What's up with Goldman? As far as I can tell, the self off in their stock is primarily due to three factors: The SEC lawsuit (I haven't read the complaint personally, but I saw an interview with Warren Buffet where he said he thought it was basically without merit) + resulting reputation damage, the criminal probe launched by the justice department, and the regulation bill currently working its way through congress.

But still, they're trading at a P/E of 5.5. While in the short run they will likely will struggle with reputation issues and new regulation, in the long run they have a bunch of extremely bright, driven people under a man who seems to be an exceptional leader in Lloyd Blankfein, and it seems to me to be a good bet that they'll find a way to evolve. Am I the only one that sees a lot of long term value in GS?

the stuff i've read and heard says that goldman is still one of the worst banks to choose in the short and medium term, despite their low p/e. on cnbc they recommend BOA over GS. i don't remember all the reasons why, but one huge reason is GS may be impacted by fin reg more than any other banks.

the government and SEC are on their nuts

Unlike BoA, Citi, or JPM, they don't have a retail banking side to their business, raising their relative exposure to regs on discretionary trading, among other reasons

i think GS is gonna get crushed. they are essentially insolvent and have been for years. this is one of the stocks you should definitely be shorting IMO. all the financials and banks are in just as much trouble as they were in 2008 and i wouldn't touch any of them with a 10 foot pole (unless i'm shorting them obv)

plowking,

I thought GS was a linchpin of the Illumnati's enforcement arm?

When you're an organization as big as the Illuminati, sometimes you don't realize what one hand is doing to the other.

lol this was good.

plowking - only like 10% of their assets are level 3 so the 'insolvent' argument is again another of your ******ed manifestations. at least if youre going to make this ******ed argument, pick an institution that holds a ton of illiquid assets so you can at least spread fear with some credibility.

remember learning calculus in high school? actually take that back, you prob didnt make it beyond remedial geometry. however let me help you understand this - when a known ******, ie Peter Schiff preaches ******ed stuff on the internet / youtube, then another known ****** attempts to interpret and recreate the argument elsewhere - this is called 2nd derivative ******ed sh*t and its even worse than the initial ******ed sh*t.

seriously - can you try to do work on these matters instead of blindly believing some massive conspiracy?

haha, wp

Goldman, like all the other financial institutions, is very leveraged. Also, with mark to market accounting, you never know what the real shape of their balance sheet is like. All the financial institutions are insolvent and i think the US government will nationalize all the big banks and financial institutions when they all collapse.

P.S. i took calculus in high school. I also took first year calculus in University, both the derivatives and integral part, and i also took second year multi-variable calculus. (i went to UBC, which is the best school on the west coast of Canada).

all i can tell you guys is that all the financial institutions in the US (obv including GS) are all toxic and you should stay away from them. They are going to get the most crushed in a few months when the market crashes.

so go ahead and buy GS... but don't say i didn't warn you. i think we'll see GS trade below $50 at some point within the next 18 months.

Thanks for the replies guys.

This confuses me. I thought the regulations in question were stipulating that retail banks - institutions which take deposits from consumers - would be banned from proprietary trading. Although Goldman converted into a retail bank during the crisis, they are still fundamentally an investment bank, so I believe they will be permitted to carry on trading. Or am I missing something?

Also, with all due respect Plowking, I believe your participation in threads related to banking lowers the overall quality of the discussion, so I would like to kindly ask you to refrain from participating further in this thread. It's nothing personal, but you obviously have very strong beliefs that the rest of the people on this forum (including myself) don't agree with, and I don't want to see this thread degenerate into something stupid. Thanks.

Malachii, since fall 2008 GS and MS have been bank holding companies which gives them access to the Fed's discount window and unlimited cheap capital. They don't have significant retail operations but as they are no longer investment banks in the regulatory sense, they would be permitted from trading. They would have to give up status as bank holding co's in order to avoid regulations on risk and derivatives. Hope that helps.

he's free to say whatever the **** he wants and it's sometimes good to have a different perspective. if you don't like him then just block him. his posts are also usually incredibly detailed and he explains his thoughts pretty well, even if you disagree with him.

especially in finance it's good to have different perspectives. otherwise you have the whole herd mentality that causes all this bubbles and crashes.

so you repeat your previous nonsense without responding to what I've said?

a level 3 asset is one that lends to aggressive assumptions and its difficult to trust what GS or any bank says theyre worth. however, the other 90% of GS assets are level 1 and level 2. level 1 assets are liquid stocks for instance where theres a very active quote and theres no real debate about their value. level 2 assets are swaps etc that are either marked to model or last sale but theres reasonable liquidity and relatively tight range on assumptions.

in other words, theres no real debate on 90% of what GS says is their book value.

you dont even know the difference between a savings and loan and a legacy investment bank. seriously what the f*ck?

you and music recorder and every other person here should actually try to research topics instead of blindly reproducing nonsense on youtube and the internet. do i need to reeducate you guys on the lesson of second derivative ******ed sh*t?

you also said the dow would be under 5k by now in numerous threads. let me help you. keep predicting massive declines and eventually youll seem right but in wont be from any analysis of anything.

sure, np

What on Earth made you say the market is crashing in a few months? Last week I picked up euro and spoo futures at the near bottom (I believe it was Monday night at 1am LA time - will check) and plan on holding for a good while. Usually I'd be out of this trade after 200 ticks but this is going to be a nice stealth rally.

A lot of people seem to be bearish still and that's a case to be bullish right now. Are you a trader by any chance? FWIW I typically like your posts.

I don't know anything about short term, but the hit to the goldman image could effect things in the medium/long term. My undergrad school was a big feeder into GS and they were the clear,clear number 1 to work/intern for. They definitely got the pick of the litter and I know many people that interned there and some that went on to work full time for them and I never heard of anybody turning them down to go to some other bank. Having the absolute best seems important to them and maybe should be important to shareholders are well. Small sample and perhaps not super important in the first place though

I'm going to go out on a limb and try to write out a serious answer.

With respect to their earnings, looking at their trailing p/e is a little misleading. Almost all of their earnings are derived from trading income which varies significantly from year to year. For the past year, much of this equates to borrowing money from the government for nothing and then putting it into higher yielding, riskier assets. This strategy has performed historically well for much of the past year, but the rate of return over the long run is unsustainable. In normal times or in times when risky assets falter, such as this quarter, their profits will be much less. They also "ran well" to a certain degree and conceded as much earlier in the quarter.

With respect to the value of their assets, you have to consider the fact that Goldman is the most highly leveraged of the investment banks. Small write downs in the value of their assets could produce huge swings in the value of their portfolio. There will be considerable write downs in risky assets related to European soveereign debt and municipal debt this quarter and into the future which may or may not be accounted for on the balance sheet, due to current accounting laws.

the 5.5 pe ratio is misleading since its their record earnings and they will most likely have to spin off parts of their business in the future.

Yeah you should just forget about basic P/E style calcs when looking at a company like this, forward earnings is murky at best and subject to so many fundamental factors. Earnings could just be variance as well, thanks to being the last man standing in a sense, but that won't continue and other opportunities they can exploit could dry up. If I was trying to value Goldman I'd be looking at their more vanilla operations and how they would benefit from expansion, and totally forgetting areas like their trading division and seeing if you can find a value buy at a lower point. But I sure wouldn't be buying now based on the profitability of the last year vs their price.

financials are valued as a multiple to book. not earnings.

12/09 51,673.0 19,829.0 1,734.0 13,385.0 22.13 32.5
12/08 1,185.0 -1,258.0 111.0 -780.0 -2.12 0.0
11/08 53,579.0 2,336.0 1,262.0 2,322.0 4.47 0.6
11/07 87,968.0 17,604.0 819.0 11,599.0 24.73 34.11
11/06 69,353.0 14,560.0 694.0 9,537.0 19.69 34.5
11/05 43,391.0 8,273.0 854.0 5,626.0 11.21 32.0
11/04 29,839.0 6,676.0 625.0 4,553.0 8.92 31.8
11/03 23,623.0 4,445.0 693.0 3,005.0 5.87 32.4
11/02 22,854.0 3,253.0 744.0 2,114.0 4.03 35.01
11/01 31,138.0 3,696.0 873.0 2,310.0 4.26 37.5


You have absolutely no clue what you speak of, it's not even an opinion. At least perform due diligence before offering bad advice, but please fix the misguided post on which banks are widely exposed to European debt, since you got that wrong as well.

Then we can address issues pertaining to the future performance of GS and how it relates to offering prudent investment guidance.