Monday, August 24, 2009

The Witch Hunt Continues

The WSJ has a sort of vague story this morning discussing how Goldman Sachs (evil) makes trading calls to its biggest clients (evil) which may be slightly at odds with the long term recommendations in its published research and therefore disadvantaging smaller clients (angels) who don't have the same depth of access to Goldman analysts and traders.

Some folks resent Goldman's success and want them to go down no matter what. Some want maximum protection for the smallest investors, even if that makes no sense from a business standpoint. Do you know any business owner who does not treat her biggest customer better than her smallest one? Let's say I'm an analyst at GS. If I have a Neutral rating on XYZ because I think it will perform in line with the market over the next 24 months, but think the stock may pop next week if people get excited about a new product cycle (a product cycle I am not a fan of), is it wrong for me to have that conversation with a client? No.

We have a very quiet two weeks ahead so maybe this one will stay under the radar.


A friend of mine at Citi just upgraded distant #2 processor maker AMD. Most stocks are up a lot and AMD is as well, but you could argue that it is still cheap if business overall gets better and they manage to execute. That is the kind of call you get at this point in the cycle. It's probably a good one, though.

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