As a shareholder could you imagine walking up to an executive of a firm you're invested in and asking him what he's doing today and him telling you "nothing"? Sweet.
I also targeted
and the newly leveled charges by the SEC.
While reform is certainly necessary in certain areas of the financial industry such as more transparency in derivatives and swaps, upon further review and more research, the charges leveled against Goldman are flimsy to say the least. Moreover, one could liken the timing of the charges to a "Black Swan" event.
The SEC announced the charges during the trading day and wiped out billions in a matter of minutes. But to add insult to injury, the SEC fired their weak missile on expiration Friday, one of the busiest trading days of the month. Traders scrambled to reposition their trades and the impact on the market was severe. I know firsthand.
As an options trader I had many positions that were "in the money" and set to expire that way. Thanks to the SEC announcement many of my positions swung from a profit to a loss. So much for the SEC looking out for the retail investor. With friends like this...
For being asleep at the switch with Madoff and Stanford, the Barney Fifes at the SEC apparently want to save their government pensions by going after low hanging fruit and high profile names. I kid. Of course no one in the government gets fired so their pensions are secure. No one or no company in the financial space is as high profile as
Feeling the populist and Washington heat, the SEC is now like a lion showing up at a new pride. They found the alpha males and are going after them. It would help if they had teeth and claws. I guess the SEC is going to gum them to death.
I currently hold a neutral to bearish May call spread on GS.
The SEC bypassed or paid lip service to many standard practices. You may say, "great, the old way of doing business wasn't working." Then standby for more 100-point swing days and hits to your portfolio. The SEC usually serves a person or firm something called a "Wells Notice" which is like counting to three with your kids. It gives them a heads up that something bad may happen and allows them to answer or fix the bad behavior before getting a swift kick. This heads up allows many firms, who sometimes do not know they are in error, to make things right. It avoids a public spectacle and helps people like me not lose money due to surprise attacks.
But as you know, right now things in the financial space are anything but normal. After a bruising round of healthcare the administration sees November on the horizon and needed to turn their populist rage cannon somewhere else: Wall Street. Reform is needed. Duh. Health care reform was needed too, not just a massive takeover of 17% of the economy. Standby for similar "government reform" in the financial industry.
Forgive me if I don't weep for the folks on the other side of Goldman and Paulson's short position on housing. They're "sophisticated investors" and know they were dancing with Goldman, not an organization known for giving away free money. It took the SEC a couple of years of digging into this mess and all they could find was maybe some non-disclosure issues. Thanks for the parking ticket officer, I'll get right on it.
Goldman and Paulson came out swinging. Good for them. If they've done nothing wrong, I support them. If they did, hammer them (Recommendation to Goldman: Have your HR or communications department hold email training. The use of "callsigns" that employees personally make for themselves can blow up in your face, i.e. "Fabulous Fab." I at least earned mine, "Whiz", which has nothing to do with intelligence. You figure it out).
The main problem I have with the SEC's attack is the timing with the administration's push for financial reform. After yielding the spotlight for the past year to Reid, it's Dodd's time to shine. Oh, and don't forget Barney. Frankendodd needed a scapegoat and they found one.
Republicans are demanding to know the details between the SEC charges and the administration's push for financial reform. While appearing to defend Goldman will be a losing issue for them, they are at least attempting to put a spotlight on a government that once again wants reform at any cost.
For example a hidden gem in the current financial reform bill raises the thresholds for an "accredited investor" from $1 million net worth and $250,000 annual compensation to $2.3 million and $450,000. Boo hoo, right?
This change will impact small businesses severely. I know, I'm starting one. Many startups are funded in part by "angel investors." These businesses need capital quickly and the government is looking to add layers of bureaucracy and months of paperwork. A more subtle but just as dangerous side effect is that the government is basically raising the definition of the word rich.
In the interest of full disclosure I became an accredited investor a couple of years ago and thought I had made it. The door to the world of hedge funds, venture capital and Willy Wonka's Chocolate Factory were open to me. I was rich! Not really. I was still me with the same debt, car and mortgage payments, and kids who apparently like to eat. But boy I was happy the government was finally recognizing that I was grown up enough to be responsible for my investments. Thank you Uncle Sam! Raising this limit cuts off a major source of funding for business in the country and also lets the government expand the middle class, and therefore, the tax base. Talk about spreading the wealth around.
Firing Line: Government reform, when done with a sniper rifle and not a shotgun, can sometimes work. Just look at Sarbanes Oxley. Ummm...wait a minute. How about Glass Stegall? Swing and a miss. Well maybe third time is the charm. Don't hold your breath.
-- Written by Matthew Buckley in Boston
Matthew "Whiz" Buckley is the chief strategy officer of
, a provider of options education for options traders of all levels. . He is also the founder of Strike Fighter Financial, a business-consulting firm specializing in leadership development, risk management and strategic planning for Fortune 500 companies and related organizations. Buckley flew the F-18 Hornet for the U.S. Navy. He's a graduate of TOPGUN, has close to 400 carrier landings and flew 44 combat sorties over Iraq. After leaving active duty, he worked as managing director of strategy at a Wall Street firm and CEO of a financial media company. He is an internationally recognized speaker and combined his experiences in the military and corporate America in his book "From Sea Level to C Level."