Goldman CDS Hits 140 As Stock Plunges

Yesterday we speculated Goldman CDS should hit 140. It is there now, as the stock is plunging by nearly 5%. At this point the Stock-CDS arbitrage is negligible, and declined from 16% yesterday to just 4% today. Currently CDS is fairly valued on a relative basis, assuming the stock price is fairly valued, which it isn't if prop trading is killed. LBO prospects are still not considered.

Comments

[bugs_]

Arrrr I wonder how many white house insiders

loaded their chests with Goldman puts?

[bobby02]

. . . . or long calls now.

Stomp big bad greedy banker is looking like an awfully crowded trade.

[TraderMark]

I was writing a story about how "BRIC" was born, and citing a great FT.com piece when the end of the story essentially was about how Goldman has plans to conquer the world.  Quite chilling really!

http://www.fundmymutualfund.com/2010/01/ftcom-how-bric-was-born.html

This drive is going hand in hand with a complex process of cultural engineering. As the bank acquires more non-western staff, it is devising programmes to rotate its locally hired employees through headquarters, to ensure that they learn “Goldman values”.

As its sponsorship of Chinese business schools shows, Goldman is trying to raise a new generation of local leaders. “If you look at the history of the London office of Goldman, you can see how over a decade or two, you can have locals rise to the top,” says one top executive. “That is our goal across the world. The idea is to get embedded, to show that we are there for the long term … but also to ensure that our Goldman values are everywhere in the world.”

It all might sound reminiscent of the way the British empire operated in the 19th century – or the way the Russian Communist party once tried to knit the diverse peoples of the Soviet Union into a single ideologically based nation. Only this time, it is MBA programmes and Goldman training courses, rather than British public schools or communist training camps, that provide the cultural glue. And – perhaps most important of all – Goldman Sachs (unlike earlier empires) is not overtly acting with a nationalist or political agenda; insofar as it has a real loyalty, it is to its own bottom line and its ability to make profits.

[Hephasteus]

Do they make them take female hormones and have sex with them as they are rotating them through the training program? To make them perfect traders?

[RowdyRoddyPiper]

Why do good things happen to bad people?

[buzzsaw99]

They need to remove Jackson's pic from the 20 and replace it with one of turbotax timmy.

[TraderMark]

Over under on going private 8 months.

[SteveNYC]

Watch the slimy shits enjoy their stock price tanking.....then they'll go private at $10/share and use the money saved buying the company on the cheap to buy the next administration.

[Tahoe]

thanks.  more than just a little interesting stories being told.  What's the CDS heat map look like, the last one I saw was from Dec2 or maybe I missed one?

[Silver Bullet]

You guys are dilusional. In the (highly) unlikely event legislation gets through both houses of congress, it will surely not apply to the good people over at 85 broad st.

Buy as many shares on the dip as possible.

The only threat to Goldman is if Big Ben isn't confirmed in the senate for a second term.

However, if that's the case, alls stock would be on the chopping block.

[Tyler Durden]

Like i said previously, it is totally irrelevant in a normal market. In today's market where correlation desks trade simply based on relative momentum across different tranches of the capital structure, it sure as hell matters. If one takes the creditworthiness argument, any (moderate) deterioration in equities should be a credit beneficial development (this is an extreme example). Everyone is just waiting for the dividend recap deals to start surging again - which are the polar opposite.

[Hephasteus]

The way I understand it is when you do your IPO you garner x amount of capital and retain some portion of that capital. From then on the stock holders become an unsecured credit card. Whatever retained stocks the company holds becomes a cash equivalent. Which is why stock prices plummet during credit events because the first thing corporations do when their balls are in the wringer is sell whatever stocks they are holding onto. But the stock holders are still considered a credit card buffer. Stock prices are important because once the company is taken public its cut up into percents but YOU can borrow against the percents that you don't own because you suckered people into buying something without any way to get physical possession of the piece they bought. So that's why stock prices are so important to credit worthyness because they represent a fancy gimmick of how much of your company you can borrow against without risking one freaking brick or even one freaking manilla envelope in the supply closet.

Great scam it's like having a roomate that pays rent but after you watch a movie with them in your undies and then things get hot and heavy you get to kick them out in the street at 12 am. I mean you can't have a more powerless stupid situation for one side of the union. Throw in corrupted deleware courts and you can even screw over international competition just by making them come to deleware and be judged wrong by just the right person in just the right way like intel did to via.

An abuser is a weak and defensless thing but a systemized abuser that impliments customs and procedures that's a whole different kind of stupid which is why it done in steps. First you set up the custom and do it absolutely above board and get people accustomed to it. Then you corrupt it slowly and by the time it gets to the way it is now and gets analyzed tactically it just seems stupid beyond compare.

[Nout Wellink]

I am sure GS has won a lot of money, shorting their own stock.

[Miles Kendig]

There it is. Anyone that thinks GS did not know about this move in advance is delusional.

[lizzy36]

think:deferred comp stock price.

portion of GS bonuses that are paid in stock usually price day after awarded.

[Miles Kendig]

Thanx Lizzy.  I spent quite a bit of time around folks that got to pick the day of their award on a post quarter price review... and I somehow managed to think that was the standard way it was done.   I failed to appreciate that GS has the capability to make the President of the United States dance to their award schedule as a necessity of maintaining the stability of the global financial system.  Yes indeed, national security necessity and the bonus pool at GS.  No small wonder they were so willing to cut their Q4 compensation contributions.... GS tries to look responsible & constrained while the administration tries to act tough. Got it.

[Anonymous]

I don't know why they are panicking about the "no more prop" chatter.

Seriously, by the time this gets through legislation, prop trading will probably become mandatory and 30,000 more troops will be shipped to Afghanistan (Yemen is already off our radar).

I am Anoynmous.

[Cyan Lite]

Current legislation won't make it into law in the next 9-10 months.  The Dems are trying to use to redirect public anger away from Obama and back onto the 'greedy bankers'.  Laura Ingram and Rush Limbaugh are picking up steam in FAVOR of prop trading and defending the banks.  That may stall it long enough until the elections.  And at this rate, we may see a new majority in Congress.

I wonder if donations from 85 Broad St. picked up towards a few Republicans lately...