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Was it possible to understand what Goldman was selling? They certainly weren't telling the whole story. Isn't part of the suit about disclosure? In general

Was it possible to understand what Goldman was selling? They certainly weren't telling the whole story. Isn't part of the suit about disclosure? In general, I agree with you, if you don't understand it then don't invest in it, but in reality close to nobody would invest in anything if they only invested in what they really understand. Regardless of which side prevails in the courts, there are some ethical issues that have been raised. Would you ever buy something from Goldman now? Personally, I've had brokers tell me they thought I was being to aggressive or careless with investments, that's pretty much what I pay them for. Perhaps it's a different relationship at that level. Between the flash trading and front running questions and then the piles of cash that they've made since the crisis, it definitely warrants more investigation. If you invest in index funds, odds are pretty high that you simply won't make money at any given point in the future, that was good advice 60 years ago, there are an awful lot of people who did that and see 2000 to 2010 as totally flat. It doesn't seem easy to call cash a good idea either, at some point the over extended currencies are going to normalize.

philk 16y ago
I don't think that even a sophisticated investor could understand many of the instruments that Goldman was selling; so for the most part I think people should have taken that as a warning. (Hell, even Warren Buffett was saying he couldn't understand derivatives and the odds of a given investor being sharper than Warren are low). I agree with you on the ethical issues but I didn't believe them to be particularly trustworthy in the first place, all of their incentives are lined up to do things that will make them money and their advice will be tainted by this. Re: Index funds and cash - yeah, they aren't going to get you stellar returns. Cash in particular gives you poor dividends. The point of these is that the chance of your money vanishing is low and they require little time investment, enabling you to focus on your area of expertise instead. If I had to choose areas to invest in that would (potentially) give better returns, I'd try: 1) Investing in oneself. ie improving skills, becoming better known, etc. Much easier to get above market returns here, of course. 2) A small number of small/medium size companies in unfashionable areas you can study and understand; basically stocks where there is the potential for decent growth and comparatively few people are looking. 3) Well chosen property for the leverage. You'd need to really spend time choosing well or the leverage would potentially fuck you over.

philk 16y ago

I don't think that even a sophisticated investor could understand many of the instruments that Goldman was selling; so for the most part I think people should have taken that as a warning. (Hell, even Warren Buffett was saying he couldn't understand derivatives and the odds of a given investor being sharper than Warren are low). I agree with you on the ethical issues but I didn't believe them to be particularly trustworthy in the first place, all of their incentives are lined up to do things that will make them money and their advice will be tainted by this. Re: Index funds and cash - yeah, they aren't going to get you stellar returns. Cash in particular gives you poor dividends. The point of these is that the chance of your money vanishing is low and they require little time investment, enabling you to focus on your area of expertise instead. If I had to choose areas to invest in that would (potentially) give better returns, I'd try: 1) Investing in oneself. ie improving skills, becoming better known, etc. Much easier to get above market returns here, of course. 2) A small number of small/medium size companies in unfashionable areas you can study and understand; basically stocks where there is the potential for decent growth and comparatively few people are looking. 3) Well chosen property for the leverage. You'd need to really spend time choosing well or the leverage would potentially fuck you over.