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With Goldman Stock Down 5%, CDS Surges 21%, Still Rich By 16%
Goldman Credit Default Swaps have surged by over 20% on the day the firm may have finally lost its trading "edge." With a 5% decline in the stock, the company default risk has jumped to a 5 month high at 121 bps. The last time its was here was on September 14th, when the stock was $177/share.
Yet a relative value comparison since September 2, 2009 (if one belives in such things) indicates that the Company CDS is rich by about 16%. If traders believe today's stock price as indicative of the true value of GS, we anticipate a widening in Goldman CDS to a level in the upper 130s/low 140s.
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Hey, Leo - you buying this dip?
Leo: "Shorts are going to get their faces ripped off."
POTUS: David, where the F is Rham?
Axelrod: I'll get him
Rham: Yes Mr. President you were looking for me
POTUS: Rham WTF are we going to do to pull this out of the fire, my approval rating is in the tank, some red neck dude in Mass just defeated what's her name, I'm being written off as a lame duck by the media and even the liberal bloggers, everyone is pissed about all the money we gave our friends on Wall Street.
Rham: Not to worry Mr. President - David could you please get our secret weapon who is waiting in the lobby.
POTUS: Rham, one of our lobbyist friends?
Rham: No Mr. President not a lobbyist this time we have someone that will appeal to all of the angry teabagger types
POTUS: You look very familiar, you're even taller than I am - pleased to meet you.
Volcker: Nice to see you again Mr. President it's been almost a year
Rham: Paul tell the President what you have in mind
Volcker: We need to separate the banks investment and other banking activities
POTUS: Thanks Paul appreciate the idea.
David: Paul could you please wait outside while Rham, the President and I have a discussion
Rham: Here's a speech Mr. President we've been working on it since last week when it became apparent that we were going to lose Mass.
David: Mr. President we've conducted a number of focus groups with teabaggers and separately with progressives and we think this should help turn things around
POTUS: But what about our friends on Wall Street?
David: I've had a discussion with Tim and he was speaking with Lloyd and the others, they're okay with it and understand that it's not like we're going to be breaking them up or anything, they just won't be able to get any larger at least in an obvious way.
Rham: Mr. President by the time this gets through the House and Senate it will be even better for the banks than what they have now and we have Barney on side to make sure that when it comes out of conference the final bill will have sufficient loop holes.
David: We've scheduled Thurday for you to make some remarks, we'll be leaking parts of the speech in advance and have already given a heads up to our Wall Street friends.
POTUS: Do you think people will believe it?
Rham: We're in contact with some of the bloggers and economists that the progressives and teabaggers trust - I think they'll give you the benefit of the doubt.
POTUS: Can we keep up this sham though November?
Rham: we`ve done it before Mr. President
POTUS: excuse me - yes hello - a tall man waiting in the lobby? Oh yes send him in.
POTUS: Pete ahh I mean Paul great to see you gain how would you like to stand next to me on Thursday while I make some remarks to the American People
The SEC might wanna take a look at the 5-min charts of the SPY trading on Jan 15, Jan 17 and today.
157.20 the daily line in the sand for GS.
1st tgt was already tagged today ~ the daily 233 EMA at 156.81. ding.
XBD daily candle is the one to watch for the equity space.
GS is a hedge fund, trading is the life. last quarter is a bad quarter, since volatility is low. Now the bonus issue is behind, expect some wild move to make some money for the next quarter. if prop trading is banned, as they proposed, then the firm is dead. but I don't think it will happen. they don't have the balls to mess with GS.
Great Wang.
POTUS: They were HUUUGGEEEEE contributors..HUUGGEEEEE.
Leo McGary: Whats next?
lmfao leo is getting roasted
Doesn't CDs trade according to credit risk? I would think that creditors are less at risk. Less of an ability to trade means flow business only and more volumetric type profit. Profit vol should drop. Volcker's ideas are a positive for credit risk and this historical relationship have little correlation with future basis levels.
Zero Hedge 'shout out'
BTW- Given that the prop trading story was out by last night, how does GS gap up on the opening print this morning?
JPM and MS both printed lower (BAC was up slightly), and GS and MS spiked (!?) just after the open, only to see all four fall off the table within minutes. Any thoughts on who was gaming this one?
Goldman keeps stating prop trading's impact in terms of percentage of revenues. They need to break down percentage of bottom line net income.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUujKsTFWE0&pos=3
Goldman Sachs, which generated at least 76 percent of 2009 revenue from trading and principal investments, gets the “great majority” of transactions from customers, according to Chief Financial Officer David Viniar. About “10-ish percent” of the New York-based firm’s revenue comes from “walled-off proprietary business that has nothing to do with clients,” he said.
“If a client wants to sell us a security, we’ll buy the security,” Viniar said today on a conference call with reporters. “That risk, which is principal risk, ends up on our balance sheet. It’s the great bulk of what we do all day long in all of our products for all our clients.”
Dear G-d, please smote Goldman Sachs. Thanks.