Goldman Sachs

That --> is 5 years of Goldman Sachs, who reported a very good quarter last night relative to expectations.

The stock is trading down a little, probably because it has run a lot and also announced that it is raising $5 billion to repay the TARP money.

The chart is breathtaking. $200 to $50 to $125 in under two years. This is not some second tier franchise either. At some point in the next decade, I wouldn't be surprised to see them go private again. The wave of scrutiny and increased regulation is just beginning.

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Strong finish yesterday after the market spent most of the day under water. This market does not want to go down, which ironocally indicates that it is due for a correction. If earnings keep coming in better, timing it will be tough.

Cell Phones and Investment Banks

A major Wall Street firm just revised its 2009 cellular handset growth estimate to -12% and nobody is batting an eyelash. I'm old enough to remember when cell phones were a growth business.

Down is still bad.

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Bloomberg reported this morning that JP Morgan, Goldman Sachs and Morgan Stanley may be working to repay the TARP funds as soon as possible, in order to avoid groundhogging days like yesterday. No kidding. The quality of the questions they were forced to answer was laughable. It's a sad state of affairs that members of Congress can summon important guys (even guys who screwed up big time) to a meeting, force them to be prepared to answer questions in detail and do no more prep themselves than printing a few emails from constituents

What exactly did Goldman Sachs do again? The U.S. government 5-year bond yield is 1.71%. The goverment borrows money at 1.7% forces Goldman to take a loan in for form of preferred shares at 5%. There is virtual certainty that Goldman will pay the money back. Doesn't sound like a lynching is warranted.

Is This a Headfake?

Today's good looking chart of the day is the the 1-year for Goldman Sachs, which is very interesting indeed. Lots of people will tell you that the market can't work without the financials working. I am also of the view that despite all the bottom-calling, more investors than not believe that we will retest the November lows.

We are going to see whether the market can make a sustained move higher with only a handful of financials working. If Goldman is in fact making noise about paying back the TARP money asap, that will change the game.

Away from the financials, the market acts very good - especially tech where the earnings news has not been encouraging.

Getting to Main Street

Would you bank online at Goldman Sachs? From today's WSJ:

"In the latest evidence of how Wall Street is seeking to broaden its sources of funds, Goldman Sachs Group Inc. is weighing whether to launch an Internet banking operation, according to people familiar with the situation."

Goldman, like every other highly leveraged financial institution, needs stable deposits to help shore up the balance sheet. Its competitors have been more focused on strategies to buy existing bricks and mortar banks. The $5k in your savings account earning 2% is now very important business.

If you bank online now, switching costs are already pretty high. Since there is rarely a reason to go to the bank itself, your laptop has become the bank. All your payees are already loaded. As long as the software and platform your bank uses is good enough, it is quite a hassle to switch.

Can Goldman attract Main Street deposits without making an acquisition? I wouldn't mind a Goldman Sachs check book but I can't imagine getting one.

The Beatings Will Continue

Until Morale Improves

$2 Billion hedge fund Andor Capital announced yesterday that it will shut down and return money to investors, according to Marketwatch and others.

The fund is down this year, but not by so much that it has to shut down according to the word on the street. Rather, the environment is just no fun. Andor is run by tech investment legend Dan Benton, former Goldman Sachs tech analyst who wrote the legendary one-pager titled "Rules for Technology Investing" or something along those lines.

I have a copy of it somewhere but it contains brilliantly simple concepts such as, "Sell stocks when earnings estimates are going down."

SEC in the Hunt - This Should Be Good

"July 16 (Bloomberg) -- The U.S. Securities and Exchange Commission subpoenaed Wall Street's biggest firms and hedge-fund advisers in a widening effort to crack down on suspected manipulation of Lehman Brothers Holdings Inc. and Bear Stearns Cos. shares, said three people with knowledge of the matter. "

Gee. Yesterday, the head of the SEC pulled off the regulatory piece de resistance of making something illegal that was already illegal. Or he did something else but nobody is sure what it was.

Now the SEC is going after Goldman Sachs and the question of whether Goldman or any of the other brokers had an unfair role in the stock price decline of Bear Stearns or Lehman. Goldman summarily denies it:

""We went out of our way to be supportive of Bear and were rigorous about conducting business as usual," spokesman Lucas van Praag said. He said Goldman never altered its terms for doing business with Bear, even as lenders pulled their financing and some trading partners retreated..."

Goldman is scary good at what they do. If the Keysone Cops at the SEC find a hair out of place on Goldman, I'll be very surprised.

4th of July

Happy 4th. Enjoy the long weekend with the market closed today.

UBS today announced that June quarter results will be close to break even, better than the large loss analysts were expecting. The stock traded up 8% after having declined 50% YTD. UBS will not need to raise new money now despite furhter write-downs according to today's report, but no details on this quarter's write-downs were given.

Meanwhile, Goldman Sachs opined today that European banks will need to raise an additional 60 - 90 billion Euros.

I don't think we're going to know where the end of this road is until we get there.

Federer, Nadal, Williams and Williams. They are all playing so well there was zero drama at Wimbledon this year.

I can't believe the Tour de France starts this week. Time flies.