Shorting Goldman Sachs and Bear Stearns

Here is the big picture. This chart does look awful.

 

I'm looking for the indices to move down to the Mar 07 lows, which means GS hits $190 before their own traders start buying.

 

I am now revising my price target for Goldman Sucks to 150.

 

Thank God you posted that!!! I'm sure tens of thousands of people were waiting for your direction. I checked upgrades and downgrades on various sites and not one of them mentioned your downgrade OR price target. If it wasn't for Elite Trader we wouldn't be privy to your reports, and we would be forced to trade using our own minds. Thank you so much.

 

Who would've thunk it... GS who beats regularly and is in a currently lower yield environment (look at bonds/notes) favorable to their business is suffering, and AMZN - a business exposed to the 'frail consumer' created by a subprime fallout and economic collapse, up 20%.

Michaelscott is a contrarian genius, and I'm on the other side of his trade, giving him, or at least the 'idealogical him' (er... the guys who actually took his trade if he didn't) all of my money.

Furthermore, great call on the bidu blowout to 215... I remember knocking it saying it was ridiculous, way apart from fundamentals.

Somehow he's making good calls ... maybe what seems ridiculous on the surface is the reason many of us reject what he says. But watch the same ridiculousness happen in the markets.

Michaelscott: maybe you'd get rejected less if you preface all your calls with 'I know this may sound ridiculous, but' ...

 

Michael are you short and at what price?

 

I have made my share of wrong calls. I said to short MA, RIMM, Apple and GOOG at one point, but I was way too early. I knew they were bubbling up too high on all this Cramer-like enthusiasm, but I wasnt right of where the pivot would lie.

I will tell you what is wrong with Goldman and this is something that I have personal experience.

It all started in Pasadena in the late 90s with the rollout of "Emits", the new computerized underwriting system. The old system was complex involving several underwriting teams. These teams were very thorough in their work and then came the software which eliminated these teams. Senior management was then able to manipulate the computer and got rid of the human underwriter. Then came loans like "0 down, no doc" and other off the wall products. All these bad loans would eventually be funded, packaged up and then there was one floor in the building which traded them out to someplace else.

Do I think GS is sitting on a huge time bomb? No. I know they are sitting on a time bomb. For BSC, they wiped out a few billion dollar accounts with these things. There is definately more to come, its just a matter of when.

Goldman Sachs may be filled with a bunch of geniuses, but they are essentially a bunch of geniuses sitting on the subprime timebomb that they have no idea how they were underwritten.

As for Amazon and Bidu, its just a natural sequence in the business cycle. Late stage business cycle favors growth over value. I say we go higher on growth plays, but go much lower on the value.

Look at plays like AllState and Progressive in the late 90s.

History repeats itself again here, but with a different twist. The SPX went down in 2000 because of growth, this time it will go down because of value.

 

I actually agree with that. I think the key to watch here is the yield on 10yr/30yr note/bond... At our current yields, there is a lot of upside in the S&Ps.

When we move to 6-7%, S&P dip buying may be futile.

 

Dang that was fast. Hit $190 today.

Time to buy.

 

paying my rent with the 220 calls i just scooped down here! Who else is in? Its up $3 in the last ten mins.