Goldman Sachs
Stocks were dropped today as the Goldman scandel hit the markets, and the entire market and all other markets got hit in the downdraft. This is a great lesson in the importance of Goldman Sachs to the financial workings of the world.
In the news today….
Goldman Sachs – was charged by the SEC for civil fraud in their managing of the housing securitization mariket. Here are some details. Apparently, the SEC thought that it was just darn illegal for Goldman Sachs to be selling a specific (housing) security while allowing a Hedge Fund to be able to choose the detail of that “specific” security and that Hedge Fund selling it short – betting the value would go down. It appears on the surface that the SEC is going after the idea of allowing an “outsider” to specify the details of the security. If this is so, then there are going to be a lot more of these civil law suits.
It has also been “leaked” that Goldman Sachs had an interest in the specific security. In other words, they were beetting it was going up. Sounds like a sound defense on the surface. Why how big was the investment? Also, if you knew the two sided deal was a little shaky; wouldn’t you bet on the upsdie to provide a good defense?
The Hedge Fund was run by a guy named Paulson, and he is a big time Hedge Fund leader – and more importantly, he made a fortune for his Hedge Fund (and himself) in the market meltdown that happened in late 2008.
So, why did gold meltdown today? Well, it turns out the Paulson’s Hedge Fund is the largest owner of the Gold EFT - GLD. And Goldman Sachs is the 11th largest holder of GLD. Now, the idea is for you to figure out why did Gold go down today. Well, everything went down today – oil, gasoline, the Euro, stocks – but not bonds – they went up.
Stocks were poised for a down trend as they have been going up continuously far too long. They just needed an excuse, and Goldman’s lawsuit provided the impetus. Notice that it wasn’t just Goldman shares that fell in value; it was all share that went down.
As a closing comment, I have been very critical of Goldman Sachs over the past 2 years, and I personally lay the blame of the financial crisis at their door. Answer this question. Why of all the financial institutions did Goldman Sachs end up so well, and many other went bankrupt? Good management (if so, how did they know how the market would end up?) Good luck? A good crystal ball?
Now on the political side, it is NOT a coincidence that the government is trying to pass a bill that revamps the rules that these investment banks operate by. So, it is entirely possible that the SEC was told to choose this time to file the civil fraud charge.
Here are the last numbers for today:
Dow Jones 30 Industrial – 11,038 (up 107)
10 Year Treasury Bond – 3.77% (down 0.08%)
Euro – $1.3506
Gold – $1136 (down $36)
Oil – $83.12 (down $2.39)
Gasoline – $2.28 (down $0.05)
