After generally impressive earnings reports sent markets higher for much of the last week, Friday’s shocking allegations against Goldman Sachs ensured that the week ended on a down note. The SEC filed fraud charges against the Wall Street giant on Friday, alleging that the firm failed to make important disclosures surrounding a subprime mortgage product some believe was destined to fail. The SEC claims that Goldman constructed and marketed ABACUS, a synthetic collateralized debt obligation linked to the performance of subprime MBS. Goldman didn’t make certain “vital information” known to investors. Specifically, the hedge fund run by John Paulson was involved in selecting which securities would be part of the portfolio, while standing to reap a huge profit if the mortgage-backed securities failed. [click to continue…]
In the summer of 1992, Eugene Fama and Kenneth French published “The Cross-Section of Expected Stock Returns” in The Journal of Finance, a groundbreaking analysis that prompted financial presses to run headlines declaring “beta is dead.” While the death sentence may have been a bit severe, it struck a significant blow to a widely-accepted and [...]
Even the most vocal supporters of passive management and indexing have to admit that certain investor track records are far too stellar to attribute entirely to luck. While I’ve frequently disparaged the concept of active investing, I’m still eager to hear what trends legendary investors are following. The Wall Street Journal’s Gregory Zuckerman recently compiled some [...]
