With Goldman Stock Down 5%, CDS Surges 21%, Still Rich By 16%

Tyler Durden's picture

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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Anonymous's picture

Hey, Leo - you buying this dip?

Leo: "Shorts are going to get their faces ripped off."

Anonymous's picture

The SEC might wanna take a look at the 5-min charts of the SPY trading on Jan 15, Jan 17 and today.

Chopshop's picture

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.

Anonymous's picture

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.

John McCloy's picture

Great Wang.

POTUS: They were HUUUGGEEEEE contributors..HUUGGEEEEE.

Leo McGary: Whats next?

 

RoastingBankers's picture

lmfao leo is getting roasted

Anonymous's picture

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.

Unscarred's picture

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?

Anonymous's picture

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.”

Anonymous's picture

Dear G-d, please smote Goldman Sachs. Thanks.