn threads into echo chambers, especially when notorious newsmakers such as GS are the subject. It often means that we can all get our hate on without ever understanding or even knowing the reason why.
posted by 2N2222 at 3:52 PM on July 28, 2011 [2 favorites]

Speaking of market-cornering, someone (that is, besides the US government) should do the world a favor and corner the market on helium. Otherwise, we may run out.
posted by GIFtheory at 3:53 PM on July 28, 2011

As a state, California doesn't have the power to enact import tariffs I believe. Besides, all the rare earths are consumed in China because they're used to make components (transistors, capacitors, etc) which are all made in China and those are used to make devices, which are all made in China... the only thing they could stop importing would be whole iPhones and I don't think anyone is very eager for that.

Nothing sinister, other than the paying people sweatshop wages and dumping toxic waste bits.

yeah, well, China's a soverign state, whatcha gonna do?
posted by GuyZero at 3:54 PM on July 28, 2011

They are buying the pieces to make the new Bay Bridge from China.

Not true. They are buying about 5% of the pieces to make a new Bay Bridge from China, and it doesn't have anything to do with commodity prices. The other 95% of the pieces are being made just down the road in sunny Stockton, California. Check the facts, please.
posted by anigbrowl at 3:56 PM on July 28, 2011 [1 favorite]

One of the most tiring things about MF is the tendency to turn threads into echo chambers, especially when notorious newsmakers such as GS are the subject. It often means that we can all get our hate on without ever understanding or even knowing the reason why.

And when have large consumers of commodities ever done anything except complain about how high prices are? If you're Boeing and you need a few tonnes of aluminum daily any price above zero is too much. That Boeing hasn't bothered to change its designs to use titanium or tin shows that ultimately the price of aluminum isn't too high but that it's exactly where it should be.
posted by GuyZero at 3:57 PM on July 28, 2011

Wasn't this sort of the plot in Goldfinger.... so do we have .... Aluminum-finger?
posted by mfoight at 3:58 PM on July 28, 2011

The US produces 1.7 million metric tons of aluminum per year. This makes us the fifth largest producer of aluminum in the world, which overall produces 41.4 million metric tons per year.

I seriously doubt that a handful of warehouses in Detroit could contain enough aluminum to affect the price.

You're not thinking very clearly. According to wolfram alpha that's the equivalent of a sphere 53.2 meters in radius, or a cube that was 85.7 Meters to a side. A city block is about 100-120 m. So a Warehouse the size of a city block 9 stories tall could contain the entire annual U.S. aluminum production
posted by delmoi at 4:00 PM on July 28, 2011 [1 favorite]

2N2222: It often means that we can all get our hate on without ever understanding or even knowing the reason why.

Well, if the shoe fits...

But who knows, perhaps GS is holding on to all that aluminum so the can gift every kid with crooked teeth around the world with some nice new braces.
posted by Skygazer at 4:03 PM on July 28, 2011

Goldman would never manufacture a famine via an artificial wheat shortage.

-plus-

Yeah, but these are commodities. Some call this "Enron-ization." Enron commoditized new markets, creating new financial instruments to make money off products that nobody ever thought of as commodities.

Equals:

"Grandma Millie wants her fucking money back."

Will we never learn?
posted by The Bellman at 4:13 PM on July 28, 2011 [2 favorites]

Goldman Sachs and their shady trading practices (CDOs etc) has been responsible and/or directly implicated in :

1. The collapse of the Icelandic economy
2. The collapse of the Greek economy
3. The collapse of the American mortgage-banking industry

4. The famine in Somalia.
5. The depletion of Atlantic Cod stocks.
6. The destruction of the Amazon rainforest.
7. The latest heat wave.
8. The debt ceiling.
9. The price of ceiling wax.
10. All those places that claim to sell a "cafe latte" but actually it's some kind of syrupy sweet stuff.
11. Killer bees.
posted by sfenders at 4:14 PM on July 28, 2011 [7 favorites]

A city block is about 100-120 m. So a Warehouse the size of a city block 9 stories tall could contain the entire annual U.S. aluminum production.

I know you're talking about theory, but in reality? No, it could not.

Not realistically, because materials handling and logistics don't work like that. Warehouses need to have a lot of empty space in them for materials handling. You can't just pile up that much metal in a cube or sphere and have it be accessible to forklifts or hoists.

And not all metals are solid or easily cubed shapes, anyway. A great deal of metal stock isn't just in the form of blooms (billets, slabs) but in coils of strip, extruded tubes and other shapes. These days most metal is delivered in pre-finished forms as specified by the customer, not the huge slabs that a foundry or mill works with.

If you've ever been in a metal supplies warehouse a good half to as much as two thirds of the floor space is empty so they have room for the powered machinery needed to handle and move the stock around, and you don't stack heavy objects very high because it's dangerous, and multi-story warehouses are rare due to the weight and difficulty in handling large materials. It's usually a ground floor operation.

Not to mention the sheer weight of a cube of aluminum that size would crush nearly any foundation you placed it on unless you're talking about a reinforced concrete slab dozens of feet thick and tied to bedrock with pilings.
posted by loquacious at 4:15 PM on July 28, 2011 [1 favorite]

For a company that's not betting on aluminum, GS sure is upbeat about aluminum futures.

And this bit from the Reuter's report sure seems to suggest that GS is still actively trading aluminum:

Analysts question why London's metals market allows big financial players like Goldman to own the warehouses which store huge quantities of metal even as they trade the commodity.

So maybe you should make sure you know what you're talking about.
posted by saulgoodman at 4:20 PM on July 28, 2011 [2 favorites]

Why on earth are they allowed to be involved in the distribution of a commodity they deal in any any way, shape, or form? This constitutes, to my mind, the very essence of insider information and is, at the very least, a conflict of interest.

Yeah, it is not so good. March 2010: "A recent rash of acquisitions will soon see three of the largest London Metal Exchange warehousing companies owned by commodity banks or traders, putting the sector's independence and profits under a spotlight.
...
"Senior figures at the exchange and around the market have already warned reported stock levels overstate the amount of metal freely available because much of it is tied up. While the warning is timely, it is unlikely to forestall howls of outrage when the inventory cycle turns."
posted by sfenders at 4:35 PM on July 28, 2011 [1 favorite]

loquacious: I don't think the quantity of aluminum cited is really in question here. The amount is being pretty widely reported, and there's no reason to question it.

Also, GS is definitely being accused of price fixing in this case, see here (behind the annoying ad wall):

This month, Coca-Cola Co. filed a complaint with the London Metal Exchange, the world's largest market in options and futures contracts on metals, accusing Goldman Sachs Group Inc. of creating supply bottlenecks to artificially raise the price of aluminum in the open market.

They might be accused of profiteering on the storage side as well. But price fixing is definitely part of the accusation. Also:

Aluminum prices have surged more than 13 percent since Jan. 1 to more than $2,500 a metric ton this month from less than $1,700 in June 2009.
....
The increase is occurring despite rising inventory. Global aluminum stockpiles on the London exchange have grown from below a million tons in 2007 to currently more than 4.5 million tons, according to Bloomberg data.

posted by saulgoodman at 4:48 PM on July 28, 2011 [1 favorite]

Headline writers and editorial cartoonists: please avoid the following:

"Curses, foiled again."
posted by hank at 4:49 PM on July 28, 2011 [1 favorite]

You can't just pile up that much metal in a cube or sphere and have it be accessible to forklifts or hoists.

Yeah, but it would be pretty awesome.
posted by delmoi at 4:58 PM on July 28, 2011 [6 favorites]

"Sphere Of Inaccessible Aluminum" is a pretty awesome spell.
posted by The Whelk at 5:03 PM on July 28, 2011 [5 favorites]

loquacious: I don't think the quantity of aluminum cited is really in question here. The amount is being pretty widely reported, and there's no reason to question it.

Right. No argument there. I just went into a brief nerd rage and was questioning delmoi's engineering skills.
posted by loquacious at 5:04 PM on July 28, 2011 [1 favorite]

At what point do we finally just line these fuckers up against a wall?

I mean, I'm all for rule of law and civil society, but still.
posted by stavrosthewonderchicken at 5:08 PM on July 28, 2011 [2 favorites]

In the early 80's I worked for a company that was in the curtainwall business - we sold and installed the outside walls of office buildings, essentially. It was office building boom times and lots of commercial construction was going on.

Anyhow, that's an industry heavily dependent on aluminum - essentially all the framing members in curtainwalls are made out of it. The big players (of which Alcoa is one) bought, sold and moved a lot of aluminum. And there were many stories in the trade - I'm bombing out trying to find cites online, unfortunately - of the shenanigans in the commodity trading of aluminum. IIRC, Alcoa made a pretty strong attempt at cornering the market during that time.

I guess what I'm getting at is that there is a lot of gaming in commodity pricing. It's not all supply and demand.
posted by Benny Andajetz at 5:24 PM on July 28, 2011

And this bit from the Reuter's report sure seems to suggest that GS is still actively trading aluminum:

Alright, that's the missing piece which completes the story. That suggestion wasn't really present in the link in the OP, as far as I could tell. Though I have to say, the idea that one can corner the market, not by buying up all of a commodity, but by warehousing it, has a kind of evil brilliance to it.

GS are bastards, to be sure, but dammit if they don't keep coming through on the magnificent part.
posted by valkyryn at 5:30 PM on July 28, 2011

I am quoting Wikipedia here. Taking chemistry I remember my prof making a point to remind us to recycle aluminum.

Although aluminium is the most abundant metallic element in the Earth's crust, it is never found in free, metallic form...
...
Electric power represents about 20% to 40% of the cost of producing aluminium, depending on the location of the smelter. Aluminum production consumes roughly 5% of electricity generated in the U.S. Smelters tend to be situated where electric power is both plentiful and inexpensive, such as the United Arab Emirates with excess natural gas supplies and Iceland and Norway with energy generated from renewable sources. The world's largest smelters of alumina are People's Republic of China, Russia, and Quebec and British Columbia in Canada.
...
Aluminium is 100% recyclable without any loss of its natural qualities. Recovery of the metal via recycling has become an important facet of the aluminium industry. Recycling was a low-profile activity until the late 1960s, when the growing use of aluminium beverage cans brought it to the public awareness.

Recycling involves melting the scrap, a process that requires only 5% of the energy used to produce aluminium from ore, though a significant part (up to 15% of the input material) is lost as dross (ash-like oxide).[26] The dross can undergo a further process to extract aluminium.

So I can look at the FPP one of two ways.

1.) Oh, look at those rich bastards locking up aluminum, jacking up prices, and profiting exorbitantly, when I could be buying cheaper aluminum.

Or 2.) Let's make the most use of as little aluminum as possible, recycling every bit that we can, and if we're tempted to trash it because it has food crap baked onto it, why not take the time to clean it up and then pop it into the recycle bin? (do this holding *most* external factors constant, and decreasing some...)

Which one of these is better for the environment, and for the future of society in general? Which one may actually stabilize aluminum prices to an extent, and benefit the economy?

Articles like these, and their framing, make me sick under my current understanding of the world. Abundant or not, we need to manage the Earth's resources correctly, and if repeating, respectful and polite reminders to please recycle all the time don't do enough, unfortunately, other measures will be employed by those that can employ them.

I post to put an alternative viewpoint up. Take it as you wish.
posted by JoeXIII007 at 5:36 PM on July 28, 2011 [1 favorite]

so, this is the place were siding from abandoned homes siding go.
posted by clavdivs at 5:38 PM on July 28, 2011

anyone have a cargo freighter and 10 semis'
posted by clavdivs at 5:39 PM on July 28, 2011

That's ridiculous JoeXIII007. Aluminum is one of the earth's most abundant resources. This is just a fucking scam, not some grand planet-saving scheme. Jesus, we're really scraping the bottom of the barrel when it comes to the rationales we can come up with for what these people are up to these days, aren't we?
posted by saulgoodman at 6:13 PM on July 28, 2011 [1 favorite]

Actually, on review, I'm starting to think my ironometer might just be busted again.
posted by saulgoodman at 6:15 PM on July 28, 2011

Maybe some commodities futures trader bought but forgot to sell... for an example of how this could happen, read the story of Brad, chief trader at Aexecor, who had 28,000 tons of coal delivered to his Manhattan office building.
posted by notswedish at 6:28 PM on July 28, 2011

The more opinions I read about economics, the more I come to understand that no one knows what they're talking about.

And yes, I'm familiar with psychohistory. It will be invented in a few millennia.</small.
posted by Salvor Hardin at 6:51 PM on July 28, 2011

Aluminum is one of the earth's most abundant resources.

...and limited. Permanently scarce and pricy before you know it if humanity is not careful. Humanity has already proven its ability to deplete things; got to change this.

This is just a fucking scam, not some grand planet-saving scheme. Jesus, we're really scraping the bottom of the barrel when it comes to the rationales we can come up with for what these people are up to these days, aren't we?

I can either think of it as a scam/bug, as valkyryn elegantly noted, or I can look at things a bit more positively. While yes, the latter could indeed encourage the rich to get richer, the last thing I want to do is encourage them to get richer by focusing too much on the loophole. There are bigger things at play here. Limits being the elephant in the room here.

In short, I'd rather be happy, not sunk in grudges against the more wealthy.
posted by JoeXIII007 at 6:54 PM on July 28, 2011

Addendum: not sunk in grudges or trying to close loopholes, and thus able to figure out how to live a sustainable life to pass on to my kids if I have 2 or 1.
posted by JoeXIII007 at 6:57 PM on July 28, 2011

On a vaguely related note, I am reminded of a sculptor that gave a slide lecture at my art school, maybe around 1995. He worked at an aluminum recycling center. He made huge sculptures out of crushed aluminum cans, his signature work was a series of "hundred dollar coins" made out of $100 worth of cans crushed into a flat disc about 4 feet across and a foot thick. Then he'd stack them up in a gallery, like a monumental stack of coins. Alas, I cannot find this guy in a web search. His work was very interesting, I remember another series he did, he'd take pure aluminum ingots worth a few bucks and hide them around the areas where homeless guys collected cans, and see how many would come back in for recycling. They were all numbered and mapped, showing the distribution and density of scavengers across the city.
posted by charlie don't surf at 7:03 PM on July 28, 2011 [3 favorites]

I would suggest that anyone who thinks that this is anything other than a massive hedge against fixed income take a look at the trajectory of the Baltic Dry Index for handys and handymaxes over the last six months or so.
posted by digitalprimate at 7:05 PM on July 28, 2011

I'm stockpiling Awesome™, because: Heeeeeeyyyyyyyyyy!
posted by jivadravya at 7:07 PM on July 28, 2011 [2 favorites]

Goldman Sachs is little more than a collection of extremely wealthy and influential thieves, extortionists and con artists and if ever there is a line-up against that wall I hope that they are the first in line

- Thomas Jefferson
posted by malocchio at 7:43 PM on July 28, 2011 [2 favorites]

In short, I'd rather be happy, not sunk in grudges against the more wealthy.

I'd rather agitate for political change that reign in these kinds of abuses, and complaining about those abuses when I see them is a part of a conscious strategy, not just idle bitterness. Though I can understand if it reads that way to people insistent on the "let's always pretend everything's just fine" social change bandwagon.

The wealthy (and big players like GS) are also a major part of the decision making apparatus and power structure that actively prevents any real, substantial progress from being made on environmental issues, you know. It's not like you can just bliss environmental destruction and the near collapse of the oceans away with a song on your lips and a smile on your face. You don't have to make excuses for liars and crooks and praise the lord in every breath to be happy and content, you know. That's just the useful myth crooked bosses have used since time immemorial to discourage the people they abuse from organizing. But that's not what you're doing, of course.
posted by saulgoodman at 8:11 PM on July 28, 2011 [2 favorites]

oops... hit post too quick... "So I'll let it slide," was supposed to be the concluding line there.
posted by saulgoodman at 8:14 PM on July 28, 2011 [1 favorite]

GoldAluminumman Sachs?
posted by ZenMasterThis at 8:15 PM on July 28, 2011

Aren't they just stockpiling the aluminium because teensy little chunks of the metal will be worth more than US dollars come next Tuesday?

I bet there are similar warehouses all over the country, hoarding everything from paperclips to bunny food pellets.
posted by UbuRoivas at 8:42 PM on July 28, 2011

At what point do we finally just line these fuckers up against a wall?

I mean, I'm all for rule of law and civil society, but still.

So, then...you really aren't? What other whims of propriety are subject to the suspension of law and civil society?
posted by malocchio at 8:59 PM on July 28, 2011 [2 favorites]

So, then...you really aren't?

It was one of those newfangled despair-jokes that are so popular with the kids these days. Sheesh.

What other whims of propriety are subject to the suspension of law and civil society?

I'm not sure what 'whims of propriety' means (though I like the phrase a lot), but there is a kernel of not-joking there, too: that there occasionally comes a certain breaking point when the rich and powerful ignore the actual laws and tenets of civil society so brazenly that the citizenry just won't take it anymore, go apeshit and start tearing stuff up. It happens. Whether it will ever happen in America again, well, I certainly don't know. But if it does, I admit that will find it hard to decide who to sympathize with, because much as I loathe these corporatist oligarchies we find ourselves living in these days, I'm no fan of the mob, either.

So I think the answer to your rhetorical question is: all of them, sometimes, for better or worse.
posted by stavrosthewonderchicken at 9:13 PM on July 28, 2011

I didn't know that Pee-Wee Herman was a Goldman Sachs shareholder.
posted by Strange Interlude at 12:34 AM on July 29, 2011

So, then...you really aren't? What other whims of propriety are subject to the suspension of law and civil society?
posted by malocchio at 5:59 AM on July 29 [1 favorite +] [!]

The rule of law is suspended when a few players rewrite the rules to benefit them, to the detriment of the vast majority of the population and to the point of economical and ecological collapse. Not when the problem is fixed by adequate, if informal, capital punishment.

The rule of law is so long gone, malocchio, that you can't even remember what it looks like.
posted by CautionToTheWind at 2:24 AM on July 29, 2011

Good thing Hugo Drax is working for our side. Without his columbite holdings, we wouldn't ever be able to build the Moonraker.
posted by LiteOpera at 2:25 AM on July 29, 2011 [1 favorite]

Aluminum, tastes like fear
Adrenaline, it pulls us near
posted by stavrosthewonderchicken at 4:26 AM on July 29, 2011 [1 favorite]

Is it time for the Detroit Aluminum party yet?

Seriously it seems like an incredibly bad idea to store your light, fungible and currently precious metal in and around a city with a population of unemployed forklift drivers. How long before we hear of the great aluminum heist of 2011?

Where is the mob when you need them?
posted by The Violet Cypher at 7:29 AM on July 29, 2011 [3 favorites]

Oh my God, they are literally seeking rent.

(And if I was Goldman Sachs, and I traded commodities futures, I would certainly use my insider knowledge that prices of this particular commodity were bound to rise to make an extra bundle on the side.)
posted by subdee at 9:56 AM on July 29, 2011 [1 favorite]

...And if you got caught doing it, subdee, I'd hope you'd agree you should be prosecuted for insider trading.
posted by saulgoodman at 10:14 AM on July 29, 2011

prosecuted for insider trading

Actually... no. Not for this. I don't think it's actually possible to be guilty of insider trading in commodities. Insider trading, as such, has to do with trading in securities, i.e. stocks, bonds, stock options, and arguably derivatives.

This is just plain old market manipulation, which is illegal, but isn't actually insider trading per se.
posted by valkyryn at 10:23 AM on July 29, 2011

they are literally seeking rent

Well, yeah. That's what landlords do.
posted by valkyryn at 10:24 AM on July 29, 2011

chavenet: "What about aluminium, who's stockpiling that?!"

Oh, you wacky Brits.
posted by deborah at 10:38 AM on July 29, 2011

That's a legal distinction, valkyrn. Not a practical or moral one, and it's really only due to how narrowly we parse our laws these days. In practice, interpreting laws as narrowly and technically as our courts tend to do know has the effect of making every law an empty gesture. Our legal system needs to get back to taking broader, principles and outcome based interpretation of law, as much as the private sector doesn't like the prospect of not being able to tell which referees to work ahead of time.

A crime like fraud, for example, should be understood broadly enough on a general principles basis that existing laws can anticipate and prevent innovations in fraudulent activity that observe the letter of the law but violate its spirit, or else our legal system will forever be outpaced by criminal innovation and forever hopelessly reacting to nominally legal variations on the same basic offenses to society.
posted by saulgoodman at 10:52 AM on July 29, 2011

That's a legal distinction, valkyrn. Not a practical or moral one, and it's really only due to how narrowly we parse our laws these days.

No. Read my comment carefully. I wasn't arguing that what they're doing isn't illegal--it probably is!--just that you've misidentified the crime. Why is it important that this be considered insider trading if it's illegal for other reasons?
posted by valkyryn at 11:04 AM on July 29, 2011

That's a legal distinction, valkyrn. Not a practical or moral one, and it's really only due to how narrowly we parse our laws these days.

As I've pointed out before, the problem with your approach is that there are conflicting opinions on what constitutes moral behavior. The abortion argument is a great example; lots of people who are against it think it's basically murder and just can't see how that can possibly be morally right, people who are for the availability of abortion think it's an issue of personal choice and autonomy and can't see why anyone would think government interference in such a personal decision could be morally right. Likewise, we've had arguments before about the nature of fraud and I think your approach is way too broad, to the point of subsidizing stupidity on the part of consumers.

In this case I think there's a great argument for more and stronger regulation, but I feel like you want to declare it fraudulent just because you hate Goldman Sachs anyway. It seems to me that part of the problem is that people wanted the low rental prices but failed to study the conditions of the rental agreement. If you buy and sell metals by the ton for commercial purposes, then thinking through those sort of issues is your job, and if you're worried about being able to get fast access to your metal holdings under existing LME rules, then maybe you should budget more for storage rental instead of putting all your eggs in the cheapest basket. There ain't no free lunch and all the people in these markets are grown-ups, so if the warehouse rental price seems too good to be true then it probably is. People's failure to price this factor in when aluminum was cheaper is a major contributory factor to this problem, and saying that it violates the spirit of the rules is basically an excuse for not having done their jobs properly and sold their bosses on why it was worth paying a few extra $/ton in rental fees.
posted by anigbrowl at 11:23 AM on July 29, 2011

As I've pointed out before, the problem with your approach is that there are conflicting opinions on what constitutes moral behavior.

There are also conflicting ideas about what constitutes harm to society, and yet, that's never stopped us before from passing laws to prevent it in practice. The fact is your argument could be made about any activity we currently define as legal, too. Does that mean you're arguing we eliminate the legal system completely or just let it run on the fumes of legal precedent without any conscious, intelligent hand guiding its direction? I doubt you'd assert that, and yet, isn't that the unavoidable logical conclusion of your argument here?

It seems to me that part of the problem is that people wanted the low rental prices but failed to study the conditions of the rental agreement.

The accusation lodged on the London Exchange is related to GS commodities futures trading activities, not it's practices as a landlord. You're deflecting the real issue.
posted by saulgoodman at 11:39 AM on July 29, 2011

(define as "illegal", that is)
posted by saulgoodman at 11:47 AM on July 29, 2011

Right. No argument there. I just went into a brief nerd rage and was questioning delmoi's engineering skills.

Well fine then, but don't call me when you need a giant aluminum sphere, OK?
posted by delmoi at 9:09 PM on July 29, 2011

psst call me
posted by The Whelk at 9:19 PM on July 29, 2011

I'd rather agitate for political change that reign in these kinds of abuses, and complaining about those abuses when I see them is a part of a conscious strategy, not just idle bitterness. Though I can understand if it reads that way to people insistent on the "let's always pretend everything's just fine" social change bandwagon.

Cool.

What I frankly cannot stand is how the sort of battle between the rich and poor has always existed, yet a majority of people seem complacent to complain and do nothing about it. I assume you do not fall into that category. Then of course there's the occasional we have some rich target within sight and we play the same talking point cards: in public, private, and this place called MetaFilter, leading to a compromise that eventually puts the rich in advantage again. Rinse, Dry, Repeat. I get dizzy watching this thing go in circles.

The wealthy (and big players like GS) are also a major part of the decision making apparatus and power structure that actively prevents any real, substantial progress from being made on environmental issues, you know.

True. It strikes me funny though that they also crashed the housing market, and quite likely killed or is killing sprawl as we know it, which I think we all know is a huge environmental victory. I could be wrong, I am merely hypothesizing. I bike through what would have been a housing development, and it is now a nice bike ride through fields that reclaimed their land, and in some cases the home of deer.

Short: yeah, they prevent progress on the environmental front, but there sure is some strange results of their recklessness...

It's not like you can just bliss environmental destruction and the near collapse of the oceans away with a song on your lips and a smile on your face.

I don't.

I am slated to have biked to work enough to log about 850 miles this summer (see this), with more miles coming later on for recreation and school, alongside expanding the family's backyard garden which produced a handful of sugar snap peas, too many squash, lots of peppers, lettuce, and soon to be cherry tomatoes and cucumbers. Hoping to plant some cool weather food for the fall.

I love the township I live in which preserves nature where it can. I love Michigan, and its lakes, which I hope we can keep the asian carp out of as best as possible (I know they've detected their DNA in the water, but if we can control the situation great. Otherwise, I found out some good news last year that decades of work has led to some of the lakes returning back to their pristine state that they were discovered in.

I don't know much about the oceans, but all I've heard is grim news, and I frankly hope for the best.

Bottom line: If I die from the destruction of the environment or depletion of petroleum, I will go down with a fight, trying to live, happy. Many people do in fact bliss it away, the problem is no one has led us a slightly different, more sustainable direction, which I will assume exists.

...That's just the useful myth crooked bosses have used since time immemorial to discourage the people they abuse from organizing. But that's not what you're doing, of course.

We may not have to organize... spontaneity would be awesome occasionally: on the rich getting richer, and environmental stuff too.

Cheers!
posted by JoeXIII007 at 3:54 PM on July 30, 2011 [1 favorite]

Cheers, Joe. If I seem strident, it's only the heat of the moment. I think we're mostly in agreement.
posted by saulgoodman at 8:03 PM on July 30, 2011 [1 favorite]

There are also conflicting ideas about what constitutes harm to society, and yet, that's never stopped us before from passing laws to prevent it in practice.

Yes, and we have a rather elaborate procedure for doing so. It's imperfect and so are the laws we pass, but your handwavey suggestion - 'make rules that punish violating the spirit of the law' - is like Justice Potter Stewart's non-useful definition of obscenity: you can't say what it is but you know it when you see it. Well, a lot of good that did because although obscenity prosecutions still occur from time to time, it's essentially a free-for-all. The same thing would happen if we adopted your morally righteous but hopelessly vague definition of fraud; we'd go from having a bit of around all the time to having it become ubiquitous.

The accusation lodged on the London Exchange is related to GS commodities futures trading activities, not it's practices as a landlord. You're deflecting the real issue.

I've already pointed out how it's meaningless to call that insider trading because the destinations and pickup points for commodities are part of the futures contract clearance process and thus public knowledge, as well as the explanations by others of how the commodities market differs from the stock market. There is no insider information to trade off because everyone already knows where the stockpiles are and who owns the storage facilities. Equally, Goldman Sachs could stop trading any commodities whatsoever tomorrow and the price of aluminum would still be inflated for as long as the LME rules allow commodity storage warehouses to artificially limit the release volume. You have completely missed the main issue here.

What I frankly cannot stand is how the sort of battle between the rich and poor has always existed

It's no more a battle between rich and poor than there is a battle between elephants and grass or whales and plankton or whatever. Although it may affect you on a personal level, that doesn't mean you're being attacked on a personal level. IT's not conflict, it's competition.Goldman needs to make a certain amount of money each quarter in the same way that whales need to eat a certain amount of plankton, that's just how it is. Doesn't mean you should sit around waiting to be eaten or abandon any attempt at regulation, but these manichean approaches are wholly misleading.
posted by anigbrowl at 9:36 PM on July 30, 2011

This is a side discussion, and a slight derail, but I have a very specific definition of fraud, anigbrowl, and it couldn't be clearer: Fraud is bringing any good or service to market and making false claims about what that good or service actually is or does.

Fraud is selling snake eggs labeled as chicken eggs. Selling antifreeze as Kool Aid. It's not a vague category at all, it's just a very broad one.

Fox News, for example, is a fraudulent organization. The many herbal supplement retailers that lie about the efficacy of their products and include ingredients such as lead and arsenic, these are frauds. The law doesn't have to be hair-splittingly particular all the time. It also needs some general principles. Unfortunately, once we relaxed truth in advertising standards under Reagan (and in many bad court rulings since, always supposedly on "free speech" grounds), we all but made fraud mainstream and enshrined tolerance for it as the law of the land.
posted by saulgoodman at 10:16 PM on July 30, 2011

Lansdowne Partners sells entire $850m stake in Goldman Sachs.
posted by adamvasco at 12:58 AM on July 31, 2011

Goldman seem to be taking the blame here for making a profit. They do deserve some of it but the real people who are at fault are the LME and the Financial Services Authority in the UK. The rules are wrong and I can name at least 3 Recognition Requirements (requirements for an exchange to trade), that the LME are not satisfying.
I hope someone from the FSA reads this blog as yes, you are inept, incompetant, and completely unproactive as a regulator of financial markets.
(This subject is close to my heart. Rant over......maybe)
posted by frostie at 2:49 AM on August 2, 2011

Goldman Sachs Sets Aside Billions For Legal Defense
posted by homunculus at 1:04 PM on August 11, 2011