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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (48323)	4/8/2009 11:39:52 PM
From: Joe S Pack	Read Replies (1) \| Respond to of 217904

Is GS yet another Ponzy? Yeap.... No wonder GS lawyer sent a letter to this guy who exposed this scheme. realestateandhousing2.blogspot.com Quite interesting. goldmansachs666.com Goldman Sachs Cash Flow, Earings, Solvency? NOTE: I received the post below via email from Dave. He originally published this on www.LeMetropoleCafe.com on February 22, 2009 Dave From Denver - More on Goldman Sachs' massive negative cash flow - I wanted to follow up on the financial information on Goldman Sachs that was presented in Midas last week. The negative operating cash flow numbers were so staggering that I wanted to see what was going on for myself. Goldman went public in early May 1999, so I tallied up the numbers from 1999 thru the first three quarters of 2008, the most up to date financials filed by GS. To summarize what was reported last week (my numbers will be slightly different because I shifted the time period slightly). From 1999 - 3rd qtr 2008, Goldman reported at total of $48.4 billion in net income. During this period, Goldman reported a total of $238 billion of negative cash flow from operations and investing (mostly operations) which was funded by $246.5 billion in cash from financing, primarily bank debt and bonds. I also wanted to look at the quality of Goldman's earnings. From 2002 thru Q3 2008, net interest earned represented anywhere from 35.1% to 113% of total net income (77% of net income during 2008 so far has been this "carry trade"). That means that not only has Goldman's operations sucked up $238 billion in cash over the last 10 years, the quality of its earnings has been largely dependent on being able to earn more interest on its investments than it pays to finance those investments. I thought Goldman Sachs was an investment bank that made money from selling stocks and bonds, advising on mergers and acquistions and other traditional securities firm activities. But based on the nature of their earnings, Goldman looks more like an savings and loan bank, hoping to make more on its investments (interest income) than it has to pay out in the cost of its liabilities (interest expense). If you step back and think about what Goldman is doing conceptually, the operations of the firm look somewhat like a Ponzi scheme. As you follow the pattern of cash flow use and the financing required to fund their operations, it looks like they require more and more financing just to tread water. For example, in 2007, GS had $1.1 trillion in assets and generated $11.4 billion in net income (GAAP accrual income, not cash on cash economic income). This is a 1% return on assets. Do the large shareholders of GS really want to pay out massive compensation to the top management of GS for delivering a whopping 1% return on assets? I can do better and take less risk investing in 1 yr. bank CD's. I'm not quite sure why anyone would want to own this stock. I may buy some long term out of the money puts on GS on Monday. What I find even more interesting to contemplate is that, based on looking at Goldman's uses and sources of cash, if the market for funding Goldman's balance sheet were to slow down, there is a high degree of probability that Goldman would become insolvent. Remember, Goldman's ability to service its debt and rollover its short term financing is highly dependent on the quality of those assets. If the music stops on Goldman's source of financing, and Goldman has no ability to generate cash from its portfolio of rapidly deteriorating assets, Goldman collapses. This would explain why the Fed/Treasury is working so hard to squeeze money from the Government/taxpayer to keep these banks alive. Let's not forget that the Fed is quickly swapping bad assets from these investment banks for Treasuries held by the Fed and taxpayer gurarantees. For now, this is keeping firms like Goldman alive... Then, a comment from one of GATA's finest: But what I find most amusing is the statement made by CEO Llyod Blankfein the other day, under oath in front of Congress, that he didn't really need the $10 billion in TARP that Paulson gave GS in October and that he wanted to pay it back. Well Lloyd, where is that $10 billion? If you didn't need it, why don't you pay it back today? The answer to why you can't pay it back is no hidden secret - the answer is that Goldman can't pay it back because they need every dime they can get ahold of just to keep their operations going. The truth will always be found if you follow the money. My hat is off to the Midas contributor who originally looked into this quite revealing topic. My guess at to why Jon Winkelreid, who I remember as a rapidly rising star in fixed income corporate finance when I worked there for 2 years in the late 1980's, unexpectedly left Goldman last week despite being a candidate to run the firm is that he is wisely trying to distance himself legally from being associated with a collapsing Ponzi scheme. ***

To: TobagoJack who wrote (48323)	4/9/2009 2:59:49 AM
From: elmatador	Respond to of 217904

The cavalry of commerce. export-import banks ride to the rescue The cavalry of commerce. Apr 8th 2009 From The Economist print edition With G20 cash in their saddlebags, export-import banks ride to the rescue TRADE is shrinking at the fastest rate since the second world war. The global economy’s woes are largely to blame, but scarce trade finance, especially in emerging markets, hardly helps. In November the World Trade Organisation put the shortfall at $25 billion, but by March the gap had widened to between $100 billion and $300 billion. At the G20 summit on April 2nd, the leaders vowed to reverse this trend by ensuring the availability of at least $250 billion over the next two years to support trade finance. What that lofty figure represents is unclear. The little official information there is suggests that as much as $200 billion would flow through export-credit agencies (ECAs), such as America’s Export-Import Bank, which specialise in trade finance. The G20 suggested that up to $50 billion of “trade liquidity support” would come via the World Bank. ECAs have long thrived in obscurity. They are “the unsung giants of international trade and finance,” in the words of Delio Gianturco, author of a book on the industry. Some agencies are government-sponsored, others private, and others a bit of both. Euler Hermes, for instance, is the public ECA in Germany, but also competes privately in other markets. One of the ECAs’ main tasks is to insure payment to exporters between the time when their goods are delivered and when they receive money for them. With liquidity tight, the risk of non-payment has risen hugely. The ECAs have been asked to stump up additional cover. Few object to the goal of reinvigorating trade. Many, however, are less sanguine about the role of the ECAs. In the past, they have aroused the suspicions of both free-market advocates and non-governmental organisations (NGOs). The first group frets that cheap, government-subsidised insurance not only distorts investment decisions but also risks politicising them. They also contend that government backing crowds out private competition. NGOs worry about what they see as a lack of environmental and social awareness among the agencies. Much of this criticism is outdated, say the ECAs. Previously they may have supported national champions, but now they are professionally—and independently—run. Private insurers cover large swathes of the market—indeed, some ECAs are purely private. The public ECAs argue that they mainly insure exports to high-risk countries which the private sector would steer well clear of. But this argument does not always wash with the critics. Why, they ask, should taxpayers be daredevils in places where private investors are not? Nevertheless, could this be the public ECAs’ moment in the sun? During the credit crunch, they have had more flexibility with capital and liquidity than their private-sector counterparts. Often, their charter is simply to break even in the long run, which should give them an edge in times of crisis. But there is also a danger that they will once again attempt to pick winners. In that case the politicians’ push for more trade may come at the expense of fair trade