GS, Buy or Stay Away?

It's likely that Goldman Sachs will not survive this. We've seen with Bear Sterns and Lehman Brothers how quick an investment bank can go under once counterparties and clients remove liquidity and halt their business relationships. A large portion of GS's balance sheet is tied up in collateral arbitrage which is made possible by their strong market position. It would be interesting to see what happens when their counterparties start to aggressively demand collateral while they're unable to hedge their exposure under the favourable conditions that they're used to. The size of this exposure could very well bring down the firm as it runs into the hundreds of billions.

Right now GS has been identified as the weak hand at the table and my guts says that they'll be tested in the coming week to see if they can be forced to liquidate positions.
 
Quote from FerdinandAlx:

It's likely that Goldman Sachs will not survive this. We've seen with Bear Sterns and Lehman Brothers how quick an investment bank can go under once counterparties and clients remove liquidity and halt their business relationships. A large portion of GS's balance sheet is tied up in collateral arbitrage which is made possible by their strong market position. It would be interesting to see what happens when their counterparties start to aggressively demand collateral while they're unable to hedge their exposure under the favourable conditions that they're used to. The size of this exposure could very well bring down the firm as it runs into the hundreds of billions.

Right now GS has been identified as the weak hand at the table and my guts says that they'll be tested in the coming week to see if they can be forced to liquidate positions.
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I think you are wrong on this---and only time will tell for sure... This is nothing more than a which hunt by the socialist president obama.
 
According to these "market pros" its still a buy.....

Said investors "OVERREACTED" to the sec charges.

Just ignore the manipulation on wallstreet and believe everything the "market pros" tell you.

haha.....




Financials—Including Goldman—Are Still a Buy: Market Pros
Published: Friday, 16 Apr 2010 | 4:15 PM ET
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By: CNBC.com

Investors have overreacted to the SEC charges against Goldman Sachs, and the stock is still a buy ahead of its earnings announcement, analysts told CNBC Friday.

"I look at next week's earnings, and I see strong trading results out of Bank of America [BAC 18.41 -1.07 (-5.49%) ] and JPMorgan [JPM 45.55 -2.26 (-4.73%) ], indicating that [Goldman] could have a really strong trading quarter," Standard & Poor's analyst Matthew Albrecht said.

Goldman is scheduled to release its first-quarter results before the bell on Tuesday.

Jeffery Harte, managing director of equity research at Sandler O'Neill, said it's always tough to comment on civil suits, which play out over time. Still, he's confident the stock's pullback is only temporary.

"The issue's going to become: Is this a one-off item—was it one rogue person—or is it a pervasive issue?"

"I do not think it's a pervasive issue," Harte said.

Albrecht said Friday's pullback in financials also gives investors opportunities to buy into Goldman's [GS 160.70 -23.57 (-12.79%) ] peers, such as Citigroup [C 4.56 -0.25 (-5.2%) ], Bank of America, and JPMorgan. Harte added to the list Morgan Stanley [MS 29.16 -1.72 (-5.57%) ], which has thus far traded at a discount to the rest of the sector.


Disclosures:

Goldman Sachs and Morgan Stanley are clients of Sandler O'Neill and receive non-investment banking securities related services.

Albrecht does not own any shares of the aforementioned companies, nor are they investment banking clients of Standard & Poors.
 
As a technical trader, I wouldn't touch it with a ten foot pole. News is my enemy!! Anyway, I'd let the market forces dictate whether or not it's a buy. If the price of the stock seems to be counter trending the news, price direction is usually right. Like I said, the main problem is news so it could be halted and trap you at anytime. Lot's of other stocks to trade, so I'm leaving GS be here
 
See how a one day sell off after the markets are up over 80% create great values according to cramer....

Cramer is such a fool!!!


Cramer emphasized again that Goldman shouldn’t scare investors out of stocks. In fact, today’s sell-off has created great values in names that have no connection to the controversy.

“Next week is your chance to buy them,” Cramer said.
 
I think Goldman will survive...however, the question is right now is what is their true valuation. Their balance sheet shows 723 billion in cash. What will be the fines against Goldman? I dont think the fines will go into 100s of billions of dollars. I do think a jury will come out with a shocking judgement, but the judge will lower the award later on.

The key things that are at stake for Goldman are:

- reputation and a loss of business- I am going to guess that Goldman will lose about 25-50% of its customer base.

- loss of talent- I think more and more talented individuals will want to distance themselves from Goldman.

- distraction of management- I saw this happen with Marvell Technologies and a few other companies where management became so paralyzed fighting the litigation against them that they could not focus on their actual business at hand. Dragging management of GS through the trial is going to take a huge mental toll on their executives and it will also take a big toll on their employees as they watch this go on day after day...

- legislation in Congress right now - I am certain that whatever they are cooking up will negatively effect Goldman.

- Potential break-up - This is a scenario that I am reading on the news and would make the most sense to prevent another financial crisis. Break up the top brokers and banks into smaller segments just like they did in 1984 to Bell Telephone.

Obviously, Goldman is not worth the price it closed at on Friday. There might be a bump up on Monday that will last a week or so, but I think we are looking at a sub-100 dollar price for GS.
 
I just took a look at the pre-market and Goldman might start of the day in the red (so will MS). I am going to wait until there is an obvious turn up before considering a long position...
 
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