Wall Street Trading Information Leaked to Favored Clients

According to the Wall Street Journal, Goldman Sachs has been disseminating important trading information to favored clients before releasing the information to the masses.

Need another reason not to do business with Wall Street firms? According to the Wall Street Journal, Goldman Sachs has been disseminating important trading information to favored clients before releasing the information to the masses. Hedge-fund giants like SAC Capital and Citadel, who are responsible for several percent of the market’s daily trading volume and pay Goldman huge brokerage fees, received calls from Goldman every week about stocks the firm thinks will rise or fall. How many calls have we received in Fernandina Beach?

Some of the information is contrary to what Goldman sends other clients. Goldman’s proprietary trading desk also uses the privileged information to profit. Days later, Goldman will release its report to the rest of its clients, often after the stock in question has advanced. This, of course, is front-running clients, plain and simple. Goldman spokesman Edward Canaday told the Journal, “We are not in the business of serving thousands of retail customers.”

I doubt an investment bank has ever issued a truer statement. These banks aim to first make billions for themselves and then make sure their biggest clients are happy. The little guy is an afterthought. Again, where are the customers’ yachts?

Here is something else to piss you off about another subject, initial public offers. Most people who invest in initial public offerings (IPOs) don’t understand that only two people get rich from an IPO, the owners and the underwriters. After all, if you owned a valuable business that was growing and poised to explode in value, why would you sell?

This quarter, around 17 companies are trying to raise a combined $8.1 billion by going public. This is up from zero companies last quarter. Why is this new trend occurring? Buyout firms spent a record $1.6 trillion on takeovers between 2005 and 2007. Now, they’re taking advantage of the market’s rally to recoup some of their investments.

Take the most recent IPO announcement, private-equity giant KKR’s attempt to sell $750 million of Dollar General stocks to the public. If the deal is successful, KKR will immediately pay itself and investors a $200 million dividend. But why is that good for the company? Why is this good for the investors? I ask again, ‚Äúwhere are the customer‚Äôs yachts?‚Äù