Monday, April 13, 2009

Goldman Sachs Wins Thanks to the Taxpayer

And the Fraud Rolls On............

Goldman Sachs came out after the bell and reported stellar earnings:

"NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N) posted first-quarter earnings of $1.66 billion, a higher-than-expected profit helped by strong trading revenue, and said it planned to raise $5 billion of common shares.

The New York-based bank reported net income applicable to common shareholders for the quarter ended March 27 of $3.39 a share. For the quarter ended February 29, 2008, the company posted net income for common shareholders of $1.47 billion, or $3.23 a share.

Analysts had on average expected earnings of $1.49 a share, according to Reuters Estimates.

Goldman said it planned to use proceeds of its share offering plus additional funds to repay the $10 billion of capital it received from the U.S. government under the Troubled Assets Relief Program."

My Take:

Is anyone else completely sickened by these earnings? I will chop off my right testicle if this earnings number wasn't juiced by the back door TARP money that Goldman received as a result of being made 100% whole on CDS bets the bank made with AIG.

Everyone knows this fact by now. The hundred billion dollar infusion by the Treasury into AIG a few months back was done for one reason: To pay off the horrible CDS bets that AIG made with several banking institutions all over the world.

What makes this even more disgusting is there are rumors that GS also hedged themselves on their AIG CDS bets in case they were never made whole on them. They could have been done this in a variety of ways: Shorting AIG would work.

So in true pigmen fashion, GS may have possibly been paid twice on the CDS bets. Once by the Treasury via the taxpayer and a second timeby trading moves made by the firm to cover themselves.

Sick isn't it? How about sending back the AIG bailout money back to the taxpayers if you "doubled down" on your profits? All I got to say is kharma is a bitch Goldman. You will get yours one day you SLIME!

These stellar earnings are just another example of how fraudulent our financial system is. Earnings like this would have made Mr. Ponzi himself proud!

Goldman's balance sheet must be a mess after watching unemployment and foreclosure numbers rise substantially throughout the quarter. There is no way they should have beaten like this if these numbers were legit. The system will never recover until this type of bullshit stops. Confidence is not restored by events like this.

It only makes investors more suspiscious. If the citizens feel that they are being gamed by the system, they will eventually walk. They will play a little while longer for now because its taking the market higher. However, once this false liquidity that allowed for these earnings disappears and these stocks tumble once again, investors will once again be left holding the bag.

Whats not surprising here is if you look at Goldman's earnings report, revenues were down in every part of their business. The stock actually is doing very little after hours. Tee Hee... Serves them right the scumbags.

Anyone see a connection between Washington and Wall St below?

Government US Deficit Rises as TARP Spending Soars:

Meanwhile(Back in reality) Tax Receipts are Crumbling as their spending soars:

Final Take:

It doesn't take a math degree to see how this is all eventually going to end. The Treasury has less and less money coming in and trillions going out. Notice the extreme jump in expenditures over the last several months. Gee..Do you think some of it might be in the form of AIG CDS handouts courtesy of the US Treasury(taxpayer)?

Folks, if you ran a business and had cash flows like this you would be in bankruptcy. There is NO way the Treasury can continue to spend the way it has if tax receipts continue to disappear at this speed.

The Fed/Treasury at some point will be forced to begin pulling some of this liquidity from the system in order to stay solvent and when they do....KABOOOOM! We are going to see one hell of a plunge in the markets IMO.

Bottom Line:

I wouldn't be surprised to see more strong bank earnings. Its pretty obvious that these earnings are being propped by all of the gifts from the government. These include:

- The AIG backdoor bailout

- M2M accounting gifts.

- Zero interest rates which allow for ridiculously profitable lending.

- Quantitative Easing which makes ridiculously profitable lending even more profitable.

- Direct Treasury capital injections.

These earnings are all "smoke and mirrors" folks. IMO, I believe this earnings bonanza is just a one quarter aberration because the AIG ATM is about to be shut off due to public/political scrutiny. The worsening economy will also increasingly take its toll on earnings.

Basically the way I see it, the future of the banks looks pretty darn bleak. I see nothing but a further deterioration in their loan books as a result of a deepening recession and soaring unemployment. All sectors of their businesses continue to slump: Lending, investment banking, and M&A are all weak and show no signs of recovery in the near future. I also see no catalyst that will allow this to change anytime soon.

We could see the "delusional" bulls continue and take this market higher as the financials enjoy one last profitable hurrah. I still believe this rally looks to be running on fumes. The reaction to Goldman was muted at best. The futures are pretty flat. Could this be a sell the news event tomorrow? Time will tell. I held my shorts on the S&P and treasuries.

Over the long term there is only one conclusion you can come to when you look at the charts above. The Fed can only replace the consumer and their spending with its liquidity for so long. The losses in tax revenue are going to eventually force them to reign in their lending and shrink their balance sheet. This is going to leave a lot of companies with no clothes on because there will be no money left for bailouts. Expect to see these same insovent companies head straight to bankruptcy court.

The financial fireworks as a result of this inevitable conclusion will leave the stock market in shambles.


Jeff said...

I almost forgot:

I just signed on to Twitter.

I plan on sending out some "tweets" during the market hours when big events occur.

If you would like to follow me you can sign up by clicking on the Twitter link on the upper right hand colum of my sight.

Joey said...

Hey Jeff,

There was a very interesting post on regarding quant trading and the amount of liquidity Goldman affords the market.

Good read. Though, it did take me a few passes to understand all the aspects.

Hope all is well.

Jeff said...


Thanks for the heads up.

I read that piece. Tyler is brilliant.

I am more concerned around the Fed pulling liquidity versus the quants and trading desks.

Tyler is dead on and makes some great points, but the Fed is the giant gorilla in the room.

Without the Fed's balance sheet and gaurantees there would be no financial system right now.

The big plunge comes when the Fed is forced to pull liquidity out as they run out of cash. They could always continue to print but the results of this could be catastrophic in the form of inflation.

Anonymous said...


Does it really matter anymore? J6P is f*cked anyway whether it is a deflation or inflation. With deflation, savers get peanut for their money in the CD/saving accounts. Only the rich people really benefit because they can take advantage of the cheap pricing.

With inflation, J6P cost of living will be skyrocketed. OTOH, the rich people are still ok because their fat saving/CD accounts will just earn much higher return. Therefore they still can afford to pay for higher cost.

Jeff said...


I agree.

I would prefer deflation because the cost of living becomes much more affordable.

If you can keep your job its the better alternative.

The zero interest rates do seriously f*ck you on your savings. Of course the bankers make a fortune on the spread.

I vote deflation if I had a choice. Neither option is very attractive though because it will be very painful.

teddy bear said...


Jeff said...


I have seen that before. What a classic.

Uh oh

More talk of a new world currency. Futures are down 8 points. Tomorrow could be interesting:

Monday, April 13, 2009 10:03:02 PM
(CH) PBoC adviser Fan Gang said that China, Japan and South Korea should establish a routine mechanism to diversify the region's reserve currencies away from the dollar - China Securities Journal
- Gang added that the Asian countries need to consider creating a transitional arrangement to help reduce reliance on the dollar before the problems in the international financial system are resolved.

Peter said...

Jeff, did you see the comments today that GS magically erased all of December from their report as they switched to a Jan-Mar quarterly period. And if you guessed that Dec is where the losses fell you are correct.

And instead of going to jail these guys raise another $5 billion. Who is buying this crap? It can't be people using their own money, it has to be other peoples' money.

jeff said...

post up around 7

jeff said...


Disgusting isn't it?

GS is slime.

I love the fact that their stock fell today and took the rest of the banks down with them.