I authored another thread which I can't find so I thought I would start a new one updating my thoughts on this one. If you have ever been through a lawsuit, then you know the other side can subpoena just about anything they want. The Discovery process is even worse then a police interogation. A subpeona gives the other side the right to get inside your home and take out whatever they see fit. More stuff will be discovered at Goldman and some of its employees will probably break down during the Discovery process singing a song. Then there is the President and Congress. Goldman thumbed their nose at them during the whole financial catastrophe and made them look bad. The executive and legislative branches are going to come down on Goldman HARD. The President has his own army of agencies beyond the SEC like the IRS and if they dont put a knife in them with the SEC he will get them in other ways. They might even author legislation to break Goldman apart like they did the Bells. Right now, Morgan Stanley is the approved broker by the Obama regime. It is the broker that the government uses for stock transactions like the Citi deal. I do not think Goldman will go bankrupt. There will always be a core set of customers and they have a ton of cash. However, GS is way overvalued at the current price. Their investment banking business, which makes up about 20-30% of their revenue, has been smashed. Goldman simply could have come out, much like the Vatican and Toyota Motors during their mishaps, and apologized. They could have come out to accept responsibility, settle the outstanding claims and drove on. However, they went the low road by making the hearings look like a remake of the Iran/Contra affair hearings..."uhhh...I dont know, I wasn there, I dont recalll...." I can picture the Fabulous Fab laughing his ass off after the Congressional hearings at one of the local DC bars bragging about how he fooled them. A week ago, I met up with someone who told me that they thought GS will pull out of this. I don't think so. This incident will dog them for many years to come. 7 out of 10 Americans agree that Goldman committed fraud therefore they will lose 70% of their investment banking business and that 70% will be transferred over to the approved broker...Morgan Stanley. Yes sir, Goldman is a buy at $50...and it will take some time to get there...but it surely will and just as Buffet was early in buying USG he will also found to be too early on the trade with Goldman... I would not try to trade Goldman. Look at Friday where all of a sudden the stock opened down 10 points and a stop would not have saved you. I saw the usual suspects a few days ago get long GS like Doug Kass and Tim Knight, but now they are silent on that long trade after the shellacking on Friday where they lost 10% over the course of a warm Spring night. Thats what happens when you trade a downtrending stock where the government has declared war on.
You dont see the big difference...Steve Jobs was not in front of a congressional hearing and is not the subject of a criminal investigation. Lets say a press release came out tomorrow that Steve Jobs was getting charged with fraud...how far do you think the AAPL stock price would drop? Would they lose customers as a result? As usual, many of you will be trying to get in on this downtrending stock all the way to the bottom. Oftentimes, the dumbest people are the ones that go down with the ship. Dont forget the SEC, Congress and the federal prosecutor will be able to subpoena just about anything from Goldman...if they want to get Lloyd Blankfein's underwear then they will get it. How uncomfortable would you feel as a Goldman customer knowing that what is supposed to be private information will be put out there for the Feds to see. Remember Ken Lay? He was prosecuted on what seemed like a very weak case...some infraction of the law...but they threw the book at him. That same book, which is still very heavy and can cause injuries, will now be thrown at Goldman. Someone will go to jail...
I agree about GS - it's an avoid at best, and not a bad outright short/put candidate IMO, even after the latest decline. With MS that's an interesting spread play, the thing I'm concerned about is will the government stop at GS? MS probably has plenty of dirt from the bubble too, I don't think somehow they were vestal virgins during the housing boom, and if the SEC/Feds hit pay dirt with GS then some Giuliani wannabe is going to go after the other banks too. I guess if they expand the investigation to other firms, probably this means GS is in deep doodoo anyway, but I wouldn't like to short GS, watch it go down to 100, long MS and then suddenly charges appear overnight and it drops 30% in a day.
Summer 2008: "LMFAO! AAPL at 100???" "Might as well say RIMM at 80!" "Might as well say GS at 130!" "Might as well say BSC and LEH at 30!" RTD, I'm not sure yet if GS would be a buy at 50
or they let gs put up some bullsh crock defense and say ,oh i see what you mean,and drop it,don't think gs doesnt have a lot of dirt on the politicians
Yep, they will probably lose 70% of their investment banking income. It will now be automatically assumed that all of Goldman's deals are designed in the interests of Goldman and not their customers. The companies doing business with Goldman usually have to answer to a higher power like shareholders, boards, investors, etc. The higher powers will surely ask why they are doing business with a company accused of fraud...there could even be lawsuits levied against those doing business with Goldman. Lets say you are publicly traded company A doing business with Goldman and something goes wrong then there is a shareholder lawsuit...Doing business with criminals or suspected criminals is simply not good from a liability standpoint. As an investor of a company, would you sue me if I chose to do business with someone accused of a felony crime if there were damages caused by a bad deal? That would have been irresponsible for me to do business with a company that has been accused, or where its officers have been accused, of felony crimes such as fraud. Once the company has been found guilty, how will this effect their licensing with FINRA? Will Goldman continue to be able to hold their licensing and registration once convicted of a felony? I dont know how it works with FINRA. The government gave Morgan Stanley the Citi contact to close their position. The US is not going to go against Morgan. Morgan is the safe investment banking bet. Why choose Goldman, who is being accused of criminality, when you have Morgan? Elections are around the corner and Goldman will be used as a poster child to represent everything wrong with America. The Obama regime will come up with some creative stuff. Maybe they might institute a full on IRS audit against them. Goldman will be the scapegoat for the housing crash and financial meltdown. Morgan will come out looking like angels...thats how I see it... The government has unlimited power and the popular support to shit all over Goldman. It might even say that Goldman is a threat to national security...they will come up with something even darker and more sinister then what you have seen these last few weeks. The ONLY THING that will keep Goldman standing is if they threw themselves at the feet of the American people and begged for mercy much like Toyota. However, it appears they are unwilling to even admit a shred of wrongdoing in the affair therefore they will be punished.
These are pretty ridiculous claims. No offense, it's obvious you are not in the industry... I'd be surprised if GS has any serious client loss. No one really cares if 7/10 Americans think Goldman committed fraud, probably something like 9.5/10 Americans don't even understand the issues involved in the case. What will likely happen? Goldman and the SEC will settle, Goldman will never admit fault, and business will continue as normal.
Buffett and Munger gave their approval to GS this weekend. That might be good for a bounce come Monday.