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Posts Tagged ‘Goldman Sachs’

Toppy Tuesday – GS and JPM Reap the Rewards of Market Manipulation

$9 Billion Dollars!  

That's how much Goldman Sachs (GS) took in in revenues in the second quarter.  They then used $1.25Bn of it (14%) to buy back their own stock at an average cost of $161 per share and reduced the total number of shares by 17% which allowed them to "beat" estimates by earning $4.10 per share vs $3.70 last year (10.8% more).

That's right – it's a scam!  The same scam GS advises it's client companies to do with their own stocks to APPARENTLY inflate their earnings while, in reality, earnings are fairly flat.  The same scam, incidentally, GS had the entire country of Greece do – before that whole thing collapsed and took the Global economy with it a few years ago!  

By trading heavily from inside this fishbowl, GS was able to bump up their Investment and Lending Revenues by 46%, to $2.07Bn and all those little moves allowed GS employees to take 46% of the profits in compensation – up 6% from last year at $3.92Bn, which is really cool as GS only has 32,600 employees – so that's $1.2M per employee but, somehow, I think the top 326 (0.1%) get a bit more than the other 32,274, don't you? 

You would think GS shareholders would be angry that 50% of their revenues go to compensation.  After all, a hedge fund only takes 20% of the profits as salary (and that plus 2% of AUM also covers the cost of all operations) but GS, after taking $3.92Bn, drops just $2Bn to the bottom line for their investors or, in other words, GS is like a hedge fund that takes 66% of the profits!  

Still, with a p/e of 10, that 33% bone they throw investors is enough to keep them happy but, as with everything else, consider the conditions under which GS is able to make $6Bn in salaries and profits on $9Bn in revenues – Endless Free Money from the Fed, a stock market fueled by Mergers and Buybacks using the same Free Money, massive market manipulation by Central Banks around the World – many of whom are run by former GS employees and most
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“The People Vs. Goldman Sachs” – Taibbi’s Magnum Opus

Courtesy of Tyler Durden

By Matt Taibbi in Rolling Stone Magazine

The People vs. Goldman Sachs

They weren’t murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.

Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn’t leave much doubt: Goldman Sachs should stand trial.

The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma. Their unusually scathing bipartisan report also includes case studies of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — "a million fraud cases a year" is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin’s small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street’s aristocratic impunity and prosecutorial immunity produced since the crash of 2008.

To date, there has been only one successful prosecution of a financial big fish from the mortgage bubble, and that was Lee Farkas, a Florida lender who was just convicted on a smorgasbord of fraud charges and now faces life in prison. But Farkas, sadly, is just an exception proving the rule: Like Bernie Madoff, his comically excessive crime spree (which involved such lunacies as kiting checks to his own bank…
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Goldman Traders Made $100 Million In A Day 68 Times Last Year

Courtesy of Joe Weisenthal of Business Insider, Chart of the Day   

The Goldman 10-K is out!

Here’s a look at how it did trading wise. It had 68 days of making more than $100 million from trading.

It only lost money on 25 days for the year.

chart of the day, goldman sachs net revenue daily trading 2010, feb 2011 


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The Market is a Whole Rigged Job

Yes, we know, and Bernie Madoff agrees; Timothy Naegele has thought so all along. Who’s Timothy Naegele? Read my interview with him to learn more. – Ilene 

Bernie Madoff: The Market Is A Whole Rigged Job, And There’s No Chance That Investors Have In This Market

Courtesy of Timothy Naegele

Convicted swindler and consummate narcissist Bernard Madoff is serving a 150-year sentence at the Federal Correctional Institution in Butner, North Carolina for his $65 billion Ponzi scheme. He was interviewed by New York Magazine, and its terrific article states in pertinent part:

From the beginning, Madoff . . . had a chip on his shoulder, along with a certain contempt for the industry he’d chosen. “It was always a business where you had to have an edge, and the little guy never got a break. The institutions controlled everything,” he said in a voice surprisingly thick with emotion. “I realized from a very early stage that the market is a whole rigged job. There’s no chance that investors have in this market.

. . .

At first, Madoff ground out a modest but steady income on the scraps of business tossed his way by Goldman Sachs and Bear Stearns, action that was too much trouble and too little profit for them. “I was perfectly happy to take the crumbs,” he said. Madoff was a market-maker, a middleman between those who wanted to buy and sell small quantities of mostly bonds—odd lots. “It was a riskless business,” he said. “You made the spread,” buying at one price and selling at a higher one, and in those days the spreads could be substantial, 50 or 75 cents or even a dollar a share. Madoff increased his profits by trading on the side.

. . .

Madoff wanted to grow his trading business, and a good way to do that was to expand his market-making business. But that meant going up against the New York Stock Exchange, the heart of the club. At the NYSE, a few firms controlled market-making, executing most large trades while getting rich on the spread. Madoff was one of the first to see that technology could match buyers and sellers more efficiently and cheaply than a human trader shouting orders amid a blizzard of paper on the floor of the exchange. By 1970, Madoff had hired his brother, Peter,


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Geithner’s Crimes Through AIG – Will The Truth Come Out

Courtesy of The Daily Bail 

Geithner’s Crimes Through AIG – Will The Truth Come Out

Video – Max Keiser & Stacy Herbert

At issue is Tim Geithner’s criminal behavior in orchestrating the AIG bailout to favor Goldman Sachs through counterparty payouts at par, and then the massive cover-up.

Further reading…


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“If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders”: Josh Rosner

Courtesy of The Daily Bail 

"If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders": Josh Rosner

 

 

 

Our favorite quotes so far from today’s FCIC report and reaction from analysts…

  • "Less than a 3 percent drop in asset values could wipe out a firm." – FCIC Report
  • "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public." – Josh Rosner
  • "The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
  • "At the time, the idea was the sucker could go down because there wasn’t enough liquidity in the system, money wasn’t moving, and you could see a domino effect," said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.  In reality, she contends, those fears were overblown: There was ample money in the financial system.  Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
  • The details in the commission’s report leave Goldman "naked," she added. "It doesn’t have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that’s doing stupid credit stuff is you let them eat it, but that didn’t happen in the bailout."
  • "If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders." – Josh Rosner

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Settling Prosecutions For Pennies on the Dollar Is a Type of Bailout

Courtesy of Washington’s Blog 

The following is an excerpt of my much longer roundup of the many covert ways the government is bailing out the giant banks.

Fraud As a Business Model

If you stop and think for a moment, it is obvious that failing to prosecute fraud is a bailout.

Nobel prize-winning economist George Akerlof demonstrated that if big companies aren’t held responsible for their actions, the government ends up bailing them out. So failure to prosecute directly leads to a bailout.

Moreover, as I noted last month: 

Fraud benefits the wealthy more than the poor, because the big banks and big companies have the inside knowledge and the resources to leverage fraud into profits. Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market. The giants (especially Goldman Sachs) have also used high-frequency program trading (representing up to 70% of all stock trades) and high proportions of other trades as well). This not only distorts the markets, but which also lets the program trading giants take a sneak peak at what the real traders are buying and selling, and then trade on the insider information. See this,thisthisthis and this.

Similarly, JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country’s derivatives risk, and 96% of the exposure to credit derivatives. They use their dominance to manipulate the market

Fraud disproportionally benefits the big players (and helps them to become big in the first place), increasing inequality and warping the market.

[And] Professor Black says that fraud is a large part of the mechanism through which bubbles are blown.

***

Finally, failure to prosecute


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“The Fed No Longer Even Denies that the Purpose of Its Latest Blast of Bond Purchases … Is To Drive Up Wall Street”

Courtesy of Washington’s Blog

The stated purpose of quantitative easing was to drive down interest rates on U.S. treasury bonds.

But as U.S. News and World Reported noted last month:

By now, you’ve probably heard that the Fed is purchasing $600 billion in treasuries in hopes that it will push interest rates even lower, spur lending, and help jump-start the economy. Two years ago, the Fed set the federal funds rate (the interest rate at which banks lend to each other) to virtually zero, and this second round of quantitative easing--commonly referred to as QE2--is one of the few tools it has left to help boost economic growth. In spite of all this, a funny thing has happened. Treasury yields have actually risen since the Fed’s announcement.

The following charts from Doug Short update this trend:

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Of course, rather than admit that the Fed is failing at driving down rates, rising rates are now being heralded as a sign of success. As the New York Times reported Monday:

The trouble is [rates] they have risen since it was formally announced in November, leaving many in the markets puzzled about the value of the Fed’s bond-buying program.

***

But the biggest reason for the rise in interest rates was probably that the economy was, at last, growing faster. And that’s good news.

“Rates have risen for the reasons we were hoping for: investors are more optimistic about the recovery,” said Mr. Sack. “It is a good sign.”

Last November, after it started to become apparent that rates were moving in the wrong direction, Bernanke pulled a bait-and-switch, defending quantitative easing on other grounds:


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The Shadow Banking System: A Third Of All The Wealth In The World Is Held In Offshore Banks

Shadow Banking and Tax Avoidance – privileges for the ultra-wealthy…  Ilene 

Courtesy of Michael Snyder of Economic Collapse

You and I live in a totally different world than the ultra-rich and the international banking elite do.  Many of them live in a world where they simply do not pay income taxes.  Today, it is estimated that a third of all the wealth in the world is held in offshore banks.  So why is so much of the wealth of the globe located in places such as Monaco, the Cayman Islands, Bermuda, the Bahamas, and the Isle of Man?  It isn’t because those are fun places to visit.  It is to avoid taxes.  The super wealthy and the international banking elite think that it is really funny that our paychecks are constantly being drained by federal taxes, state taxes and Social Security taxes while they literally pay nothing at all.  These incredibly rich elitists make a ton of money doing business in wealthy western nations and then they transfer virtually all of their profits offshore where they don’t have to contribute any of it in taxes.  It works out really great for them, but it sucks for the rest of us.

It is estimated that approximately $1.4 trillion is held in offshore banks in the Cayman Islands alone. According to an article in Forbes magazine, there is a total of approximately 15 trillion to 20 trillion dollars in offshore bank accounts, brokerage accounts and hedge fund portfolios.

A recent article in the Guardian stated that a third of all the wealth on the entire globe is held in offshore banks and that the vast majority of international banking transactions take place in these tax havens….

On a conservative estimate, a third of the world’s wealth is held offshore, with 80% of international banking transactions taking place there. More than half the capital in the world’s stock exchanges is "parked" offshore at some point.

All of the biggest banks in the world are involved in playing this game.  All of them have big branches in these various tax havens.  All of them work very hard to ensure that the tax burdens on their ultra-rich clients are as light as possible.

Nobody knows for sure how much money big governments around the globe are missing out on from all this tax avoidance, but everyone agrees the number…
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After Nearly Two Years Of Searching, TrimTabs Still Can’t Figure Out Who Is Buying Stocks

Courtesy of Tyler Durden of Zero Hedge 

A year after Charles Biderman’s provocative post first appeared on Zero Hedge, in which he asked just who is doing all the buying of stocks as the money was obviously not coming from retail investors (and came up with one very notable suggestion), today Maria Bartiromo invited the TrimTabs head once again (conveniently in CNBC’s lowest rated show, during Christmas Eve eve, at a time when perhaps 5 people would be watching) in an interview which disclosed that after more than a year of searching, Biderman still has no idea who actually buying. In response to Bartiromo’s question if the retail investor, who left after the flash crash (thank you SEC), Biderman responds what every Zero Hedger has known for 33 weeks: "Retail investors are not coming back to the US. Those investors that are investing are buying global equities and are buying commodities. We are seeing lots money going into commodity ETF funds: gold, silver…" and the even more unpleasant summation: "individuals have been selling, companies are net selling, insider selling and new offerings are swamping any  buyback and any cash M&A activity since QE 2 was announced. Pension funds and hedge funds don’t really have that much cash to invest. So what nobody’s asking is what happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don’t know what is going to happen...When I was on your show a year ago I was saying the same thing: we can’t figure out who is doing the buying it has to be the government, and people said I was nuts. Now the government is admitting it is rigging the market." Cue Bartiromo jaw dropping.

As for the simple math of where the money is actually going:

"Money flows come out of income, take home pay of everybody plus money that came from real estate is down about $1 trillion a year. It peaked in the 3rd quarter of 2008, at $7 trillion, that’s take home pay for everybody who pays taxes plus the money that came from real estate. It has now bottomed at $5.9 trillion. We are still down $1.1 trillion in money that people have to spend each year, that 16%. And some of the money that is leaving equity markets we think is going to pay bills."


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Zero Hedge

Monday Humor: Now Available With A 30 Year Fixed-Rate FHA Loan

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

"Because moar is always betterer..."

 

h/t @Stalingrad_Poor

 

It seems the reviewers had more to say...

 

And the Q&A also provided some insight...

 

So sure enough - too ...



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Phil's Favorites

Jaguar Inflation - A Layman's Explanation of Government Intervention

Jaguar Inflation - A Layman's Explanation of Government Intervention

By Elliott Wave International

I am tired of hearing people insist that the Fed can expand credit all it wants. Sometimes an analogy clarifies a subject, so let's try one.

It may sound crazy, but suppose the government were to decide that the health of the nation depends upon producing Jaguar automobiles and providing them to as many people as possible. To facilitate that goal, it begins operating Jaguar plants all over the country, subsidizing production with tax money. To...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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OpTrader

Swing trading portfolio - week of December 22nd, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Chart School

Have a Great Christmas and New Year! Small Caps - It's Over To You....

Courtesy of Declan.

I will be keeping posts to a minimum until the New Year. Friday finished with a bit of a high volume flourish, which added a nice gloss to Thursday's big gains.

The Russell 2000 managed to go one step further with a breakout. Watch this index over the coming days; if it can hold the move it will bring other indices with it. The Russell 2000 has under-performed (relatively) all year, and if bulls are to maintain a broader market rally into a sixth year then the Russell 2000 will have to do most of the leg work. As an important side note, the Russell 2000 turned net bullish technically. The flip-side is to watch for a 'bull trap', but even here, this might instead widen the recent trading range handle as major resistance lives at 1,210/15 not at 1,190.

...

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Pharmboy

2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Digital Currencies

Chart o' the Day: Don't "Invest" in Stupid Sh*t

Joshua commented on the QZ article I posted a couple days ago and perfectly summarized the take-home message into an Investing Lesson. 

Chart o’ the Day: Don’t “Invest” in Stupid Sh*t

Courtesy of 

The chart above comes from Matt Phillips at Quartz and is a good reminder of why you shouldn’t invest in s...



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Sabrient

Sector Detector: Energy sector rains on bulls' parade, but skies may clear soon

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Scott Martindale of Sabrient Systems and Gradient Analytics

Stocks have needed a reason to take a breather and pull back in this long-standing ultra-bullish climate, with strong economic data and seasonality providing impressive tailwinds -- and plummeting oil prices certainly have given it to them. But this minor pullback was fully expected and indeed desirable for market health. The future remains bright for the U.S. economy and corporate profits despite the collapse in oil, and now the overbought technical condition has been relieved. While most sectors are gathering fundamental support and our sector rotation model remains bullish, the Energy sector looks fundamentally weak and continues to ran...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

...

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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