Investors ignored Goldman Sachs’ (NYSE:GS) Malaysian 1MDB scandal on Jan. 16, sending the stock up 10% after it beat earnings estimates. The price of Goldman Sachs stock rose as high as $197, but nudged downward below $195 as the hangover from that party set in.

Goldman said it earned $2.54 billion, $6.04 per share, during the quarter, on revenues of $8.08 billion. This easily eclipsed estimates of $4.54 per share of earnings on revenue of $7.55 billion.

During the quarter Goldman, known entirely as an investment bank, proved it can do retail banking, luring $7 billion in UK deposits through Marcus, an online bank paying high interest rates.

Analysts at other banks were impressed, although some noted that expectations had been low.  One analyst even predicted the stock could rise another 25%, as its price is still lower than Goldman’s book value.

The 1MDB Scandal and Goldman Sachs Stock

But the hangover of the 1MDB scandal still hangs over the stock, and before buying you need to hear the story.

Malaysia is seeking $7.5 billion from Goldman, which raised $6 billion for a government-backed fund that wound up becoming a slush fund for former President Najib Razak, his associates, and a financier named Jho Low, now a fugitive in China.

Along the way Goldman collected $600 million in fees.

The scandal brought down the Najib government and brought Mahathir Mohamad, now 93, out of retirement as president, with a mandate to find and punish the guilty. The new government insists Goldman knows where all the money went.

The question for courts is whether Goldman Sachs is criminally liable, or just Tim Leissner, the former head of the bank’s Southeast Asia department, who has already pled guilty and could wind up with 10 years behind bars.

Goldman says Leissner is entirely to blame, but Malaysia disagrees. People who are bullish on Goldman stock assume there will be some penalty levied against the firm, just nothing close to what prosecutors want.

New Goldman CEO David Solomon took the unusual step of apologizing on the earnings call to Malaysia for Leissner’s actions, but also spread the blame around. “It’s very clear that the people of Malaysia were defrauded by many individuals, including the highest members of the prior government,” he said.

Basically, it’s the government’s fault too and Goldman was lied to.

The size of the penalty levied against Goldman may turn out to be a political decision, as the U.S. tries to maintain relations in the face of growing Chinese power.

Another reason to be bearish on Goldman Sachs stock comes from Goldman’s own analysts, whose outlook for 2019 warns of slowing growth ahead.

Goldman is also concerned that the recent bear market could turn into a self-fulfilling prophecy as people with money slow their spending. If the global bull market is ending, it can’t mean anything good for Goldman’s stock.

The Bottom Line on Goldman Sachs Stock

Regardless of how the courts rule in the Malaysia case, Goldman is unlikely to disappear. It has a market cap of $77 billion, and over $110 billion of cash on its books.

Its Tier 1 ratio, measuring its ability to weather a market downturn, is now at 13.3%, on par with JPMorgan Chase (NYSE:JPM). Book value per common share reached over $207 by the end of the year, up about 15%, even while the stock fell 10.5% over the last 12 months.

In conventional terms it’s right to call Goldman Sachs stock a bargain. The question is whether these are conventional times.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.