GS CRUSHES ESTIMATES, RAISING $5B
As expected, Goldman Sachs is announcing a huge beat in earnings and a capital raise. Expect to see the same sort of announcements out of the other financials. I still firmly believe the banks are taking advantage of fishy accounting and the AIG trading desk to help drive earnings higher. All of this is an attempt to fool private investors into providing capital because the government is concerned the PPIP and TALF plans will fail to achieve their goals of shoring up bank balance sheets.
Of course, readers of TPC knew this was coming early last week (more here). The fact that so few investors have caught on to this effective scam is remarkable. To the government’s credit, I must admit – this is a very clever litte scheme to try to raise capital from the public. It goes like this: change the accounting rules, funnel funds to the banks via AIG boosting Q1 earnings, announce the PPIP, announce the stress tests, leak the results and the fact that all banks will pass and then let the earnings do the talking. Then hit the market with billions in capital raises so that the banks can raise capital from the public (something they are now concerned about being able to do through their various taxpayer programs and let’s not forget that the possibility of raising more money from Congress is entirely out of the question now that taxpayers are fully onto the scams that are occurring at their expense). Tim Geithner is a clever man, but it’s only a matter of time before the tide goes out and the banks are again exposed as being undercapitalized government run ponzi schemes.
TPC, thanks for all your work. I don't know how you connect the dots so far in advance of real time events, but I hope you know it's really appreciated by all of us regular folk. Keep up the great work.
TPC Reply:
April 13th, 2009 at 9:08 PM
I'm glad to help.
What is your real background? you claim to be a former FA at ML, but you seem way too smart for that sort of a crap job. What is your real background?
TPC Reply:
April 13th, 2009 at 9:09 PM
Nothing on the "about us" page is false. Some people at the big banks are smarter than they get credit for. I happened to learn a lot from them….
yoyo rider Reply:
April 13th, 2009 at 9:42 PM
TPC, You have been spot on with your 'capital raise' analysis. I wonder just which investors think that banks are really out of the muck and would be willing to part with their money on earnings beat for a quarter. I almost wish I had put a little roulette money around your bottom call and was ready to get out right about now. There has been more than a 3x move in most of the bank stocks. You still think there will be a chance to short with all the government interference?
TPC Reply:
April 13th, 2009 at 9:56 PM
Yoyo,
I'm now thinking that the market could remain buoyant for the remainder of April. The problem is that the banks announce earnings for the next 2 weeks and no one in their right mind wants to get short in front of that. I still think we're likely to see "better than expected" earnings from the majority of the banks. Then we'll get an announcement on the stress tests at the end of the month. I wouldn't be shocked if that announcement is one of these grand Sunday evening events where the Fed and Treasury declare that they have saved the world again. 5% market pop off that and then we're all set for the greatest "sell in May and go away" that the market has ever seen. These banks are not healthy and the economy is not rebounding. I am certain of both.
Personally, I am not getting short in front of these bank earnings. It's just too risky. Until then I can afford to be patient. If the market melts up further then it will only tee up my short positions better. If you want to be long I wouldn't allocate no more than 30% of my capital to the long side and I would likely do it entirely in tech names. I want nothing to do with the banks until these fake earnings are over.
Thinking about this whole scheme and wondering what other plans the treasury has for the future. I've read too many "last bullet" phrases on the net, and they just keep coming up with more. Gotta agree with Yoyo, hard to get in front of this and short.
TPC Reply:
April 14th, 2009 at 4:00 PM
I certainly underestimated the creativity of the Treasury. I assumed the uptick rule was certainly the last bullet, but it looks like this stress test is giving life to a new last bullet….Of course, things change so we must adapt….
TPC, thanks for all your work. I don't know how you connect the dots so far in advance of real time events, but I hope you know it's really appreciated by all of us regular folk. Keep up the great work.
What is your real background? you claim to be a former FA at ML, but you seem way too smart for that sort of a crap job. What is your real background?
Thinking about this whole scheme and wondering what other plans the treasury has for the future. I've read too many “last bullet” phrases on the net, and they just keep coming up with more. Gotta agree with Yoyo, hard to get in front of this and short.
Glad to help.
Nothing in the about us section is false. I think the people at the big banks get a bad wrap some times. I had the opportunity to work with many of them and I had the good fortune of learning from some very smart people….
[...] the Pragmatic Capitalist posits that Goldman’s efforts to raise capital are all part of Treasury Secretary Tim [...]
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