Goldman Sachs

Goldman out right lies to investors and the SEC, exactly as I said they were (in explicit and illustrious detail) throughout all of the financial crisis. Who wants to bet against the presumption that the SEC will let them get away with it?

The fact that the unveiling of Facebook was done with so much noise and fanfare by GS, a firm that never does anything rash you understand, suggests that there was a need to divert attention from the issue of valuation.

Some new perspectives on gold, and its very special relationship with Goldman Sachs, courtesy of a London-based King World News source. And some were wondering where Paulson got the long gold trade idea from: King World News source out of London has confirmed that Goldman Sachs has been long gold for years. The source stated, “Goldman Sachs has been getting long the metals for years. Goldman Sachs has essentially been acting as their own central bank, buying on dips for years to hedge their currency positions which are being eroded through coordinated global money printing or currency debasement which they knew would take place. They are long the metals as a hedge and as I said have been for many years.”

John Noyce, Goldman's arguably best technician, in his weekly Charts that Matter, has released one (among many) interesting observation on just how overbought the market currently is, and more specifically just how desperate the velocity of the pick up in the stocks since August has been, in order for levered beta players such as hedge funds, as we predicted in the end of August, to make up as much of their year as possible before seeing redemptions (even so many will not survive into 2010 as the entire 2/20 model is now crumbling). Specifically, by looking at where the S&P is relative to its 55 DMA, Noyce notes that every time the market has gotten to above 5% its trailing average, it has always entered a period of consolidation (read at least modest selling). Furthermore, compared to the recent trend extreme of 7% above 55 DMA, the market moved meaningfully above one just one occasion in the past: in January 2009... just before the crash to the decade lows of 666 on the S&P occurred.

In a stunning turn of honesty, Goldman's David Kostin does a 180 and renounces everything that the Fed wishes the gullible public would swallow hook line and sinker. But first the facts: while the strategist has no choice but to raise his 12 month S&P forecast (this is a new development for all the headline chasers) from 1,250 to 1,275, which is a token nothing compared to the recent 12 month gold price boost from $1,365 to 1,650. This merely reinforces the Zero Hedge view that gold has now become the natural, higher beta, and unlimited upside short hedge to stocks. Indeed, a 1% boost in the S&P PT, is meager compared to the 20% expected gold appreciation. And digging between the facts, we encounter this stunning admission, that would force all current and former Fed chairmen to spin in their graves, assuming a deceased state is attributed them all: "The economy is not the market and QE2 is not a panacea." Read that again, because this is only the first time in history a sellside advisor, especially one who works for Goldman Sachs, has said this truth so fundamental, that nobody actually dares to admit it, least of all the public or the Fed. Below, we present the latest strategy piece by David Kostin which is probably about the most bearish note released by the traditionally permabullish successor to Abby Cohen.

A very well made 45 minute documentary on Goldman Sachs, derivatives, US real estate and the root causes of the Pan-European Sovereign Debt Crisis

BN  *LANDESBANK ALLEGES FRAUD OVER GOLDMAN'S DAVIS SQUARE VI CDOS
BN  *LANDESBANK BADEN-WUERTTEMBERG SUES GOLDMAN SACHS OVER CDOS
BN  *LBBW IS GERMANY’S BIGGEST STATE-OWNED LENDER :2525Z GR, GS US

So... now what?

After a lengthy attempt to bail out his pet bank, ShoreBank Chicago, Illinois, which included several alleged armtwisting episodes by the administration, the president has finally let the bank die (with its assets valued at about 50% of face). Yet instead of going to hell, it was immediately resurrected with a bevy of new owners, among them Goldman, Morgan Stanley, and BofA, all of whom received nearly $400 million in taxpayer money for their "generosity" to keep the bank zombified even in the afterlife.

Goldman's European strategist, Francesco Garzarelli explains how he interprets the market impact from the Fed's QE lite announcement: First "the Fed’s actions will act to push real rates out to 5-yrs deeper in negative territory (currently -8bp). We forecast that nominal 5-yr yields could reach 1%. Factoring in positive foreign macro influences, and accounting for an already very depressed bond premium, we believe 10-yr government yields could rally to 2.5%, but are unlikely to break below this level on a sustained basis." Second:" we remain of the view that the pro-active stance of policymaking, in the US and overseas (see Monday’s note on China by Yu Song and Helen Qiao), should continue to support moderate returns on risky assets, as cash balances become increasingly expensive to hold, and cyclical volatility declines." In other words, buy stocks. It's good to see the leopard never really does change its spots.

The Thrill is Gone, Baby!!!

These days it’s hard to distinguish mainstream media financial journalism from the funny pages. Here are some of the best stories of the past week.

As the world focuses its attention on Europe where tomorrow at 4pm GMT (the idea of an earlier release was scrapped)  the results of Stress Test version Europe will be released, there are two types of pundits: those who know the tests are weak and have been designed by the very banking system they are presumably supposed to test, yet due to billions of dollars in vested interest are preparing to put on a cheerleading show that would leave the Laker girls green with envy; then, there are those who know the tests are weak and have been designed by the very banking system they are presumably supposed to test, and as a result refuse to even look at them due to advance knowledge they are nothing but a systematic farce which should achieve nothing, yet will likely provide a sufficient excuse for those who lift every offer regardless of cost to send the market to A. Joseph Cohen giddyness levels (at least if our own experience with stress testikng is any indication). Needless to say, we fall in the latter category, and would be more than happy to deconstruct these tests, if only the criteria were publicly known in advance! So for those who actually do pretend to care, here is a Q&A with Goldman Nick Kojucharov in which the Goldman analyst discusses the ins and outs of the Stess Test. And since it has been leaked that the only bank which will fail is Germany's permabankrupt Hypo (even as the Cajas, Landesbanks and Greek aluminum shacks with a backyard vault and a repo line to the ECB, all pass), the only part of the Goldman report that caught our eye was the following: "There is obviously the risk that if too many banks pass and do so with a comfortable margin, the test may be judged as too easy to have actually been informative about the strength of the banking system, and markets may not draw any new comfort or optimism from the exercise."

Commodity trading and hedging recommendations dated July 15 by Goldman Sachs.

And as the regulatory theater ends, both on Wall Street and on the bottom of the GoM, everyone gets paid handsomely for their participation, with the taxpayer getting the bill as usual. From the Apache press release:

Apache to Acquire BP Assets in Permian Basin, Canada and Egypt For $7 Billion

- Legacy assets complement existing operations in all three areas - Adds proved reserves of 385 million barrels of oil equivalent and approximately 83,000 boe per day of production - Substantial development opportunities and additional resource potential
...
Apache's financial advisors for these transactions were Goldman, Sachs & Co., BofA Merrill Lynch, Citi and J.P. Morgan.

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