Monday, April 26, 2010

GS And More

I opined a couple weeks back that I thought GS would be fine but would wait for better prices. However, at this point I am rethinking a number of things.

1. The problems GS are experiencing are akin to accounting problems, and those issues have to be respected.

2. The C issuance and its timing. At the very least C is the much easier trade and at this point I think C has much better risk reward than GS. MS is also the firm doing the C offering -- this fact should not be under-stated either.

3. You can't fight city hall. Or can you? Just as many bears are fighting the Fed and my highly variant economic strength back drop, staying long GS here might be like staying long MSFT back in the day when the DOJ really went after them for the monopoly on Windows. MSFT really hasn't been the same since. GS is trying to fight this case and some of the merits for them look good. However, I remember all the firms paying fines on tech research. In some cases the SEC didn't have a great case (against certain firms) but firms paid anyway.

4. City hall part deux. By the way, if the SEC does not bring multiple suits against multiple Wall Street firms this is really bad for GS.

5. How much will the exploding new issuance calendar be moved from GS to other firms? If you were Facebook or another hot tech IPO would you want GS to lead or co-lead your coming out party?

6. I say all this feeling that my EPS numbers (for GS) crafted many moons back (which were just massively bullish), will likely still be proved largely correct. Though at this point I am moving some of that future GS EPS to other firms.

7. So for me this has become a total "steer clear" proposition on any fundamental metric as they are essentially meaningless for the time being. Until we know any form of resolution I would play GS purely on the TA's and those TA's are now looking very bearish.

long C

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