Brother, can you spare a billion?

Yes, even exalted Goldman Sachs & Co. Inc. can make big mistakes.
The New York-based financial powerhouse last week said that three of its hedge funds have lost nearly $5 billion in value so far this year. What’s more, Goldman had to pump in $3 billion to shore up its faltering $3.6 billion Global Equity Opportunities fund, which had lost nearly 30% of its value the previous week.
The firm invested $2 billion of its own money, as well as another $1 billion from a group of high-profile deep pockets.
Goldman’s chief financial officer, David Viniar, insisted that the cash infusion was “not a rescue.” He told financial analysts that “given the dislocation in the markets, we believe this is a good investment opportunity for us and for the other investors that we have brought in.”
The firm was praised on Wall Street for putting its own capital at risk, but the seriousness of the move didn’t go unnoticed.
“This is a black eye for a company with such a strong track record,” Michael Mayo, a securities industry analyst in New York with Deutsche Bank Securities Inc., told The New York Times.

Rage against machines
Goldman was hardly the only Wall Street icon to take a beating last week.
The much-revered “quants” also had a lot of ’splaining to do. In addition to the Goldman hedge funds, other quant funds suffering losses included East Setauket, N.Y.-based Renaissance Technologies Corp. and AQR Capital Management in Greenwich, Conn.
So active are those two firms that they account for more than half of all daily activity on the New York Stock Exchange, some estimate.
The quants’ lack of human input in trading decisions has come in for widespread criticism because they have failed to detect market trends — and emotions — that real people find obvious but to which computers are oblivious. In a letter to clients following recent losses, AQR managing principal Clifford Asness conceded that the hedge funds’ stock selection strategy “has come under severe pressure.”

Analytical insight
Do analyst stock recommendations influence their earnings estimates?
Researchers at Thomson Financial, a New York-based unit of The Thomson Corp. in Stamford, Conn., recently looked at brokerage analysts who had a “hold” or worse on a stock, and then moved the recommendation to a “strong buy” to see if the analyst revised the earnings estimate upward. The researchers also looked at the other end of the spectrum, where analysts had a “hold” or better but then moved the company to a “sell” recommendation to see if they revised their estimates downward.
Although analysts talk about valuation levels when they change their recommendation, Thomson found that not all changes from a negative bias to a positive bias or vice versa led analysts to time their sentiment change correctly.

Nasdaq foiled again
Robert Greifeld is a marrying kind of guy who just can’t find a bride.
Last year, the chief executive of The Nasdaq Stock Market Inc. in New York wooed and pursued the London Stock Exchange PLC. But chief executive Clara Furse refused to get hitched.
That left Mr. Greifeld without a major European exchange to call his own — though the pursuit resulted in Nasdaq’s controlling about 30% of the LSE’s shares. Recently, after ogling OMX AB, he offered 202 Swedish kronor a share for the Stockholm, Sweden-based operator of exchanges in Scandinavia and Eastern Europe.
But wouldn’t you know it? Along came Borse Dubai last week with an offer of 230 kronor a share for OMX.
Although the recently created Borse Dubai, a government-owned company based in the United Arab Emirates, is run by the former head of OMX, current OMX management greeted the company’s offer tepidly.
In a statement, Mr. Greifeld said that Nasdaq “remains in close dialogue with the management team and board of directors at OMX,” and would be willing to consider “other approaches.”

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