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On Goldman’s Latest Earnings Results…
CNBC (the world’s biggest Goldman cheerleader) reports “Goldman Sachs’ Revenue Falls, but
Profit Beats Views” even as Bloomberg reports “Goldman
Sachs Profit Falls 82%, Misses Estimates on Trading-Revenue Drop”. Whoah…
It’s hard to get a straight answer out of these news guys, ain’t it?
Well, one thing they both have in common is that Goldman’s trading
revenue fell over 40%! Hey, I told you so. Reference my overview of GS’s
last previous quarterly performance,
A Realistic View of Goldman Sachs and Their Latest Quarterly Results
For those who have forgotten the
implications of the highly leveraged and opaque financial holdings (the
true value of which rests at the mercy of
market sentiment) and can turn blind eye to the highly volatile nature
of the trading revenues combined with a literal tsunami of regulatory
pressure and potential litigious onslaught (all issues which we have repetitively brought up in the past as what
appears to be the sole voice of contrarian reason), Goldman Sachs
holds a strong investment proposition. However, if fundamental
considerations such as the company’s solvency, true economic profit
(not the accounting earnings you hear preached from your brokerage’s sell
side marketing propaganda research reports) and the
sustainability of income are to be considered, GS should NOT appear
among the preferred lot.
GS swims and sinks with the financial
markets and the performance at the trading desks determines not only
the profitability, but the survival of the Company. The market’s
unfounded exuberance (largely driven by liquidity rather than
fundamentals), combined with the collapse or near collapse of 3 of its 4
largest competitors is enabling GS to generate extraordinarily strong
trading results. Trading revenues which account for more than 60% of
the revenues not only dictate GS’s profitability but also serves as a
cushion to absorb the write-downs on the investments. Thus, Goldman
Sachs is amongst the most vulnerable to a major market disruption which
can severely dent its earnings stream and expose it substantial equity
erosion from investment write-downs. Apart from that, the recent
fraud charges filed against GS not only adds to the risk of incurring
huge litigation costs but also add to the risk of tighter regulation
and oversight of the sector which can hinder the business activity in
the coming years.
The chart below demonstrates how the
volatility of the revenues from the trading and principal investments
trickles down into volatility of the total revenues and profits of
Goldman Sachs…
‘Nuff said! Well, not really. There were other things that we looked
into last quarter that actually may give us hints to Goldman’s future. I
suggest those that don’t subscribe to my blog read the entire post
linked above. I will be providing a full Q2 review and analysis for
subscribers within 24 to 48 hours. Click here to subscribe.
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DOW chart update :
http://stockmarket618.wordpress.com
As Hans Landa (Inglorious Basterds movie) would say: "Au revoir Shoshanna"
View from a clueless coon: Investors in companies experiencing death throes could end up getting their teeth knocked out.
I hate it, I just crossed the Rubicon yesterday, I started buying companies that have & continue to be bailed out, mis-managned with obsolete business models that directly benefit from changed accounting practices, overwritting laws that the common working man is forced to lived by....I feel terrible, just like an American that voted for a anti-American president.
a jedi gone sith
One must be strong to resist the dark side.
How much difference is there really? I suppose Goldman's influence peddling is a little more transparent, but the tactics and businesses seem similar.
"Whoah… It’s hard to get a straight answer out of these news guys, ain’t it?"
Ain't that the point?
good time for solars then...
Goldman, Citadel, SAC Capital, DE Shaw are all long solars at these levels and so are many other top fund managers. When solars move, they explode up. You can laugh all you want, but solars are turning the corner in a major way. It's a volatile sector, very manipulated, but I still love it.
Nuttin' like a little S&M to start the morning.
Reggie,
Even value managers were buying GS in late April:
http://www.investmentnews.com/article/20100426/FREE/100429908
Smart money jumped on GS shares yesterday morning, maybe for a quick buck, or maybe for a longer-term hold. The setup yesterday was too beautiful, a trader's wet dream! Keep buying them dips folks, summer meltup will continue.
Smart money? More like other people's money. Ain't nothin' smart about buying a dishonest company whose revenue stream is strictly based on their reputation or their ability to withdraw from the Fed's discount window.
GS lovers can kiss my ass
I would just as soon buy shares in the Mafia