For Goldman's stock, it's like the crash never happened

Goldman Sachs Group's record second-quarter earnings report this week just generated more enmity toward the Wall Street titan, if more is even possible at this point.

Fans of Matt Taibbi must immediately have flashed back to his characterization of Goldman as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Charlie Gasparino asserts that the $3.4-billion quarterly profit shows that the firm has expertly milked its government bailout and the collapse of its rivals, while resuming "many of the risk-taking activities that got it into trouble in the first place."

Mike Morgan, who just won a court battle with the bank to keep his goldmansachs666.com website operating, says he will remain devoted to demonstrating "how destructive this company is to our lives and the hopes and dreams of our children." Yikes.

But for Goldman’s long-time shareholders, it’s all good. On Wednesday the company’s stock jumped $5.60 to close at $155.26, the highest since Sept. 11 of last year.

Why is that date significant? It was just before the weekend that Lehman Bros. collapsed -- the trigger for the financial-system meltdown.

So, for a buy-and-hold Goldman shareholder, it’s now as if the fall credit wipeout and market crash never happened. And, by the way, Goldman investors never suffered a dividend cut, either.

Most financial stocks still are far below their pre-Lehman prices. The average financial issue in the Standard & Poor’s 500 index would have to rise 71% to recoup its post-Lehman losses.

Among Goldman’s major rivals, shares of JPMorgan Chase, now $36.26, were at $41.17 just before Lehman’s end. That isn’t too much ground to make up.

But Bank of America Corp., at $13.42 now, is less than half its pre-Lehman price of $33.74. Morgan Stanley, at $28.80, would have to get to $37.23 to make up all the lost ground. And Citigroup? At $3.17, it would have to rise 466% to get back to the pre-Lehman price of $17.96.

Goldman being Goldman, it has managed not only to survive the financial calamity but to thrive. And of course, it didn’t hurt the firm to have $10 billion of government capital on its books during the worst of the crisis, just in case. That money has since been repaid.

The risk-taking issue, particularly with regard to Goldman’s vaunted trading operations, is no small matter. You don’t make $3.4 billion in a quarter on Wall Street by being risk-averse.

So what would happen if markets were to crumble again and Goldman were to get caught on the wrong side of too many trades? Would the public really stand for another infusion of government money into the most hated firm on the Street?

If the Obama administration has a recurring nightmare about what could yet go wrong in the battered financial system, the image of Goldman hat-in-hand must be one of the most vivid scenes.

Inconceivable? Certainly -- just like so many things that have happened over the last 12 months.

-- Tom Petruno

Comments

[Andre from Sacto]

""When the people and the government fear Goldman Sachs, there is economic dictatorship that will destroy the very fabric of our existence as a civilized society." - Mike Morgan""

Can we finally do away with this notion that the government is by and for the people? This is a crime pure and simple. The execs running this "bank" need to be in jail next to Madoff. Instead they get a pay raise? Where is their civic responsibility? Or does it only apply to people who cannot afford to weasel out of it. Wait, instead of jail they need to be at the end of a pitchfork. I have mine ready to go.

[Nikkei 225]

If Goldman shows that it can be done to make $3.4 billion in a quarter then the rest of the crowd soon will follow, their shareholders simply demand the same return on investment. This is a worrying situation, if the top dogs lose their fear for high-risk investments we have another disaster waiting to happen. Maybe the policy makers should seriously consider dropping the too big to fail policy for repeat offenders, as it only creates a breed of arrogant renegade bankers.

[Luva, not a hater]

Why do you hate Goldman Sachs so much? Jealous of their salaries? They earn them for a reason. When a contraction happens like what did since October 2007, be glad firms are beginning to show profits again. It will only help everyone else. Remember the big picture, Tom: when Goldman starts making $, the economy will start making $.

[James Raider]

Goldman Sachs will be eternally grateful to Obama for staying out of its way.

This could be its letter of appreciation, ----

http://pacificgatepost.blogspot.com/2009/07/goldman-sachs-thank-you-mr-president.html

Goldman has an uncommon grasp of the joystick.

[Michael Snyder]

Luva,
What about the ROI for taxpayers from Goldman's share of the TARP funds? You'd have to be from Missouri to believe The Fed's manipulation of the economy in the last year did anything to provide a level playing field. You'd have to be stupid by Missouri standards (single digit IQ) to believe TARP was about anything other than protecting the wealth of Washington insiders.

Real unemployment, not the watered down number of people collecting benefits, is well into double digits, consumer credit rates look like they come from a loan shark & small businesses are collapsing like a bunch of mud huts in a 7.0 earthquake.

I'm happy you bought in while GS was at its' IPO value, but down here on Main St. folks are losing their livelihoods, homes & businesses at a record pace. If you think this "recession" is over you've got your head in the clouds.