As IF Times

link Paintings Worth Millions Stolen from Paris Museum – WSJ.com.

As if.  I think what they mean is, paintings insured for millions stolen.  As may be obvious to readers, I am skeptical of valuations placed on “priceless” works of art by long dead artists.  With assets worldwide going into the tank from real estate, to stock, to bonds, to perhaps even hard metals, the ability for anyone to sell and receive value for “priceless” works of art are few.  The better way to recoup value for these pieces is from the insurance companies.  That may be a cynical accusation on my part, but when you think of the logic of it, there’s more validity than insanity. 

If the pieces were stolen, then the thieves can only realize value in one of a few ways.  One, they can resell to a collector for some discounted price.  Presumably, this collector has the money and power to thumb their nose at laws against stealing such things and in fact, perhaps even hired the thieves in the first place.  Two, they can strike a deal with the insurance companies to return the pieces for a “small” reward.  Most likely, the thieves will try to capture value for the pieces right away, like Goldman Sachs doing an arb trade.  Presumably, lots of money was spent to set this up, to pay off people and for logistics.  That money has to be retrieved in order to offset these costs.  And there had to be costs involved.  Anyone who has seen the movie, The Thomas Crown Affair would have an idea of the planning that’s involved with a heist like this.  One doesn’t just hire some unibrow thugs to lift the pieces off the wall and saunter out of the museum with them under their arms. 

I’m sure the insurance companies have their crack sleuths on this right away. It’s not as if they didn’t know where to look.  How many people could have pulled this off anyway? Groups that would be in a position to move or receive hundreds of millions of dollars worth of art are likely a small fraternity. 

Here is my suggestion for catching or at least annoying the thieves.  If there is a ransom demand of some kind, try this approach:

Ring ring.  “Hello, Lloyd’s of London, how may I help you?”

” I’m calling about the recent art heist.  We’re willing to return the art for a reward”

“Hmm, yes, well about that, we’ve decided to just let it be.”

“Pardon me?”

“Yes, we’ve decided it’s more trouble than it’s worth to look for them, so we’ll just write it off and find something else to replace them”

“What!! You can’t do that!   These are timeless works by the great masters!  You have to get them back!”

“Actually, they weren’t that great anyway and they cost way too much to insure.  The premiums we received weren’t worth it.  We think we’ll go with some newer stuff, you can keep the pieces”

“But we don’t want them, we want money!”

“Sorry”

“We’ll give you a discount!”

“Again, sorry”

“We’ll throw in frames”

“Look, we really don’t care.  They really weren’t worth that much in the first place, we just used them to collect insurance premiums from the idiots who were willing to pay them.  Over the years, we’ve got our money out of them, Sotheby’s got their cut and now it’s time to move on”.

“Hey, that’s dishonest and not fair!”

“It’s just business”

“What are we supposed to do with these things then?!!”

“Try Ebay.  Have a nice day”

link Goldman Sachs Advice Hands Clients Losses in 7 of 9 Top Trades – Bloomberg.com.

Gee, I wonder how that happened?  Goldman makes “trading” profits every single day for the first quarter of this year, yet the picks given to clients were losers.  Anyone who has experience trading markets knows that it is improbable if not impossible to have wins every single day for a quarter with directional bets.  More likely what are considered “trades” are arbs between positions which in fact carry very little risk to Goldman.  Especially in making markets in over the counter derivatives where they may be the only source of bid/ask quotes.

Let’s be clear here, Goldman is not in the trading business, it is in the business of making money, which doesn”t have to be the same thing.  Guessing in which direction macro economics takes prices is very much an imprecise science.  Forecasts which may be brilliant may take more than  the expected time to unfold and  can eat up resources in the meantime.  However, if you are the primary market maker for products, you are able to see the supply and demand from both sides and profit accordingly.  Logically if you think about it, it’s difficult to see why Goldman maintains any clients at all if they are so adept at trading their own accounts.  The answer is of course, they need customers to get order flow.  Without the benefit of knowing the customer on both sides of a trade, for example a municipality being advised on an interest rate swap and a hedge fund on the other side, it would be difficult to carve out  a “trading” profit. 

No doubt, much of the trading profits are derived from currency trading and arbitrage, which becomes somewhat easier if your boys are advising nation states on interest rate policies.  Goldman is a great organization, but they exist to make money, trading is a coincidence.  As for the advice given publicly to customers, well that’s par for the course.  Historically, funds and advisers in general have always underperformed the overall market indices, but the illusion of special insight keeps people coming back.

There is an old saying, I’m unsure of who to attribute it to, but it goes, “never buy stocks from someone who sells them for a living”.  Something to think about next time someone tells you to go long bananas.