Not the first time we’ve seen Goldman in the news, is it? Now the old Wall Street firm (1869) is being attacked by the SEC for being on both sides of trading activity. Here’s my question: What is Goldman exactly?
If Goldman is a brokerage firm, it’s bound to handle trades from both sides — customers who are buying and customers who are selling. Goldman could take an order from one customer to buy a security while it is selling the same security for another customer.
While I agree that I’m a long, l-o-n-g way from being a trader (financial planners trade, buying and selling stocks and funds, but usually not on a daily basis), big financial investment banks often have a substantial trading “desks,” where customers may buy and sell shares. Thus, it seems plausible that Goldman — which deals with moneyed individual and institutional customers — could take orders from customers who bet both ways on subprime mortgages. And Goldman itself could bet either way separately. Indeed, one part of Goldman could bet one way and another division could bet another. Many often bet two ways, including institutional investors, in order to hedge against risk.
According to the April 19 issue of Barron’s, this was a private transaction among “Buyers — and losers — (who) were sophisticated institutional investors and financial companies.”
So, I think it’s about disclosure. The disclosure for my monthly column, “The Investment Edge,” (April’s column: “Feel the fever: Retirement Savings Planner“) says that I may take positions in the investments I discuss:
This information is intended for financial professionals only, not the general public. This is not a solicitation to buy or sell any specific security. Mr. Hoe may have positions in the securities or other investments discussed. Evaluation copies of software and review copies of books are sometimes furnished by publishers without charge; however, Mr. Hoe only reviews books and programs he feels will of value to LIS readers and avoids writing about books and programs he feels would be of little interest.