Media Appearance: Morning Meeting
By Barry Ritholtz - July 14th, 2009, 8:30AM
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The whirlwind media tour continues apace this morning, with a discussion with Dylan Ratigan & Co. on MSNBC’s Morning Meeting about Goldman Sachs earnings at about 9:10am.
Goldman’s profits were an astounding 3.44 billion dollars — $4.93 share — far surpassing the $3.65 consensus; For details, see this Bloomberg article, Goldman Sachs Posts Record Profit, Beating Estimates on Trading.
A few things worth thinking about:
• Goldman Sachs got $13-billion in bailout payments via AIG
• That was after Goldman squeezed AIG for $5.9 billion before the bailout (Oh, and Goldman execs dumped $700m of stock as Lehman collapsed).
• Salon’s Glenn Greenwald has the full timeline of all the events preceding Goldman Sachs’ new “blowout profits”
July 14th, 2009 at 8:38 am
US June retail sales stronger than expected
WASHINGTON (MarketWatch) – U.S. retail sales rose a better-than-expected 0.6% in June, the best gain in five months, the Commerce Department estimated Tuesday. Strong auto and gasoline sales offset weakness in many sectors. The consensus forecast of Wall Street economists was for retail sales to rise 0.5%. Excluding autos, sales rose 0.3%. Wall Street had expected an increase of 0.7%. Excluding gasoline, sales increased 0.3%. Excluding both autos and gas, sales fell 0.2%, the fourth straight monthly decline
http://www.marketwatch.com/story/us-june-retail-sales-stronger-than-expected
Spin machine is back!
July 14th, 2009 at 9:04 am
CapCanuck-
and yet- futures are flat- the market expected exactly what it got out of GS- and then this headline
“CIT shares rally as firm seeks federal aid”
excerpt-
“The company’s shares rose more than 22 percent in premarket trading Tuesday . . .CIT is holding advanced talks with the government about receiving emergency federal assistance”
http://news.moneycentral.msn.com/ticker/article.aspx?Feed=AP&Date=20090714&ID=10139665&Symbol=CIT
Thanks Uncle Sam- you are the bestest Uncle any bank could ever hope for- and once you start bailing out- you just can’t stop- a 12 step program may be in order
July 14th, 2009 at 9:10 am
Meredith was right on yesterday with her earnings estimate for GS.
Plan to sell my remaining $FAS today. As I predicted yesterday, oil will go up a few dollars more. I will get rid of $UCO (already up nice in premarket). I expect market to sell off at some point. I will be waiting to open new short positions in Crapital One and others.
July 14th, 2009 at 9:12 am
Goldman is the biggest underwriter of stocks and bonds still in business…last quarter saw record issuance of stock…Goldman got a ton of business…we are seeing massive issuance of corporate and government debt…more money for Goldman…we know about their trading forays.
Loking under the hood…most of that equity issuance was from banks. So Goldman is profiting as companies dilute equity and issue more debt and they have a near monopoly on this as well and a license to print money by trading. I’m not going to go into a useless outrage…I ‘ll leave that to others…but it is clear to me that Goldman is not a bellwether for the markets, as it seems to now be able to do even better in a weaker market.
July 14th, 2009 at 9:14 am
How much did Matt Taibbi earn? Zero Hedge? The rest of the tin foil brigade?
July 14th, 2009 at 9:18 am
manhattanguy-
“Crapital One”- Freudian slip?
SB Says-
“but it is clear to me that Goldman is not a bellwether for the markets”
I am pretty sure everyone is on the same page as you re GS and the rest of the banking sector- they are not necessarily skipping along merrily down the same path
July 14th, 2009 at 9:24 am
VennData-
what does one have to do with the other- neither said GS was going to under perform- they just said that GS has shady business practices-
being successful at making money does not negate the accusations
July 14th, 2009 at 9:29 am
Why does Ratigan keep asking the question: Why is GM allowed or forced into bankruptcy and Goldman Sucks and AIG are not when their debts exceed their assets?
Why does he act like he doesn’t know why Geithner and Paulson, Bernanke, and Obama are paying off contributors like GM’s union, and the partners of Goldman, AIG, and other shyster members of the Chosen?
He’s being more than disingenuous trying to elicit the answer from his guests.
July 14th, 2009 at 9:32 am
Do we live in a free market society or do we have to pay a toll to Goldman Sachs on every transaction?
July 14th, 2009 at 9:36 am
@VernnData — exactly.
And how much did Goldman Sachs “earn”? And how much was accounting smoke and mirrors, along with theft and fraud?
“Earning” money is sooooo 20th century, Smith Barney needs to get a better slogan (are they still around?).
Much better to make your money the bankster way.
July 14th, 2009 at 9:39 am
Steve Barry nailed it.
July 14th, 2009 at 9:41 am
Glad I didn’t turn on CNBC. I woulda seen crap like this:
Fed to Blame for CIT’s Liquidity Problems: Forbes
http://www.cnbc.com/id/31904283
It doesn’t pay to bail out the rich. They complain anyway.
July 14th, 2009 at 9:45 am
Anyday, the market will have to start discounting a cataclysm in Japan and an 1800 P/E…and CNBC will not be able to explain what is happening.
July 14th, 2009 at 9:48 am
Goldman made almost 11 Billion in trading and principal investments…in other words, nothing that will benefit society… unless their bonuses help goose the condo market in Manhattan.
July 14th, 2009 at 9:48 am
Steve B – Is the 1800 p/e you are talking about 1 year trailing for the S&P500?
July 14th, 2009 at 9:51 am
I would have been very disappointed if the ruling class (e.g. GS) didn’t profit immensely from the bailouts and transfer’s of power and wealth they have so conveniently arranged over the past year. At least that’s working.
July 14th, 2009 at 9:56 am
Bullish numbers should be scaring the bears.
“Geithner says force of global recession receding” – yahoo finance
Meredith, GS (earning), JNJ (earning beat), Singapore (gdp up), CIT taxpayer bailout (in the wings)….
July 14th, 2009 at 9:57 am
Does anyone else find it appropriate that Goldman is reporting these profits on Bastille Day? The arrogance of overreaching (record profits based on taxpayer-funded bailouts, huge bonuses, etc.) is similar to that of the French monarchs, no? Let them eat CDS!
July 14th, 2009 at 9:59 am
@hope:
the 1800 P/E (actually 1911.77 now to be exact) is based on trailing 12 months GAAP earnings estimated by the S&P for the qtr that just ended. We have to wait till this earnings season is over for the exact number. If you are interested, here is a link that you can have fun with and remember, the P/E has never been above 46 before and that was the height of the tech bubble:
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS?GXHC_gx_session_id_=5350992f205e73e4&
July 14th, 2009 at 10:09 am
CIT bailout seems to be on the way from this morning’s Congress chatter. Not sure if I would want to get short ahead of that, as banks and REITs would definitely benefit.
Energy and miners fairly strong today, we’re still riding that trade from last week. Today could be another crawl up the wall of worry. Retail, JNJ, GS, were all market positive. Point taken on Bastille Day, by the way…
July 14th, 2009 at 10:13 am
Steve B,
I think trailing PE tells us more about the crisis over the last year than it tells us about the coming year.
The fact that it has never been above 46 means the crisis was truly a black swan event, and we may be lucky the bailouts (as distasteful as they are) were forced through congress.
If you want to talk fundamentals like PE, I’m more worried about the forward looking numbers, lack of real earnings recovery, and the anti-consumer and anti-business climate and policies.
July 14th, 2009 at 10:21 am
@LB
TLT is running a perfectly symmetrical reverse H&S pattern going about 23 days from left shoulder to head, and now 23 days from head to right shoulder…
Too obvious?
July 14th, 2009 at 10:24 am
but it is clear to me that Goldman is not a bellwether for the markets
No, it is at the pinnacle of the money flow pyramid. The catbird seat for the first, best use of freshly printed money as the money people would say.
They may not be a bellwether for the markets but they might be a bellwether for inflation. As we see this money continue to spill out, down and around the pyramid watch for signs of pinch point inflation. It will continue until it starts creeping back into labor wage rates and then they will slam the brake down again.
July 14th, 2009 at 10:26 am
@cvienne: I see that, oddly enough LB was just looking at TLT and LQD. Support for TLT at 94. Probably equates to SPX resistance in the 910-925 zone. A bit of room below for the $ here, a bit of room overhead for SPX.
July 14th, 2009 at 10:30 am
@hope:
the 19oo P/E includes a massive loss in 4Q08, that is true. You could ignore it as “one-time”, but you would be ignoring an unprecedented negative event. So going forward, you see S&P forecasts earnings to grow close to 50% from this qtr estimate to 3/10…amazing recovery…and if you get that, you’ll still be paying a bubbble P/E of 30, if stocks are just flat until then. If stocks appreciate even more, you’ll be paying a bigger bubble P/E.
July 14th, 2009 at 10:33 am
@LB
There was ‘yet another’ 1,000 contract purchase on the TLT Jan ‘10 105 call strike…
It’s been the MO lately…buy that thing near par, sell the rips…
July 14th, 2009 at 10:46 am
SB – PE as a measure of where the stock market is going is out of whack. It’s been out of whack for a few decades. No private business sells for the PEs the stock market does. The stock market long ago ended being “own part of a business” because no one buying a business would bid up the price to the levels we have been seeing in stocks for years.
They could remain out of whack for a while longer. My only thoughts on the value of PEs right now is, they should end up close to historic lows (trailing 1 year) before the next secular bull starts. How we get there, and when we get there is the question.
July 14th, 2009 at 10:52 am
MESSAGE TO ALL:
Please run immediately over to the think tank section of this blog and read the piece “Debt and Deflation”…I give it 5 stars of approval and intend to read it a few more times. An excerpt:
“Total U.S. debt as a percent of GDP surged to 375% in the first quarter, a new post 1870 record, and well above the 360% average for 2008. Therefore, the economy became more leveraged even as the recession progressed. An over- leveraged economy is one prone to deflation and stagnant growth. This is evident in the path the Japanese took after their stock and real estate bubbles began to implode in 1989. At that time Japanese debt as a percent of GDP was 269% (Chart 5). This percentage actually continued to move higher until 1998 when it peaked at 345%, below the current level in the U.S. While the Japanese increased leverage for nine years after the bubble highs, neither highly inflated stock and real estate prices nor economic performance could be sustained as debt repayment became more burdensome.”
July 14th, 2009 at 10:56 am
@hopeImwrong
“How we get there, and when we get there is the question.”
How we get there will be determined by when people realize that parking money there as an ASSET CLASS isn’t worth as much as parking it in other asset classes (or ANY asset class for that matter)…
In a credit deflation environment, cash is less risky and probably more valuable…While people increasingly hold cash, earnings will continue to be under pressure…
July 14th, 2009 at 11:05 am
Cvienne – yes. It’s the path to get there which is not known (at least to me). I expect many twists and turns, but predicting them is almost impossible.
For gold bulls, I would say that, unfortunately, the gold market is suffering a fate similar to the stock market. It’s more and more a paper market based on the casino mentality and the greater fool theory. It is more an more subject to “potential manipulation” due to the paper nature of the market. I don’t subscribe to the grand conspiracy theories about the gold market, but with all the paper proxies out there for gold, the physical market is not the only think determining the price. I think the physical market is less and less important all the time. Gold is now a casino market run by the big boys. The gold market may become and may stay irrational for a very long time.
July 14th, 2009 at 11:09 am
Just got my first experience of a post being lost. Maybe it will show up later. It had my current thoughts on gold.
July 14th, 2009 at 11:31 am
Welcome to another edition of Misdirection Tuesday. With the selling in Treasuries, I am sure SPX will end higher. The dollar isn’t doing much but has some room to explore to the downside, so oil and gold may bounce off the lows.
July 14th, 2009 at 11:45 am
Love the exuberance in the market. Found a great opportunity to short some $COF. Sold remaining $FAS and $FUQI for a nice profit. Still holding long Oil.
July 14th, 2009 at 11:45 am
@LB
Actually lefty, isn’t the dollar kind of holding on a DOUBLE fibonacci line…
1. a .618 retrace from the June 15 high back to the June 2nd low.
2. a smaller .618 retrace from the 7/8 high back to the 7/2 low.
Both of those lines are coincident of where the dollar is holding now by my view…
July 14th, 2009 at 12:10 pm
LB thinks that the Euro has just a little room overhead into resistance (half a cent). Not a lot.
July 14th, 2009 at 5:19 pm
Not that I’m a Goldman supporter but…
from:
http://www.thestreet.com/p/_search/rmoney/marketcommentary/10484539.html
“You have seen the roughly $13 billion Goldman received from AIG. Bucket one was return of collateral for return of cash lent. Bucket two was collateral posted based on market values. Bucket three was a transaction that unwound trades — at a cost to both parties. Two of the buckets were unwinds of trades where bonds were exchanged for cash, and the third was posting of collateral that may very well be returned, depending on the future course of asset performance. “
July 14th, 2009 at 11:20 pm
Hope the bonus pool is accruing a credit for future bonus payments in return for services currentlly being rendered by certain future Goldman employees.
July 15th, 2009 at 8:35 am
Can I find a transcript of the interview on Morning Meeting anywhere? I tried the msnbc site and couldn’t find it.