Interesting story: two smart macro guys at Goldman Sachs actually got the company to short all the CDO garbage during 2006: http://www.money-rx.com/blog/2008/01/how-goldman-sachs-beat-subprime-crash.html Now Goldman Sachs is one of the best positioned firms and they have been rewarded handsomely with many key posts: http://ftalphaville.ft.com/blog/2008/07/21/14628/the-further-goldmanisation-of-us-finance/ Is Goldman really that good? Are they really the elite of the elite that can lead our country out of Subprime Doom?
Yeah, cause NOONE else in the whole world knew that the housing bubble was going to burst. NOONE! Only Goldman's macro guys could figure that out, and years ahead of anyone else in 2006. (heavy sarcasm intended). Goldman has a sh*tload of dirty mortgages as well, they are just hiding them better and focusing attention on their short position (which is a fraction of their long position). Don't forget how only 6 months before announcing how smart they were, they took a half billion dollar hit going long a housing index in a matter of a week. The balance sheets of these banks are fiction nowdays, they could sweep it all under the rug but many of them have to face reality due to liquidity issues. Still, they make certain projections of writedowns, then go way over, then repeat. This speaks volumes.
GS is the only good broker dealer out there. Their decisions in the past 2 years show that they are worth keeping your money in. Plus, Paulson will surely tip them off as he probably still has some stock in the company. Short all financials, long GS is a great pair trade.
Maybe the Goldman guys took heed to the inverted yield curve in 2006, that left many just scratching thier heads, and shorted one of the largest leading indicators of the U.S. economy-- housing.