Uncertainty haunts Wall Street

As the 'ghosts of bubbles past' come back to haunt Wall Street, investors have another reason to be wary of the 'overextended and overpriced' US market.

"The ghosts of bubbles past" have returned to haunt Wall Street, says Alan Abelson in Barron's. America's Securities and Exchange Commission has accused Goldman Sachs of securities fraud over how it structured and sold a collateralised debt obligation (CDO an instrument containing subprime mortgages bundled together) in 2007.

Goldman allegedly didn't tell investors in the CDO that a hedge fund, Paulson & Co, had been involved in choosing the derivatives that were included in the CDO. Paulson had taken out a short position against the CDO, and so would profit if it bombed, which it duly did.

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