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.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
FDO15
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.
Anonymous
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?
skippy
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.
Cullen Roche
Glad to help.
Cullen Roche
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….