It's a testament to the odd world in which we live that when a Wall Street firm pays a $550 million fine by conceding negligence in how it dealt with clients, its stock surges, adding billions of dollars in market value for the firm's shareholders. But that's what's happening to Goldman Sachs, as it reached its long awaited settlement with the Securities and Exchange Commission over how it sold a basket of mortgage related debt to investors in 2007. Back when the SEC brought the case, the conventional wisdom on Wall Street and the financial media was that Goldman didn't have to settle -- the case was weak and Goldman is, after all, Goldman. Now that Goldman has indeed settled, the news is being spun, again mostly by the financial media, that the deal with the SEC was a victory for Goldman's CEO Lloyd Blankfein, who survived the investigation largely unscathed, paying a measly $550 million to the government (equivalent to a few days trading gains at Goldman) and without having to give up any power, such as relinquishing his role as chairman of the board, as senior executives both inside Goldman and at competing firms believed would be part of any settlement. Well, if history is any guide, Blankfein may not go tomorrow, or even next month, but sometime in 2011, Blankfein will at the very least no longer be chairman of Goldman, and may also be forced out of the firm altogether. - Charlie Gasparino
Remember when a week ago the world was slowing down? Apparently all it takes to forget reality is for Europe to sweep the fact that its banks are insolvent under the rug courtesy of a systematic farce conducted by the very system the banks are part of, rendered even more "credible" since as of today it appears no banks will fail the stress test. On the US earnings front, a materials company beating reduced expectations and a chip maker having just record the best quarter in its history (what growth next for Intel: 80% margins? 90%? every household in China buying an i7 980 for their 7th toaster in their 5th house?), even as global trade is paradoxically stalling following an all time record month for Chinese trade? Americans may be unemployed and homeless but they sure like their iPads and their fast PCs. Either way, to remind readers that despite the latest market run up on no actual positive economic data, here is Dominic Wilson, Director of Global Macro & Markets Research at Goldman, with advice to clients on how to navigate the "slowdown."
The economic mood at 200 West has officially downshifted. In a report by Jan Hatzius, the Goldman chief economist warns that "the second half slowdown has begun." Hatzius says: "This is consistent with our long-standing forecast of materially slower growth of just 1½% (annualized) in the second half of 2010." And while the contraction has been obvious to all those without a metric ton of wool in front of their eyes, the two indicators that have broken Goldman's will were this week's NFP and ISM reports. And not only that, but Hatzius is now firmly in the Krugman camp, blaring an even louder warning that should the government cut off the fiscal subsidy spigot "there is some downside risk to our forecast of a gradual reacceleration in 2011 (to about 3% on a Q4/Q4 basis)." In other words, not only will H2 GDP officially suck, but since Goldman has now officially jumped on the Keynesian gravy train, and as Goldman has rapidly become the best contrarian indicator in the world (we can't wait for David Kostin to realize that endless economic stimulus, GDP and corporate profits are, gasp, related), it likely means that Obama will not allow for even $1 dollar of extra unemployment subsidies or state bailouts just to spite Goldman.
Another Day, Another Loss For Goldman Sachs Clients: Latest GS FX Reco Stopped Out With 0.8% Loss In Just 3 DaysSubmitted by Tyler Durden on 06/23/2010 21:50 -0400
Goldman's Thomas Stolper is not having a good year. Or rather, Thomas Stolper is having a blockbuster year, Goldman clients who listened to Tom Stolper are scraping the bottom of the GoM. Pretty much every single trade conceived by the Goldman FX team ends up stopping out with clients ending up on the losing end. Tonight is just such an example: "$/PHP closed London at 46.10, above our stop and leading to a potential loss of 0.8%." The trade was initiated on Monday. 0.8% in 3 days. Annualized that's just under a 100% loss. Clients 0 - Goldman + ∞.
What a guy ...
From the lawsuit: "Goldman intentionally failed to provide correct information regarding the state of the market in Timberwolf and/or intentionally failed to provide correct information concerning Goldman's actual opinion concerning the state of the market for the Timberwolf security and its quality and value. At the time Goldman made these statements to BYAFM, Goldman was actively shorting both Timberwolf and comparable securities because Goldman's internal assessment of the market for such securities was that their value would drop. In order to reduce Goldman's exposure to CDOs, Goldman personnel made false and misleading statements of material fact, knowing such statements were false and misleading... and with knowledge that BYAFM would rely on them in making the decision to purchase an interest in Timberwolf. Moreover, Goldman personnel failed to disclose material information knowing that, by this omission, information that they did disclose was rendered misleading, or they acted with reckless disregard as to whether the omission of the information rendered other disclosures misleading."
A team at Goldman, decidedly different team from the one which this morning said the EUR could drop to a 1.16 level shortly, looks at recent fund flow data and notes that with the US now perceived as a safe haven to the rest of the world, particularly Europe, a fact which implicitly is a huge benefit to the treasury supply onslaught as buyers for USTs no matter the yield or maturity, are easily found in this environment of insecurity. No surprise there: it is almost as if Europe's problems were engineered, courtesy of a EURUSD which was kept too high, for too long, by too many market participants. Goldman's conclusion is that the dollar is not the fundamental safe haven it is portrayed to be, but is, once again, merely the best of the worst. As Goldman's Robin Brooks highlights: "non-Treasury portfolio inflows are still falling short of covering the monthly trade deficit, in contrast to before the crisis when they were more than enough. This is consistent with our often repeated view that the BBoP (broad basic balance) for the US remains weak and is why – even in the face of strong foreign inflows into Treasuries – we remain cautious about the USD outlook." The primary reason for the increasingly strong bid for gold is explained by Brooks' observation: while unwinds in existing FX carry pairs continue to implicitly benefit the dollar, when it comes to allocating capital to a safe haven, the only recourse continue to be gold. And as FX is fickle, all it takes is one massive short covering spree to invert the balance of power once again in the direction of the EUR: all that would be needed is a wholesale realization that the consolidated US balance sheet is in far worse shape than that of Europe, and for the herd to shift from one side of the boat to the other.Yet should more volatility come into FX markets, gold would benefit even more.
From Bloomberg: The Financial Crisis Inquiry Commission has submitted a subpoena to Goldman Sachs Group Inc., according to a spokesman for the panel. The subpoena requests documents and e-mails from Goldman Sachs, FCIC spokesman Tucker Warren said today in an interview. The subpoena was sent because Goldman Sachs hasn’t complied with requests for documents, Warren said.
Earlier, when observing the US AG disclosure of a civil and criminal investigation into BP plc, we noted in passing that BP's former Chairman, Peter Sutherland, who left the firm is a Chairman of Goldman Sachs International. Mr. Sutherland holds some other interesting titles, including a position on the Trilateral Commission, he was a chairman of the London School of Economics in 2008, he is a UN special representative for migration and development; he was the founding director-general of the World Trade Organisation, he had previously served as director general of GATT since July 1993 and was instrumental in concluding the Uruguay GATT Round Negotiations. Needless to say, we focused on the Goldman relationship. When digging deeper, we uncovered some amusing correlations, most notably between the BP plc sellside ratings by Goldman BP analyst Michelle della Vigna and the Goldman Sachs Asset Management holdings of BP plc. These are summarized on the attached chart. Yet for the ADHD challenged here is the punchline: GSAM dumped 40% of its holdings shortly after Goldman went from Neutral to Buy on the stock, and concurrent with fiduciary release by Peter Sutherland who left BP for good on January 1, 2010 to return to his full-time Goldman Sachs International Chairmanship duties.
You heard my warnings about the "best of breed", "incomparable on the Street" (and all of the other groupie talk, worshiping phrases thrown at this company) Goldman pillaging clients and of their excessive overvaluation for over two years in BoomBustBlog, yet now the mainstream media is starting to catch on as Goldman's stock plummets (down over $5 yesterday and over 20% for the month, with more to go). I wonder when they will get around to the other investment banks and FIRE sector companies that I warned about. Let's reminisce...
"The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks. It's a transfer from savers to banks."
Since Goldman is the only party that ultimately determines domestic financial and economic policy through its Washington D.C. subsidiaries and puppets, the attached presentation disclosing the squid's thoughts on regulatory reform is about as significant as they get. Remember - what the Squid wants, the Squid gets. To be sure, that Goldman is virtually pretty much negative on practically every proposed "reform" is no surprise. Goldman likes to maintain its monopoly just as it is, for as long as it can. Pay particular attention to where Goldman Sachs sees the biggest opportunity: the $437 trillion Interest Rate Swap market. If Goldman were to formalize its monopolistic tentacles over this particular product, then it is pretty game over.
Top Recipient of Political Cash from BP, Goldman Sachs, Defense Contractors AND Healthcare Giants: Barack ObamaSubmitted by George Washington on 05/05/2010 18:26 -0400
Change? Yup ... a whole lot of change adds up to some real money!
The Rating Outlook revision to Negative incorporates recent legal developments and ongoing regulatory challenges that could adversely impact Goldman's reputation and revenue generating capacity. Goldman's franchise and market position are potentially vulnerable to scrutiny by stakeholders, and like peers, may be affected by the industry's regulatory evolution.
Max Keiser is in his prime discussing Goldman and Bill Clinton's hypocrisy in defending Goldman. Which is not all that surprising considering Clinton's son-in-law Marc Mezvinsky is a Goldman Investment banker. Anyway, in addition to the usual scathing observations on the life, universe and everything, Max goes head to head with Senate hopeful Peter Schiff. Good clean fun ensues, with Alan Greenspan's invitation to the Keiser show pending.