Guest Post: Suspicious Timing Surrounding The "De-risking" of AIG's Toxic Obligations

Because everything unraveled so quickly, no one scrutinized Standard & Poor's flip-flop on AIG. On Friday, September 12, 2008, S&P said it would, "continue discussions with the company over the coming weeks regarding liquidity and capital plans. Once we have more clarity on these issues, we could affirm the current ratings on the holding company and operating companies or lower them by one to three notches." Of course, that never happened. S&P did not wait, and issued a downgrade the following Monday. It had at least one conversation with AIG that day, when only two things were clear: Nothing at AIG was settled, and the contagion effect from the Lehman Brothers bankruptcy was huge. The discussions could not have been especially detailed, since AIG's financial staff was preoccupied in its negotiations with Hank Paulson's deputy, Dan Jester, Goldman and JPMorgan Chase, who ostensibly were trying to put together a bank deal that would address S&P's concerns.

Exclusive: The Bank Of England Engaged In Flagrant Gold Manipulation In The Interwar Period Via The New York Fed; Does History Repeat Itself?

An article written by University of Tennessee professor John R Garrett, "Monetary Policy and Expectations: Market-Control Techniques and the Bank of England, 1925-1931" which describes in exquisite detail the gold falsification measures undertaken by the Bank of England in the interwar period in order to impact interest rates in a favorable direction, performed with the full criminal complicity of the Federal Reserve Bank of New York, may mean paranoid "gold bugs" could soon be forever absolved of their "tin hat" wearing status as outright gold, and other data, manipulation by a major central bank is now proven beyond doubt. The implications regarding the possibility of comparable deceitful and treasonous acts by modern central bankers are staggering.

Exposing The Story Behind Goldman's Record Profits - Part 2: The Role Of The Taxpayer

Do Goldman employees deserve any compensation, much less the $16 billion paid out in salaries and bonuses in 2009 when one considers that the firm would not only have no money to pay, but would be defunct had the US taxpayer not stepped in and bailed them out? Should this money have been used to prepay the firm's $20 billion TLGP exposure instead, thus truly making the firm independent of taxpayer support, instead of just claims to Goldman's public funding independence? Will the wave of public anger, now that President Obama has suddenly and inexplicably done a 180 degree turn and sides with the middle-class instead of the financial executives, take Goldman down at the next black swan occurrence? Is Goldman hypocritical in claiming it did not need a bailout after it rushed to become a bank holding company? Is Goldman a doomed business model which relies solely on the existence of the "greater fool" to sell to? Will its monopolist and ever-larger dominant status result in an implosion in the financial industry (especially with the DOJ continuing to deny there is any anti-trust problem)? All these questions and more seek answers in the just released Part Two of the PBS series "Is taxpayer money behind profits at Goldman Sachs."

We recommend watching Part One of the PBS series in advance of the clip below.

Weekly Chartology

Goldman could just as easily recap their entire market outlook in 8 simple words, "volume low, market up, volume high, market down" but since they are expected to provide extended sell-side service in exchange for everyone routing their trades through Redi, Sonar, Sonar Dark, OmtimIS, 4CAST, PortX, Piccolo, Navigator, Apollo, Sigma, FX trader, not to mention the hundreds of fixed income and commodity flow and prop traders (the two are interchangeable at GS), this is how Goldman quantifies the current, indisputably "cheap" market:

• Performance
  S&P 500 rose 1.5% this week. The Utilities sector was the worst performing sector, falling 0.1%. Materials was the best performing sector, rising 3.7%. We expect S&P 500 to rise to 1300 by midyear (+20.5%), before ending 2010 at 1250 (+15.9%)
• S&P 500 Earnings
  Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 39% increase in 2010 to $79, and a 20% increase in 2011 to $95.
• Valuation
  Top-down, the S&P 500 trades at an NTM P/E of 14.3X (13.3X on pre-provision EPS). Bottom-up, it trades at NTM P/E of 13.7X and LTM P/B of 2.3X

And here are the charts that validate the popular delusion.

IMF Prepares For Action: Signs Agreements With Three Countries Increasing Borrowing Capacity By $7.2 Billion, Expands Total Access To Over $500...

Late today, the IMF released details of three borrowing agreements signed between the organization and the National Banks of Belgium, Slovakia and Malta. The total amount between the three agreements provides the IMF with additional borrowing power of €5.3 billion. While the incremental capacity is not in itself material, it bears to keep in mind the full recourse the IMF has access to. As the press release notes: "The agreement is part of a commitment made by the European Union in March 2009 to contribute up to €75 billion (then equal to about US$100 billion) to support the IMF’s lending capacity (See Press Release No. 09/82). The European Union has since committed an additional €50 billion to the Fund’s expanded New Arrangements to Borrow (see Press Release No. 09/298)." In summary, with today's expansions, the IMF now has access to just over $500 billion in firm commitments as part of the IMF's April 2 agreement to triple its lending capacity to $750 billion.

As the IMF's bail out role will soon achieve much greater prominence, we present the full listing of countries pledging support to the IMF. The US comprises roughly 20% of total backstop capital. In other words for every dollar the IMF provides to Greece, Portugal, Spain, Italy, Hungary, Bulgaria, Latvia, Ukraine, etc., American taxpayers will be on the hook for 20 cents.

Exposing The Story Behind Goldman's Record Profits

You know the official version of how god's bank, aka Goldman, makes money: in the traditional, and not at all mysterious god's way, as a pureplay investment bank, which allocates capital, provides financing, advisory services, etc. Despite what Mr. Blankfein would want you to believe, that's only half the story. This two part PBS Series analyzes the other side of the equation. Who should know the truth better than former Goldmanite, Nomi Prins, author of "It Takes a Pillage." Classical investment banking function is a small portion of their revenues, I think it is about 10% or so. So if he is doing god's work, he is only doing it 10% capacity. The rest is prop trading." But wait, according to Goldman prop trading accounts for only 10% of revenue. Why the discrepancy? Simple - because that 80% "vacuum" is really just the client-facing prop/flow fixed income hybrid model, which after the disappearance of all big fixed income trading houses (Bear, Lehman and soon, RBS) Goldman has now monopolized. Being able to determine how big or small the bid/offer spreads on anything from cash bonds, to CDS to various non-CDS OTC derivatives should be, courtesy of having the largest fixed income inventory in the world at any one time, to which it can add or from which it can sell, makes Goldman not so much a pure play prop trader, as a market monopoly, which has to be dismembered as it now is the market (just like the Fed is the market in MBS and Agency paper) when it comes to all non-Fed dominated Fixed Income and OTC derivative products. This is, and always has been, an FTC issue: remember Ma Bell?