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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Saturday, April 20, 2013

Yes, We Should Worry About the Risk-Taking at Goldman Sachs

In a Wealth Daily article about Goldman Sachs's "expectations," the author talks about the increasing risks and leverage Goldman is taking in order to earn more revenue.  Although Goldman's revenue increased, its shares dropped.

Goldman Sachs Beats Expectations 
Shaky Banking Sector
By Swagato Chakrovorty - Wealth Daily
. . . .
Leveraged finances, or high-risk/high-yield debt finances, are precisely what played a major role in the financial crisis that decimated Wall Street just a few years ago.

The bank’s investing and lending revenue of $2.1 billion is 8 percent higher than figures of a year ago. However, Q1 returns on equity dropped to 12.4 percent despite these increases in overall profits and earnings.

Return on equity is usually seen as a metric of how successful a banking institution is in giving capital back to its shareholders. For comparison’s sake, Goldman Sachs typically posted returns on equity in excess of 20 percent annually before the financial crisis.

Moreover, CNN reports that CEO Harvey Schwartz refused to answer some fairly standard questions (such as the bank’s target for its next return on equity) during the conference call for Goldman’s earnings report. No doubt, that has increased investors' trepidation regarding the company.

Read the article here


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