Goldman Sachs

Three years of anti-Goldman bashing and exposing the company's legal and illegal dirty laundry have clearly had an impact on society:

*COHN SAYS SUMMER PROGRAM APPLICATION POOL WAS BIGGEST EVER

The Borg zombification shall continue until everyone wants to work solely at "The Goldman Sachs"

It seems the Muppets have been well-and-truly Oscar'd this time. Combining Goldman's once-in-a-lifetime equity buying opportunity position recommendation with their short Treasuries trade has produced an astoundingly un-positive return of -29% in just 48 days (based on SPY (stocks) and TBT (ultra-short TSYs given duration and beta). Extrapolated using the only tool that counts (Birinyi's famous ruler) this means your account is Corzined by Thanksgiving - happy holidays.

Updated | The notion that the trades which caused the losses by JPM were put on in the last six months or so seems to have been widely accepted in the media. But is this really the case?

As anyone who has ever traded CDS (or any other OTC, non-exchange traded product) knows, when you have a short risk position, unless compliance tells you to and they rarely do as they have no idea what CDS is most of the time, you always mark the EOD price at the offer, and vice versa, on long risk positions, you always use the bid. That way the P&L always looks better. And for portfolios in which the DV01 is in the hundreds of thousands of dollars (or much, much more if your name was Bruno Iksil), marking at either side of an illiquid market can result in tens if not hundreds of millions of unrealistic profits booked in advance, simply to make one's book look better, mostly for year end bonus purposes. Apparently JPM's soon to be fired Bruno Iksil was no stranger to this: as Bloomberg reports, JPM's CIO unit "was valuing some of its trades at  prices that differed from those of its investment bank, according to people familiar with the matter. The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter. "I’ve never run into anything like that,” said Sanford C. Bernstein & Co.’s Brad Hintz in New York. “That’s why you have a centralized accounting group that’s comparing marks” between different parts of the bank “to make sure you don’t have any outliers” .... Jamie Dimon's "tempest in a teapot" just became a fully-formed, perfect storm which suddenly threatens his very position, and could potentially lead to billions more in losses for his firm.

Bankia is done: at this point the only questions left are i) what will be the final bailout cost  ii) who will pay for these costs, and iii) whether the bank has enough beach towels to satisfy the onslaught of manic Spaniards desperate to hand over their €300 euros to the insolvent bank in exchange for some Spiderman-embossed linen. Oh, there is one more question: who is next. Now, as we showed earlier today, in the aggregate the answer is simple: everyone. But, in a very Stalinesque sense, where everyone is merely a statistic, that is essentially the same as saying no one.  It is also certainly not helpful to any Spanish readers who may be worried about their deposits (and investments) which in a world of total disinformation, will first be lost before the government advises caution and safety. So instead we go to Goldman Sachs which has conveniently constructed the following analysis, which replicated the loss provision calculation of Bankia, and applies it to the other listed banks. The result: in addition to the €19 billion in bail out costs for Bankia, Spain will need to spend at least another €25 in bailout funding for six other listed banks which include CaixaBank SA, Banco Santander, Banco Popular Espanol, BBVA, Banco Espanol de Credito SA, Bankinter SA.

• JPMorgan dips into cookie jar to offset "London Whale" losses: firm has sold $25 billion to offset CIO losses (Reuters)
• Storied Law Firm Dewey Files Chapter 11 (WSJ)
• The European "Wire Run" - Southern Europeans wire cash to safer north (Reuters)
• Bankia Tapping Depositors for Bonds Leaves Spain on Bailout Hook (Bloomberg)
• Glitches halt new Goldman trade platform (FT) such as reporting prices and seeing trading spreads collapse?
• Japan, China To Launch Yen-Yuan Direct Trading June 1 (WSJ)
• Another fault line? Italy Quake Kills Nine in North of Country (Bloomberg) shortly following another Italian quake
• RIM Writedown Risked With $1 Billion Inventory (Bloomberg)
• China’s Wage Costs Threaten Foreign Investment, EU Chamber Says (Bloomberg)
• Dollar Scarce as Top-Quality Assets Shrink 42% (Bloomberg)

All you need to read.

Mere hours after the annual European Eurovision song contest ended at a cost to the host country in the hundreds of millions, money which should have been spent productively elsewhere but wasn't while providing utterly unnecessary distraction to hundreds of millions from what is truly important, we get another stark reminder that the continent is not only broke, but that it no longer even pretends to have credible ideas about how to go about fixing itself. The latest speculation: "Secret plans are being drawn up in Brussels for a European rescue fund that could seize control of struggling banks across the Continent. The scheme, which would be funded by a levy on banks, will be presented by supporters as a "silver bullet" that could halt the steady escalation of the eurozone debt crisis. It is being worked on in tandem with a proposal from Mario Monti, the Italian prime minister, for a Europe-wide guarantee on bank deposits. The proposal would throw the financial muscle of Europe's stronger nations, and healthy financial institutions, behind weaker countries and lenders. Proponents, including top advisers to the European Commission, say the removal of the threat of bank collapses would restore market confidence in Italy and Spain." In other words, last week's rumor that was supposed to be presented at the latest flop of a FinMin summit is once again being reincarnated as apparently nothing else in the European arsenal has any remaining credibility - and as a reminder, none other than unelected Monti's one-time employer Goldman Sachs said a eurowide deposit guarantee would not work.

In Christian ethics – although not in exclusivity – there are a number of vices, most often referred to as the seven deadly or capital sins, which depict the antithetical side of virtue. Of the seven, avarice or greed (Avaritia in Latin) comes at the head of the list for me since its practice affects the wellbeing of others, and not just those who profess it. And it was this lady, Avaritia, who walked the Red Carpet a week ago, Friday, May 18, in a glittering dress that reminded us of what rapacious capitalism is all about, as shares of Facebook started trading past their scheduled time in the NASDAQ. A very surprising opening with a larger (25 percent) number of shares issued for trade, at a much higher (52 percent) price… or a “more aggressive” price in Wall Street IPO parlance.

Only in public schools and universities is the fairy tale still taught that governments are representative of the people.  The blue collared man on the street realizes the chips are stacked against him.  For those who don’t have political connections, the pseudo fascist system that is still referred to as “capitalism” in the U.S. is akin to a casino game of chance.  That is, the odds are always in the house’s favor.  The house is the federal leviathan and its equivalent at the state and local level as well as the big, cartelized industries which feed off government protection. With Obamacare, the middle class will end up being liable for yet another entitlement program that, like any other government initiative, will cost more than was initially estimated.  Worse yet, they will be bombarded with advertisements they paid for which attempt to convince them that Uncle Sam has once again delivered prosperity with a badge and a gun. The disheartening part is some Americans will be foolish enough to actually believe it.

For anyone who can't see the "WHY" or "HOW" in a Muppet Manipulators suit, re: Facebook IPO, here's a step by step guide comparing my research to that of the top 4 underwriters showing exactly what they did wrong & how everyone is ignoring it

While the sur-realities of just what Corzine and the rest of the MF Global 'traders' did has been extensively discussed here and elsewhere, PBS' Frontline provides the most succinct (and relatively in-depth) documentary on just what occurred from how the corrupt CEO lobbied regulators who had the power to stop his risky bets to the endgame realization of the missing customer money. A narrative, not just of "a bet that went bad", but "a Wall Street morality tale". Must watch!

For the drillers, but....

All you need to read.

While hard information is scarce, concerns about deposit flight from Greek banks have increased since the 6 May elections. To the extent that such flight arises from liquidity concerns, the ECB can contain it (or its impact) via its various monetary policy and ELA operations. But, as Goldman Sachs notes in its Focus today, the ECB cannot deal with concerns about bank solvency and/or deposit currency redenomination. That requires a pan-Euro area guarantee of the Euro value of bank deposits by the fiscal authorities.  Politically, it will not be domestically popular in Germany (inter alia) to extend such guarantees, however much Germany may benefit from arresting the financial instability deposit runs may cause. And institutionally, in order to contain the threat of free-riding on the guarantee of others, entering into a pan-Euro area deposit guarantee would need to be associated with a deepening of the pan-Euro area system of financial supervision and regulation. This would involve substantial loss of sovereignty relative to the status quo and require significant institutional innovation. However, attractive in principle, even Goldman agrees with our skeptical perspective that it is unlikely that such a guarantee can be implemented credibly in short order. So, what would you do with your hard-earned deposits? Demand them or leave them at the bank on the basis that the EU leaders will do what they promise - this time is different.