Goldman Sachs

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.

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.

Remember, practically everybody poo-poohed my research and opinion in 2008 when I said Goldman was drastically overvalued. Those 600% to 1,000% gains on put options proved otherwise. Speaking of which, look at those July 150 puts… Can you smell what old school, fundamental analysis (you know counting profit and discounting for risk) is cookin’???

Time for the media circus to go nuts. The AP reports that the Feds have just opened a criminal probe into Goldman: now it is getting interesting. And everyone was thinking that Eric Holder is a toothless puppet (well, that still has to be refuted).

In light of the fact that Goldman Sachs actively trades against its clients, it is now high time for the U.S. federal prosecutors probe into Goldman’s trading practice of Baidu IPOs as well.

For those who have forgotten the implications of the highly leveraged and opaque financial holdings (the true value of which rests at the mercy of market sentiment) and can turn blind eye to the highly volatile nature of the trading revenues combined with a literal tsunami of regulatory pressure and potential litigious onslaught (all issues which we have repetitively brought up in the past as what appears to be the sole voice of contrarian reason), Goldman Sachs holds a strong investment proposition. However, if fundamental considerations such as the company’s solvency, true economic profit (not the accounting earnings you hear preached from your brokerage’s sell side marketing propaganda cum research reports) and the sustainability of income are to be considered, GS should NOT appear among the preferred lot.

Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs. There was an audible gasp in court when the leader of the pirates announced, "We are doing God's work. We work for Lloyd Blankfein. We were functioning as investment bankers, only every day was casual Friday," the pirate said.

Long-term subsidies, like the Fed holding who-knows-what to maturity, equals soviet communism, as every hooligan knows. Short-term subsidies transfer credit risk, and they leverage parasitic behavior. Positive valuations assigned by shareholders to equities arise solely from anticipation of value transfer from firm debt-holders or resource transfers from US taxpayers. Debt-holder get a piece of this action too if governments overpay for “toxic” assets backing up their claims. But “everybody” receives more than fair value for their investments.

That is why the fat lady has sung and the SEC has acted. It is not that Goldman is the ogre that has broken the rules. Everyone has followed this same path, and there weren’t any rules either. There is only one critical difference between Goldman and the others: Goldman is the best, the most efficient. Because it is the best of the breed, the political focus will fall on them. The others will be tried only in the shadow of Goldman, after the show trial is over. Although the public relations team of Goldman came out with a very well reasoned document making their case to those of us who use the firm’s services. Of course, this has gotten great play in the financial press, but it is all beside the point. The issue is not the actual case brought up by the SEC but the entire structure of Wall Street – the fact that a 31 year old derivatives salesman is sometimes paid more than 100 times more than a manufacturing executive in Peoria. The inequality of the system is the issue or, putting it another way, the jealousy of the lunch-pail voter is the political dynamite that cannot be ignored.