Facing both ways on Goldman’s research
Both readers of the Wall Street Journal Europe were finally treated to the Goldman Sachs research story today, across two out of 32 pages. For new readers, the WSJ discovered that the world’s most envied bank told its most profitable clients about its research before telling everyone else.
There’s even a real-life example in the WSJ article, of a suitably-named investment company called Janus, which rose from $23 to $25 the day before the Goldman analyst reiterated his “neutral” stance on the stock. The price then bobbled around between $25 and $26 while the Goldman traders huddled and talked to their clients. Eight days later, the hapless analyst decided that Janus was a buy, and the price gently subsided.
Now the US securities regualtors are joining in, according to the WSJ. Here are a few questions for them to consider:
Q1: Is the analyst’s research worth anything to a trader?
Q2: If it’s bona fide research, should the conclusion be described as inside information?
Q3: Would you have felt privileged to have been told about the work before the upgrade?
Q4 Do bears use portaloos in the woods?
Answers: No, no, no and no.