Facing both ways on Goldman’s research

August 25, 2009

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.

One comment

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A1: Are sensors helpful to a gunner?

A2: Bona fida or not, if a trader can confidently predict the effect of the future public release, the early tip-off is inside information and pure (if you’ll pardon the expression) gold.

A3: I would have checked that my retainer to the best criminal defence lawyer in NYNY was up-to-date.

A4:Heck yes!
http://housingdoom.com/2009/03/24/k-wint er-sanitation-inc-named-to-head-toxic-as set-cleanup-effort/

“HOUSING DOOM: Barrie, Canada, March 24, 2009: In an announcement that has shocked the financial world, US Treasury Secretary Tim Geitner has named Canadian Port-O-Potty and Kondratieff re-Cycling specialist K. Winter Sanitation, Inc. as the prime contractor in America’s effort to clean up Wall Street’s toxic efforts.”