Thank You Goldman Sachs
The WSJ just broke a report that basically says something I bet we all instinctively knew anyways, but nevertheless it is still making ripples. Essentially, Goldman Sachs' (NYSE:GS) research analysts are conducting "trading huddles" where they give "short-term" stock tips to other analysts who then call their 50 best clients with the advice. So what's wrong with that? Well, the stock tip is often contrary to what the analysts are writing in their research reports -- research reports that all the clients, not just the best ones, are privy to.
Some of the not so favored clients (aka, anyone that is not a hedge fund or an institutional investor) are upset that they are not getting the same service and information that others are getting. In addition, securities laws prohibit firms like Goldman from giving advice that contradicts their true beliefs and mandates fair dealing with all customers. Morgan Stanley (NYSE:MS) does something similar -- however, they call the tips "research tactical ideas" (so creative!) and find loopholes by providing disclosures telling customers that they might contradict another opinion on the stock.
Is anyone here surprised? Goldman is treating its best customers, well, better than other customers? What a shocker.
If I were a Goldman customer, I'd feel fortunate right now. That is -- if I'm a true investor. Because investors, as opposed to speculators, don't try and time the market, especially when it comes to short-term price fluctuations that revolve around earning reports and such. Often times, the tips are only targeted for a few days, or a week. Analysts are encouraged to use cautious language like "oversold" or "run up", as opposed to "buy" or "sell". I certainly wouldn't want that type of shifty, ambigously random information. All those "stock tips" would only be a distraction to my overall investing strategy.
As essayist and ex-trader Nassim Taleb would say -- the early morning Goldman huddles only serve to clutter your financial conscious with "noise" as opposed to useful "information".
So for all the small fish Goldman clients, you can thank your bank ahead of time for not bothering you with their week-to-week snippets of arbitrary "buys" and "sells" masked under the guise of "ups" and "downs".