So it now seems the Goldman allegedly allowed a large hedge fund ru nby John Paulson to put together a portfolio of subprime mortgages that cummulatively were marketed at being worh in excess of a billion dollar. Paulson then allegedly shorted or bet the portfolio would go down in price which they subsequently did and netted a tiddy 1 billion dollars in profits from the transaction.

Talk about rigging the bet. This is like knowing the star quarterback is badly injured and placing a bet on the big game. Paulson knew that the the morgage backed security had to go down in value given that he knew that the underlying mortgages were almost worthless.

this is yet another example how the financial system is riff with colrruption and calls into question the verasity of the entire financial system.

As with many things in business, we function by trusting the verasity of the entire system. If the system is shown to "have no clothes" then the entire system is at risk.

The revelation at Lehmans are yet to be flushed out completely and now with the highly reguarded Goldmans called into question i cant help but feel the entire financial system is at risk.

More importantly this event will add momentum to the financial reform legislation working its way through congress and given the tendancy of congress to overreact the legislation could be particularily punitative and will further restrict the US financial system from competing on the international market.

The way this is handled in the media over the weekend will indicate if this is going to be a one day event or the start of a longer term decline in the markets and in the US economy.

Stay vigilant and would certainly lighten up on any exposure to the markets for the next few days to see how this plays out.

All the best and hope this is a one day event but this could be the event that triggers the next bear market.