Goldman Sachs misunderstood

Last spring it came to light that a unit of investment banker, Goldman Sachs, was selling a mortgage backed security (MBS), while simultaneously an analyst at Goldman Sachs was recommending that the firm’s clientele sell the security.  To the general public this situation appeared outrageous.  Shares in Goldman Sachs plummeted as investors were certain that Goldman was going to have its feet held to the wrath of the Federal Congressional fire.

From the beginning though, the general public misunderstood this story.

First of all, that two units of Goldman Sachs were in disagreement with one another is a healthy sign of independent thinking.  The predominate reason for the public’s outrage is that they view Goldman Sachs, and many businesses, as a personality.  That is, they see Goldman Sachs as a person.  This is a massive oversimplification and is similar to the public’s anthropomorphizing of financial markets.

Goldman Sachs is the name of a business that houses people with various responsibilities, selling various products.  That Goldman allows people within its organization to publicly disagree with one another is commendable, not reprehensible.

The next issue that investors, not the public, misunderstood, is the degree to which the Federal Government would hold Goldman accountable.  As a former professional investor myself I knew that all Wall Street firms engaged in similar practices.  How could the Feds single out Goldman Sachs without shining light on all of Wall Street?  They couldn’t.  And what was the context?

It was an election year in 2010, the Feds were wanting to demonstrate to the American public that it was okay to start to trust the financial system again.  So it was my intuition that Goldman Sachs was massively oversold.  Therefore, I purchased shares in the storied investment bank at a deeply discounted price.

My point?  Independent thinking, a combination of analytical rigor and intuitive insight, is potent!  These are the very issues that I discuss in The Intuitive Investor: A Radical Guide for Manifesting Wealth.

Jason