The stock markets moved up rather nicely throughout the week, that is until Friday, when investors panicked over what I consider a non-event. The three major stock market indexes ended the week mixed – the Dow gaining 0.2%, the Nasdaq gaining 1.4%, and the S&P 500 ending with a loss of 0.2%.
On Friday, investors locked in profits and fled the markets after the SEC “civilly” charged Goldman Sachs (GS) for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.
According to excerpts from the SEC report -
The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO..
The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events..
But, is this really an event worthy of investor panic? Not in my opinion. I think it’s just another show put on to appease an angry public and isn’t anything investors need to be concerned about.
After all of the criminal activity the SEC (intentionally?) let slip through it hands this past decade, the organization has lost all creditability with the American public and needed to “do something” in order to show that it still has muscle, and boost investor confidence.
But, in my opinion again, if the SEC was really serious about these charges, they would have charged Goldman “criminally”, charged more insiders individually, and would have included Paulsen & Co. in their indictment.
Instead, a few corporate executives at Goldman Sachs will be called to testify before Congress, a few fines will be paid now that Goldman can afford it, no one will be held accountable and go to prison, Mary Schapiro will be called a hero, and it’ll all blow over in a year or two. Business as usual on Wall Street.
So, what I’m I going to do? Nothing.
I don’t see a need to change my allocation or move out of stocks yet. There’s no reason for panic and I still see stocks as offering the best returns.
Comments 4
I’m going to follow-up on this alleged scheme over time just to see if what happens actually occurs as I’ve described. Here’s a the first part -
1. now that Goldman can afford it
According to an Yahoo! AP report excerpt today -
Posted 20 Apr 2010 at 7:51 am ¶Just a more descriptive addendum to my post from The Daily Show – These F@#king Guys – Goldman Sachs
Posted 25 Apr 2010 at 8:35 am ¶2. a few corporate executives at Goldman Sachs will be called to testify before Congress
Goldman Officials Defend Actions in Faceoff With Senators
All a pre-scripted show to make it seem that “our leaders” really care and are doing something other than speaking sternly. The outcome was already determined many months ago.
Posted 27 Apr 2010 at 2:47 pm ¶What did I tell you about this whole phony show of enforcement?
3. No one held accountable and go to prison.
Goldman Sachs to Pay Record $550 Million to Settle SEC Charges Related to Subprime Mortgage CDO
Does that not convince you who really runs the show? It’s not the President, it’s not the Legislature, it’s not the Judiciary.. it’s Wall Street and the corporations they helped create. They own our politicians.
Consider this question that I proposed in a previous comment, and some other follow-up questions -
Do you not think it coincidental that the BP explosion and oil spill occurred just after Goldman Sachs was indicted?
Do you not think it coincidental that the SEC can’t discover the cause of the May 6th “flash crash”, that also occurred just after the Goldman Sachs indictment?
Do you not think it coincidental that the SEC announces this settlement the day that BP announces that it’s finally capped the oil spill?
The SEC attempts to puff up this settlement by stating that this is the largest fine ever imposed against a financial firm. But, does anyone think $550 million is a large fine, especially compared to the trillions of dollars it cost taxpayers to bailout Wall Street? Think about it, Pfizer was recently fined $2.5 BILLION just for it’s Bextra indictment.
So, do you really think the SEC is there to protect individual investors?
Posted 15 Jul 2010 at 2:16 pm ¶Trackbacks & Pingbacks 1
[...] of the SEC, and grand protector of the American investor. That news will be the crowing touch in my previous theories about who’s really running the [...]
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