Tuesday, April 14, 2009

Goldman Sachs Earnings Transcript

Ok, unique snowflakes. Time to tear this apart... Judging by how many readers posted comments on the prior GS post and sent me emails (I wish I could analyze every angle), there should be enough brainpower here to fully digest the "one-time, non recurring, 4 month monster quarter." In the meantime, GS is finalizing the terms of its follow on: $123/share price, to be completed before market open.

One thing that caught my eye off the bat from the Q&A:
Question: Thanks, and cleanup on the exposures David. Could you provide us a where marks and exposure levels stood in March versus November for the hot spots, commercial real estate, leveraged loans, residential real estate, ALT-A, subprime.

David Viniar: Let me give you a couple of those and anything I don't answer, ask he into if I haven't given what you need. The commercial real state, we had at the end of the quarter market value of-- round numbers I'll give you, about $8.5 billion and about $1.5 billion was CMBS security sots real loan portion was about $7 billion and our average mark across there was something in the high 50s. The residential real estate for us, we just have a trading position at this point. We have nonagency residential real estate

We have roughly $4 billion split equal, roughly equally between prime ALT-A and subprime, and that is really a trading position. You know, it's going to go up or down over the course of any quarter at this point. I wouldn't call them legacy. Our leveraged loans, from the $52 billion of legacy loans that we had at the end of the third quarter of '07 which is when the credit crisis really hit, we're down to a market value of about $2.3 billion. So the exposure there is pretty minimal this point and the average mark on that 2.3 billion is in the range of 50 cents.
So if Goldman is marking their commercial loans at 50s, can someone please remind me how the Treasury/FDIC is making a valid case for these being valued at 84 cents? Also, it will be curious where the other banks disclose what their marks on these are - one would assume seeing how healthy the banking sector all of a sudden is, that Citi, BofA, JPM et al are all marked at 50 as well.

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20 comments:

Anonymous said...

Im extremely curious as to why FICC had such outsized profits compared to equities and currencies and commodities. They are all volatile lately so dont give me this "wide spreads" bllshit. Was AIG unwinding massive strucutural trades at ridiculous prices or not?

Anonymous said...

Viniar denied there was any AIG-PnL in the FICC #. I kinda have a hard time believing that. He kept pointing to good volume and wider spreads in "vanilla" FICC trading products. I don't see it, though. The results in equities are more like I'd expect. And spreads in equities have gotten wider! But revs were still down huge in that "vanilla" product.

Something doesn't add up.

Anonymous said...

The Meredith Q&A is pretty funny. I think Bloomberg lost it's way at the beginning.

Anonymous said...

CNBC Rick Santelli reported this AM that Goldman changed their reporting period from a 3 month quarter to a 4 month quarter. If true it changes the picture. Any idea if it is true?

ella

Anonymous said...

Meredith is dreamy. I'd have her over to the coral reef anytime.

Anonymous said...

Tylor don't get all excited about what GS said cause it doesn't make any sense.

Bottom line: the GS spokesman says they have 8.5 billion in 'market value' CRE exposure which they are 'marking' to the high 50's.

Can that really be true? I doubt it. No one is that stupid. Are they?

Anonymous said...

The bulk of GS profits had come from AIG transfer payments (the theft from taxpayers AIG 100% payouts funded via bailout money that saw GS as one of the largest recipients). Most of the AIG effect was in December. For the first quarter, the total A.I.G. effect on earnings was, in round numbers, zero.

It seems that GS is moving from a December to a quarterly calendar. Meaning their latest Q is January thru March.Goldman’s 2008 fiscal year ended Nov. 30.

But what of December, with all the AIG money and the comparison to the strong December 2007 and all?


This leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?

Unbelievable!!

Anonymous said...

The boys also made money by charging counterparties to let them out of losing interest rate swaps. Plenty of pensions, localities, and others were sitting on the losing side of interest rate swaps, and paid to get out.

Anonymous said...

every one seems confortable with 163 billion usd set aside as legacy (for whom)? What are 5 billion usd capital increase going to produce when compared to a trillion usd BS?
Tear 1 and tear 2 in excess of basil ask the bond market ask the inter bank what kind of reading they are making.
Sorry it is full crap.

Anonymous said...

Possible formation of Sheer Descent Waterfall lacking spillway support pattern.

Totally rad book! said...

Anonymous 9:56 -- so Goldman is a direct beneficiary of Indianapolis Water Authority, Philadelphia Gas Works et al? Amazing.

Anonymous said...

got to give this blog props...mike mayo only asked the q about AIG b/c of the post about AIG making everyone's quarter.

that said, viniar said "i would say our p&l related to AIG in the first quarter rounded to zero"

so zero hedge and everybody else that thinks they know everything was way off (and are losing their pants on their GS short).

Anonymous said...

The blog only implicated the banks that preannounced: C, JPM, BofA : let's see what they note about their AIG "windfall". Also, GS very likely unwound ahead of everyone (no surprise there) in the curious December stub month... why else did they move to recalendarize?

LongOverdue said...

All this grandstanding from GS just doesn't add up. I think we have a "consensus" that there's some funny business going on here.

phillydog said...

Mmmmmm...let me see. When did Goldman start marketing its credit opportunity fund citing the very attractive pricing of leveraged loans at 65 cents. Oh right...just when they were massively reducing their book.

Funny how that works

Anonymous said...

http://norris.blogs.nytimes.com/2009/04/14/the-case-of-the-missing-month/

Anonymous said...

"So if Goldman is marking their commercial loans at 50s, can someone please remind me how the Treasury/FDIC is making a valid case for these being valued at 84 cents? Also, it will be curious where the other banks disclose what their marks on these are - one would assume seeing how healthy the banking sector all of a sudden is, that Citi, BofA, JPM et al are all marked at 50 as well."

are GS positions HFS or HFI?
also might depend on what type of loans they have left on their books after all those sales,..are they left with the junk they couldnt offload?

Anonymous said...

"So if Goldman is marking their commercial loans at 50s, can someone please remind me how the Treasury/FDIC is making a valid case for these being valued at 84 cents?"

Well, if a bank took purchase accounting marks on an acquisition (WFC/WB) they marked billions in loans down to zero...obviously, that's overly conservative, as there is some value in MBS...they take those loans marked to zero and sell them via the ppip and get maybe 80c on the dollar...and that's pure gravy.

Anonymous said...

GoldmanSachs666 is a dis-info site put up by Goldman, to tell us all the obvious facts, that we already know, thereby distracting us from the real conspiracy of GS crashing the market in 08!
Here is how I see it.
1. GS shorts the ABX(subprime) in 07. Makes a Billion or 2. Sends a ripple in the markets.
2. GS men at the Exchanges raise margin requirements forcing massive liquidation in JULy 07, not to mention cornering the oil market.
3. GS men at the SEC raise margin in 08, lower regulation increasingly over entire tenure.
4. There man Hank Paulson took Lehman in the other room, executation style. That really got things rolling (downhill)
5. Then, GS influence at Mood'yS(warren buffet) slashed AIG rating forcing them to find Billlions overnigth,
6.Then Hank Pauslon shows up with his $700 Billion ransome note. After stock markets crash around the world for 10 days, congress gives the big five banks their money.
7. Jim Cramer, former partner of GS, after watching the market crash for 10 days, tells America to sell everything. If we see a rally this year, you know Cramer is in on it
8. Rubin was a trojan horse on Citi's Board, encouraging them to get long and heavy in realestate.
9. AIG and Citi were made fall guys from the beginning, "to big to fail" was the plot
10. It's possible that GS even inflitrated Freddie and Fannie. It's obvious IndyMAc was a front to push liars loans.

patrick the painter said...

GoldmanSachs666 is a dis-info site put up by Goldman, to tell us all the obvious facts, that we already knew, thereby distracting us from the

real conspiracy of GS along with others to crash every market in the world. Why would they do this? Many reasons:

There is much more money to be made in volitle market. Especially to the down side, and if you are in on it. Money isn't lost in the market. It is

just moved across the table or the world. In addtion, the FEDeral Reserve Bank, decided the the CDS market had gotten way to big,

and it was time to bring in all the chips, I mean dollars back to the nearest Fed Bank.! GS wanted a shake-up of the banks, eliminate their compeption,

marginalize the rest, and get the FDIC to shut down the small ones and feed those deposits up the food chain. I am sure they made

trillions of dollars shorting the world in 08. Just where did they stash the money? Of course, they are going to declare

a measly loss for 08, but where did they stash the money? The trillions that GS and their clients made crashing the market in 08.

I am sure it will show up soon, but in the mean time here is why I think Goldman Sachs, along with others is the main conspirator.


In 2007, GS shorts the ABX(subprime) index and makes about a Billion dollars.

Yet, one year later Hank Paulson who is now US Treasary, tells Bush and Congress that "he didn't see it coming." (the real estate thing)

even though he was just CEO of GS one year prior to GS's bet against the subprime real estate market. PAulson was CEO at GS

for a long time and had 5-10 year vision. Paulson most certainly knew that subprime would tank way before he went to be a public

servant as Treasary. In fact, I bet that he knew, and the bailout plan was already in his pocket before he got to D.C. Any Joe with a brain knew

that subprime would blow-up, but we didn't know that Wall ST had been collaterizering it all these years. I think Goldman new that heavy shorts on

ABX subprime index could be enough to get the avalanch started. If not in the markets, then at least in the media, get the topic of subprime outthere.


Flash forward to July of 08, and a we see a hugh sell off in the commodities markets with the media blaming it on a slowing economy. It was really Goldman

Sachs, telling the Exchanges to rasie requirments for everybody, forcing many out of the market. Some even believe Goldman even cornered the oil market.

Goldman publicly announces OIL foracst of $200 but are shorting it at the same time. Principal/Agency principal mean nothing to Goldman!


GoldmanSachs former employee Cristopher Cox, headed the SEC for the last many years. Made sure that regulations were very lax, encouraged employees

not to follow cases, and would rasie the margin requirementts after the market was falling.


Hank Paulson took Lehman to a private room in the White House, and put his head on a platter. I'm pretty sure Hank new that this would rattle the markets.

Just as he wanted! And the perfect excuse in side pocket, "didn't have the legal authority to do." Now that I am a public servant and all. And if it wasn't enough,

he would have his contact at Moody's cut AIG's rating. His contact is Warren Buffet who owns 20% of Moody's. By cutting their rating, AIG was forced to

find Billions overnigth. A bit much, even for Wall ST. Not a chance!, Oh wait Here comes the government to save the day. Yes! Is that HanK Paulson over there

with a $700 billion plan? Hank, That plan looks worn out like its been in your back pocket a few years? It sort of is has says Hank. "You can barely read

the part "to big to fail." Enough with the jokes.


Hank knew that there would be this tug-a-war between the markets and DC while he pitched his plan. After the market had fallen to Goldman's likening,

it was time for Hank to really press urgently and threathen Congress to pass it. They do. The market rallies for 900.

Then you have Jim Crammer from Mad Money, after watching the market crash for 11 days in a row, tell the American Public to sell everytning. Did I mention

Crammer is a former Goldman partner. If the market rebounds this year, then you know he is "in" on the conspiracy.

It also would hold that Crammer is just a tool for Goldman to abuse the public, because he never makes any sense when he talks.


Since AIG slipped through the biggest loophole ever, not to be regulated by the CFTC and SEC because they are an insurance company, that loophole was

well known 5 years ago, which leads me to belileve that AIG was hank picked to be the fall guy at the inception of this conspiracy 5 years ago. It was their

mission, and with Goldman advising them, to get so big, as to be "to big to fail." Possibly Citigroup also. When you look at how large Citi got relative

Goldman, Morgan and others, 10 times as big, it makes it seem they are a fall guy. If the smarter guys(GS) at the table new way in advance about subprime, they

probably were force feeding it to the dumber guys(Citi) and others at the table. Rubin, former GS, sat on Citi's Board. Maybe as a Trojan Horse? Goldman has a

habit of looking at others books and then reneging on either a merger deal, like with Morgan or straigth up fucking you if you are in the he oil market.

The reason I feel that this was conspired 5 years ago is that is when subprime was invented.


It's highly possible that Freddie Mae and Freddie Mac were also made to be fall guys. What if they were influenced by the bankers to get as big as possible.

We all know Indy Mac, specialized in LIARS or Ninja Loans. Still investigating this lead. But check this out to all the quants..


What are the odds that the 2 most eventful (events) in our lifetime(s) happened on the 1st and Last years of the President's watch? (that would be 911 and the Credit Crsis).

If the 1st one didn't convince you the second one will.

Looks like Bush was made to be a fall guy too!