Goldman was the trade of the year part 2

The witty authours of Canaccord’s (CCI:TSX) Morning Coffee had this to say about Goldman Sachs (GS:NYSE) this morning, and it might explain why the stock is off almost 5% in the first hour of trading, even though the Dow is down just half a percent:

“Goldman (GS : NYSE : US$240.21), Net Change: -7.71, % Change: -3.11%, Volume: 12,560,296

Smart, lucky or just old fashioned cheating?

Remember the impressive report from Goldman a few weeks ago, about how they avoided an earnings blow-up by actually being net short the mortgage related assets? The New York Post’s John Crudele (if you don’t read him regularly, you should) reports that the SEC is looking into whether Goldman Sachs cheated its way to enormous profits by perhaps having had insights that their competitors did not have. For example, perhaps investment banking tipped off the trading side, suggested one source in the article. Goldman was definitely long a lot of mortgage-related assets and even lost money on those positions along with everyone else. But they slapped on some short-term positions that more than made up those losses. It takes an enormous amount of “lopte” (as they say in Croatian) to put on such a large position. Either that, or specific knowledge.”

So much for my earlier post (“Goldman was the trade of the year“, October 31-07).

MRM
(disclosure – I own GS)