A couple of people sent me links to this clip of an unusually candid share trader on BBC, asking for my opinion. Allesio Rastani alleges that Goldman Sachs ‘rules the world’ and that traders dream of recession so they can make money from it, and he encourages ordinary people to do the same.
It’s true that some traders shorted the 2008 financial crisis and made loads of money. Michael Lewis wrote a great book about it called The Big Short, and Rastani seems to aspire to the same success as the characters in this book. But most of the financial world lost money in 2008. Lehman Brothers got wiped out. Bear Sterns went bankrupt the year before. Those traders weren’t ‘praying for recession’. Sure, most of the companies got bailed out, but that is no longer an option for most western nations, either financially or politically.
And if you’re hedging on recession, someone needs to buy those hedges.The ‘big shorters’ got rich by betting on the collapse of collaterised debt bubbles, because many experts and trading companies thought a market collapse was impossible. I don’t think many traders are going to get rich betting on market collapse in the next decade or so. Are any experts insisting that ‘Greece will never default’ or ‘a European banking crisis is unthinkable’? No.
It’s true that Goldman Sachs essentially owns both political parties in the US, and that makes them powerful in some respects. But they don’t control the decisions of central banks in China or Europe, which have a pretty massive impact on the global economy – arguably more than the US government does.
Update: Luke in the comments links to this Telegraph article explaining that Rastani is not really a trader, but a ‘motivational speaker’. Which makes sense.