The Brown Stinky Stuff is Splattering Off the Fan Blades and Landing on That Shiny New Building on the West Side Highway.

Reggie Middleton's picture


The Hudson Mezzanine 2006-1 CDO
contained credit default swaps that referenced $2 billion in subprime,
BBB-rated residential mortgage-backed securities, according to the
documents released by Levin’s committee. While Goldman Sachs selected
the assets in the deal, the firm was also the only investor buying
credit protection on the entire transaction, the documents show.

Goldman Sachs created and sold the
Hudson CDO in late 2006, near the time documents released by Levin show
senior executives wanted to reduce the firm’s exposure to subprime

“The CDO imploded within two years.
Your clients lost; Goldman profited,” Levin said in an April 27 hearing
during which he questioned Goldman Sachs Chief Executive Officer Lloyd
about the Hudson deal and other CDOs. “To go out and
sell these securities to people and then bet against those same
securities, it seems to me, is a fundamental conflict of interest and
is — raises a real ethical issue.”

Blankfein responded that “we are one
of the largest client franchises in market-making in these kinds of
activities we’re talking about” and that “they know our activities, and
they understand what market-making is.”

While Goldman Sachs was short on the
Hudson Mezzanine CDO, meaning it stood to gain from a collapse because
of the credit protection it had purchased, a marketing document for
the deal released by Levin’s committee states that “Goldman Sachs has
aligned incentives with the Hudson program.”

In April I told a reporter from Crain’s NY that Goldman’s
overvaluation is totally overlooked by the market and the trend
followers (see side bar for the full article), and guess what happened
just a few days later… Yeah, reality caught up with them!

Earlier this month, Mr. Middleton
took a break from blogging to tend to his yacht. Cruising the Hudson
River, as the headquarters of Wall Street’s big

Crain’s New York

“His work is so detailed, so accurate, it’s among the best in the
world,” says Eric Sprott, CEO of Sprott Asset Management, a Toronto firm
that manages about $5 billion and subscribes to Mr. Middleton’s

For more of my opinion as expressed through the mainstream
media, click here.

banks sparkled brightly, he warned of
dark times. He pointed at Goldman Sachs’ huge new tower and proclaimed
the bank “overvalued.” Bank of America Merrill Lynch is worse: “They
bought Countrywide and some of the biggest trash out there.” He hasn’t
shorted banks’ stocks lately, but plans “to go after them again” in the
near future. Mr. Middleton likens himself to the character in the movie
The Sixth Sense, who sees things no one else can. “I see dead countries,
companies, municipalities,” he says. “They are dead and flying high in

I can actually extend the Bloomberg article above for quite a while

the Patina Fades… The Rise and Fall of Goldman Sachs???
16 March 2010

I have warned my readers about following myths and
legends versus reality and facts several times in the past,
particularly as it applies to Goldman Sachs and what I have coined
“Name Brand Investing”. Very recent developments from Senator Kaufman
of Delaware will be putting the spit-shined patina of Wall Street’s
most powerful bank to the test. Here is a link to the speech that the esteemed Senator from
Delaware (yes, the most corporate friendly state in this country). A few
excerpts to liven up your morning…

Middleton vs Goldman Sachs, Round 1
Tuesday, 08 December 2009
and Reggie
Middleton vs Goldman Sachs, Round 2
Sunday, 31 January 2010

On December 8th of last year, I penned “Reggie
Middleton vs Goldman Sachs, Round 1″
wherein I challenged all to
take a critical look at exactly how much money was lost by Goldman
Sachs’ clients. Well, here comes round 2, which is directed at Goldman

Those Who Chose Not To Heed My Warning About Buying Products From Name
Brand Wall Street Banks,
Wednesday, 24 February 2010 -Those CDO
buyers shoudl really heed this article. Not only did the GSAMP investors
lose over 80%, but the real estate investors lost 98%
(see Wall
Street Real Estate Funds Lose Between 61% to 98% for Their Investors
as They Rake in Fees!

First a little background info. Goldman is
supremely overvalued in my opinion. It is even more so considering much
of its profit is generated solely from the raping of its clients. I say
this holding absolutely no ill will towards Goldman. This is strictly
factual. Let’s walk through the evidence, of profit potential,
valuation, and the stuff behind some of the value drivers in their
business model, like brokerage and investment banking…

But wait! There’s
more, and it get’s quite interesting…

Reference “Blog
vs. Broker, whom do you trust!”
and you will be able to track the
performance of all of the big banks and broker recommendations for much
of the year 2008 for the companies that I covered on my blog. Since
the concept of sell is rather remote to any big broker whose trading
desk is not net short a particular position, it would be safe to assume
that if the market turns the broker’s recommendations will also turn
in a similarly abysmal year as well. Just to be clear, this is not
about ability, or who is the smartest. It is about marketing and
conflicts of interest. Brokers do not charge for their research. Thus
it should be obvious to anyone with even the slightest modicum of
business savvy that the sunk costs that is freely disseminated research
is most likely a loss leader (with the losses being born by the
consumers of said research) otherwise known as the marketing arm for
underwriting, sales and trading.

blind following of Wall Street marketing
research, and the abject worshipping of Goldman marketing,inventory dumping,
sales research allows them to
rake billions of dollars off of their clients backs, yet clients still
come back for more pain. A fascinating, Pavlov’s dog’s/Stockholm
Syndrome style phenomena. Have you, as a Goldman client, performed as
well as their employees receiving $19 billion in bonuses? Don’t get me
wrong. I’m not hating Goldman, but now they are actually raping raking billions of dollars off of the tax
payers backs as well. I do not do business with them, hence I do not
want get my back raked – but it appears that as a US taxpayer I have no
choice. A company that nearly collapsed a year ago, receives
mysteriously generous government assistance (AIG full payout during its
near collapse as an insolvent company) with the help of highly ranked
government officials (many of which are ex-Goldman employees) and then
pays out record bonuses on top of so many tens of billions of dollars of
taxpayer aid with taxpayers facing high unemployment and sparse credit
is not necessarily a company that should be looked upon as a scion of
Wall Street. There is no operational excellence here. The only reason
such an aura exists is because main street and Wall Street clients have
an amazingly short memory, as I will demonstrate in the paragraphs
below. This goes for the big Wall Street banks in general, and Goldman
in particular.

As stated above, Goldman is now underwriting CMBS under a
broad fund our $19 billion bonus pool
“buy” recommendation in the CRE REIT space. Let’s take a look at another
big bonus development exercise,
marketing push they made into MBS a few years ago…

In April of 2006, a Goldman Sachs forced “Goldman Sachs Alternative
Mortgage Products”, an entity that pushed residential mortgage backed
securities to its victims clients through
GSAMP Trust 2006-S3 in a similar fashion to the sales and marketing of 
the CRE CMBS that is being pushed to its victimsclients
as described in the links above. The residential real estate market
faced very dire fundamental and macro headwinds back then, just as the
commercial real estate market does now. I don’t think that is the end of
the similarities, either.

Less then a year and a half after this particular issue was
floated, a sixth of the borrowers defaulted on the loans behind this
product, according to CNN/Fortune, where the graphic to the right was
sourced from. Here’s an excerpt from the article of October 2007 (less
than a year after the issue was sold to Goldman clients, clients who
probably didn’t know that Goldman was short RMBS even as Goldman peddled
this bonus bulging trash to them)

The Goldman short from early 2008 continues to print money,
challenging B. Bernanke and his steroidal presses for the dollar volume
efficiency prize of the year:

Although the GS positions weren’t as profitable in ‘09 and this year
(at least not yet, we still may have some room to run) as in ‘08, I am
continually proud of this research and trading. The reason? It was one
of the most contrarian of contrarian moves and proves once again that
math, truly forensic research and an objective perspective will
continuously best the crowd following, “Goldman is too connected”
huffing, “This is the best company on the Street” touting, Buffet
position worshiping, momo chasing, “I just do what everybody else in the
industry does” crowd. This should show BoomBustBlog skeptics that
sometimes it takes more than brand name marketing and political
connections to maintain an unjust premium in a risky business. If anyone
ever bothered to actually take a close look, they would have found
that, adjusted for risk, Goldman barely covers its cost of capital (see A Realistic View of Goldman Sachs and Thier Lastest
Quarterly Results
). How can such a thing slip past so many people
for so long? Because most were blinded by the brand…


Hey, I and my fellow BoomBustBloggers saw it…

How Many Banks and Analysts Were Bearish On Goldman Before Today?

and Is
the Threat to the Banks Over? Implied Volatility Says So.
Some may
ask why I’m being so generous in regards to the extent of this
quarter’s earning review. Well… A European institutional  subscriber
recently stated he was able to get the same content found in my
offerings from his investment bank research. Whaaatt!!! I told him that
he probably wasn’t reading the subscriber content. He wrote back
stating that that wasn’t the case. He also said that he doesn’t see any
fundamental analysis  in the work. I nearly fell out of my chair.
Hmmmm. Well, on the day that Goldman executives are due to testify
before the Senate, let’s review the opinions of the ONLY entity that I
know of that had a bearish perspective (rightfully and profitably so –
twice and counting) on Goldman Sachs. If I am not mistaken, nearly
every bank and analyst (save Meredith Whitney, you know I love you :mrgreen: ) had a strong buy or hold on this company both back
in 2008 and last month. So much for relying on that name brand
investment bank research.  For any others who may hold the sell side
propaganda machine in such high regard (or is it me in such low
regard), might I recommend the following two posts before we move on: For
Those Who Chose Not To Heed My Warning About Buying Products From
Name Brand Wall Street Banks,
vs. Broker, whom do you trust!”

Map those base Jumping, spilunking, sky diving drops in Goldman's<br />
 share price with the research linked below. This company is very, very<br />
 risky and the risks are there for all to see. All you have to do is<br />
look  for them!!!


Map those base Jumping, spilunking, sky diving drops in Goldman’s
share price with the research linked below. This company is very, very
risky and the risks are there for all to see. All you have to do is
look for them!!!

Those who have not seen these Matt Taibbi videos may find them worthwhile:

  1. Rolling
    Stone: The Great American Bubble Machine PT.1 of 5
  2. Rolling
    Stone: The Great American Bubble Machine PT.2 of 5
  3. Rolling
    Stone: The Great American Bubble Machine PT.3 of 5
  4. Rolling
    Stone: The Great American Bubble Machine PT.4 of 5
  5. Rolling
    Stone: The Great American Bubble Machine PT.5 of 5

Subscribers can reference our valuation of Goldman via this link: GS 4Q09 Final Review and Updated Valuation GS 4Q09 Final Review and Updated Valuation 2010-02-01 03:04:55 528.52 Kb

More of Reggie on Goldman Sachs



Goldman Sachs Stress Test Retail Goldman Sachs Stress Test Retail2009-04-20
720.25 Kb – 17 pages

Goldman Sachs Stress Test Professional Goldman Sachs Stress Test Professional
2009-04-20 10:06:45
4.04 Mb

- 131 pages

Free research
and opinion

§  As
Reality hits, the Masters of the Universe are starting to look like
regular bank employees

Middleton’s Goldman Sach’s Stress Test: Breaking Ranks with the Crowd
Once Again!

is the Newest Riskiest Bank on the Street?

More remium

Goldman Sachs Report June 21, 2008 Goldman Sachs Report June 21, 2008 2008-10-20
361.18 Kb

Middleton on Goldman Sachs’ fourth quarter, 2008 results


Goldman Sachs - strategic investment and public offering Goldman Sachs – Buffet’s strategic
investment and public offering 2008-09-26 02:29:15
895.36 Kb

Goldman Sachs' Bank Holding Company Fundamental Valuation and<br />
Forensic Analysis - Professional
Goldman Sachs’ Bank Holding Company Fundamental Valuation and Forensic
Analysis – Professional 2008-12-18 10:12:37
267.49 Kb

Goldman Sachs' Bank Holding Company Fundamental Valuation and<br />
Forensic Analysis - Retail Goldman
Sachs’ Bank Holding Company Fundamental Valuation and Forensic Analysis
– Retail 2008-10-20 15:45:05
348.99 Kb

GS ABS Inventory GS ABS
Inventory 2008-02-25 06:48:56
1.22 Mb

Goldman Sachs Valuation Model updated for PPIP - Retail Goldman Sachs Valuation Model updated
for PPIP – Retail 2009-04-04 19:50:51
388.04 Kb

Goldman Sachs' Bank Holding Company Fundamental Valuation and<br />
Forensic Analysis - Professional
Goldman Sachs’ Bank Holding Company Fundamental Valuation and Forensic
Analysis – Professional 2008-12-18 10:12:37
267.49 Kb

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Escapeclaws's picture

Always love your analysis, Reggie. But what confuses me is the short-sightedness of GS screwing their clients. Even Buffett always made a big deal out of buying companies that have a franchise. You would think he would have refused to get involved with a company like GS that violates his own principles. Yes, GS has made billions this way, but possibly at the cost of the firm. Must be either those spoiled brat preppy baby boomers who think adversity is something that happens in Africa running the show there or GS and Buffett both know that the apocalypse is coming. Blankfein as much as admitted that they have a pipeline to God.

litoralkey's picture

Reggie, the prop trading will not be stopped.

GS is putting the finishing touches and going into simulated stress testing at the new co-location datacenter in Mahwah NJ owned and operated by NYSE Euronext, the facility goes live in October, testing started in earnest in mid-May.

As mentioned above, the prop desk can hang a new shingle, and continue on it's merry way.  The facilities, the co-location contracts, and the personnel are already in place.


EDIT: sister facility in Basildon, England is also up and running.

New World Chaos's picture

Here's a black swan for you: Goldman torched during NYC food riots of 2012.  Blankfein's mutilated head becomes the first trophy of America's first guillotine.

Puts on the squid, puts on the squid, puts on the squeeeeed... bitches!

got JPM puts too, thanks to their PM shorts and interest rate derivatives.

jkruffin's picture

Reggie, I would love to see you do a piece like this on JPM, and their nuclear bomb derivatives exposure among the rest of the crap they are holding.  I actually believe JPM sinks before GS does.

swamp's picture

Honolulu Chief Elections Clerk Says Obama Not Born in Hawaii; background-repeat: no-repeat; background-attachment: initial; -webkit-background-clip: initial; -webkit-background-origin: initial; background-color: initial; background-position: 0px 100%;">June 9, 2010 · 66 Comments

Tim Adams was the Chief Elections Clerk for the city and county of Honolulu, Hawaii, during the 2008 presidential election. As Chief Elections Clerk, he supervised a staff of 50 and had access to all the database to verify documents like birth certificates and birth places of campaign candidates.

On June 5, 2010, Adams was interviewed by James Edwards of the Political Cesspool radio show. Adams says unequivocally:

“Barack Obama was NOT born in Hawaii.”

Adams is currently teaching in the graduate program of Western Kentucky University, Bowling Green, Kentucky, (270) 745-0111. He’s listed, as Timothy Adams, in WKU’s faculty-staff directory, HERE. Timothy Adams is also listed as a Graduate Assistant of the English Department, HERE:

Timothy Adams CH 20
(270) 745-5767

A big h/t to American Grand Jury & AGJ’s source, The Betrayal.


tom's picture

it don't make no difference because his mother was a us citizen, you dim bulb. now go spam elsewhere.

BoyChristmas's picture

Ha. Those slivers of equity are so thin you couldn't pick them up with tweezers. All those colors make up the volatility rainbow.

Econophile's picture


Nice job with GS. I buy into your analysis that they are overvalued and that their profit centers may be in jeopardy: prop trading and Fed Funds carry trade. Although I agree with the above comment that prop trading, high speed or otherwise, will never be regulated out of existence.

I also don't necessarily see any breach of securities law or fraud -- yet. Facts may be uncovered that may prove me wrong. I have written about their case several times, including here at ZH: ; I see them more as a political scapegoat for the whole crisis than bankster. As if "greed" or CDOs caused the crisis.

Actually what I found really interesting was you. I enjoyed the Crain's piece. Tooling around the Hudson is so cool. I hope you find success from blogging. I never thought blogging was a way to riches. But you and Tyler seem to be doing something right. I thought if I could get a book deal I would be happy. At best it helps me focus my investing ideas. I just want to change the world.

Congratulations and way to go. 


hbjork1's picture


What Reggie and Tyler are doing right is spending a lot of time acquiring off and digging through data. Then they let the analysis speak for itself.

Investigative journalism.

MarketFox's picture


Special stuff...

Keep doing it !!!!!!!

Mr Lennon Hendrix's picture

Reggie!  Reggie!  Reggie!

JohnR's picture

You're no Dick Bove Reggie Middleton.

For which I am grateful.


whiteshadow's picture

let those squid swim with bp in the dark nxt generations of students here like me,,,so when we run the markets..we have a better judgements,,,

help the ones in need,,,ppl

ZerOhead's picture

+1000... (Best strategic strikethroughs anywhere bar none! ...)

Cognitive Dissonance's picture

I love how the "strike out" allows you to convey the message while denying you conveyed the message. The written non denial denial. :>)

tom's picture

Reggie's right, Goldman is the only bulge bank facing a choice between losing its near-zero funding rate or its prop trading ... IF the ban on bank prop trading is adopted.

BUT ... it won't be adopted. Who do you think's footing the bill for this year's election campaigns, anyway?



anony's picture

Goldman is only a name.  The playuhs, like Lord Blankfein and his accomplices can simply hang up a shingle under another untouchable corporate umbrella and practice the same ability to read the minds of a million traders and know what move to make, or market to create.

It's not like they have plants and machinery to move.  They can simply sign a new lease at 86 Broad and keep on keeping on, paying off the same politicians, putting their people in strategic places like the head of BP oil, and basically change nothing but their name and address.  Their book goes with them each night out the door and back in the next morning.

Only way to beat them is to kill them.

Problem Is's picture

Now You Are Getting It
The Blankfeins et al own the Government and the Government owns us... Every law and rule benefits them and fucks us...

Then a change puppet comes along and calls the fucking "reform"... We are all Orphaned Catholic Alter Boys now...

As the priest said to the Orphaned Catholic Alter Boy:

"Pray for lubricant, my son."

Lucky Guesst's picture

Thank you for pulling me through that. You have proven your case to me about GS (I knew they were crooks but now I understand how and why). It will take our congress a lot of time and resources to give them their slap on the wrist and GS is just 1 bad apple. I don't believe that there are enough Reggies and Tylers to expose the entire problem. And if even you could, there are not enough of us out there willing to listen. That's why so many are "doom and gloom", it feels like it's past the point of being able to be fixed and nothing short of wiping the slate clean will ever get things back to good.

Pooh-Bah's picture

Shorted the squid @ 148 after Meredith Whitney said its a 120 stock.

Panafrican Funktron Robot's picture

Just to play devil's advocate, what if the Lincoln amendment is DOA in the conference committee and the compensation statement is not factually correct/misstated? 

I like the idea of trading contrarian to Goldman's guidance, but actually shorting Goldman itself, not sure on that apart from the general reality that shorting just about anything is going to be a good play over the next few quarters. 

In short, I'm somewhat less convinced that GS will drop faster, or even as fast, as SPX, which seems like a safer/more obvious short play.

Commander Cody's picture

Goldman contrarian plays seem to be one of Tyler's focus areas recently.

Reggie Middleton's picture

I'm not offering up trading advice here. I told my subscribers, in detail, what I thought of Goldman in time to reap the benefit fo two large drops in price (and admittedly, hit by one helluva of a rally). The stuff that I post here is in retrospect. That being said, if I had a choice of being long Goldman or short, it wouldn't be long. Goldman is leveraged into big moves of junky assets on its balance sheet and activity on the Street, both of which have a negative macro outlook.

whiteshadow's picture

Mr. Reggie,

as usual good stuffin,, m sure u'll get to enjoy the turkey when time vindicates you...

been waiting for 2 weeks to hear from you and I got summer vacation plus got enough time on fall during classes too. Please give me an opportunity to intern( will work for $0,nada dollars,). btw I can work for 15 hrs a day standing,,,an opportunity to learn n support is all I want.


Mr cheeky bastartd., I had requested ur opinion in ur future chart posting,,,would be greateful if some reply was made..thanks...


some one who said jpm will b the last one standing,,i think u need to read mr. reggie;s  posting,...learn about their fx exposure n see if u you still feel the same way,,,



FEDbuster's picture

Squeezing some fresh lemon on the calamari, yum.

GS down in today's big rally.

JW n FL's picture


          Fantastic work, frying up the squid for all too enjoy. Your karma is glowing! It would seemt that in the end only JPM will be left... save the new little squids allowed to grow, so too service the low hanging fruit.

Thank You! and keep up the fantastic work Reggie... Please never stop!

My very best to You and Yours Reggie, JW

sumo's picture

Reggie, great work. May you profit handsomely from it.

Ragnarok's picture

Reggie, everyone of your posts is like eating a entire Christmas dinner to yourself.  Excellent and overwhelming.

Cognitive Dissonance's picture


I just had to post this one. Nice work. Does your mother know you have a brain like this?

williambanzai7's picture

She reads it every day. It keeps my scatological humor in check.

Cheeky Bastard's picture

I absolutely agree with everything written here.


And here is the thing that bugs me. Elections are but a few months away, and throwing shit and possibly hand grenades at the bankers is a sure thing to get you re-elected. 

Was Goldman doing something illegal here; probably not [I dont know the law]; un-ethical; fuck yes; is that reason good enough for GS to serve as an election platform for couple of congressional retards; no; hell no.

This will blow over when the elections pass. Mark my words.

Is GS overvalued; probably not given the dominant market position. Is GS leveraged to its eyeballs; yes; but so is any other IB I know of.

damage's picture

Reggie, I think this guy is a bit biased...


The main problem I have is.. in part 2 he says the "industry just decided to drop long standing industry standards in lending" and that they "started loaning as much as they wanted" (paraphrased)
But completely fails to mention WHY! Which was mainly government intervention like the Community Reinvestment Act and such the government created a market where to remain profitable compared to other companies in the industry you had to take high risk and be
loose with your lending standards and he completely neglects to mention freddie and fannie.

Obviously it was the absurdly low interest rates and government intervention into lending standards, and Fannie & Freddie which are mainly to blame for the decay in lending standards. Why doesn't he mention this?

DudleyDoRight's picture

The CRA did not cause this mess. 

Further to the other comments responding to your assertion, the CRA was passed in 1977.  The CRA did not at all stop Fleet's rapacious lending tear through the south in the early-to-mid 1990s.  In essence Fleet made 50% LTV loans to poor southerners who had home equity basically knowing that the borrowers could not repay the loans.  In essence Fleet got into the foreclosure/property acquisition biz and turned a lot of people out of their homes.

Fleet did finally run into some reluctantly proffered minor regulatory resistance, but think where we'd be today if Fleet had been hammered by the Masters of Reg Z (the Fed) and the OCC for their lending practices?  1993-96 is not that far removed in time from the credit bubble heyday of 2003 to 2007. Had the government acted forcefully to prevent this type of rapacious lending, I wonder whether we would have had this housing bubble.

So here is a real source of government failure giving rise to the current problems. Why would people be surprised at the push for consumer protection (which would foster systemic stability)?

percolator's picture


Here's your chance to make $100K if you really believe CRA significantly is to blame for the credit crisis:

Steaming_Wookie_Doo's picture

Only a part of the pie--don't forget the 100x securitization of said low-grade loans. I have lines to mortgage folks who knew that some were making loans/appraisals on places and people that did not exist. When one can sell off crap, one cares very little for its short-time smell.

Don't forget about those 20 million recently unemployed folks adding to the strain.

Ripped Chunk's picture

Good to look at this again.

GS has their "tentacles" into so many things that may potentially go wrong, it is hard to value it as a whole.

Clearly there is much more that will go south in Europe this summer.


Reggie Middleton's picture

Take a look at the GS balance sheet and relative valuation, it ain't as pretty as some may be led to believe. GS may be approaching fair valuation, but if the Europeans kick off the shit storm in the bond and swap markets that I believe they will (see the entire Pan-European Sovereign Debt Crisis series on my blog), then all bets are off..

Click to enlarge full screen.

This multiple summary and graphs above also explains how Obama effectively cut the compensation GS, and to the lesser extent, othe banks employees. They are getting stock at the peak of a banking bubble – particularly after the most recent run up. I know I have heard pundits and analysts across the media saying that employees are getting discounted stock, but it is stock discounted off of a bubble at a time when banks are about to become worth a lot less – that is unless they find a way to do something else that is very productive contributory to growth (other than theirs) to replace extant yet dwindling revenue streams. Just take a look at the facts and figures above. They don’t lie!

So, what is GS if you strip it of its government protected, name branded hedge fund status. Well, my subscribers already know. Let’ take a peak into one of their subscription documents ( Goldman Sachs Stress Test Professional 2009-04-20 10:06:45 4.04 Mb - 131 pages). I believe many with short term memory actually forgot what got this bank into trouble in the first place, and exactly how it created the perception that it got out of trouble. The (Off) Balance Sheet!!!

Contrary to popular belief, it does not appear that Goldman is a superior risk manager as compared to the rest of the Street. They may the same mistakes and had to accept the same bailouts. They are apparently well connected though, because they have one of the riskiest balance sheet compositions around yet managed to get themselves insured and protected by the FDIC like a real bank. This bank’s portfolio looked quite scary at the height of the bubble.

You know what most people don’t realize is that it looks quite scary now as well.

If one were to strip out the revenues from prop trading, it would leave bards some balance sheet issue. Again, I query, should virtual hedge funds that pay out half of revenue as compensation trade at such high premiums to the rest of the market? I don’t think so, and I have put my money behind the idea that the market will not think so in the near future either.

Cognitive Dissonance's picture

Very impressive. No one can seriously question the effort behind your work. Though I'm sure there are plenty who try. I like that you lay out the good and the bad, including information that's contrary to your conclusion. Kudos on the honest inclusion of all the data you are aware of.

h4rdware's picture

Indeed. Interesting, informative and difficult to refute.

And lets face it, anything that shines light on on some aspect of the squid is worth some time.


chumbawamba's picture

Reggie is definitely the man.  An economics nerd who really knows his stuff.

I am Chumbawamba.

Cheeky Bastard's picture

Fair enough Reggie; you convinced me.


Noah Vail's picture

GS makes John Gotti look like Mother Theresa.

Mr. Anonymous's picture

If it's good enough for Cheeky, it's good enough for me.  Nice charts. Fade the squid.

chumbawamba's picture

I have no idea what you're talking about but I'm convinced as well.

I am Chumbawamba.