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Is Goldman Starting To Offload Prop Positions?

Tyler Durden's picture





 

Abby Joseph Cohen must have threatened with retirement and David Kostin is here to pick up the Olympic torch. Goldman Sachs just raised its 2009 year end S&P target to 1060, "13% above the current level" meaning Goldman prop positions are full and the great offloading to marginal buyers has begun. The justification: "After trading in a 10% band for the past three months, our “Pop, Stall, & Sustained recovery” framework, sequential improvement in ex-Financials EPS, stabilization in profit margins, and higher forward EPS guidance all point to a rising market through 2009." More specifically, 85 Broad is raising its 2009 EPS to $52 from $40, and 2010 EPS to a patently absurd $75 from $63, a 45% increase in bottom line earnings, and almost 100% from the old $40 estimate. And just so it seems more credible, "measured on a pre-provision and pre-write-down basis our estimates are $69 and $81. S&P 500 trades at 12.5x our 2010 operating and 11.6x our pre-provision EPS." In other words, pure rose-colored glasses halcyon.

As Q1 and Q2 earnings "beats" have demonstrated, all bottom line upside surprises have come from companies trimming the fat and mass firing employees left and right: alas for the most part revenues have been flat if not materially lower to expectations - just look at GE's recent results for a good recap of what is happening wth the economy theme. Arguably, there is no more SG&A extraction available to the vast majority of US corporations, meaning Goldman is expecting an unprecedented pick up in revenues. And with the US consumer completely tapped out and unable or unwilling to borrow, this implies that foreign countries will have to pick up the pace in bailing out our top line: so look for much more weakness in the dollar to even remotely justify Goldman's prediction. This will put Bernanke's claim of pursuing a strong dollar policy to the biggest test, as well as Europe's resolve to continue playing in this highly rigged version of F/X "game theory."

But back to Goldman - up until this point the firm has been at least slightly sensitive about catching marginal end buyers. Now the guns are blazing, and as all Wall Street professionals tongue-in-cheekly know all too well, a forceful upgrade is when any firm (Goldman most definitely included) starts to sell into a call (in this case its own). So buyers please beware: you are now implicitly buying the shares that Goldman and other brokers have been accumulating over the past 4 months.

 


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Mon, 07/20/2009 - 09:17 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:53 | Link to Comment Lets_Eat_Amen
Lets_Eat_Amen's picture

the prediction range was originally $150-$200, thus stopping at $147.  They were also one of the only firms to forecast oil over $100/barrel.  I wouldn't scoff off their forecasts, despite how leary we may become of them as a bank of mal intent.

 

Is it me, or did these math questions get harder to answer?

Mon, 07/20/2009 - 09:20 | Link to Comment John Self
John Self's picture

Well the VaR exemption doesn't last forever, you know.  A poor ole bank holding company's got to make a buck somehow!

Mon, 07/20/2009 - 09:22 | Link to Comment MsCreant
MsCreant's picture

Goldman = The Fleece Train

Goldman = The Pied Piper of Gamblin'

Mon, 07/20/2009 - 09:23 | Link to Comment barracuda
barracuda's picture

Dedicated to Goldman Sachs & Co.

Humans are Dead: Robot Song

http://www.youtube.com/watch?v=WGoi1MSGu64

Highly relevant to current market condition...

 

Enjoy.

 

Mon, 07/20/2009 - 09:24 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:28 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:53 | Link to Comment mattco
mattco's picture

She needs more poocha shells to distract viewers from her mug.

Mon, 07/20/2009 - 09:33 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:24 | Link to Comment Lets_Eat_Amen
Lets_Eat_Amen's picture

yeah, due to how the GDP is calculated, since the trade deficit has declined, we'll pull off a positive GDP number eventually.  This is of course despite the real indication that less goods and services are being demanded.  Eventually this will create that double dip effect i imagine; we'll have positive GDP, and then when China's stimulus runs out they'll want less from us, thus creating a relapse in the GDP rating.

Mon, 07/20/2009 - 17:54 | Link to Comment braintrust
braintrust's picture

Never bet against China. They can pull any shit out of the bag they want. You'll be amazed.

hat tip :good finance articles

and away we go.....

Mon, 07/20/2009 - 09:37 | Link to Comment yellow submariner
yellow submariner's picture

A S&P500 Level at the end of the year slightly above 1000 is IMHO very likely, if no really shocking development (=severe bankruptcies) takes place. However the amplitude of oszillations will depend on the news and will keep S&P500 not necessarily above 800.

Here in Germany tax income of cities drops up to 40%.
http://www.forbes.com/feeds/afx/2009/07/18/afx6671242.html
However everybody in the stock market seems to be confident *grin*.

Mon, 07/20/2009 - 09:38 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:45 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:47 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:48 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:49 | Link to Comment Anonymous
Mon, 07/20/2009 - 09:50 | Link to Comment Eduardo
Eduardo's picture

well if about 13% is all I can loose according to the second bulliest analysts in town I think I will keep my shorts

Mon, 07/20/2009 - 09:51 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:42 | Link to Comment Gilgamesh
Gilgamesh's picture

After logging in, let me follow-up on that comment.  VIX is shooting up, but VXX is now in the red.  Hmm...

Mon, 07/20/2009 - 09:52 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:37 | Link to Comment Gilgamesh
Gilgamesh's picture

Seems some people are finally paying attention to the actual facts, instead of the talking heads.  BAC and C are down for the 3rd day in a row.  Good regionals in the past that bankrupted themselves on bubble loans are down big again (ala MI).

Mon, 07/20/2009 - 09:52 | Link to Comment quant-this
quant-this's picture

That is such BS. I was out at a very casual function on Saturday where several of us who run large small businesses (20-50m in sales) got together for some boating and frank business discussion. Most of the businesses are serviced based dealing with much larger companies; it seems that everyone I spoke to is already locked in with crappy contracts for 2010 and now looking to 2011 for things to change. The big fear, and this is shared by the larger companies they service, is that margins have been improved as much as possible and unless things do pick up by end of 2010 then there will be another contraction round that will most likely be more painful. Obviously 2011 is far away and things seem to have stabilized for now but everyone was fearly negative which means no expansion. Flat seems to be the better case scenario.

 

 

Mon, 07/20/2009 - 10:24 | Link to Comment Anonymous
Mon, 07/20/2009 - 11:25 | Link to Comment quant-this
quant-this's picture

Hopefully yes; but it's all fun and games until they try to change service contracts mid-year. No one was painting a picture of desperation; I think the general theme was that the contraction was a lot quicker and harder than even the most conservative had anticipated but things were at least not crashing and on life support. The problem there is that business spending and investment is not going to pick up any time soon since everyone is very focused on not spending on anything not necessary and not really expanding. Everyone is playing defense. This is the end is positive for companies as they will be much more profitable when they grow; but the profitability will come from savings instead of expanded sales. This is the other side of the coin of the consumer picture, where savings is also going up. What it doesnt get you is excess spending at the same levels as before. So the guy making $250k or the company making $2.5m will not be spending the same as they did at those levels previously. This in the end is healthy and it's nice to see that the system is actually healing naturally but along with that comes anemic growth and probably not starting until 2011. That was the view and I have to say I agree.

 

Just my .02

Mon, 07/20/2009 - 10:01 | Link to Comment mdtrader
mdtrader's picture

Don't forget that a week ago the Nasdaq 100 traded 1400 or so, now everybody wants to buy at 1540. Jesus where do these people come from?

Tue, 07/21/2009 - 02:47 | Link to Comment dnarby
dnarby's picture

Do a search on High Frequency Trading (HFT) on this site, also watch this http://www.youtube.com/watch?v=V4cRYI2x60Q&feature=player_embedded

 

HFT is probably responsible for over 50% of the volume, maybe up to 70%.

 

Leading to a whole lot of 'nothin underneath there...

Mon, 07/20/2009 - 09:57 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:40 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:08 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:10 | Link to Comment My cognitive di...
My cognitive dissonance's picture

That's it for me. I am now a collapsitarian.

Mon, 07/20/2009 - 10:15 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:35 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:48 | Link to Comment Anonymous
Mon, 07/20/2009 - 12:22 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:37 | Link to Comment Milton
Milton's picture

Abby is sooo nice. She reminds me of someone's grandma that just baked some chocolate chip cookies. She's so, ummmm, sweet and cuddly, and never raises her voice, and just wants to help us.

Mon, 07/20/2009 - 10:42 | Link to Comment Anonymous
Mon, 07/20/2009 - 10:51 | Link to Comment Anonymous
Mon, 07/20/2009 - 11:10 | Link to Comment Anonymous
Mon, 07/20/2009 - 15:37 | Link to Comment Hondo
Hondo's picture

GS is a whore.....they have know idea what earnings or at what level the market will be at year's end (just like they predicted the current environment..right?).  They simply exist to gull you in and rape you while you're in a fog.  Anyone who invest money based on what GS says deserves to lose their money.  The market is right back to where it was in the mid '90's....did they predict that?  NO....because they can't!

Mon, 07/20/2009 - 16:41 | Link to Comment braintrust
braintrust's picture

They also predicted  $200 oil and $30 oil; both were wrong.

Tue, 07/21/2009 - 02:49 | Link to Comment dnarby
dnarby's picture

...But great contra-indicators.

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