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Items Tagged With GS

Financial Stocks: Take Sector Risk, Not Specific Risk at this Point
Written By: David Neubert
2008-03-10 14:24:03
A friend who must remain anonymous asks:

"Sent you a message on your Facebook acct...you adding to Merrill Lynch (MER - $42.97)?  Can't get a read on the big pullback..do the institutional traders know something we dont?"

I'm not adding to MER and I'm actually out of it for a while.  My stop loss rule got me out just after I wrote about Thain. (Sadly, I did not apply that same stop loss rule to some other stocks recently).

The institutional traders are selling everything financial.  There is nothing special happening with MER that isn't happening with Lehman (LEH - $42.03 ), Goldman (GS - $160.92), Citigroup (C - 20.16), Morgan Stanley (MS - $40.62) and the rest.  And if there is I'm not sure what it is.  Unless you have really done a lot of research and figured out something special about specific financial companies, I'd rather play the financials using the financials iShare (XLF -23.66) at this point.  I'd rather not take the specific risk of any one company at this point.  If you believe financials are cheap you might as well buy them all.  The fund provides diversification and thus is much less risky.  I don't know if any of these firms are going under but I'm sure they are all not.  And when they bounce back up they will NEARLY all bounce together.


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I Will Buy Investment Banks as They Buy the Democrats
Written By: David Neubert
2008-03-21 11:30:55
I'm looking for Wall Street to do well no matter who wins the election this year.

Three factors will keep the cash register ringing for investment banks:
1. Demographics of baby-boomers saving for retirement.
2. The cheaper dollar, meaning that foreign firms will be on a shopping spree for U.S. companies, which will help M&A advisory.
3. Mortgage portfolios that have been marked to market. When liquidity retuns to this market, portfolios of mortgages will start to show profits.

It would seem that Wall Street also hasn't forgotten that it is the second most regulated industry in the U.S. (after nucular energy) and that it needs to keep track of where its bread is buttered. Banks are betting that the butter will be spread by a Democrat in 2009.

On the next pullback, which I think is coming once all the shorts are done covering, I'll be looking to buy the investment banks cheap again. Look out for U.S. firms like Goldman Sachs (GS - $179.63), Lehman (LEH - $48.65), Morgan Stanley (MS - $49.67) and Merill Lynch (MER - $46.71) to continue to do well. I own the investment banks directly, but rather than pick individuals, the Exchange traded fund (IAI - $39.43) works well as a proxy.


Bread and Butter
Photo:ebby, Creative Commons, Flickr
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Is the Sky Falling? (Continued)
Written By: Mark Bershatsky
2008-03-27 11:14:40
In a previous post, I had mentioned how our current financial crisis has rippled across other sectors of the U.S. economy and overseas, sending noticeable shock waves across global financial markets. The critics and "doom and gloomers" are all lined up and waiting to unleash a heavy dose of "I told you so" to investors that will supposedly get burned if they don't allocate their money properly, however I think much of this pessimism is overhyped.

The Bubble
Photo:tlindenbaum, Creative Commons, Flickr

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Level 3 Assets at Big Brokers - Not as Scary as People Say
Written By: David Neubert
2007-12-14 12:08:58
Felix Salmon at Portfolio.com dug up the ratios for level 3 assets at each major Wall Street broker.  This ratio is seen by some to be "scary."  I don't find it as scary as some.  The assets in Level 3 are mark-to-model.  Some of these could include complex derivatives for which there is no market that exactly hedges assets, hence the high risk in panic liquidation but not so much in cash flow. Their markets are worried about some of those with the highest ratios of Level 3 assets to capital.  Personally, I trust the risk managers at firms like Goldman Sachs (GS - $212.89), Morgan Stanley (MS - $50.88) and Lehman Brother (LEH - $63.03) to be able to correctly value these situations.  I do believe the market will continue to focus on this ratio, which will encourage firms to try to move more assets out of this category.


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Looking for Profit Oppurtinities in Falling Financials with Hedge Fund Manager Joe Capone
Written By: David Neubert
2007-07-26 16:15:04
Home For Sale By Broker signOne nice thing about being a blogger who was a successful trader and is still an active investor/trader means that when I ask a hedge fund manager some questions, he asks me some too.  We also talk about our positions.  Yesterday I was lucky enough to get a bit of Joe Capone's time while he was listening to earnings-related conference calls.  Joe is the owner and portfolio manager at Smart Financial Partners - a long/short hedge fund dedicated to the financial sector.  I always value his opinions and find his analysis methodology completely value-driven. He is not tricked by market momentum, technicals or emotion.  In other words, he's my kind of manager. 
 
Multi-tasking is typical on Wall Street. People talk on the phone, watch a screen or two, read research and carry on several Instant Messenger conversations at once.  Following is our discussion (after the closes yesterday and today) of sub-prime mortgages, the market decline in the financial sector, Goldman Sachs (GS) and CountryWide Financial CFC):
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