Archive for August, 2009

Mad at Goldman Sachs?

Monday, August 24th, 2009

By paying attention to how the media has latched onto Goldman Sachs (GS) lately, there is a very important lesson learned and possible tip off into the future.

What we see is non mainstream media picking up on stories about Goldman Sachs that should be of no surprise to people that understand how wall street works.  However, what is apparently happening is that you’re beginning to see the real jealousy of those that get angry with these stories.  GS has found countless ways of making money in a capitalist society.  They have numerous advantages that were created, not given to them.  They recruit the best of the best in brain power, internal drive, motivation and competitiveness, etc…  They have former GS partners in high ranking political positions and other areas around the world that one would agree are ultimate benefits to GS if needed or called upon.  i.e.  Hank Paulson, Robert Rubin, etc…  They have created a culture that others try to emulate, but can’t.  The fact that they make so much money will ultimately be their downfall.  Somewhere along the line, somebody is going to get their hands on the wrong story, at the wrong time attached to the wrong people, and their entire existence will be gravely threatened.  Truth be told, they are doing exactly what their partners and shareholders want them to do.  Succeed by beating everyone else.  Unfortunately, this country has a hard time allowing the ones will the largest success to continue without over regulation, political targeting and media mud slinging.   We wish them well.

By the way, the market is getting closer to that point in time for the bear market to continue.  We’re not there yet, but you’ll know it when you see it.  Our subscribers will know a little quicker than most.


Spin the market

Sunday, August 23rd, 2009

Impressive rally is an understatement.  Even more impressive is the rally in the face of less than impressive news flow.  Let’s take a look at a few stories and factoids.

Unemployment still on the rise.  So the market rallies on the prospect of a bottom in unemployment.  In most cases, that may be a legitimate reason because of the ensuing recovery hopes.  In this case, how can we be sure about the ensuing recovery when the consumer is not participating, top line retail numbers are still down, credit is still tight, home prices are really not bottoming yet as the media would like you to believe.  Many of the sales are foreclosure inventory which can skew reality for a while.

Commercial real estate.  Who’s buying buildings these days.  If a building is sold, it’s at a distressed price.  When the market prices continue to adjust downward, the owner who needs to refinance gets a crappy appraisal and realizes that he ows more than the property is worth.  Not to mention the decreasing revenue stream from renegotiates leases and tenants leaving, downsizing and going out of business all together.  We can see how the gov’t is going to get away with bailing out the entire industry.  Caution.

Next years earnings.  The market is trading as if next years earning will grow and achieve 17x earnings multiple at $70 per share.  Well what happens if the cost cutting comes to an end, the top line revenue is still not growing and that number appears to be an overshoot on the upside.  Surprise surprise, have a nice sleigh ride down the money trail back to 850 on the S&P.  This is strictly with no crisis, surprises or geo political event.

On the bright side, oil is up.  Ha ha.  Why is oil up good news.  Doesn’t this issue increase the cost of living?  Haven’t we read this book before with the high gas prices, surcharges on deliveries, increase in just about everything.  Inflation.  Then we pay tax on the inflating prices and our gov’t makes money.  What a concept, a tax without raising taxes.

Decreasing tax revenue.  Speaking of taxes, the IRS has been experiencing a business downturn just like everyone else.  When business is bad for America, it’s non discriminant.  If the IRS is taking in less, and the gov’t is spending more, then how can we expect things to get better.  Sounds like a viscous cycle to us.