Investors as Muppets - A View from the Inside

What the sunshine reveals is sometimes harsh, but it’s better to know than to encounter those things in the dark.

Investment fraud happens at all types of brokerage firms, and it’s getting worse.  - The Vigilant Investor

Having seen into the dark corners of the industry during my time as a Branch Chief at the SEC, I know that what actually happens at brokerage firms is as far from their trustworthy image as Homer Simpson is from a vegetarian diet. So, I was glad, but not surprised, to read a New York Times editorial from Greg Smith, who spent 12 years inside Goldman Sachs. The whole piece is well worth your time. For my purposes, I’ve pulled out the following quotes: (more…)

Animal House and Goldman Sachs

If Goldman Sachs were a character in a movie, it would be Eric (“Otter”) Stratton from Animal House.

If Goldman Sachs were a character in a movie, it would be Eric (“Otter”) Stratton from Animal House.  As played by Tim Matheson, Otter comforts pledge Kent (“Flounder”) Dorfman after Otter and his Delta Tau Chi brothers have trashed the car that they convinced Flounder to let them borrow for a road trip.  As Flounder cries over the demolished car, Otter puts an arm around Flounder and says “Face it, Flounder.  You f#$%ed up, you trusted us.” (more…)

SEC Charges Goldman Sachs with Fraud

This case teaches two lessons. First, the securities industry observes no human morality. For players in the market, the only moral code is “‘good’ means more money for me. ‘Bad’ equals less money for me.”

The U.S. Securities and Exchange Commission (“SEC”) has charged investment banking giant Goldman Sachs (“Goldman”) and Goldman employee Fabrice Tourre (“Tourre”) with securities fraud.  According to the SEC, Goldman secretly allowed a hedge fund that was betting on the sub-prime collapse to select securities to be included in a collateralized debt obligation (“CDO”) and then sold investors on the prospects of a rise in the value of the CDO. According to the SEC, the Paulson & Co. hedge fund paid Goldman $15 million to be able to choose lousy securities and made $1 billion when the CDO, predictably, imploded. (more…)

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