A back of the envelope calculation gives us an intermediate term downside target of $142 and change. (We are not short this).
The facts here are pretty damning according to what I read in the SEC press release and complaint. But the situation is fluid, and subject to more info coming out.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
"Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries." -Bill Gross
Signs continue that European markets are getting tired. The Spanish and Italian stock markets, big beneficiaries of the sharp decline in their bond yields over the past few months are falling to the lowest since Feb 1. The European bank index is at a 1 1/2 week low after earnings reports from Commerzbank and Credit Ag (RBS bouncing although reporting weaker than expected earnings) were disappointing. This market action is in spite of the German IFO business confidence figure which rose to a 7 month high coming in a touch above expectations and Italian consumer confidence which bounced more than...
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April 16th, 2010 at 12:55 pm
well my SDS and QID positions I took out on Wednesday coming along nicely today- will most likely sell at close however
April 16th, 2010 at 12:57 pm
Can GS be profitable if it can’t play both sides of a trade? That is the question.
April 16th, 2010 at 1:17 pm
Goldman Sach’s stock value has to be hurt substantially by this.
The value of Goldman Sach’s goodwill is rapidly approaching zero, zilch, nada. They stand to lose business across the board as a result of lost confidence, trust & stature.
This episode likely will open the floodgates on civil and maybe criminal (RICO) indictments. It will strengthen the hand of those who are pushing for (much needed) regulatory reform.
Boehner is looking a bit like a fool at the moment (which is not hard for him to do IMO). He thought he could cleverly curry favor with the investment bankers and win over their contributions for political advantage. Wrong.
April 16th, 2010 at 1:42 pm
Goldman Sachs Running for Governor of California
http://www.salon.com/technology/how_the_world_works/2010/04/12/meg_whitman_and_goldman_sachs
OK, it’s a bit of a misleading headline. Well, just plain wrong.
But I’d raise the price target on GS, BR.
Imagine how big a draw Arnold will be after his uber-successful, businessman’s approach to running the late, great State of California.
April 16th, 2010 at 1:48 pm
Recap of today’s GS news:
1. GS-backed PE fund loses 98%
2. GS director may be implicated in Galleon insider trading case, won’t stand for reelection
3. Civil charges against filed by SEC.
Another productive day for the Squid?
April 16th, 2010 at 1:48 pm
Much ado about nothing.
Gold off 23.00, Palladium down 18.00, three quarters of a trillion dollars lost in one hour all because of one lousy billion dollar lawsuit, civil, no less, that will reveal next to nothing since Lord Blankfein can pay the settlement out of the petty cash drawer.
April 16th, 2010 at 1:50 pm
GS CAN play both sides of a trade. That’s not the issue here.
They are on the hook for failing to disclose that their big hedge client Pualson, created the vehicle w/ GS, paying them to do so; and then Paulson went short through the GS account — which GS had to know about.
It leads to the point that GS aided in the creation of a fraudulent vehicle, which they then actively marketed. Ultimately, “buyers” of this fraudulent vehicle lost about $ 1 Bil. Because as the SEC says: “it was set up to fail”. Paulson’s large profit on their short suggests this is true.
It further likely opens the door for litigation against GS with the investors citing “fraud” — and with the SEC’s current finding, this would be a litigation GS would lose.
It’s unclear to me whether this is a “criminal” filing — if it gets there, then GS is in serious trouble. (That’s why Arthur Andersen went out of business after the dot.com bust.)
.
This is bad news for GS
April 16th, 2010 at 1:50 pm
And don’t think that Goldamn Sucks didn’t have t huge short positions all over the place, knowing that this suit was coming.
This charge has just made the bonuses for 2010 richer than ever.
Ever try and catch a giant squid?
April 16th, 2010 at 1:52 pm
And on options expiration day? Come on where are the real realistic cynics out there?
April 16th, 2010 at 2:01 pm
This is a great day for Goldman. It helps wring out the anger from the system they devised, and they get to make a killing on the short bets they placed prior to today’s announcement. If anyone thinks Goldman’s not operating a casino, well, then, they aren’t thinking. All a casino operator wants is activity. He doesn’t care which way the dice roll. He makes his money because the dice rolls. He’s always got both sides of the bet.
April 16th, 2010 at 2:05 pm
@flipspiceland:
Are you talking about three quarters of a trillion book value “lost”? It’s fictitious anyway. And if someone actually has lost something (e.g., due to closing a long position lower than opening it before), someone else must have won something, or will win something. So what’s the problem?
April 16th, 2010 at 2:06 pm
Goldman’s stock was very cheap on a lot of metrics partly because the company has a “black box” aspect to it in terms of liability and regulation. Investors in the CDO lost $1 billion? Okay, so Goldman goes to one of its admin’s desks and empties out a third of the “loose change” drawer and makes good. Sanctions? Punitive damages? Disgorgement? Okay, so they empty out the other two thirds of the loose change drawer. Does anyone actually close their account or shelf their banking deal because of this? Nah. I think we’ve seen the lows for the price. I think your prediction for further lows will be like the one you made in February for the broader market: By Barry Ritholtz – February 9th, 2010, 7:30PM “Is the Sell Off Over? So, was that it? Is the worst of the market correction now over? Is everything hunky-dory once again? I don’t buy it.”
April 16th, 2010 at 2:11 pm
Full complaint is here, Fabrice has a couple of foot and mouth quotes, I wonder if this initial case was chosen because of those, and that otherwise there are more to come:
http://online.wsj.com/public/resources/documents/secgoldman2010-04-16.pdf
Also, a copy of the referenced powerpoint for the applicable CDO is here. Lots of talk abou the credit selection process by ACA….
http://online.wsj.com/public/resources/documents/secgoldman2010-04-16.pdf
April 16th, 2010 at 2:20 pm
OT Based on the shakiness in his voice I suspect Jim Cramer got burned on the GS news.
April 16th, 2010 at 2:23 pm
@rootless_cosmopolitan
If you don’t see a problem with a decrease of a trillion dollars in notional value, then I can’t help you.
If you buy and hold, and the markets resume their rise, back to yesterday’s levels, no problem.
If on the other hand you were long in 2007 and haven’t yet made it back to youre original investment, you have have been losing money for 3 years.
I’d prefer to have markets react with more rational responses to one single piddly law suit against one company who likely made several billion today betting against it’s own stock becasue once again they had inside information.
April 16th, 2010 at 2:31 pm
Also, it appears that some of the AIG CDS were definitely of the Abacus series – although I couldn’t confirm they include the exact one at issue in the current suit – in fact, Abacus CDS were part of the ones recently settled with Goldman.
http://www.nasdaq.com/aspx/company-news-story.aspx?storyid=201004120326rttraderusequity_0160&title=aig-unit-unwinds-cds-positions-with-goldman-sachs-wsj
A review of the AIG collateral list related to the Maiden Lanes does not seem to include any of the abacus CDOs, but that lists eems to only apply to Maiden Lane III, so maybe the Abacus and newer vintages were placed in that vehicle: http://sec.gov/Archives/edgar/data/5272/000095012310006481/y81800bexv10w1.htm
April 16th, 2010 at 2:50 pm
This is going to turn out to be much ado about nothing. GS is at the top of their game for a reason.
However, if for some reason this thing starts to barrel forward and GS gets into trouble of big manitude, it will suck for the entire economy. They are too intertwined ,and we better hope they don’t go down.
April 16th, 2010 at 2:53 pm
@flipspiceland:
No more a problem than the increase before.
Everyone who buys in the stock market, or in any asset market whatsoever, should know that there is a risk involved, that no wealth is created in any market, that markets can be overvalued, and that it can go down like it went up before. To expect that asset prices only go up is irrational and shows a lack of understanding how it works. That’s not a problem of the markets, it’s an educational problem.
If market reactions and price movements were more rational the markets wouldn’t have been up in the first hand.
April 16th, 2010 at 3:14 pm
I concur with rootless. In fact, I wonder if this isn’t a BUY on GS at this time? How often do you get a 12-15% discount on a winning stock in one day? It won’t make it all up by Monday. See how the weekend shakes out, decide on an entry point……
April 16th, 2010 at 3:25 pm
I sold all my GS today, I was thinking along the lines of rootless and ashpelham, but after reading the case, my view is it is quite strong, even leaving aside the political pressure given that the taxpayers ultimately funded much of the losses on related CDS by Goldman and others via the AIG bailout.
I also think this is only the first of many suits by the SEC or others. Clearly, they have to prioritize, this is probably one of the strongest cases and I’m sure the juicy emails from Fabrie Torre helped choose it for initial PR. However, the underlying allegations I’m sure relate to many other CDOs by Goldman and others, and are also consistent with the Magnetar article from last Sunday.
So I think there could be real financial damages to GS and others.
Plus, it will ultimately just continue to be a drain on the GS employees and GS reputation. I do have great respect for the talent there, but why will they stay around when there are other opportunities that are increasingly more attractive? I was at CSFB during the tech / Quattrone scandals. Alot of the good bankers just got tired of showing up to every pitch and being peppered with questions about the various lawsuits and investigations, so when they got offers to jump ship to new platforms, many did… You know, the whole problem with investment banks and similar companies – companies where the assets take the elevators up in the morning and down at night can face a brain drain incredibly quickly.
April 16th, 2010 at 3:34 pm
Just to not be misinterpreted. I didn’t say anything about the valuation of GS, and I don’t have an opinion about it. Nor do I have an opinion whether markets generally will go up or down from here in the short term. The validity of what I said doesn’t depend on either.
April 16th, 2010 at 4:01 pm
Fine + max losses. It’s not like they are losing out on a bunch of CDO underwriting fees. That market is never coming back. Biggest risk is momentum to financial reform. That’s the only long term negative with this SEC Charge. Everything else is short-term noise.
April 16th, 2010 at 4:04 pm
@flipspiceland Says:
April 16th, 2010 at 1:50 pm
And don’t think that Goldamn Sucks didn’t have t huge short positions all over the place, knowing that this suit was coming.
I love this concept. GS trades on insider knowledge about their own tit in the ringer and makes $10 billion on shorts today. They pay all the fines and reimburse a couple good clients under the table. Only $3.5 billion to add to the bonus pool in December.
Fliiper, you bring a big smile to my cynical face. But in my heart I do love to see GS get slapped around a few times. Who said “Doing God’s Work” wasn’t hard?
April 16th, 2010 at 4:19 pm
@ bobabouey Says:
I also think this is only the first of many suits by the SEC or others. Clearly, they have to prioritize, this is probably one of the strongest cases and I’m sure the juicy emails from Fabrie Torre helped choose it for initial PR.
How about this idea: Disgorge all the profits from Goldman Sachs being short mortgages in 2008. GS traded on inside information because they created the CDO monster, touted (I hate that word) it to their clients, and then they shorted it. I think the SEC and the Feds should fine GS $12 billion to recapture the illegal insider trading profits they received from the AIG bailout.
Now that is a fine worth talking about: Disgorge the profits!!!!!!!!!!!!!!!!!!!!!!
April 16th, 2010 at 4:26 pm
I notice that another name that keeps coming up in the stories about this, Deutsche Bank, took a hit today as well.
See how it works kids? Shine a light and watch the cockroaches scatter!
Ummm, did I miss the news regarding any investigation of Magnetar? Or are they adequately protected?
http://www.nakedcapitalism.com/2010/04/rahm-emanuel-and-magnetar-capital-the-definition-of-compromised.html
April 16th, 2010 at 4:30 pm
Must see TV:
CNBC Guest Calls Jim Cramer “Public Relations Officer” For Goldman Sachs
http://www.mediaite.com/tv/cnbc-guest-calls-jim-cramer-public-relations-officer-for-goldman-sachs/
April 16th, 2010 at 6:06 pm
GS Price target 140sh? Barry will never ever again appear on CNBC:
http://www.zerohedge.com/article/cnbc-guest-tells-truth-calls-cramer-shallow-yanked-air
April 16th, 2010 at 6:17 pm
Ratigan goes off on GS:
http://www.msnbc.msn.com/id/21134540/vp/36604057#36604057
April 16th, 2010 at 6:38 pm
Obama’s SEC war against Goldman Sachs
Goldman Sachs | SEC
A few thoughts on the SEC charges against Goldman Sachs:
1) Goldman Sachs gave the Obama campaign $994k during the 2008 election, his biggest donor. Doesn’t this undercut the theory just a bit that Washington is under the thumb of Wall Street?Even a tiny bit? (No, say Simon Johnson and James Kwak.)
2) I can’t help but think this boosts the odds of financial reform passing and a shift it to the left, as well. You might even see more GOPers advocate for breaking up the banks, as do some Fed regional presidents.
3) Certainly under the leadership of a new chairman and enforcement director, the SEC’s Obama years have marked a hard switch from the posture of the Bush SEC. In 2009, the regulator opened twice as many investigations as in 2008, with fines up 35 percent. The new assertiveness helped cool talk the Hill that the SEC should be merged with the CFTC pushed into a giant super-regulator
4) But its aggression can also lead to unforced errors. A judge threw out a $33 million SEC fine against BofA regarding bonuses paid to Merrill Lynch employees. The SEC also failed to execute in its case against Cohmad Securities and the firm’s involvement with Bernard Madoff. In February, a federal court dismissed the SEC’s “flimsy” charges that Cohmad helped enable the notorious Ponzi schemer.
5) A failed case against Goldman for alleged securities fraud might leave the SEC in worse shape. It would also open the watchdog to charges that the timing of its charges, right in the middle of a debate over financial reform, was merely an attempt by the Obama administration to intimidate Wall Street into supporting its get-tough legislation.
6) This is exactly the sort of scenario a bank exec outlined to me a few months back. The exec worried that the longer FinReg reform dragged on, the odds increased that some bolt-from-the-blue news would change the political calculus and push the bill to the left.
More at this link:
http://blogs.reuters.com/james-pethokoukis/
April 16th, 2010 at 7:47 pm
Taibbi had it right. GS is the poster child for vampirish squid-like behavior. With the economy on the mend and some wind at the administration’s back, the White House is going to make an example of the Broad Street bullies. Bad time to go long GS, and if I were Summers or Geithner I’d be polishing the old resume. How about a perp walk for Paulson — either one will do.
April 16th, 2010 at 7:53 pm
@mitchn Says:
Bad time to go long GS, and if I were Summers or Geithner I’d be polishing the old resume. How about a perp walk for Paulson — either one will do.
—–
I’m a Democrat…and I believe it will be “Ice Age in Hell” before Obama gives us either Geithner or Summers.
I always hope and wait that I will be proved wrong! But, after this time…..I’ve given up waiting…….
Reform needs to come from another angle for “my Dems” to wake up……..
April 16th, 2010 at 8:04 pm
@TakBak04 –
If Harvard can fire Summers, the United States can, too. Geithner is a goner — and could be implicated in something more than shady before the shit has stopped hitting the fan.
April 16th, 2010 at 8:20 pm
mitchn Says:
April 16th, 2010 at 8:04 pm
@TakBak04 –
If Harvard can fire Summers, the United States can, too. Geithner is a goner — and could be implicated in something more than shady before the shit has stopped hitting the fan.
———-
From “your lips” to the “Gods or PTB’s Ears! We can only hope…but hope and waiting has not proved to be what is going on out there…….. Just Saying…..
April 16th, 2010 at 11:08 pm
I’m looking at a GS chart on Stockcharts, and $147 – $150 look closer to next support. I’d expect more buying near $150. If you got the bucks you might get a fast bounce off $150 for a nice gain. JMOP