I came across this story yesterday and almost passed right over it because, you know, tales of suspicious goings-on at Goldman Sachs are almost expected. It’s just what they do: the sun rises in the east, fish swim, Goldman traders do fishy things and make lots of money. Calling them out on it is too easy, and pointless because Goldman Sachs could do literally anything it wanted, with no fear whatsoever of repercussions because who’s going to do anything? You? Or you? Yeah, that’s what I thought. But then I thought, hey, bad publicity is what we’re all about. So I give you…more scandal and intrigue.

(from the original WSJ article)

Goldman Sachs Group Inc. research analyst Marc Irizarry’s published rating on mutual-fund manager Janus Capital Group Inc. was a lackluster “neutral” in early April 2008. But at an internal meeting that month, the analyst told dozens of Goldman’s traders the stock was likely to head higher, company documents show.

The next day, research-department employees at Goldman called about 50 favored clients of the big securities firm with the same tip, including hedge-fund companies Citadel Investment Group and SAC Capital Advisors, the documents indicate. Readers of Mr. Irizarry’s research didn’t find out he was bullish until his written report was issued six days later, after Janus shares had jumped 5.8%.

Wait, what? Yes indeed, Goldman’s favorite clients got investment information well before the rest of its customers. Are you as shocked, shocked, as I am that Goldman would effectively front-run most of its own clients to make a select few (that Goldman invests in) a lot of money? I thought this was an ethical bank, not an institution that would chase profits at any cost. Oh, I need to sit down, my entire worldview is crumbling around me.

Goldman’s response is that it doesn’t invite the bulk of its customers to these so-called “trading huddles” in which its analysts offer tips to a select handful of its favorite clients, because the recommendations would not be relevant to everyone else. However, I find it a little hard to believe that large hedge fund groups like Citadel and SAC Capital really need this kind of information from Goldman analysts when they each have their own analysts paid to produce the very same kinds of information.

So that leaves me wondering just what kind of tips are actually shared at these huddles. Feel free to recklessly speculate in comments, it’s not like GS will ever sue anyone for any reason.