Archive - Jun 12, 2010 - Story

With daily geopolitical, natural resource and sovereign liquidity crises suddenly becoming the norm, it is easy to get sidetracked from other very important issues, in which, at least until recently, moderate progress had been achieved. Primary among these is the seeming disconnect (at least when compared to other banks such as Bear Stearns and Lehman Brothers) in the preferential treatment of Goldman Sachs. Now that Goldman is a household name, courtesy of a variety of litigation overtures, both in the civil and criminal arena, demonstrated by Goldman's popularity among the broader population, the firm has been kind enough to publicize its "Code of Business Conduct and Ethics" in an attempt to placate the concerned populace, and demonstrate that Goldman has a whopping 4 pages dedicated to promoting legal behavior amongst its nearly 30,000 employees. What confuses us is the placement at the very end of this document of the following section, Waivers of This Code, in which one reads: "From time to time, the firm may waive certain provisions of this Code." In other words, Goldman's activities comply fully with legality until such time that Goldman decides it is in the name of the greater good to "waive" this compliance. We are confused that in light of this glaring loophole, not one question has been asked of Mr. Blankfein as to what specific circumstances have necessitated the invocation of the "ethics waiver", by either executive and non-executive employees: something which none other than former Goldman CEO Hank Paulson recently used in order to pursue the full taxpayer-funded rescue of precisely this firm. Which is why, in the absence of others doing so, we have decided to ask this question directly of Goldman head of PR Lucas van Praag.

A quick look at the "math" behind the spectacle that will consume over 25 billion people for the next thirty days.

Ever wonder who may have been buying up every share of BP stock earlier this week, especially when it plunged to 14 year lows on June 9 amid media frenzy based on a Fortune story in which Simmons & Co.'s CEO Matt Simmons was quoted as saying that BP "has about a month before they declare Chapter 11. " Why, Simmons & Co. itself, of course. In a note released to clients on Friday, Simmons & Co, upgraded BP from Neutral to Overweight, in which Mr. Simmons amusingly notes, "the kitchen sink of headlines have been thrown at BP shares over the past 2 weeks, thereby partially desensitizing the shares to the news." With his dire warnings of an imminent bankruptcy just two days prior to the upgrade, Mr. Simmons surely did his fair share to contribute to kitchen sink. It is only fair that after creating a near-panic in the name, that the firm would now suddenly be stuck in a Schrodinger's Cat world, in which BP is seen as both bankrupt, and having a $52 price target at the same time.

In a response letter sent to Alan Grayson, the Fed chairman has the following brief retort to the question of whether "the Federal Reserve- alone or in concert with the Treasury Department or any part of the government- ever taken any action with the purpose or effect of supporting the stock market or an individual stock": "The Federal Reserve has not intervened to support the stock market or an individual stock." Shocking. And we are confident that the fine people at Liberty 33 just sit all day, twiddling their thumbs now that the Fed is no longer in the MBS and UST monetization business. Furthermore, anyone who reads anything into the fact that the FRBNY is continuously ramping up its hiring of traders, both credit and equity, as posted in assorted public venues, is simply paranoid and does not understand that this is only due to Brian Sack's fascination in being surrounded by 400 traders daily. On the other hand, at this point pretty much everyone is aware of the sad state of FRBNY intervention, whether it is in the FX market or the gold market, and indirectly via the discount window and the repo system, in which banks purchase bonds at auction, using discount window or other zero cost capital, only to repo it back, and to use the proceeds to bid up stocks. Maybe Mr. Grayson can ask the Chairman whether the Fed is actively endorsing primary dealers to bid up risky assets to create the impression that since the market is ramping higher (on no volume, mind you, but who cares) that the economy is doing so as well (we will shortly have something to say that refutes this thesis, compliments of none other than Goldman Sachs). All cynicism aside, Grayson at least still continues to ask the right questions: among these are 1) How does the fed plan on dealing with the $1.7 trillion in MBS on the Fed's balance sheet, 2) Why Greenspan and Bernanke were so wrong in keeping the FF rate for so long, and how does the Chairman plan to reconcile the same bubble creation that blew up the economy last time ZIRP was around, with the deflationary threat to the economy, 3) Why does the Fed think a Tobin tax is bad (and, incidentally, why does the Fed even have an opinion on tax policy), 4) Why is the Fed failing at pushing unemployment lower even with ZIRP and QE, 5) How the Fed is lobbying on behalf of its, and Wall Street's interest, 6) How much gold should the US government own, and many others.

For the soccer fans out there, attached is a World Cup calendar by Marca.com which provides an instant view of every day, match, team, group and stadium. By far the best one stop shop of catching up with everything happening during the tournament. And with that, there is only two hours left until the US-England game...and many, many BP halftime commercials.

David Kostin just does not give up: the seer of seers, prognosticator of prognosticators, A. Joseph Cohen of A. Joseph Cohens is a ruthless long-only pitching machine, and will not relent until ever last single human being is fully invested (and on margin) in the raging bull market. In today's "weekly kickstart" piece, in which he notes that the current investment debate fulcrum is the "tug of war" between a strong micro and weak macro. That the former is just a lagging indicator of the latter, and that now that the stimulus effects are over, and that the micro is about to roll over, for some reason does not cross the economist's mind. In addition, we present another pitchbook by Goldman, "Where to Invest Now- the path to 1250" in which his conclusion is that it is irrelevant where one invests as long as one invests. Biased commentary aside, some pretty charts.