Boycott the Market - "HOW GOLDMAN SACHS' PROBLEMS ARE HURTING YOU"

[WhiskeyGirl]

AMERICANS should boycott the stock market.

No, I'm not kidding. And this isn't going to be one of those funny columns.

In fact, I'm deadly serious that investors shouldn't risk any more of their money until there are promises of a thorough investigation of Goldman Sachs.

Over the past few years I've looked into the much-too-cozy relationship between Goldman and Washington.

I've suspected that this Wall Street firm has been acting, in essence, as an arm of the government. And I am also pretty sure that if Goldman and Washington have something secret going on, the investment firm isn't doing it for altruistic reasons. There's money to be made.

The most intriguing recent mention of Goldman occurred back in July when a former employee of that company named Sergey Aleynikov was arrested for stealing proprietary computer codes.

The Justice Department snapped right to it, saying in court: "The bank (Gold man) has raised the possi bility that there is a dan ger that somebody who knew how to use this pro gram could use it to ma nipulate the market in unfair ways."

Is that what Goldman was doing with the program? Was it manipulating the market in unfair ways? Why else would it have had such abilities?

Either the Congressional Oversight Committee or the Justice Department should start doing their job. And if any investigator gets grief from the Treasury, then we will automatically know that there has been wrongdoing.

Meanwhile, investors should know they could be walking into the third act of a major drama.

And with the stock market in a mini-bubble since March, even without justification in economic fundamentals, be prepared if the curtain suddenly drops.

http://www.nypost.com/seven/08272009/business/how_goldman_sachs_problems_are_hurting_y_186624.htm

Why isn't the Federal Reserve on board with a rigorous audit?  What's the holdup with Barney's committee?

Americans deserve truth and honest dealings.

[WhiskeyGirl]

"Wall Street Learned Nothing"

Is Goldman well capitalized enough to survive the next black swan? It doesn't matter. As Shanley says in her analysis of Goldman's bonds: "The company's debt spreads clearly benefit from the perception that it is too big to fail." So the price of Goldman's bonds mean that traders expect that the government will bail Lloyd Blankfein out of any serious trouble his traders get into.

Did those on Capitol Hill and the White House learn anything?  Maybe things are going according to plan?

At least representative Edolphus Towns, D-N.Y., believes that Wall Street should face up to its recent history. His hearings on the merger between Bank of America ( BAC - news - people ) and Merrill Lynch have revealed that Ken Lewis played a very dangerous game. If he thought that buying Merrill Lynch was bad for BofA shareholders, he should have refused. Treasury Secretary Hank Paulson threatened to get Lewis tossed out as CEO if he didn't go through with the merger. So what? A CEO's job is to protect shareholder interests, even if it means getting fired. But Lewis tried to have it all, he kept his job and went through with the merger, leaving taxpayers with much of the bill.

I wonder who made money by Merrill Lynch merging with BOA?  Who had a financial interest in that one?

Nothing's changed on Wall Street. What's worse is that they think that if anything goes wrong that we'll bail them out again and their bondholders apparently agree. Perhaps they need to be bluntly told that we'll never rescue them again. It's the only way they'll learn.

http://news.alibaba.com/article/detail/entrepreneur/100162624-1-wall-street-learned-nothing.html

[WhiskeyGirl]

Selective disclosure is what it is all about. If you are newer to the markets, Eliot Spitzer used to have a job before "disgraced Governor"; he was New York's AG. His coup de grace was stopping the behavior of "selective disclosure" - that is disseminating information to a select group (who could act on it) before the masses. Which is effectively front running and illegal. Is Goldman doing that now? Technically no or perhaps - maybe? But remember, in a piece last week I said there is "spirit of the law" and "letter of the law"... many rules are placed with the expectation that the spirit of the law will be obeyed. Meanwhile, a horde of attorneys are pecking through the fine print (and in fact the lobbyists many time help create the "new rules" so the loopholes are already known) to find ways to get around the spirit of the law, without technically breaking the letter of the law. And it's not just in high finance - heck, I'd argue the whole corporate accounting profession is based on this.

"The spirit of the law is twofold," says Eric Dinallo, who in 2003, when serving as a deputy to former New York Attorney General Eliot Spitzer, helped negotiate a $1.4 billion stock-research settlement with 10 major Wall Street firms, including Goldman. "Analysts should give consistent advice to all their customers, be they small investors or big trading clients." Any views that differ from an analyst's published rating but are "worth sharing with certain customers," he says, should be made "available to everyone."

The part I am interested in, is the complete skirting of the Chinese wall... it's an amazing stretch and only a company so arrogant to essentially own the regulators would pull a stunt like this. But it's a financial oligarch country and there is none more powerful than these. Here is the part that SHOULD be getting all the attention at the SEC. Not only is the Goldman research term giving short term tips to a small group of their biggest hedge fund, there are some magical men sitting in on those meetings. These men are called "franchise risk managers" - they happen to work for Goldman's trading floor.

Every week, Goldman analysts offer stock tips at a gathering the firm calls a "trading huddle."  Some Goldman traders who make bets with the firm's own money attend the meetings.

Say for example in a "trading huddle" - as in the case with Janus Capital - an analyst recommends a stock to the "wink wink" hedge fund crowd and his franchise risk manager (wink wink), allowing hedge funds and FRM to buy the stock. (of course FRM won't talk to ANYONE else in the firm on the trading floor either but keep his purchases a secret...right) Then 6 days later Goldman Sachsrecommends Janus publicly, allowing hedge funds and FRM (and all his trader friends on the other side of the Chinese wall) to sell the stock to the ravenous public who is joyous Goldman issued a "buy!".

As I said last week: We (the collective) only see the tip of the iceberg when we think we know what is going on in these markets. We find out new things every month, quarter, and year of the policies and practices. Some get "fixed", some don't. Even those that get "fixed" get worked around. The regulators are like the drug testing officials using technology 10 years old. The top select financial firms are like BALCO - except when they get caught they get slapped with a cursory fine that is akin to 1 day of trading profits (while of course never admitting they did anything wrong).

It has always been a rigged game; you know that walking in. But the degree of "it's fixed" is now at levels that are jaw dropping.

http://www.istockanalyst.com/article/viewarticlepaged/articleid/3440859/pageid/1

This is an interesting and educational article.  I wonder why the bloggers always seem to pick on Goldman Sachs.  They're always in the news.

Do others do this to?  Is Goldman just the biggest and most profitable?  The best target?

I never heard of a "Chinese Wall" before.