Wednesday, April 9, 2008

gs and credit issues

can't gs handle risky inventory? credit issues are hot again, even though so much (finally) has been done to clear them up. some of it is plain silly - when these fuzzy assets are starting to go up and trade, as they are right now, don't you want a lot on your books? gs has risky assets, but don't we want that now if those are trading and going higher after they have been knocked down? risk, after all, IS their business.

the market seems to be foolish here. gs has shrunk its balance sheet remarkably already. one doesn't want to shrink it too much to miss the upside now that we have some trading. the bears can't have it both ways. i would imagine gs, more than anyone else, knows what to own and what to sell or short.

there is research that shows that gs has traded poorly on a bunch of days so far this quarter. sorry, that's not dispositive of what's going on. finally, if things are trading, you need inventory.

it is true that the personal mortgage insurers should be rocked by the news from fre calling into question their finances. but isn't that like saying, "Maybe the fundamentals aren't sound?" duh.

faber has reported that the CDOs are at last trading. given that they had to be marked down SEVERELY last quarter, i think that this recognition of problems, resolution of problem loans, and the trading of them is bullish, not bearish.

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