The Goldman Sachs Lesson (as told by a professional)

As a follow up to this previous post, Mark Hulbert offers a great lesson regarding the Goldman Sachs' situation over the last couple of months:

"The time to buy, Nathan Rothschild famously said, is when the blood is running in the streets."

"But how to put this apocryphal advice to actual use? What does it look like in practice?"

"For an answer you need look no further than what Goldman Sachs Group Inc. did in mid August, when it looked like the capital markets might dry up completely and the stock market appeared to many to be on the verge of a meltdown."

"The blood most definitely was running in the streets."

"So what did Goldman do? It invested $2 billion (that's billion with a "b") of its own money in one of its hedge funds that was hemorrhaging."

"The payoff? Its $2 billion investment has grown by a cool $320 million in the short time that has elapsed since then a 16% return in just one month, in other words."

Lesson learned. When the blood is flowing through the streets, make purchases or cover shorts.