On Thursday I had lunch with a close family friend that is high up in Goldmanââ¬â¢s banking division. We were just shooting the breeze talking about family things as we often do, when the conversation turned to the market. The good news is that he seemed to be fairly bullish on the year saying that he and his associates believe that we will still see a strong year lead by record LBO activity, relatively inexpensive valuations and the possibility of interest rate cuts. Towards the end of our lunch we discussed the recent issues with sub-prime lending practices and how they would ultimately affect general sentiment. He said that he had sat in on numerous meetings over the past month to discuss this very issue. Obviously all the major brokers are worried about how this will unfold. He briefly alluded to the fact that Goldman has more interest in this sub-prime area than most investors and analysts seem to think. Apparently they became more concentrated in this space as it became increasingly profitable to fund these higher risk liabilities. Simply put GS may have some explaining to do, come the end of the year if this turns out to be as nasty as it seems. I have been long Goldman since late July when I accumulated shares ranging from $150-165. To be honest I am cutting my position as I am not so sure I want to be overweight this space as the crisis unfolds. I would prefer to keep sub-prime exposure off my sheets until we see how this thing plays outââ¬Â¦.