The Big Fume | FT Alphaville

The Big Fume

Why is Barry Ritholtz, round at The Big Picture, so bad tempered when it comes to writing about the Goldman Abacus case?

As the uber-blogger fumed on Friday:

Amongst the regular complaints I have about the financial media is the lack of accountability of alleged experts. The bad stock picks, the terrible market calls, the unsupported opinions, all blithely made and forgotten. Yet the same experts are trotted out week after week to give more money losing advice…

Nowhere has the lack of qualifications been more evident than in the coverage of the SEC indictments of Goldman Sachs. The parade of pundits who opined about things they knew nothing about was an impressive display of the blind leading the foolish…

Now that Goldman Sachs has lost their will to fight and settled the case for a record breaking amount, the same media fools who told you a) this was a weak case and b) GS was going to win are now spinning this massive Goldman Sachs defeat as some sort of a Goldman victory.

Don’t believe them.

Trouble is, the market has yet to buy the Ritholz line. Goldman stock held on to most of its gains on Friday despite a fierce market-wide sell-off.

And it’s not just snap media pundits who are declaring the SEC settlement to be a victory for Goldman. Here’s Roger Freeman, writing to BarCap clients:

We view this settlement as a clear positive for GS. The fine is on the lower end of what we believe the market has been expecting based on recent discussions with investors. However, in reality, the amount of the fine has always been relatively immaterial. On $123 of BVPS (as of 1Q10), the difference of $0.90, $1.70 or $3.00 is not the meaningful. From a sentiment perspective, the low figure, though, is good news for the stock.

The bigger issue around these charges, from our perspective, has been whether the firm was or could suffer any fall-out in its client business from reputational risk or counterparty concerns of fiduciaries. This risk has been lifted. Another concern had been whether any settlement would lead to senior level departures and/or require significant changes to business practices. Neither is happening in this settlement.

The trouble is Ritholz is heralding a sea-change in terms of behaviour on Wall Street that other people are apparently “too dim” to notice. Specifically, he has full confidence in the SEC’s  director of enforcement, Robert Khuzami, the “new sheriff in town”…

Many on Wall Street seem to be underestimating this guy. So far, it cost Goldie half a billion dollars.

I said it in April, and I will repeat it here for those of you who are too dim to grasp this: Robert Khuzami is a bad ass, no-nonsense, thorough, award winning Prosecutor. . . He is the shit. My advice to anyone on Wall Street in his crosshairs: If you are indicted in a case by Khuzami, do yourself a big favor: Settle.

That continues to be the best free legal advice you will receive all year. Feel free to ignore it at your own peril.

Khuzami may well prove to be a force to be reckoned with. But in truth there was a whiff of PR desperation at the SEC media conference, hurriedly convened late on Thursday as news of this “landmark” settlement began to leak.

Indeed, if Khuzami is supposed to be some latter day Pat Garrett, we’ve yet to see the evidence.

Related links:
Goldman Sachs settles with SEC – FT
Analysis: Goldman won the day, but at a cost
– John Gapper
Full coverage of the Abacus affair
– FT Alphaville series