Yes absolutely! There's a reason why Goldman achieved the image as "a vampire squid sucking on the face of humanity." The first time I heard this was when the US economy was bottoming from the housing crisis in 2009. Goldman showed their true colors during the crisis. Not only were they dumping bad sub-prime mortgages onto unsuspecting clients right before housing tanked, they profited from the downfall of many companies like AIG. You may recall that about $13 billion of the taxpayer bailout to save AIG went directly to Goldman. Why? Because they were betting that several mortgage CDOs, some of which they were selling to clients as good investments, would actually default. Goldman made that bet by purchasing credit default swaps from AIG. Well finally in 2010 some justice was served. Goldman decided to settle with the SEC for $550 Million for "misleading investors", which was the largest settlement every administered to a financial services company. It pales to the $13 billion profit though. The other really annoying thing about Goldman Sachs is their CEO Lloyd Blankfein. He was quoted as saying that investment banks are doing "God's work". His ego and greed are just totally off the charts.
The reason why I bring this up now is to remind everyone of the kind of forces that drive financial markets. Remember that big investment banks, hedge fund managers, and big brokers, love the boom and bust cycles, or bubbles, because they make bets on the way up and down. And when you're as big as some of these guys are, your investments can actually move markets. As an example, these type of investments are blamed for running up the price of oil to over $4/gallon a couple years ago. One thing that really bothers me is when they make a press release about where the market is going. Often they make these releases after making big bets and are hoping that they will make millions on the reaction. I remember reading a news release from Goldman Sachs saying that they thought oil would quickly drop to $90/barrel, and minutes later reading a release from Merril Lynch (I believe) that oil could move up to $120/barrel. I do enjoy it when they try to sabatoge each other. Another very recent example is with the company Herbalife (HLF). A billionaire investor Bill Ackman invested a huge short position in Herbalife, then made a press release that he believes Herbalife is a big pyramid scheme. Another billionaire investor, Carl Icahn, had a huge long position in Herbalife and took a big hit after Ackman's release. Anyway they ended up duking it out (verbally) like teenagers on live TV. Those are the good moments. But remember, just with that press release, Herbalife's stock dropped nearly in half, and Ackman probably made millions. These are the types of games being played, and sometimes it is on a much bigger scale. I personally think that Bill Ackman's news release and profiteering from HLF is the same thing as insider trading and should be illegal.
This is why I like having more control over my investments. When I refer to the "Wall Street monster" this is the type of thing I am referring to. For the middle-income straight shooting investor like myself, these are the sharks that try to get you to invest one way so that can make money the other way. The best thing you can do is to stay well informed, and not to be easily swayed by media hype. Also, by paying attention, it becomes easier to pick-up on what's hype and what's not, or where you might be seeing bubble formation or even panic selling. You may even be able to catch some good opportunities in there if you time it right.
Question of the week. Where do you think the next bubble will be?
As a footnote, the person who coined the "vampire squid" metaphor was Matt Taibbi in a Rolling Stone article. If you want all the dirt on Goldman Sachs, find the article at this link.
http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405
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