SEC actions are always a fun way to pull back the curtain and see how Wall Street really works. Peering inside the Goldman Sachs sausage factory, we see how bankers put together their wonderfully innovative products:
Apparently when sharp MBAs get bored with ripping off their clients and hoodwinking regulators, they create mystery products that serve no useful purpose but somehow command a premium. They then create proprietary indexes against which they can measure the performance of their mystery products, and these indexes are just as meaningless as the products.
Does any of this matter to investors? Only if they're dumb enough to buy these Frankenstein securities. Smarter investors (like yours truly) just wonder what all the fuss is about and move on.
Full disclosure: No position in GS at this time.
As the U.S. housing turned downward in January 2007, a Goldman Sachs trader wrote in e-mails to a woman he apparently was courting that investments he had sold were "like Frankenstein turning against his own inventor."
Apparently when sharp MBAs get bored with ripping off their clients and hoodwinking regulators, they create mystery products that serve no useful purpose but somehow command a premium. They then create proprietary indexes against which they can measure the performance of their mystery products, and these indexes are just as meaningless as the products.
Does any of this matter to investors? Only if they're dumb enough to buy these Frankenstein securities. Smarter investors (like yours truly) just wonder what all the fuss is about and move on.
Full disclosure: No position in GS at this time.
