It looks like a buy recommendation.

_{--Sell Texas to China!}

"What do you want? To charge in and, what, take what is not yours at all. Hey, as a matter of fact i want to go to your house and take what you have that I don't because I don't have it. rights be damned ownership be damned. Lets get out the pitchforks and steal shit from each others houses. How dare you have something I don't have!!"

Is straight from RNC Central. Way to support the Republican narrative. I personally would prefer to have much more of a social democracy, but that makes me on of those evil communists, doesn't it?

^{"All men's gains are the fruit of venturing."}

-Herodotus

for me what Goldman has done to be singled out and have their earnings confiscated, for what making money on new equity ventures.

I am at a total loss. Every time this thing comes up it drives me crazy. A functioning banking system is critical to recovery. Investment banks sit at the center of that. Goldman got a loan and paid it back, they are engaged and lending, meeting all contract obligations, hiring, growing.

Should JP Morgan be punished too when their earnings show substantial progress, how about Wells Fargo?

I get the sense this group WANTED the entire system to fail, for the credit structures to melt down, for everyone to be unemployed and violence to break out in the streets. It has sounded like that to me for a long time. So the idea of busting into your house and taking stuff you have I want is not so far off the mark here. Not to me. Obama has been beyond spot on for this crisis. He has averted global disaster. And has done so without getting any credit whatsoever. Thank god everyone is complaining about this industry being TOO SUCCESSFUL just three months after it was believed to never recover.

You will have the recession called as over by August or September, earnings in the third quarter will start to really come in positive, and job growth by year end. Probably a healthcare bill. And everyone can go on carping and complaining about each and every shred of good news for the next twelve months. It is the New American Way.

LOL

you're too optimistic about the recession being called in Aug. or Sept. And what's wrong with a little good old anarchy? There IS a difference between wanting it and being prepared for it. As for me, you can come take my stuff...I'll be your huckleberry!

Distrust anyone who wants to teach you something.

Well, scott, yes indeedy, sure is good to see the fine folks at GS still doing well. I guess that means the private airports in Connecticut and the caterers to the personal Carribean islands can count on remaining employed.

Meanwhile, back in the rest of the world, jobs keep declining, wages keep declining, hours keep declining, and benefits keep declining. Hey, I know, lets throw another trillion dollars at the banksters. That'll do it!

comes only to those responsible for everyone else's bad news, it's not really so good.

I think the "bailout" (handout) money should be considered a loan, burdened with the same usurious interest rates that the scoundrels use on us.

To be honest, we should have used the trillions we threw away on our richest criminals to underwrite a new publicly-owned banking system, if having a robust banking system is so essential to the functioning of our society that we can't do without it. These villains already proved empirically that they are incapable of constructing a non-corrupt, fault-tolerant banking system.

When working people fuck up that badly, they don't get another chance to do it again. Why should plutocrats?

that was paid back with interest. Part of a program that is fully being paid back. I defy anyone to identify any bad behavior on the part of Goldman. They did not have a derivatives exposure, their CDO portfolio was well calculated and supported, they did not carry 'toxic' assets, their contractual relations with AIG were properly hedged. They would have received 90% of the $12 billion exposure with AIG through hedges - which were voided BECAUSE the Fed took over AIG.

I defy anyone to identify anything Morgan Stanley or JP Morgan or Wells Fargo or US Bank did incorrectly. These are exceptionally well run enterprises.

WILLIAM SMITH, CHIEF EXECUTIVE OF SMITH ASSET MANAGEMENT IN NEW YORK

"They're terrific numbers...I think things are very fragile but they manage to make money in all environments which is what you're supposed to do."

"I think you're going to see absolutely enormous numbers coming out of the money centers, including Citigroup."

"The fact is that as you have stabilization and as credit spreads tighten, we still have a steep yield curve for the traditional banks and trading activity has exploded. These are things you need to happen. The toxic assets on the banks' balance sheets all of a sudden aren't toxic. Suddenly they have value. One by one you're going out and shooting all the bear arguments... The fact is, these aren't zombie banks, the toxic assets have proved not to be toxic -- and have become now undervalued."

"Goldman should be celebrated, not demonized."

I will add that you will see the managed money accounts, that has been sidelined, begin to enter this market now after strong second quarter results. There are mountains of money that has been waiting for two quarters of good news. Asian and Middle East money as well that will enter in the fall. In fact the decline of the past several weeks was more an anticipatory build of cash. There are blow out numbers coming from the markets right now. Alcoa, J&J, JP Morgan, Goldman all beating estimates.

was straight up theft right out of the sopranos.
The govt bailout of AIG went to GS to pay off bullshit bets they had placed on other people's derivatives plays.
you're defending criminal scumbags.

Hope it never grows up- I sorta enjoy it when the blowhards get a going -- stuff might not be 100% correct but it is entertaining and many times you scott lead the parade - I salute you

I'm an Agonist kid!

Distrust anyone who wants to teach you something.

LOL

do get me going on this.

When will this site grow up

When these people die of old age.

People fix their attitudes in a short period of their life time and do not grow mentally after it. It is the next generation which has different attitude. Optimists say that progress is made grave by grave. I don't see it as an inevitable necessity that the next generation would be wiser than the previous one.

I do believe this site went out on a huge limb last quarter pronouncing that the first quarter profits were a one off, and that reality would come crashing back in the second quarter.

"1Q profits are not real" was the financial lie of that time in the financial nonsense stories everywhere on the internet.

_{--Sell Texas to China!}

Goldman. I will await Numerian's comments (hopefully) on just where Goldman's profit centers were this last quarter. And then we will see. But if I know anything of Goldman's model, they apparently made a lot of money of the money that was lent them.

As for ScotJen61's comment about Buffett's money being with Goldman, I would submit to him that Buffett's terms for the loan he made Goldman--er, equity stake--were MUCH, MUCH, MUCH stiffer than those from TARP.

^{"All men's gains are the fruit of venturing."}

-Herodotus

I want to look at their balance sheets, especially their Level L3 assets. We will probably not get any current readings out of the Fed on their Maiden Lane I, II and III holdings, but that would tell us something about how the parked assets are doing, and whether these are ready to be shipped back to the banking community.

The only obvious thing to cite with today's earnings report is that Goldman Sachs earned a return on equity of 23%. It is not possible to earn that sort of return as a commercial bank, which is odd because GS became a commercial bank at the height of the crisis last fall. That was a very fortuitous move, because at that time the government was becoming the principal source of finance for the entire economy, and Goldman was in a position as a commercial bank to tap in directly to the Fed as the font of that capital.

What is obvious, therefore, is that Goldman Sachs is back to its old model as an investment bank, quasi hedge fund. Investment banks and hedge funds have only been able to generate returns in the 20% - 30% range through leverage. The commercial banks that tried to do so used the shadow banking system to create more assets than they could hold on their own balance sheet, but that system has collapsed. So it will be interesting to see how much leverage is on the GS balance sheet, and whether the other commercial banks can duplicate the Goldman returns by finding some other way to leverage themselves.

I can tell you this much. There are forces at the Fed and the Treasury very disturbed by these earnings. A Goldman spokesman specifically said today that the firm has never changed its model, and this is contrary to what many in the government were expecting and hoping. They want this model to disappear. So a showdown is brewing between some parts of the government and Goldman as to just how much "old behavior" is going to be tolerated. Geithner, Bernanke, and Summers are three powerful forces protecting Goldman and the old Wall Street culture, but ultimately they cannot buck some powerful people in the administration and Congress, and it would be a mistake to think that Wall Street and the federal government are completely in lock step on how commercial banks should act in the future.

Alongside this is a quasi-academic argument that is developing over the unhealthiness of financial firms that can routinely return 20% - 30% return on equity. Such firms double in size every 5 - 7 years and take an accelerating chunk of the nation's profitability to themselves, which is not invested in the nation's manufacturing or export capacity, but is instead squandered on bonus payments to a very small minority. It has not gone unnoticed that Goldman set aside 48% of its record profits as compensation for its 29,000 employees.

I did inhale.

Goldman Sachs earned a return on equity of 23%

Holy smokes!!! You are totally correct... a legitimate commercial bank could NOT have made those profits last year. But as you say, a hedge fund or investment bank could... so it is looking more and more likely that they just used taxpayer money for cheap leverage on risky deals.

I'll still try to reserve judgment on this... it is still statistically possible that they just got really lucky. But odds are low on that one.

Also, it's still not clear if these guys did anything technically illegal. Since they seem to have written the laws back in 1999, I'd wager ts very likely that they skated around the loopholes.

--
http://bexhuff.com
Of COURSE you can trust the US Government! Just ask the Indians.

Eight years of a Bush Administration that blocked innovation and science. The internet explosion was shut down by the Fed when they defunded Internet 2 in 2001, stem cell research was shut down, alternative energy research was shut down. All the new industries were ignored, Federal money was drained out of the system in warfare, military and oil subsidies. It was the height of idiocy, and banks looking for a market, as you say, identified housing as a place to park capital.

Science is coming back, innovation returning, Federal research money again coming online. Capital will have places to go. That was not capitalism that was broken, it was a broken Bush white house intent on warfare, wiretapping and torture. The bubble was Bush. Come 2011 if the spending and science can converge it will be the best period in American history.

everything is above board, then why this:

The Huffington Post's Ryan Grim has details on growing anger among Congressional Democrats at the refusal of the Treasury Department to provide even basic disclosure and transparency regarding the disposition of TARP funds. Indeed, Geithner is simply refusing even to acknowledge their inquiries, and it looks as though the Democratic-led Congress will impose a legal deadline for him to do so.

^{"All men's gains are the fruit of venturing."}

-Herodotus

Sorry to be so blunt. The question of how TARP money is being spent is meaningless. It is paid to the banks as equity, as a loan that supplements equity. This equity can then be leveraged within the bank as the ability to make loans. The money sits as equity against which the bank can leverage funds.

Tracking spending of equity money paid in as a loan is a stupid exercise. Anymore than tracking a loan inside of GE. Where did the money go? It changed light bulbs, paid salary, cleaned a floor, made a loan, bought tile in the entry, paid a janitor. You tell me when a dollar falls into a pile of other dollars that are all moving and being spent how one tracks one dollar through the financials of a company. It is a meaningless enterprise.

This has been the problem with this whole crisis. It has to be overseen by non-financial folk who don't understand shit from shinola. It would be like going in for surgery and the mayor and governor standing at the surgeons side with their opinion on what should be done. In this instance it has to be lived with.

You write:

It is paid to the banks as equity, as a loan that supplements equity. This equity can then be leveraged within the bank as the ability to make loans. The money sits as equity against which the bank can leverage funds.

Exactly, I want to know how much of my money was used as leverage so that Goldman could be profitable, how much it didn't need and then I want the difference taxed as a windfall profit. That ain't stealing someone's home, that's called good public policy and good use of taxpapayer's money.

Sorry you don't like the idea of disclosure, which makes it clear you never worked in banking. It's essential to the proper and orderly functioning of markets, as so many Nobel Economists have said. Pity you dislike such an antiquated idea, as well. You would have fit in with the Bushies just fine.

^{"All men's gains are the fruit of venturing."}

-Herodotus

Goldman should have just buried the bailout money in the ground and done nothing with it in the worst economic crisis in history. Why use it, if they do it will be confiscated.

All the banks should have done nothing. Not used it, because if they do then it gets confiscated, because when the folks at these institutions successfully allocate the capital that was leveraged within commodity markets, currency markets, and equity sales keeping the system going - which was the goal of the entire TARP program - everyone will throw up their hands and cry out. You were successful - it just proves how bad you are. You used the money wisely, you made good investments, you kept the stock markets going. How dare you!!!!

Had the banks known that, if they actually USED the money, they were loaned and told to use it would then be confiscated if they successfully used it.

Great reasoning. Why? Cause its ours. We loaned you that money. I have to remember never to borrow money from you.

public money that should be used for investments in public infrastructure is not "lent" to private speculators. In my world, the public purse is controlled by democratically elected representatives who practice appropriate oversight. In my world, "investment" means providing funds for projects that have a life of future productivity, not using the myth of efficient allocation to cream off useless rents.

Of course, in my world, I'm probably on the way to thinking I'm Napoleon, but I still try to use language in a way that means something other than a con-man's patter.

Not even the politicians in this crazy ranting 30-second sound bite world will go there. They know that a successful banking system is the core of this recovery. And they know it is WORKING.

I know scott you think all is well and we have turned the corner. I say we get to 13% unemployment. Wanna bet?

OwDow up 300 points in two days. Money management money comes off the sidelines. 2nd quarter GDP no more than-.5% and 3rdquarter no more than positive 2.6%. Unemployment no higher than 10.4% with lots of bashing of teeth. Tired of being right.

Dow up 300 points in two days. Money management money comes off the sidelines. 2nd quarter GDP no more than-.5% and 3rdquarter no more than positive 2.6%. Unemployment no higher than 10.4% with lots of bashing of teeth. Tired of being right.

I'm tired of being raped by weasels.

I made a correct bet on the direction of the market, then lost most of what I had in the game when Uncle Hank turned over the chessboard. That's thug checkmate, I guess.

My tentative guess is that such episodes of naked manipulation are why the market is going to remain broken for a long time. Players will dash for the exits at the merest provocation, because they know how direly the game is rigged. They just want to grab a fistful off the table and run before the rules change again.

mind Ron Paul sitting in on my surgery. (wink,wink,nudge,nudge)

Distrust anyone who wants to teach you something.

Their 2nd Quarter revenues are broken down this way:

Investment Banking: $1.44 billion
Trading and Principal Investments: $10.78
Asset Management and Securities Services: $1.54 billion

They have three categories of expenses: Compensation, Non-Compensation, and Taxes.

They have no category for loans on their balance sheet, which means they are still an investment bank, not a commercial bank. They do have net interest income but it is not highlighted as meaningful.

While they provide a modicum of information on Tier I Capital and Basel I and II risk weighted assets, the details are only in footnote 8. There is no extensive discussion of their capital as you would find with a commercial bank. It would be useful because their risk weighted assets are smaller than their total assets of $890 billion, which is counter-intuitive for a bank and contrary to the whole purpose of the Basel Accords.

Of course, no one should expect Goldman Sachs to look like a bank overnight, but it would be expected to see some major effort to convert to a commercial bank like their competitors. There is no such evidence.

Whatever money they got from the government, it didn't go to make loans, tile an entry, or pay a janitor. It went for speculation. The VAR for the quarter jumped 33% to $245 million, up from $184 million a year ago before the crash. By any meaningful comparison, GS is a far great speculator than Citi, JPM Chase, HSBC, UBS or other competitors that are true banks.

but your sense of history is seriously lacking. Remember the dot.com bubble? Ever heard of any of the other speculation bubbles throughout history?
It's a simple fact of monetary systems. Everyone wants as much as possible. Money can only be effectively invested by loaning it to someone else. Supply and demand. The problem is that those with money tend to have greater influence and political power than those borrowing it. So the supply of investment capital tends to naturally outgrow the base of borrowing and you have a good old fashioned credit crash. Only this time around, it's had the full advantage of modern technology and advanced math to grow beyond anyone's wildest imagination. What everyone overlooks is that government debt is central to this bubble. For one thing, where would all the money borrowed by governments have been invested otherwise? Hi tech? Real estate? Derivatives? Now that I mention it, what are derivatives? In their simplest sense, they are a form of pari-mutual wagering. That is everyone wagering against everyone else, not just the house. What this means is that if I bet you 5 dollars it will be sunny a week from today, that's ten dollars invested. Now we both go and hedge our bets the other way, it's twenty dollars invested. Now it seems a zero sum game in the long run, because nothing of value is created, but if you're the investment house skimming a bit off the top and you use these as filler for slightly more worthy investments, it makes sense. Eventually though, when no one wants to play the game anymore and wants their money back, much of the notational wealth simply disappears as these losing leveraged bets cannot pay up. There is no real difference between what is legally happening with the markets and a Ponzi scheme. Later investors pay earlier investors, until the well of suckers runs dry. Meanwhile those running the sting are living high on the hog.
Just because it has been going on for longer than the collective attention span doesn't mean it's not a bubble.

I still prefer to hold gold but growing a garden is great advice.

isn't a bad idea. You can't exactly go to the grocery store and expect the clerk to give you change on that gold coin. On the other hand, so much money is virtual that when the system does really start to fray at the edges, there will likely be discounts for using cash. Even if you go a precious metals dealer to cash in a gold bar, he likely won't have the cash on hand to pay and have to give you a check.

Scotjen,

Look at the physics and the history of human civilization, not just the last fifty years in this country. Things happen and they can happen in a big way. The only way the government can pay off the debt it is taking on is through taxes on a much healthier and larger economy and much of our economy is based on consumer spending that was based on credit. How far up would gas prices go, if it does come back. Fact is, we life on a finite planet and occasional squeezes do happen.

... is very different in the US than for a German. In my country the big crisis also always were accompanied by massive inflation. It was very eye opening to talk to my grandmother how this totally debilitated the very foundation of commerce (i.e. the prices of goods had to be changed daily, you tried to exchange your money into something tangible as soon as possible - cigarettes turned into ersatz-currency. Foreign coin was king.

I fortunately only experienced this looking from the outside in after the iron curtain came down. Freshly graduated from high school I drove to Prague with a couple of friends. There you did not exchange your D-Mark at the bank but on the black market on the street. Gave you twice the rate. We were students with very little money but we could live like kings back then. At one point I bought a round of beer for an entire crowded bar. Hardly made a dent in my wallet. Did cost me about as much as one beer back home.

I am not particular concerned about ever being able to exchange gold or silver for goods. Surplus value needs a storage medium, with defunct banking and currency precious metal will again be the practical choice.

Not that I expect this mad max scenario to be very likely but I am with Buffet in that I expect inflation to come back with a vengeance:

"“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,”

When inflation means running the printing presses like made, the paper is worthless. This time I suspect a significant gap will open between virtual money and the much smaller amounts of actual cash in circulation. I certainly don't expect a Mad Max scenario either, or I would be thinking more in terms of gold. It's more a matter of analyzing the forces at work to understand where the weaknesses and strengths are. Frankly, living outside of Baltimore, the local economy is stable and I expect it to stay that way. Baltimore kind of serves as Washington's side door, so there is just lots of unpublicized stuff, from banking, to medical, to military going on, which keeps the rest of the economy stable.