As Q1 and Q2 earnings "beats" have demonstrated, all bottom line upside surprises have come from companies trimming the fat and mass firing employees left and right: alas for the most part revenues have been flat if not materially lower to expectations - just look at GE's recent results for a good recap of what is happening wth the economy theme. Arguably, there is no more SG&A extraction available to the vast majority of US corporations, meaning Goldman is expecting an unprecedented pick up in revenues. And with the US consumer completely tapped out and unable or unwilling to borrow, this implies that foreign countries will have to pick up the pace in bailing out our top line: so look for much more weakness in the dollar to even remotely justify Goldman's prediction. This will put Bernanke's claim of pursuing a strong dollar policy to the biggest test, as well as Europe's resolve to continue playing in this highly rigged version of F/X "game theory."
But back to Goldman - up until this point the firm has been at least slightly sensitive about catching marginal end buyers. Now the guns are blazing, and as all Wall Street professionals tongue-in-cheekly know all too well, a forceful upgrade is when any firm (Goldman most definitely included) starts to sell into a call (in this case its own). So buyers please beware: you are now implicitly buying the shares that Goldman and other brokers have been accumulating over the past 4 months.Sphere: Related Content Print this post