Monday, August 24, 2009

Goldman's Trading Tips - Doesn't seem right...does it?

The Wall Street Journal reports that critics complain that Goldman's distribution of the trading ideas only to its own traders and key clients hurts other customers who aren't given the opportunity to trade on the information. In fact, every week Goldman analysts offer stock tips at a gathering the firm calls a "trading huddle." But few of the thousands of clients who receive Goldman's written research reports ever hear about the recommendations. At the meetings, Goldman analysts identify stocks they think are likely to rise or fall due to earnings announcements, the direction of the overall market or other short-term developments. Some of their recommendations differ from ratings printed in Goldman's widely circulated research reports. Some Goldman traders who make bets with the firm's own money attend the meetings. Since the trading huddles began about two years ago, Goldman has supplied "trading ideas" on hundreds of stocks to the traders and top clients, according to internal documents reviewed by The Wall Street Journal. At least one firm discloses such trading tips more broadly: Morgan Stanley (MS). Their research dept. sends blast emails with short-term views on various stocks to thousands of clients, and posts the information on its Web site. It doesn't call customers to convey the tips, because co officials decided that could expose the firm to questions about selective disclosure, according to people familiar with the matter.

As I have mentioned before Goldman trades one way in private with their own money and says a different thing in public. Not right, man.

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