Archive - Apr 16, 2010

From the open outcry pits:

Goldman sold 1,000 big SP today over 1,200.00.  Was it just a hedge because they KNEW the SEC would do nail them to the cross?  Is that insider trading?  Who knows how many tens of thousands they sold in the ES?

We can hope the SEC still hasn't blocked Zero Hedge and is reading these very pertinent questions.

Bloomberg Television's Betty Liu does a great job deconstructing the hypocrisy behind Warren Buffett's Goldman investment - she quotes Alice Schroder author of Snowball, who says, "I've always wondered why Buffett would trade his skepticism for an investment in Goldman Sachs. It looks it was a mistake, it was a mistake for Buffett to invest this money in Goldman and to compromise his philosophy on Wall Street." What philosophy? That of the benevolent old uncle who is happy to rip the entire silver market apart and demand physical when he knows full well (as does the CFTC) that it is an impossible request? Or that of the guy who pretends to have principles when he is fully aware the government will always bail him and his investments out at the expense of the middle class? We eagerly await to see Berkshire's press release on its Goldman investment after this development.

Cramer has just come to the rescue of this former co-workers at Goldman, claiming a "source" has notified him that Goldman was "long" Abacus. Well, duh - that's how structured finance works. They are long one tranche and short another. Cramer should also immediately provide "factual" information to all those who may have bought Goldman on his BS, whether Goldman was in fact net short via CDS with AIG... Yeah, remember that whole thing about Goldman being short CDOs via CDS underwritten by AIG? Apparently it slipped the mind of Cramer's source. This is yet another semantic loophole abused by the world's greatest wealth destroying stock pumper. And by the way, Jim, take a look at the CDOs that Goldman had protection on AIG with before you "break" any more news, and find out what Goldman's exposure really was: because our sources tell us Goldman was short. Also, this is not even remotely a "game changer" at all, because the SEC's contention has nothing do with whether Goldman was shorting the CDO, but how the CDO was designed in the first place, with the explicit purpose of benefiting one party whose material involvement was not disclosed, and in fact was misrepresented!

If the logic on the gold plunge is that Paulson will be dumping (as we first reported), that means that GGBs, in which Paulson has sizable long cash exposure (with or without the CDS), will be the next to go. And since he can't hedge anymore (remember the whole thing about CDS speculators being branded traitors), he will be forced to sell. Sorry Greece, Goldman just punk'd you once more.

Time for the SEC to take a look at what bets Goldman's prop desk, and material affiliates as well as hedge funds that are close to Goldman's flow traders, were taking on Goldman's stock over the past few days. If indeed Goldman shorted itself, bought SPY puts, bought octuple leveraged negative financial ETFs, or something else of the sort, on material non-public information, it would be time to shut the firm down. 

“These are very serious charges against a key supporter of President Obama’s bill to create a permanent Wall Street bailout fund. Despite President Obama’s rhetoric, his permanent bailout bill gives Goldman Sachs and other big Wall Street banks a permanent, taxpayer-funded safety net by designating them ‘too big to fail.’ Just whose side is President Obama on? - John Boehner

• ABACUS 2007-AC1 is a $2 billion notional synthetic CDO (the “Transaction”) referencing a portfolio (the “Reference Portfolio”) consisting of RMBS obligations.
• ACA Management, LLC (“ACA”) will be acting as Portfolio Selection Agent in this Transaction.
• ACA currently manages 22 outstanding CDOs with underlying portfolios consisting of $15.7 billion of assets
• The 360 WARF target Reference Portfolio selected by ACA consists of 90 Baa2-rated mid-prime and subprime RMBS bonds issued over the past 18 months.
• The CDO tranches amortize principal using a full sequential amortization sequence, avoiding any reduction in the relative subordination of the CDO tranches.
• The CDO tranches will have a projected average life(2) of 3.9 to 4.9 years, which is shorter than the average life of most traditional ABS CDOs executed in the current market environment.
• The CDO tranches do not bear any available funds cap risk and other related interest shortfall risks.
• Goldman Sachs’ market-leading ABACUS program currently has $5.1 billion in outstanding CLNs with strong secondary trading desk support.

Just as the S&P took out recent support levels (if one can find any in a non stop up market), the next support level is 12 points lower. At the same time there is a total carry unwind panic in process, with the JPY surging, and very other pair plunging.

Goldman CDS 42 wider on the day, hits 133. Has about 300 points to go before it surpasses Greece. That said, the vampire squid is suddenly riskier than Russia (130), Brazil (115), Colombia (130), Thailand (115) and Italy (129).
Other fins also broadly wider. We will keep you updated.

“We can have only one justice system in this country for both the rich and powerful and those who are not. I’m not prejudging the merits of this action, but if we don’t treat Wall Street firms that have allegedly defrauded investors of millions of dollars with the same gravity as we treat all others, why would our citizens have faith in the rule of law?"

“To restore the public's faith in our financial markets and the rule of law, we must identify, prosecute, and punish with stiff fines or prison those who broke the law. Their fraudulent conduct has severely damaged our economy, caused devastating and sustained harm to countless hard-working Americans, and contributed to the widespread view that Wall Street does not play by the same rules as Main Street.” - Senator Ted Kaufman

RANsquawk 16th April US Afternoon Briefing - Stocks, Bonds, FX

From the tip box: "guess what site got conveniently blocked @ GS today...that's right, ZH." Thank you Goldman for proving we were right all along. In retaliation, Zero Hedge has blocked the entire Goldman IP universe: 204.4.128.0 - 204.4.191.255.

AIG stock only fin up today on expectations the firm will now have legal precedent to sue Goldman Sachs.

And judging by the action in gold, the market is already anticipating this.