Sunday, November 27th, 2016

Goldman Sachs accused of Fraud by SEC/Temper Tantrums back?

GSTalking about slaying the dragon on CNBC.In a bold and unprecedented move SEC moved to charged Goldman Sachs  of sub prime mortgage fraud.  Here is the excerpt from AP  “The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.  The Securities and Exchange Commission announced Friday civil fraud charges against the Wall Street powerhouse and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create — and then bet against — subprime mortgage securities that Goldman sold to investors.  The Goldman client implicated in the fraud is one of the world’s largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007. ”

Bizarre as it may sound, it was the housing market that took down the economy and created what is known as second Great depression. Obama administration  was not joking when they announced in January their intent on regulating too big to fail banks. But with  fraud charges filed it has come full circle in punishing the culprits and players who were responsible. Today’s announcement plunged GS stock down 13% in strong selling. This wiped off billions of  dollar of market cap for Goldman Sachs.

The market is in nasty mood. It reminds me of January when Obama chastised big banks and everything under the sun was sold off and some more. Wall Street is known to have these nasty temper tantrums and as you can see from our posts in January and February, that is what they may be up to again. Its best to sit on side lines and stay there till the storm blows over. Well it may never blow over because these are serious charges that can go on for years to come.

The market is extremely overbought and this may trigger a major sell off. What looks right now Wall Streets temper tantrum is coming on full swing. Markets mood is extremely nasty and unsavory.

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