What separates the winner -- Goldman Sachs Group (NYSE: GS) from the losers -- such as Morgan Stanley (NYSE: MS) -- in this year's Wall Street money-making game is the way information flows among decision-makers. The winning firm encourages vigorous information flow and intense debate about decisions across different levels of the organization. The losing firms shoved decisions from the top down the throats of traders who executed them.

This came to mind in reading a story about Morgan Stanley's recently departed co-president in today's Wall Street Journal [subscription required]. Cruz reportedly "set a tone in which she didn't welcome dissent once higher-ups made decisions about trades. Communication broke down among some of the key decision makers involved in vetting the mortgage trades." The lack of communication contributed to Morgan Stanley's decision to make a largely unhedged bet on Collateralized Debt Obligation (CDOs) -- one that cost it $9.4 billion in write-downs.

By contrast, as I discussed on CNBC on Tuesday, Goldman encouraged debate between its CFO and COO and a then-lowly proprietary trading desk. This debate led to the successful decision to bet heavily on a decline in the ABX which helped Goldman generate $4 billion in profits -- more than offsetting the $1.5 billion to $2 billion worth of losses from its CDO holdings.

Continue reading How communication explains Morgan Stanley's losses and Goldman Sachs's profits

How communication explains Morgan Stanley's losses and Goldman Sachs's profits originally appeared on BloggingStocks on Thu, 20 Dec 2007 15:44:00 EST. Please see our terms for use of feeds.

Over the weekend there was a referendum in Venezuela that would have scrapped constitutional the term limits for president Hugo Chavez. He has been president of Venezuela since 1998 and constitutional term limits will not allow him to run again in for reelection in 2012. The left- leaning Chavez has been following in the steps of Fidel Castro and turning Venezuela into a communist state. He has enacted emergency powers, nationalized oil infrastructure, expelled foreign missionaries and allowed crime to run rampant. In order for him to constitutionally stay in office though he needed to get rid of the presidential term limits. That referendum this weekend failed, which is good news for democracy.

Venezuela is the forth largest oil exporter to America after Canada, Saudi Arabia, and Mexico. About one half of its 2.3 million exported barrels a day come to the US representing about 9% of all US oil imports. Like Iranian President Mahmoud Ahmadinejad, Chavez likes to talk and can move oil prices higher with off handed remarks and his railing against US foreign policies.

The Venezuelan people led by Chavez have headed down the road to socialism and almost a Cuban style dictatorship. While by no means the end of the story, this referendum is a win for democracy and should help the long term stability in the region which is important for US oil prices. Exxon Mobil (NYSE: XOM) and ConocoPhillips (NYSE: COP) have both been had investments in the country in past years.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Chavez referendum fails -- good news for oil originally appeared on BloggingStocks on Mon, 03 Dec 2007 13:01:00 EST. Please see our terms for use of feeds.