"Buy a market when it has passed a test, but avoid it during the test" - George Soros "Buy at the point of maximum pessimism" - John Templeton Cramer used to have a rule: accounting concerns = sell. I think government lawsuit concerns are in a similar category. The market hates uncertainty. Personally I would stay well away and don't think we have got close to the point of maximum bad news & pessimism here. We need to wait for Cramer to recommend shorting Goldman, we need to wait for Buffett to get grilled in Washington. This could easily be a Salamon Brothers mk II. Poor Warren, he knows he shouldn't get involved with i-banks, but *Goldman* at $100 with a 10% yield, he just couldn't resist it.
One day doesn't mean much for where it'll be in 6-12 months. Enron rallied plenty of times (including a near 100% rally just before the end) on its way to $0. Whether Goldman will get sued into oblivion is not something you can find out with a weekend analyzing the accounts IMO.
Also - this thread should be called "GS - sell short or stay away". Why only have buy or flat as choices? It *just got sued by the SEC* - how is that a bull point? The fact that people are debating buying it instead of shorting it, 1 day after terrible news, after an 80% rally in the S&P and a 250% rally in the stock, is puzzling.
I don't think all the negative news is out on GS or the financials by any means. It seems to me that with Obama wanting to pass banking reform, this is just the first volley to force public opinion so that the Republican cronies won't oppose it. I think over the next couple of weeks, the news will get progressively worse, and banking reform will be a big slap across the face, and people who have made a lot of money on the financials over the last year will rotate sectors as quickly as possible. I'm tempted to wait for a snapback and then buy FAS puts.
I dont think the question is if GS is a buy right now, but if MS is a buy right now. The Obama administration gave Morgan Stanley the contract to sell Citigroup shares. They would not have given them the contract if they had any current investigations going on at MS unless the Obama administration became more stupider then I give them credit for. Secondly, the greatest probability is that Goldman Sachs will lose business and Morgan Stanley seems uniquely situated. There are other small firms that will probably greatly benefit from a loss of biz at Goldman. Customers may no longer want to deal with a large firm...PJC, LTS, JEF. I would not make any hard and fast decisions right now, but wait for price to move. If its a good trade, then you can wait until Tuesday because price will keep moving in the direction you desire for days or weeks if you think its a buy now...
GS is litigating this because with the best legal team in the world, and enough political clout all the way to the US supreme court, they are pretty sure they can win this. This doesn't mean the stock price won't fall, and perhaps that is one play they are looking for. To drive the price down below $50 and then go private and becoming a partnership again - which is what GS has always thought of itself - as a partnership.
What? That makes no sense to go private. GS just IPOed 10 years ago. The partners would lose way too much money if the stock price fell. The cost to take GS private doesn't make financial sense either. I think retaildaytrader's idea of MS is a great one, I'm going to be watching that one as well.
I think the problem with this is that all the i-banks had their fingers in the housing bubble pie. If the SEC win over Goldman, aren't they going to go after other firms next? IMO all the i-banks are at risk.
It's certainly a negative, but not much of one. Investors lost $1B in the Abacus deal. Assuming the government wants GS to be on the hook for all of it, and trebles the damages because it's willful, they'll ask for $3B and will settle for a few hundred million and GS will not have to admit any guilt. Their employees will get an average of $590K salary this year instead of $600K and that'll be it. Unlike MEE, there's no talk of shutting down part of GS's business.