Tuesday, April 14, 2009

So What's the Story Morning Glory?

Tonight's post is going to be all Goldman Sachs, so if the clouded drama that is a fraudulent banking system does not interest you try back another night!

So What's the Story Morning Glory?
You know I had a feeling that when the first full "earnings report" from a bank was released there was going to be fireworks. It was all well an fine for Wells Fargo (WFC) to give a "pre-announcement" because that does not require any real details. The first batter up was Goldman Sachs (GS) and over 24 hours later there is still confusion and conflicting information. Transparent markets indeed!

The Curious Case of the Missing Month
When GS moved to become a "bank holding" company this required them to report their earnings in a slightly different way. Instead of the quarter just ended encompassing December to February, the new reporting structure would include January to March instead. Seeing that this was a first run for GS, one would have expected them to issue some details for the "orphan month" and what exactly transpired in that span of 4 weeks.

That did not happen. The month of December was basically glossed over. Was there anything material from December? If you guessed yes, you are both correct and a conspiracy nut via The Big Picture from Floyd Norris:
Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?

Very slick move indeed.

AIG Payments - Non Event or Meaningful Ripoff?
The hottest area of contention is whether AIG payoffs of counter party's added to the GS bonanza. GS CFO David Viniar said today that is was a total non-event (via Clusterstock).

Of course opinions vary, and Yves Smith at Naked Capitalism has a different take.

Karl Denninger at Market Ticker keeps the pressure on the AIG double payment issue as well with this post.

So the CFO says no, and others say not so fast. What a mess. As I wrote lats time, this will be an ongoing process to figure out just what the heck happened.

TARP Funds Needed or Not?
As if all that was not enough, now there are issues with GS repaying the TARP money while other money lent by the government goes missing (via Self Evident):
So let me get this straight. Goldman Sachs has issued tens of billions of dollars of debt insured by the FDIC. They have access to the TSLF, TAF, and the good old-fashioned discount window, where they can borrow at half a percent or less to finance their long-term investments. And of course, they received at least $13 billion in taxpayer money via AIG. (That certainly helps to explain the profits this quarter.)

But if they repay the TARP — just the TARP — they will be freed from any meddling government interference in, say, their executive compensation. And that is precisely what they are about to do.

Ahhh, American capitalism at its finest. We truly have the best government money can buy.

Again, another mess.

Economic Disconnect argued loud and hard against any government intervention for the banks because of moral hazard and clear conflicts that can never be sorted out. The GS earnings report provides the best evidence of these facts.

The GS offering went off without a hitch this morning at $123. The stock closed at $115. Another brilliant play by the Goldman boys to capture the best price possible for their stock. I would love to see the buyers faces right now as they are slowly figuring out they just "got punked" once again.

Have a good night.


watchtower said...

I had read KD's piece earlier today and what can you say?
Would it surprise me if this is in fact true? Maybe a few years ago it would have, but not now.
It is kind of like one of those 3D Stereogram pictures where the real picture is hidden but after you have found it you can't look at the picture without seeing it.

I've probably posted this before but here I go again:

"All the perplexities, confusion and distress in America arise, not from defects in their Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation." - John Adams

I believe this is still true today as probably over 90% of the people I know in my life are virtuous and do have honor, not to mention most I have talked with believe the Constitution to be inspired from another realm, but these same people don't have a clue as to what is really going on behind the "nature of coin, credit and circulation".
Is it any wonder why the sheep go blindly to the shearing?

Anonymous said...




watchtower said...

I seen where the CPI came in below expectations and got to thinking of the different post that I have read here and there lately about the "deflation debt spiral".
Then I remembered a post that GYSC wrote titled: Debt Chandrasekhar Limit
plus an article by a person named Chris Laird titled: How to Survive the Coming US Dollar Collapse
In this article he goes into the Chinese (and others) not buying our debt anymore because in effect the US consumer has collapsed.
Here is an excerpt from that article:
"...the next victim of this emerging depression will be the USD. As I said, the only thing keeping the USD afloat with the massive fiscal deficits has been an ever spending US consumer who bought trillions of dollars worth of exports. When they get tapped out there is no reason for our trade partners to keep that up is there? The USD subsidies (primarily our trade partners buying US bonds of all types) will end this time around (this economic cycle)."
I've had that article (and GYSC's) on my mind since I read it in early November of last year.
Is he right? I don't know but I have a feeling we are about to find out.

Anonymous said...

"Rightwing extremism," the report defines in a footnote on Page 2, goes beyond religious and racial hate groups and extends to "those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or rejecting government authority entirely."

Texas Gov. Rick Perry fired up an anti-tax "tea party" Wednesday with his stance against the federal government and for states' rights as some in his U.S. flag-waving audience shouted, "Secede!"

This is gonna get ugly.


GawainsGhost said...

I live in Texas, and I like Rick Perry a lot. His position is exactly correct. The states formed the federal government to be responsive to them, not dismissive of them. The 10th ammendment is in the Bill of Rights for a reason.

I went to a TEA party this evening. It was peaceable and interesting. People of all walks of life and across all age groups attended. I put the total number at around 3000.

Lots of American and "Don't Tread On Me" flags. They were selling pocket Constititions for 35 cents. Also lots of hilarious signs. The best on read "Karl Marx Wants His Teleprompter Back."

I talked to a couple of hundred people. The contempt for entrenched incumbents on both sides of the aisle was palpable. This is a bottom-up movement at the grass roots level, and it is growing. Because it is about principle not party affiliation.

Elected representatives ignore it at their peril.

Oh, and by the way, Don't Mess With Texas.