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Archive for the ‘derivatives’ Category

Reggie Middletons take on Goldman Sacks

Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look

To begin with , Goldman Sachs produces more accounting revenue and accounting profits than its peers. This is because Goldman benefits from virtual monopoly pricing and advantages in several markets. Despite this advantage, when one factors in economic RISK and the cost of capital, Goldman doesn’t fare nearly as well as the sell side makes it seem. Of course, the sell side rarely attempts to quantify risk, which is cool until reality rears its (sometimes ugly) head. Before we get to risk adjust returns, let’s look at the simple accounting numbers and attempt to throw some logic on them…


Above, you see that GS has enjoyed a significant premium over its peers in terms of book valuation. This premium has actually increased over the past year. Let me be the one to remind you that no US company has every survived a criminal judgment, none. Arther Anderson was driven into bankruptcy from charges stemming from the Enron collapse, and that is despite the fact that the Supreme Court overturned the guilty verdict! Assuming, for the benefit of the doubt, GS can somehow set precedence, or more realistically, criminal charges are not filed, we still have to contend with:

  1. the SEC lawsuit
  2. the increased regulation, in particular the Volcker rule and derivatives oversight
  3. follow on litigation, which is virtually guaranteed, and virtually guaranteed to be extremely expensive, time consuming, and distracting from the core businesses.
  4. a general decline in business since we are coming off of a credit and risky asset boom and going into a sovereign debt crisis that will make FICC much less predictable (seeThe Next Step in the Bank Implosion Cycle???
    for a more on how this could end with the Pan-European Sovereign Debt Crisis drama unfolding).

  5. Taking all of this into consideration, you tell me… Does Goldman really deserve to be trading at such a premium considering the myriad risks it is currently exposed to PLUS the murky business and regulatory environment? They are also losing talent on the sales side, and at the MD level to boot. Today’s market is starting to see things the Reggie Middleton way.


    Now, let’s factor in some more reality. No matter what your broker says about accounting earnings and revenues, they don’t come free. They all have a cost of capital attached to them. Let’s reference an excerpt from When the Patina Fades… The Rise and Fall of Goldman Sachs???

    GS return on equity has declined substantially due to deleverage and is only marginally higher than its current cost of capital. With ROE down to c12% from c20% during pre-crisis levels, there is no way a stock with high beta as GS could justify adequate returns to cover the inherent risk. For GS to trade back at 200 it has to increase its leverage back to pre-crisis levels to assume ROE of 20%. And for that GS has to either increase its leverage back to 25x. With curbs on banks leverage this seems highly unlikely. Without any increase in leverage and ROE, the stock would only marginally cover returns to shareholders given that ROE is c12%. Even based on consensus estimates the stock should trade at about where it is trading right now, leaving no upside potential. Using BoomBustBlog estimates, the valuation drops considerably since we take into consideration a decrease in trading revenue or an increase in the cost of funding in combination with a limitation of leverage due to the impending global regulation coming down the pike.


    Remember, practically everybody poo-poohed my research and opinion in 2008 when I said Goldman was drastically overvalued – Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis. Those 600% to 1000% gains on the put options proved otherwise. Speaking of which, those July 150 puts… Can you smell what the forensic analysis is cookin’???


    For those who haven’t read my review of Goldman’s latest quarter performance, please do: A Realistic View of Goldman Sachs and Their Latest Quarterly Results

    source
    http://boombustblog.com/reggie-middleton/2010/04/30/can-you-believe-there-are-still-analysts-arguing-how-undervalued-goldman-sachs-is-those-july-150-puts-say-otherwise-lets-take-a-look/

Keiser report No.19

If you want to really know what is going on then look at this video
covered in the video is Gold, IMF, UK deficit, George Soros, and many more stories

Is the Irish government involved in these kind of financial tools and were there advised by Goldman sacks?

Can they categorically state on the floor of the Dail that they have no exposure to any of these kinds of toxic synthetic financial tools?

Can they categorically state that none of the Irish financial instustions have any of these derivatives on their books and if they so state then why are they looking for traders in these kinds of derivatives at NAMA

see link http://thepressnet.com/2010/01/16/irish-banks-derivative-trading-losses/

It is my belief that not only are the banks up to their tonsils in these derivatives and are hiding huge losses, the Government are actively concealing such losses from the General public.

we may even be in the same situation as Greece ,because the government will not come out and deny that they have not used the services of Goldman Sacks in the setting up of such derivatives.

The derivatives market : April 2010

 

A major crisis is building in the derivatives market yet a cabal on Wall Street is blocking the formation of a clearing house that could stop the next financial meltdown, a senior official with the Kauffman Foundation said on Tuesday…

The need for disclosure in the swap markets is enormous, yet the will to act is missing because of a small cadre of special interests, said Harold Bradley, who oversees almost $2 billion in assets as chief investment officer at Kauffman…

“I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus,” he said. “Everybody is afraid to regulate them.”…

U.S. and European officials are trying to craft new rules to regulate the $450 trillion private derivatives market in broad efforts to avoid another financial crisis…

Bradley said those efforts fall short…

Instead, he said regulators have found a boogeyman in high-frequency trading, which has taken the focus off the highly levered derivatives market…” (Emphasis added.)

“Wall Street cabal seen derailing serious swap reform”
Herbert Lash, 3/30/10
http://www.reuters.com/article/idUSTRE62T5RD20100331

“The dollar-based monetary system is no longer adequate for a larger and more integrated world economy…

Prominent developing economies are increasingly demanding to be included in any multilateral dialogue that aims to shape the new economic order…”

“Beyond the Dollar: Rethinking the International Monetary System”
The Chatham House Report, March 2010

The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system…

Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets, the people said. They declined to be identified because talks with regulators are confidential…

Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures”… New Jersey’s fund may also participate…

The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010… Pension funds, whose 100 largest members manage $2.4 trillion, could provide capital to acquire deposits and outstanding loans from collapsed banks

Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program. At least 60 lenders skipped some of their promised dividends to the TARP fund

…The California Public Employees’ Retirement System, the largest U.S. public pension fund, said in a Feb. 16 presentation that one of its goals is to increase its “co-investments” in transactions alongside money managers…

Known as Calpers, the pension fund plans to “explore unique structures with select general partners”…” (Emphasis added.)

“Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash”
Dakin Campbell, Bloomberg BusinessWeek, 3/8/10

“Alfredo Ley, founder of Ley Investor B.V., an investment management and research firm in the Netherlands, yesterday published a fascinating review of a 1989 academic paper written by the great rationalizer of surreptitious government intervention in the gold market, former Harvard professor and former U.S. Treasury Secretary Lawrence H. Summers, now director of President Obama’s National Economic Council…

Ley’s review of that paper, headlined “From the Horse’s Mouth: Lawrence Summers on Market Manipulation in Times of Crisis,” construes the paper as an argument for government to respond to financial crises by propping up asset prices and rigging currency exchange rates, presumably also largely surreptitiously…”

“More advocacy by Obama’s top economist for sneaky market rigging”
The GATA Dispatch, 3/27/10

The Threat to Wealth, including a Threat to that (formerly most sacrosanct) category, Pensions, is just beginning, though the Markets now appear to have calmed. But that calm is The Eye of a Market Hurricane which began in 2008, and The Eye is slowly but inexorably moving.

The Megabankers have apparently encouraged FDIC’s push to use Pension Fund Assets to buy often-still-Toxic “Assets” of Failed or Failing Banks. If that Push is successful, it would result in yet another massive benefit to Megabankers.

It would remove failed or failing Assets from the banking system (to the detriment of Pensions) and leave the mega-Bankers in a position to acquire the still-performing Assets in that System “on the cheap”.

It would not be the first such acquisition nor would it likely be the last.

Deepcaster and others reported recently on a similar Mega-Bank-generated Plan to force Pension Funds to Buy U.S. Treasuries – not such a good idea in light of the U.S.A.’s prospective (by 2028) $20 Trillion plus National Debt and $100 Trillion plus downstream unfunded liabilities, for Social Security, Medicare, etc. Given this Reality it is highly likely long-term U.S. Treasuries will decline in value over the next few years.

And Deepcaster’s Long-standing claim that one goal of the Mega-Bank led Cartel’s* ‘End Game’ is the Destruction of the U.S. Dollar, is supported by the Chatham House Report referred to above which serves as a Trial Balloon. And as the degradation of the purchasing Power of the U.S. Dollar proceeds, what happens to the value of the Dollar-denominated Assets. The Answer is unfortunately clear.

The foregoing are just three more examples of the potential appropriation of Citizen Investor Assets, just as the 2008-2009 Market Crash resulted in a massive Wealth Transfer (of some $11.9 Trillion in gain(!) in the six months of July through December, 2008 – the six months encompassing the Market Crash when Investors world-wide were losing Trillions). Verify this Gain for yourself at the Central Banker’s Bank’s own website – http://www.bis.org, Path: statistics>derivatives>Table 19.

If the Investor/citizens of the U.S.A. (and nations around the world) do not stop the Musical Chairs-like “Game” of Bailouts of and Asset Grabs by the Mega-Banks in which Investor/Citizen/Retiree/Taxpayer Assets are appropriated one by one, then all will ultimately share impoverishment.

One step to stop the grab is to Audit and then Abolish the private for-profit Fed, leader of the Cartel.*

Despite the Hot Air from Washington, DC, it looks as if the chances for passage of Real Financial Reform Bills – including Rep. Ron Paul’s Audit and Abolish The Fed bills – are slim to none in this session.

Indeed, the simple solution to the “Too Big to Fail” problem is not receiving serious consideration in Washington, DC – yet. That would be, of course, to break up the Mega-Institutions and parcel out their Assets and functions to regional and state Banks.

Official Numbers       vs.      Real Numbers

Annual Consumer Price Inflation reported March 18, 2010
2.14%                              9.39% (annualized March 2010 Rate)

U.S. Unemployment reported March 5, 2010
9.7%                               21.6%

U.S. GDP Annual Growth/Decline reported March 26, 2010
0.06%                              -4.62%

Significantly, last week’s weak Bond Auction (resulting in a spike in rates) and the release of figures showing February was the worst month for new House sales ever, show that Main Stream financial Media Happy Talk about the Bullish Equities Markets and “Recovering Economy” is just so much hot air.

Sooner rather than later, these Realities are going to rear their ugly heads in an Equities Market Takedown. Facilitating that Market Takedown is the fact that Equities Markets are generally considerably overvalued, with the S&P P/E Ratio at about 23 to one.

Some of you will remember the period leading up to the Market Crash of 1987. For months, the Fundamentals and Technicals deteriorated while the Equities Markets continue to rise.

The same was true of the period leading up to the Internet Bubble Burst of 2000. The bubble “should” have burst earlier than it did. But the shorts had to wait for months before profiting.

In our view, a similar situation exists today. The Stimulus Bills plus positive Main Stream Media “spin” plus Cartel Intervention have created a “Sugar High” in the Markets. But it is highly unlikely it will last.

And it is important to note that: Market Crashes and Takedowns typically strike suddenly, before one has time to “get short, or exit longs”.

Thus, in our view we are in the Calm Eye of the Markets’ Hurricane, but that Eye is slowly, but inexorably moving. We shall soon be in the Hurricane again.

Will The Cartel employ a chunk of the $437 Trillion in dark OTC Interest Rate Contract Derivatives they have available for Market Control to fuel another Bond Rally soon?.

“We Must Break Up Big Banks and End Too-Big-to-Fail, Says Simon Johnson”
Tech Ticker – Yahoo, 4/1/10

source link see full article: http://www.financialsense.com/fsu/editorials/deepcaster/2010/0401.html

Copyright © 2010 DeepCaster LLC

Pirates Of The ‘Carry-On-Regardless’

Posted by jayfromeire on Mar 25th, 2010 and filed under Economic Crisis, International. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry from your site


William K. Black wrote a book in 2005 titled “The Best Way to Rob a Bank is to Own One” where he outlined the fraud and corruption at the highest levels of international banking.                   

What we are seeing now in the light of massive bonuses, involving billions of Euro, Dollars and Pounds, being handed out to executives and lower level employees, is simply the same culture of fraud and corruption which has seeped down to the lower levels of an industry which has utterly disregarded any pretence of moral conscience.       

           
 

This industry has deliberately plunged the world and the majority of ordinary people into a period of extreme doubts and anxieties over the future of themselves, their children and future generations.        

The climate of greed in this industry has undeniably never changed. Whilst the international bankers have absconded with the wealth of nations, their cronies in subsidiary banks, where ordinary people’s financial security is crucial, are now doing the same. These lower level parasites continue to coerce governments into passing legislation, in Ireland’s case, NAMA – (Never Any Money Again).                   

This is happening across the developed world and allows governments, without the consent of its citizens, to literally tax working people to pay for the illegal and corrupt practices of a criminal cabal responsible for the state of the world today.                    

This is piracy of the highest order, and the ordinary people paying for this, for generations to come, will be born into a financial bondage to the coming world state which amounts to nothing less than SLAVERY.               

We are being financially raped by the banking elite who simply demand that our government pass the very legislation which will condemn the citizens to a future of indentured servitude. We, the taxpayers, will have to cough up our last cent to the parasites of finance to furnish their lavish lifestyles of champagne parties and fancy yachts, whilst we are left struggling to make ends meet.                 

The government tells us we need to get through this current financial crisis together, by pulling together don’t you know, whilst they maintain their positions of power over us and live the highlife with their banker and building developer buddies. They don’t take responsibility for, or account to the public for, the catastrophe they’ve inflicted on families and businesses in this country. At the same time they try to justify their uselessness and inflated salaries, presumably in line with their inflated egos and ludicrous self belief in their value to society, whilst at the same time maintaining their massive expense accounts and lavish pension arrangements which nobody else in the country is entitled to.

machholz responce 

Careful what you ask for!

With the cries of change the government getting louder, I caution and ask the question will we be any better off?

Make no mistake I want to have a change of government and I want to jail All the corrupt Basta***

Responsible for the mess we are now in.

What exactly will the new government do about the political gangsters responsible for the mess we are now in?

see posting

we need reform now!

The current Irish Government are responsible for the financial disaster the country is in,
With the establishment of NAMA the Government is trying to socialize the enormous losses that the Banks and their Developer buddies have encored.
Corruption is rife and now a new monster burocratic system is being created, where X politicians will have jobs for life and the same corrupt developers will be able to manipulate the housing market all over again
While the people are being robbed of their homes, savings, pensions, and education for their children, that same gangsters are running the country
This has to stop!
Join the CAB to-day and get things moving
Come on! Get active in your own area now!
We as a country need new faces and not the same old tired faces that have being around using the system to suite themselves.

The Economist comments

 

Mar 17th 2010, 15:50 by R.A. | WASHINGTON

PAUL KRUGMAN continues to push back against my criticism of his get-tough approach to the Chinese dollar peg. New posts on the subject are here, and here. The first concerns the question of how much of the world is in a liquidity trap, which is important because:

We’re currently living in a world in which both central banks and governments are unable or unwilling to pursue sufficiently expansionary policies to eliminate mass unemployment; so it’s a paradox of thrift world, in which anyone who tries to save more reduces demand, reduces employment, and – because investment responds to excess capacity – ends up actually reducing investment. By exporting savings to the rest of the world, via an artificial current account surplus, China is making all of us poorer.

Read more on this link http://www.economist.com/blogs/freeexchange/2010/03/chinas_currency_3?source=hptextfeature

Tell the people the truth about the Markets & NAMA

Do you really want to know what is really going on in the market place?
Ever heard of the “Rigged Market capitalists system”
Are you ready for this news??
Ernst & Young auditors of Anglo Irish Bank now working for NAMA ,
The same auditors for Lehman Brothers .
This is criminal , allowing this to go on, they should all be in Jail !
We must have a new Irish people’s political party that will stop this fraud in its tracks.
A political party that will prosecute all the individuals responsible for this criminal conspiracy
They must be brought to justice
We the people must have our pound of flesh!

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