Something's Wrong

[boont]

"shares of Goldman Sachs fell almost 4 percent, to $139.25, after the company reported that its profit more than doubled, and Lehman Brothers, which reported a record profit on Monday, fell 4 percent yesterday, to $59.42, after dropping 5 percent on Monday.

"It's one thing if you make mistakes and the stock goes down," said Mr. Black, president of Delphi Investments, "but when you are shooting the lights out and the stock is getting drilled every day, that is a bear market."

 

[2B]

When the market wants to go down "good news" is bad and "bad new" is even worse. The spin I heard was "investors are concerned that the unexpectedly good earnings will not be able to be sustained." In a few days the "investors" will suddenly realize the new P/E and jump on it like.....

 

[justin]

that's the best kind of drop in stock prices - one where the fundamentals haven't changed but the price drops. It's just going on sale. When you buy the stock, you're getting the same thing, just cheaper.

 

[Nords]

"shares of Goldman Sachs fell almost 4 percent, to $139.25, after the company reported that its profit more than doubled, and Lehman Brothers, which reported a record profit on Monday, fell 4 percent yesterday, to $59.42, after dropping 5 percent on Monday.

Nothing wrong with taking a profit.

Especially near the end of a seasonality quarter with options expirations and other volatility-enhancing events influencing investor emotions.

 

[cute fuzzy bunny]

The spin I heard was "investors are concerned that the unexpectedly good earnings will not be able to be sustained."

Lets see...a quick pass through the spin degenerator says the real answer is:

"We dont know"

 

[justin]

Lets see...a quick pass through the spin degenerator says the real answer is:

"We dont know"

So that sounds like a BUY BUY BUY! to me. Or are you saying sell sell sell!?

 

[cute fuzzy bunny]

Oh, its "buy!"...just probably not now.

I'll put you on the "buy!" notification list right behind dantien if you'd like!

 

[justin]

Oh, its "buy!"...just probably not now.

I'll put you on the "buy!" notification list right behind dantien if you'd like!

That's ok. I've got my own predictive indicators I look at. They are 100% correct. It's just that timing is an issue. They are only reliable to +- 1 day unfortunately.

 

[saluki9]

I don't think the issue with Goldman relates to the market as a whole.

GS earns an increasing % of their profits from proprietary trading. They aren't required to disclose many of the details about this trading and the potential exposures it creates.

This makes it a very hard company to analyze, and therfor makes their spectacular profits less so.

 

[justin]

That's ok. I've got my own predictive indicators I look at. They are 100% correct. It's just that timing is an issue. They are only reliable to +- 1 day unfortunately.

CFB,

My predictive indicators reveal that yesterday, 6/14/06 would be a very good day to get into the market. Hope that helps some. Your welcome in advance!

 

[cute fuzzy bunny]

Just wait until next week. You might change your mind...

 

[Leonidas]

Could you say this was a case of buying on the rumor and selling on the news?

I’ve been doing a lot of reading about why and when the “Smart Money” on Wall Street buys and sells. Looking back at the last week or so I came up with some reasons why they would have been concerned about future revenue streams. I would be interested to hear what some of you think of my attempt at analysis.

GS is divided into different philosophical camps, like the bankers vs the securities guys. A lot of their profits in the past year have been from the securities side of the house. But, the ability to keep that going in the near future had some doubt cast on it Monday when Lehman’s announced their quarterlies with some qualifiers. Basically, they said last quarter was the easy one for equities, but the next one is going to be difficult to predict. About 60% of GS’s profits right now are coming from the trading side of the house. GS started falling that same day, as did Lehmans.

Specific to Goldman Sachs is the fact that their CEO is leaving for Treasury and the President, Blankfein, is moving into his spot. That’s not the big worry for the “smart money” as much as who Blankfein’s replacement is going to be. What philosophical camp the new president comes from can have a dramatic impact on what the company’s philosophy on doing business will look like.

The banking side of the house had a decent year but there have been a few bumps in the road. They’ve never had a problem paying debt, but they’ve also never had as high a debt to equity ratio as they do now. Again, something to be concerned about. A few more bumps in the investment banking side and a crappy quarter for the market investors and who knows what might happen. Like Saluki said, the securities side of the business is a little murky to start with and when their competition starts pointing out that the easy day was yesterday the future gets even murkier.

So, simply put I think that the wall streeters look at GS and see a company that has raised its dividend by 40% in a year and now the revenue stream that supports that is possibly threatened. It may not be a credible threat, but there is a blip on the radar screen so to speak. They don’t want to be left holding the bag if everybody else bails so they move out of their positions.

The way I see the so-called smart money guys is that they’re like a couple of gunfighters in the old west. Each trying to anticipate the other guy’s move so they can try and beat him to the draw and pull the trigger first. For us long term kind of guys it can be unnerving, especially when you’re trying to move in or out of a stock. But the rest of the time the smart money crowd is just an annoying noise that we have to put up with.

 

[cute fuzzy bunny]

The analogy works until you reveal the truth that very few gunfights occurred the way they're shown in the movies. When they did, usually both guys died. Maybe thats the punchline.

Very few of the big name gunfighters engaged in many gunfights, and almost all of them were shot in the back at some point. Thats a good punchline too.

 

[boont]

Although I was ignored, I was certainly correct in my post, "Somethings Wrong". By January 3r, of 2007 banks started failing. Lehman Brothers then nearly took down the world economy. My post was just months before this and centered on the banks.

 

[foxfirev5]

Congrats on the great call. What moves did you make to profit from this observation? And of greater importance, what can we do now. Thanks

 

[Car-Guy]

Although I was ignored, I was certainly correct in my post, "Somethings Wrong". By January 3r, of 2007 banks started failing. Lehman Brothers then nearly took down the world economy. My post was just months before this and centered on the banks.

Are you saying something is wrong now ? If so what? Please just the top ten things..

 

[Out-to-Lunch]

That's a long time to hold an "I told you so" grudge...

 

[Gumby]

You were right. The warning signs were legion. https://www.early-retirement.org/fo...cash-uut-refinancings-22533-2.html#post419786

 

[frayne]

Please tell me this isn't déjà vu all over again. Oh, well, we've had a pretty good fifteen year run so I guess it's time for the rubber band to snap back and start over !

 

[target2019]

Although I was ignored, I was certainly correct in my post, "Somethings Wrong". By January 3r, of 2007 banks started failing. Lehman Brothers then nearly took down the world economy. My post was just months before this and centered on the banks.

Do you mean the world ignored you, or people on this forum? Maybe both?

Companies, and that includes banks, do fail in our system. So we should expect that to happen, but less so where the company holds our savings and we expect safety.

The bond schemes of the great recession seem to be a different kind of stupid than what we saw with SVB and others.

 

[copyright1997reloaded]

Do you mean the world ignored you, or people on this forum? Maybe both?

Companies, and that includes banks, do fail in our system. So we should expect that to happen, but less so where the company holds our savings and we expect safety.

The bond schemes of the great recession seem to be a different kind of stupid than what we saw with SVB and others.

This one (in retrospect) will be quite "interesting". The Fed has stress tests that didn't test for increased interest rates (only falling/depressed rate scenarios) and encouraged "safe" investments in low-yielding treasuries which could be kept on institution books using HTM methodology.

Unbelievable as it seems now, the Fed's most stressful scenarios had the CPI running at sub-2% all the way into 2025.

Link (best I could find not behind a paywall): https://www.yahoo.com/lifestyle/fed-stress-tests-failed-stop-110011273.html

We have government institutions that always seem to be preparing for the last war, not the next one.

 

[dixonge]

Although I was ignored, I was certainly correct in my post, "Somethings Wrong". By January 3r, of 2007 banks started failing. Lehman Brothers then nearly took down the world economy. My post was just months before this and centered on the banks.

Goldman Sachs almost doubled from June 2006 to Oct. 2007.

Which banks failed in Jan. 2007? I can't find that on Google...

 

[DrRoy]

Stock prices do not move because of absolute changes in profits. They move because the announced profits are better or worse than expected. If GS profits were up 100%, but the estimate was 150%, the stock will fall.

Similarly, if a company loses money, but loses less than expected, the stock will rise.

 

[Gumby]

Goldman Sachs almost doubled from June 2006 to Oct. 2007.

Which banks failed in Jan. 2007? I can't find that on Google...

As I recall, the financial crisis, which had been brewing for a couple of years, started with the failure of some non-bank mortgage lenders early in 2007. Then, over the summer, some Bear Stearns and BNP hedge funds started to fail. I think the first actual banks to fail were in the late summer or fall of 2007. I recall Northern Rock in England, but I'm sure there were more. There may have been bank failures in Iceland about that time, but my memory is less clear on that.

 

[Surewhitey]

As I recall, the financial crisis, which had been brewing for a couple of years, started with the failure of some non-bank mortgage lenders early in 2007. Then, over the summer, some Bear Stearns and BNP hedge funds started to fail. I think the first actual banks to fail were in the late summer or fall of 2007. I recall Northern Rock in England, but I'm sure there were more. There may have been bank failures in Iceland about that time, but my memory is less clear on that.

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