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The Squid That Can't Trade!
Learning to fly with tentacles instead of wings may prove difficult for the Squid!
Note: Subscribers can download the GS 3rd quarter review with the updated valuation opinion here
Goldman Sachs Q3 update Final (482.35 kB 2011-11-03 03:03:51)
In our Goldman Sachs update note, “Show me how to trade”
(August 2011), we challenged Goldman Sachs’ ability to create alpha.
Besides Goldman’s apparent lack of skill in generating returns in
downward markets, we also presented an analysis on how its share price
is driven by momentum (equity markets) instead of the commonly accepted
metric of book value. Those who would have followed the traditional
school of thought (sell side) by bidding the price up instead of down
would have seen their capital erode by 9%; the stock is down 9% since
our most recent publication. Below are some of the extracts from our
previous note alongside updated charts including Q3 results to peruse
before we delve further into the quarterly results the BoomBustBlog way.
“Unfortunately,
despite the entire start syndrome attached to Goldman Sachs, its prop
desk is yet to exhibit the ability to create alpha, let alone match the
returns of boombustblog.com. The table in the exhibit shows Goldman
Sachs’ trading (under) performance vis-à-vis S&P”
“Given
the high correlation of Goldman’s prop trading desk to equity markets
and taking into consideration the state of equity markets in Q2-Q3, it
would be interesting to see how Goldman Sachs share perform in the
coming quarter”
‘Goldman Sachs’ share price is driven less by book value per share and is driven more by momentum (multiple)”
With
Goldman Sachs return on equity (ROE) already under considerable
pressure to meet even its cost of capital, additional strains on capital
could put further pressure on its profitability. In Q3 ROE declined to a
negative 2.6% from 6.1% in Q2 and 10.4% in Q3 2010, Goldman Sachs
return on equity has declined substantially due to de-leveraging in an
adverse market (the absolute wrong time to deleverage, yet the time when
most banks seek to do it) and is below its current cost of capital.
With ROE down to sub10% from c40% during pre-crisis levels, there is no
way a stock with high beta as Goldman Sachs could justify adequate
returns to cover the inherent risk. For Goldman Sachs to trade back at
200 it has to resume its ROE of 20% which means it has to increase its
leverage back to pre-crisis levels of c25x. With curbs on banks leverage
and de-risking this seems highly unlikely. 
Two
months or so ago (Monday, 22 August 2011), I penned the public blog
post that also relased my most recent research on Goldman Sachs -
The Squid Is A Federally (Tax Payer) Insured Hedge Fund Paying Fat
Bonuses That Can't Trade In Volatile Markets? Who's Gonna Tell The
Shareholders and Tax Payer??? - as excerpted:
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. I don’t call Goldman the world’s
most expensive federally insured hedge fund for nothing!
And
for those who haven't been following my Squid Hunting series, there's a
lot more to come from those boys at 200 West Street. If you want to
know what will happen next, just look at the first few pages of the
lastest Goldman subscription docs (click here to subscribe):
After all, eventually someone must query, So, When Does 3+5=4? When You Aggregate A Bunch Of Risky Banks & Then Pretend That You Didn't?
I'm Hunting Big Game Today: The Squid On A Spear Tip
Summary: |
Hunting the Squid, Part2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?Welcome |
Hunting the Squid Part 3: Reggie Middleton Serves Up Fried Calamari From Raw SquidFor |
Hunting the Squid, part 4: So, What Else Can Go Wrong With Goldman Sachs? Plenty!Yes, |
Hunting the Squid, Part 5: Sometimes Your Local Superhero Doesn't Look Like What They Show You In The Movies |
Discuss Finance, Investment, Blogs, Global Macro and Research with Reggie Middleton of BoomBustBlog at Salon de Ning700 Fifth Avenue New York, NY 10019 6:45 pm, Friday November 4th I
Previous BoomBustBlog events have been more than worth it...
I can be reached via the following channels, or directly via email: |
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my best friend's mom makes $77 an hour on the computer. She has been out of job for 9 months but last month her check was $7487 just working on the computer for a few hours. Read about it here LazyCash6.com
What?! my best friend's mom makes $77 an hour on the computer. She has been out of job for 9 months but last month her check was $7487 just working on the computer for a few hours. Read about it here LazyCash6.com
Reggie - great stuff. If the GS paid trolls are upset about the delivery, you are doing an even better job.
funny stuff!
People knocking Reggie for being grandiose have obviously never had to promote their own business. I imagine they would have been suggesting Alexander The Great rename himself Alexander The Shy.
Never mind the negative comments. You have always been way ahead of the crowd and that certainly deserves a pat on the back in my opinion. Great job, as always.
Never mind the negative comments. You have always been way ahead of the crowd and that certainly deserves a pat on the back in my opinion. Great job, as always.
Cut out the self grandiose drivel and you might actually have a few folks who might contact you Reggie! You sound like you probably got bullied as a child and and are now looking for some validation and acceptance as a professional because of your obvious shortcomings. I will never give my money to anyone with bad grammar period!
I will never give my money to anyone with bad grammar period!
did you mean poor grammar?
Like how the Irish carry a chip on their shoulder put there by the British, a pedophile Priest or just an angry father? Just kiddin' bro, a wake up call.
Giving forgiveness as we have received it is the only value worth having, and ya gotta give it in order to receive it. Teach it in order to learn it.
"Christ's vision has one law; it does not look upon a body and mistake it for the Son whom God created." Course in Miracles
Seek to change your mind and the world your eyes perceive thru the reflection of your mind changes. The world is effect, the mind cause. If you feel victimized, impotent, angry, etc. look at how you put yourself there by fabricating a social mask/self-concept of "being charitable", "being easy-going", or "justified as judge of others", respectively. Your false creations are just returning to bit yo ass.
When you recognize, in you and others, the holy Son God created, not a mask or wanna-be winner persona, you will see the veil begin the lift, and witnesses of Heaven and Love appear. Truth arrives where it is not opposed.
No one enters Heaven alone. And when we judge a brother, we put them and ourselves in Hell. Just look at the world you see and experience, vapid victories swallowed in bitterness and death, and one day you will seek to change your mind---your lifeline to Life.
"Like a bridge over troubled waters, I will ease your mind."
Minds experience shame, guilt, hate, grief...not bodies (just effects of). You are a mind, the body is just it's effect. Change the content, and your perceptions change. Cause is never separate from effects. Ideas do not leave their source.
Minds joined to Source, God's Mind, do experience Love beyond the body's world of limitations, conditions, phases and cycles, and endings. REALITY is experience; my words are once removed from it, and my words you you are thus twice removed. Words can lie or lead to vision, depending on the mind's intent.
Experience is not learned or taught, but the vision that leads to it can certainly be. Your experiences are just witnesses to the deeply cherished contents of your mind. Forgiveness is the means to change mind contents. God did not create impotent minds, so illusions are as strong in their effects as is truth.
Truth is God's creation, not the world's. God is Love, not hate, punishment, spite, retribution---those are just projections of fearful, guilty, angry minds. Don't take my word, brothers, study "The Course in Miracles".
This is a feisty bunch today. I'm always amazed at the people who take the time to click on my links, read the posts (which almost always have the same formats) and then find the time to state that they would never click on the links and how it is a waste read the posts.
Why bother reading my stuff with so many other authors who you care more for? That being said, there were too many pics in the post above, but that was simply a cut and paste oversight, and still doesn't explain why people who should be too busy to do so bother to come to my posts, read through it and complain about them.
I'm even getting complaints about how good girls look at get togethers. Come on now. The event is in a pretty people spot, and this is not a fashion show it's financial discussion...
I find the pretty girls to be a plus. Could you get some shots of them diving off the boat in bikinis next time, Reggie?
I actually have the shots of the bikini diving from that day. It's a good look, and many of the girls were ivy league and very, very sharp. It was a fun day, but I don't want to divert from the primary purpose, and that's fruitful discussion of things investment and finance related.
You tell em Reggie!
It never ceases to amaze me how people who are getting great free important info, have nothing else to say than the stupid comments about girls looks and boasting.
I for one appreciate your gifts and think you are hysterical!
How many ZH usernames do you have Reggie? I lost count after I got to 100.
Latest comment from Reggie:
I (as Ive said repeatedly) told (if you bothered to listen) you (not me, you) so (because I really am, that much smarter than you.)
Bullshit the Squid just took several hundreds of MM$ from MFG - party on !
swimming with wings is easier than flying with tentacles
[my corp strat direction: drop the tentacles, stay in the water and grow wings]
the squid likes spikes, luring it onto a spear should be no problem
xactly...why "trade" when you can "cheat"....
Give Reggie a break, the guy's onto something. Maybe if everyone in the financial world dressed like a Zulu warrior, things would be better than they are now.
This is how the chicks on boats thing looks in my neck neck of the woods...
http://www.flickr.com/photos/special_grandma/2533092088/
GIT-R-DONE! I didn't know couples waited 'til wedding nite now-a-days.
Okay, now THAT was funny!
Reggie, could we have a few more pictures of you. There's a corner of the universe that isn't full yet.
and would it kill ya to put on a shirt and upgrade your armaments?
i admire the research but the presentation needs work imho
I like my squid tenderized, delicately fried and served with a spicy red sauce.
I feel like I've seen those boat pics 100 times now. Take more pictures, please. Also, doz boat girls iz aaaaight. Beautiful is a stretch.
The boat girls are from Craigslist. He pays them $60 USD per hour to fawn and appear excited to be there.
It's visual combat.