GS, The Market, And Tech Stuff

I'll not re-do the whole GS story; it's all over the place for all to see. I'll just make some (in my mind) salient comments on the situation. Basically, the complaint brought by the SEC hinges on the supposed fact that Goldman didn't tell ACA that the mortgages were selected by Paulson's hedge fund to sell, not buy. It does not indicate that ACA did any due dilligence, but it did say ACA endorsed the porfolio. So one obvious question: Does it matter that Paulson got involved if ACA was actually doing its job? The complaint alleges that the Goldman structure guy clearly hid that the mortgages were almost certainly terrible - because they were selected by Paulson - but regardless of who selected them ACA did endorse them as okay, so I think Goldman throws the structured guy to the wolves, pays the fine, and says it won't do it again.

Many folks who are still very angry about the just-passed financial crisis don't "get" that GS is not a "main street" kind of firm; its customers are institutions; so-called "sophisticated" clients. The allegations are ugly; the headlines and upcoming "revelations" are more than likely to get uglier. Over at Rolling Stone, Taibi I'm sure is revving up the word processor.....Obviously GS' role in the whole thing; their behavior - violates the sense of fair play, of decency, held by many. I'm just not sure they actually broke any laws. But sleazy? Sure, probably so.

But, at first glance, the government's case doesn't look like a good one because of caveat emptor.....and the fact that you could have shorted it, too....You could have shorted it, you could have gone long. There is no gun to a client's head. The mortgages were there for all to see. Unfortunately for all the GS haters, GS will have a very good case....

And I don't buy the other other shoe/falling dominoes theory either with today's Goldman news; it just so happens Congress is bringing the financial reform bill to the floor next week. The Obama Admininstration wanted a poster child for 2008 and timed the enforcement action to coincide with the bill.....

Remember how Madoff was supposed to trigger a wave of hedge fund arrests? Yeah, right......

So how to play the sell-off induced by the GS news? I think it's crystal clear. Here's how I would play it:

1. Buy GOOG
2. Absolutely buy more AAPL in the $230s
3. Buy GOOG
4. Buy MS another 10% lower than currently. This could really ignite soon.
5. Review all the communication chip plays mid next week.
6. Review all regional bank plays mid next week.
7. Buy GOOG

Corrections come out of left field on unforeseen events. Many have been calling for a correction and been wrong for about 3-5% on the broad market. As for GS stock itself, I briefly looked at buying some OTM puts but they were too juiced already. Also, I have been a GS bull; I would view this news as something similar to an accounting problem - and I generally steer clear of that sort of issue no matter the company.

In fact, the only way I would enter a long on GS in the near term would be a bull put spread with defined downside. If the stock were to get to $135 or lower, I would possibly consider going long the common. Make no mistake - this is certainly disturbing news.

However, the biggest winner here may be MS. I may have to start a position on any material selling in sympathy with GS. This stock is already insanely cheap on a relative basis and it is getting even cheaper on this news.

The gift today is clearly GOOG; I need to figure out a way to get long GOOG again down about 40 or so. I see good support in the low $550's and then more in the $535 area. My view on GOOG is even better after last night’s report and I see it to new all time highs in the months to quarters to come. GOOG is set to monetize amazing amounts of money from mobile search and other forms of mobile technology leadership. In fact, we could see in the not too distant future GOOG making as much money from mobile as the desktop. Frankly, it's stunning you can buy one of the premiere growth companies on the planet at a forward PE of 14 (that is after stripping out the cash). That puts GOOG nearly as cheap as AAPL on a forward PEG basis.....

BIDU is down and I do find it ironic that GS was one of the last firms to put a big new price target on the stock. I'm really looking at shorting it on a break of the $630-635 area, which could happen today. I see still see BIDU back to the $520's - if not much lower...

long AAPL