- Are 'Pure-Play' ETFs a Shrewd Investment – Or a Risk Not Worth Taking?
- Thursday's Wild Stock Market Ride Spotlights 'High-Frequency Trading' as the Latest Worry For Investors
- Goldman Director Linked to Insider Trading on Buffett Investment
- Money Morning Mailbag: What's More Broken – Washington or Wall Street?
- SEC Charges Goldman Sachs With Fraud, Sending Its Stock, Reputation Tumbling
- Odds of IMF Bailout Increase as Greek Bond Prices Plummet
- Having Served its Purpose, TALF Could Soon Turn a Profit for the Fed
- Investing Strategies: How to Decode the New Options Trading Symbols
- It Was a Wonderful Life – And Then Came Securitization
- Continued Corruption on Wall Street is Sapping Investor Confidence on Main Street
- Plan to Repair U.S. Banking System Unveiled by Former Hedge Fund Manager
- Japanese Stocks Rise Today on Buyout, Credit-Market Optimism
But are they too much of a risk?
According to Dictionary.com, a mutual fund is an investment company "that gives small investors access to a well-diversified portfolio of equities, bonds and other securities," professionally managed to "match the objective stated in the (fund's) prospectus."
Traders said that a growing confidence in the strength of the U.S. rebound was a key rally catalyst.
But Money Morning's Shah Gilani was worried.
The new disclosure stems from a government examination into whether Gupta gave inside information to Mr. Rajaratnam about a $5 billion investment Warren Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) made in the Wall Street bank before it became public knowledge.
In a March 22 court filing, the government revealed more details about the information it alleges Rajaratnam received, alleging that he or "co-conspirators" traded on non-public information, including advance notice about the Buffett investment in Goldman.
A week after the Securities and Exchange Commission brought fraud charges against Goldman Sachs, President Barack Obama yesterday (Thursday) blamed the financial meltdown on both Washington and Wall Street in a speech in New York and urged Wall Street giants to stop fighting reform.
The SEC accused Goldman Sachs of failing to disclose vital information on a synthetic collateralized debt obligation (CDO) that was peddled to clients while the bank bet against its success, knowing the bank was likely to come out the winner. The SEC says Goldman used hedge fund Paulson & Co. to pick particularly risky securities for the product with a higher chance of collapsing.
The whole financial sector slid after the SEC's announcement. Goldman's stock fell over 12% Friday to close at $160.70 a share.
Economists expressed new doubts over the country's banks and short term funding plans and warned that recent developments now threaten to create a vicious cycle of bad news.
"The fear factor is beginning to creep in. In fact, it's galloping in," Neil Mellor, a senior currencies analyst at Bank of New York Mellon Corp. (NYSE: BK) in London told The Wall Street Journal.
In an interview with Dow Jones Newswires, Dudley, the president and chief executive officer of the Federal Reserve Bank of New York, said that the TALF program has reignited the market for securities backed by loans on vehicles and credit-card debt.
TALF was launched by the Fed to entice buyers to buy new bonds backed by auto and student loans. At the time, investors were reluctant to purchase securities backed by shaky collateral, fearing they would lose their entire investment.
But the "government" had nothing to do with it.
The idea for a new option-quotation format was actually put forth back in 2005 by securities industry insiders whose companies were struggling to find ways to deal with the rapidly growing number of optionable stocks, index options, short-dated "serial" options, long-term issues such as LEAPs - and the expanding strike-price ranges for all of them.
With the guidance of the Options Clearing Corporation (OCC), a group was organized and tasked with creating what was subsequently dubbed the Options Symbology Initiative (OSI) - a system to "overhaul the symbology used in representing listed option contracts in data transmissions between market constituents."
If nothing else, this landmark court case should make one thing very clear: Securitization - the product of the finest brains of Wall Street for more than two decades - doesn't work as advertised.
Historically, mortgage loans were made by small local institutions, which knew the borrowers personally and took the credit risk themselves.
A couple of days ago, I caught an episode of the American Experience on my local PBS station that covered 1929 stock market crash. The episode in question had premiered in 1990, and featured first-hand accounts - as well as interviews - with historian Robert Sobel and economist John Kenneth Galbraith. It has an interview with Patricia Livermore, daughter-in-law of trading great Jesse L. Livermore and the subject of the annotated version of "Reminiscences of a Stock Operator" that I just completed. (Publication date is Jan. 10).
It won't work.
What is needed - and what would arrest the slide in U.S. housing prices - is a renewed general confidence in protective regulations, and tax incentives for investors to buy troubled assets and to make equity investments in banks.