Goldman Sachs, revisited

In a post made this past July, I suggested that Goldman Sachs common shares might be rolling over.  There was never any question in my mind that all the big, corrupt banks would eventually crash and burn but the question is always "when?".  In fact, I wrote, "When the great debt Ponzi eventually collapses GS will certainly have a leadership role in the collapse, AIG style.   Right now these con men have everyone fooled into thinking that they are not part of the system but rather damned near the system itself.  Nothing could be further from the truth.  If they were so strong they would not have needed backdoor bailouts via the AIG scandal.  Goldman is using Art of War tactics.  It is acting strong when it knows it is very vulnerable ... In the long run Goldman will be lucky to survive at all.".  The chart looked pretty bad and so I made the call.  GS was trading for about $135 on the day of that post.

Today the shares are trading for about $93.  People in the investment community think the shares are cheap at this level.  After all, with $815 billion in cash and only $485 billion in debt their net cash position of $330 billion looks pretty strong relative to their $47 billion market cap even if the shares still pay only a paltry 1.4% annual dividend.  While the shares may be due for a short term bounce, I think we will see them trade well below $50 before this crash is over (well below).  In fact, the company will be lucky to remain intact.  The recent Wall St. sit in is telling me that the sheeple are tired of getting sheared and when politicians see the people self-organizing like this they know that something must be done.  If people self organize in order to right the wrongs of the world then why do we need police?  Why do we need massive government?  This is the question that bureaucrats fear the people will ask themselves.  Self preservation, not service to the people is what drives the government to step in and "do something".  And so they must soon "do something" even if it means attacking their partners in crime on Wall St.  This is always how criminal organizations fall apart: they turn on themselves internally when the ratio of criminals to patsies gets too high.

I believe that nasty facts about GS will be brought to light in the coming years.  Their massive corruption will be exposed, probably leaked to the press by their partners in crime in government, in order to give people the moral imperative to demand that government dismantle GS.  Either that or we will find out that this huge cash position pales in comparison to off balance sheet losses on highly leveraged bets.  One way or another, GS will fall.  This is not my hope or desire but rather my prediction based on how these things have unfolded so many times in history. 

The thing to keep in mind is that if you want to know who is most involved in the operation of a Ponzi, look to those who have profited the most.  Thus, when the Ponzi finally collapses as they always must at some point, look to those who have profited the most to have their legs kicked out the hardest.  Goldman Sachs is a great place to cash in for employees (for now) but it's shares are a really crappy investment for the common man.  The employees are spiriting all the value of the company out the back door via the compensation they pay themselves.  Investors in this corrupt Ponzi scheme will some day realize that they are nothing more than clueless patsies in the big con.  IMO, Goldman Sachs will be exposed to be Madoff but on a much grander scale before this is over.  This may not be a very popular opinion today but I suspect that some day the main stream media will be writing about how obvious it was.