I just read Too Big To Fail by Andrew Ross Sorkin, so I am aware what happened to the US investment banks (and the global economy) in the 2007 mortgage bubble and 2008 stock market crash. My conclusion? Just another bubble!
In Australia they have a phrase, “Tall Poppy Syndrome”. This is the self-defeating practice that some societies have of bringing down those who have achieved success, especially those who display their success. Australia and the UK are enthusiastic practitioners of Tall Poppy-ism: possibly a reaction to monarchy and the class system. The US tended to celebrate success and “The American Dream” so it seemed to me that it was less inclined to participate in Tall Poppy-ism. I think the crash of 2008 changed this. Perhaps the US considers Wall Street to be their monarchy? In any event, some want to tear down the tallest poppy of Wall Street: Goldman Sachs (GS).
Chief poppy cutter is Matt Taibbi, whose recent piece in Rolling Stone entitled The People vs. Goldman Sachs is causing a stir this week. I read the piece. It’s overly dumbed-down (his analogies are silly, even for a non-financial audience) and populist, but he does have a point: dealing with a bank should not be a “buyer beware” situation. As a new shareholder, I like Goldman’s earnings growth prospects and their strong position in the industry. I think the spectre of litigation and new regulation (neither of which will amount to much) is depressing the share price, making it good value. I bought it on 15th April for $155. Taibbi and his adherents have driven it down to $142. My opinion? I just wish I had known to wait a couple of weeks until Taibbi’s article came out to buy! Or would that be insider trading?