August 18, 2002

8:15 AM

As Jack G. Grubman explains in his letter of resignation (pdf), he is a victim. He made $20 million a year shilling WorldCom and other plunging telecom stocks, he now has Salomon Smith Barney’s $32 million severance package in his back pocket; but, feel sorry for him. The NY Times calls his letter "a whinefest worthy of a 6-year old."
posted by found missing (20 comments total)

Oops, that's supposed to be Jack "B." Grubman. Victimized again.
posted by found missing at 8:21 AM on August 18, 2002

what kind of asshole hires a mr. grub, man?
posted by quonsar at 8:51 AM on August 18, 2002

and is the daddy of the infamous lizzie?
posted by quonsar at 8:55 AM on August 18, 2002

The size of his severance package sums up the problem perfectly. No one should be listening to these people for investment insight.
posted by Tempus67 at 9:11 AM on August 18, 2002

Were people really so naive as to think they were getting unbiased investment advice?

If I were going to put my life savings in someone else's hands, I'd surely want to know whether the stock-picker was better than an untrained monkey or not. Now we see of course that they were worse (the monkey would take a banana over stock any day...)

Personally, I see the real culprit here as the idea that somehow it is fitting and right (and possible and furthermore probable) to take money and magically turn it into more money without having to do anything.

People seem to think they were entitled to increasing value! The nerve of those stocks to go down, I mean, really!

It's gambling, folks. Always has been. And now people are pointing fingers at the folks who told them how to bet. Boo hoo hoo. I guess next we'll see people suing Las Vegas casinos because they didn't win or something.

Don't get me wrong - Grubman is clearly a cunning schemer making off with the loot, and he should have known better. But my point is that the whole system is fucked, and pointing the finger at one guy (or ten or thirty or four hundred) doesn't change the fact that the problem is the roulette wheel itself, and the people who continue to put their money down and lament when they don't win are just missing the point.

There are ways to invest in things of real value, but people choose not to do that, because they are shortsighted and scared and think their greed will save them.

Shyeahhh, right.
posted by beth at 9:43 AM on August 18, 2002

I see the real culprit here as the idea that somehow it is fitting and right (and possible and furthermore probable) to take money and magically turn it into more money without having to do anything.

Then you're against the entire financial business?
posted by HTuttle at 9:45 AM on August 18, 2002

It's gambling, folks.

Betting on a horse race is one thing. Betting on a race that has been fixed is quite another.
posted by HTuttle at 9:47 AM on August 18, 2002

Oooo, HTuttle, excellent point on the fixed-ness of the race.

Then you're against the entire financial business?

As it stands now, yes. There is, in theory at least, a way to run a banking and financial system that doesn't suck. That is, in a way that promotes the kind of development that enriches people's lives without at the same time sucking out vast amounts of profit from the top with a huge whooshing noise and giving it to the powerful few.

Er, I'm not an expert in these matters, but I am a creative and sometimes partially crazy person who often dreams of a world in which unchecked greed is not the only motivation for people to create institutions that assist each other.

As one tiny example of what I personally would like to see more of, I remember seeing a bit on pbs a few months ago about how a group of Muslims set up a bank to give out home loans without charging interest. I can't remember the details as it was fairly complicated, but they came up with a way to do it - essentially the bank bought the house and the family leased it, with part of the rent going towards paying off the house. After N years, the family would own the house outright.

(please bear with me, I'm not a financial expert - but the gist was they were ending up significantly massively better off than with a traditional American mortgage). The bank was small, they had just gotten started, but they had the idea right and hopefully it will grow.

See, I think that's cool. I think everyone should have that opportunity. I would love to help with something like that.

The idea that the only way to deal with money is to do whatever it takes to make it seem as though it's magically increasing (when the value it is supposed to represent is not also increasing), is bullshit.

Money is a tool, like a hammer. It can be used to build something nifty, or used to dominate and subjugate.

I want to build a castle.
posted by beth at 10:11 AM on August 18, 2002

halliburton will be bidding to build the moat.
posted by quonsar at 10:18 AM on August 18, 2002

Then you're against the entire financial business?

He might be but I think he was focused more on the "without having to do anything" part. Investment is all about risk but too many people thought stocks offered some sort of guaranteed return and never did any research to see whether the company they were buying looked healthy or that the risk they were running was justified by the return or their tolerance for risk. Remember all those stocks which had atrocious financials and still skyrocketed when they were discovered by the herd?

Anyone who buys a stock without doing any research gets what they deserve if it craters, just as they would if they gave their money to that slimy character who claims he's got a sure bet in the next race.

The one exception to this is executive fraud. Doing your research can't protect you if the numbers are all fictitious - for that we need strict enforcement and some hard jail time.
posted by adamsc at 10:57 AM on August 18, 2002

quonsar, this Grubman is no relation to Lizzie or her dad, the music-biz lawyer.

Glad to see Gretchen Morgenson of the NY Times take him to task -- she's just about the best business writer around, and won a Pulitzer Prize this year for Beat Reporting.
posted by sbgrove at 10:59 AM on August 18, 2002

(psst, quonsar: Lizzie is the daughter of showbiz attorney Allen Grubman. Confusing the two sneaky shademeisters is totally understandable. Okay, back to the topic.)
posted by boomchicka at 11:08 AM on August 18, 2002

D'oh, a minute too late.
posted by boomchicka at 11:08 AM on August 18, 2002

nitpick on adamsc's comment (which I think is great, btw): I happen to be female. I know it's kinda hard to tell sometimes with names, but...
posted by beth at 11:10 AM on August 18, 2002

Betting on a horse race is one thing. Betting on a race that has been fixed is quite another.

To extend that analogy a little further....

Paying someone to give you advice on which horse to bet on is one thing. Him telling you to bet on a horse which he knows has a broken leg is another.

I'm have a (small) SSB account and I'm pretty pissed.
posted by mbd1mbd1 at 11:26 AM on August 18, 2002

"...to build lines of communication with people who effect that business ..."

While here "effect" could mean "to bring about," as in "people who bring about that business" (the meaning of the verb "effect"), my money has it that he simply misspelled "affect," a common, if high school level, mistake. Nevertheless, a major spelling error in a document sure to be read and analyzed closely by thousands of people. From a guy whose entire job it is to be fastidious and attentive to details, as well as persuasive and well-spoken. In most cases this would be making a mountain of a molehill, but in this case it speaks volumes about the author.
posted by risenc at 2:44 PM on August 18, 2002

Beth, Islam forbids lending at interest. So in order for lenders to make a profit, what they usually do is write a contract where the lender is a formal business partner of the borrower, to be rewarded with a chunk of any proceeds from business financed with the loan. (see here.)

In practise, this kind of breaks down when used as a model for consumer credit, and addds a high degree of risk to lending. Banks in Muslim countries often lend money to infidel banks who then write the irreligious contracts...

You may also be interested in Credit Unions, co-operatively owned financial organisations that offer banking services to their members.

As for stock pickers - I hate to say it, but I agree with adamsc. If you don't understand enough about a venture to have faith in your own judgement, stay away.
posted by i_am_joe's_spleen at 9:32 PM on August 18, 2002

Drat. That should be Credit Unions.
posted by i_am_joe's_spleen at 9:43 PM on August 18, 2002

Beth - sorry about that. Mea culpa...
posted by adamsc at 11:06 PM on August 18, 2002

no problemki :)
posted by beth at 3:04 PM on August 19, 2002