Goldman Sachs

U.S. Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937

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Ben S. Bernanke, chairman of the U.S. Federal Reserve, speaks on a television above a trader in the S&P pit at the Chicago Board of Trade in Chicago, on Tuesday Oct. 7, 2008. Photographer: Joshua Lott/Bloomberg News

Oct. 7 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.

Bank of America Corp. tumbled 26 percent after cutting its dividend in half and saying it plans to sell $10 billion in common stock to brace for a recession. Morgan Stanley, KeyCorp and JPMorgan Chase & Co. slid more than 10 percent as investors shrugged off signs the Federal Reserve will reduce interest rates. General Growth Properties Inc., a mall owner, plunged 42 percent on concern it won’t be able to repay debt.

The S&P 500 slid 60.66 points, or 5.7 percent, to 996.23, extending its 2008 tumble to 32 percent in the market’s worst yearly slump since 1937. The Dow Jones Industrial Average dropped 508.39, or 5.1 percent, to 9,447.11, giving it a 29 percent retreat in 2008 that would also be the worst in 71 years. The Nasdaq Composite Index lost 5.8 percent to 1,754.88.

“We’ve approached the edge of the cliff,” Leon Cooperman, 65, who manages $6 billion at hedge fund Omega Advisors Inc., said at the Value Investing Congress in New York. “Do we go over the cliff or begin to recede? History says we recede, but there’s no guarantee. This is the most difficult financial environment I’ve lived through.”

Read moreU.S. Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937

The Dollar is Doomed

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When the precious metals were smashed out of nowhere and the dollar started climbing this summer I became very worried. I didn’t question my conviction that commodities are in a bull market, or that precious metals in particular are undervalued. I felt something sinister was at work. Neither move was justified on a fundamental level. I assumed that something very bad was about to happen and the metals needed to be brought lower in advance of the bad news.

Now we have a glimpse at the ugly consequences foreseen by the Treasury Department and the Federal Reserve. In early September, Fannie Mae and Freddie Mac were nationalized with a financial commitment of USD$200 billion from the taxpayers. Incredibly, the loan limits at the former GSEs were raised from $417,000 to $729,750 in March when it was more than obvious these institutions needed to be reined in. Like most bailouts and bank failures, this one was announced on a weekend to limit the impact on the stock markets.

As I mentioned in last month’s issue, Treasury Secretary Paulson was under severe pressure to act, as the Chinese started selling Fannie and Freddie bonds while threatening further retribution. Common shareholders were left with nothing, while bondholders like Pimco and Asian central banks benefited. The small investor was stung again, as taxpayer dollars were used to bail out foreigners and wealthy Americans in a policy that Jim Rogers terms “socialism for the rich.”

Unfortunately, $200 billion is just the tip of the iceberg. As the government has assumed responsibility for Fannie and Freddie’s $5.4 trillion in liabilities, the Congressional Budget Office correctly states that these institutions “should be directly incorporated into the federal budget.” The Bush Administration has strongly opposed this move.

Read moreThe Dollar is Doomed

China Shuns Paulson’s Free Market Push as Meltdown Burns U.S.

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“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,” Paulson said.

Contemplate that for a moment.
Now add this to your contemplation:

Section 8 of the proposed legislation says it all:
“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
Right; “non-reviewable” supremacy.

Would you trust Mr. Paulson that much???

There are only two possibilities left:
1. Mr. Paulson does not have the foggiest idea what he is talking about.
2. Mr. Paulson is a puppet of the elite and all of this is a New World (Market) Order conspiracy, which will lead to the the destruction of the Dollar, the destruction of the middle class and the bankruptcy of the US.
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Henry Paulson, secretary of the U.S. Treasury, gives a speech on Chinese financial markets at the Shanghai Futures Exchange in Shanghai on March 8, 2007. Photographer: Qilai Shen/Bloomberg News

Sept. 24 (Bloomberg) — Eighteen months ago, U.S. Treasury Secretary Henry Paulson told an audience at the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets.

“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,” Paulson said.

That advice rings hollow in China as Paulson plans a $700 billion rescue for U.S. financial institutions and the Securities and Exchange Commission bans short sales of insurers, banks and securities firms. Regulators in the fastest-growing major economy say they may ditch plans to introduce derivatives, and some company bosses are rethinking U.S. business models.

“The U.S. financial system was regarded as a model, and we tried our best to copy whatever we could,” said Yu Yongding, a former adviser to China’s central bank. “Suddenly we find our teacher is not that excellent, so the next time when we’re designing our financial system we will use our own mind more.”

The recent moves by Paulson, the former chief executive officer of Goldman Sachs Group Inc., contradict what the U.S. told Asian governments over the past decade. Thailand, South Korea and Indonesia were urged to let unviable banks fail during the 1997-98 Asian financial crisis.

Read moreChina Shuns Paulson’s Free Market Push as Meltdown Burns U.S.

Mushroom Clouds Over Wall Street

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By MIKE WHITNEY

“One bank to rule them all;
One bank to bind them…”

These are dark times. While you were sleeping the cockroaches were busy about their work, rummaging through the US Constitution, and putting the finishing touches on a scheme to assert absolute power over the nation’s financial markets and the country’s economic future. Industry representative Henry Paulson has submitted legislation to Congress that will finally end the pretense that Bush controls anything more than reading the lines from a 4′ by 6′ teleprompter situated just inches from his lifeless pupils. Paulson is in charge now, and the coronation is set for sometime early next week. He rose to power in a stealthily-executed Banksters’ Coup in which he, and his coterie of dodgy friends, declared martial law on the US economy while elevating himself to supreme leader.

“All Hail Caesar!” The days of the republic are over.

Section 8 of the proposed legislation says it all:

“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

Right; “non-reviewable” supremacy.

Read moreMushroom Clouds Over Wall Street

Goldman Sachs and Morgan Stanley have been put under Federal control

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Morgan Stanley headquarters in New York

Investment banks Goldman Sachs and Morgan Stanley have been put under Federal control as part of a package aimed at rescuing the US finance system.

The move not only puts the two financial services giants under the direct supervision of bank regulators but also gives the Fed the power to force the banks to raise additional capital.

The US administration wants to prevent the collapse of two of Wall Street’s remaining investment banks after the fall of Lehman Brothers and the government-funded bailouts of Bear Stearns, Merrill Lynch and global insurer AIG.

Read moreGoldman Sachs and Morgan Stanley have been put under Federal control

Dollar May Get `Crushed’ as Traders Weigh Up Bailout

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U.S. one dollar bills are displayed for a photograph in New York, April 15, 2008. Photographer: Daniel Acker/Bloomberg News

Sept. 22 (Bloomberg) — Treasury Secretary Henry Paulson‘s plan to end the rout in U.S. financial markets may derail the dollar’s three-month rally as investors weigh the costs of the rescue.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

``As we get to the other side of this, the dollar will get crushed,” said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world’s biggest currency hedge-fund firm, which manages about $15 billion.

Read moreDollar May Get `Crushed’ as Traders Weigh Up Bailout

Goldman Sachs, Morgan Stanley Become Banks, Ending an Era for Wall Street

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U.S. flags fly outside the headquarters of Goldman Sachs Group Inc., in New York, Sept. 16, 2008. Photographer: Gino Domenico/Bloomberg News

Sept. 22 (Bloomberg) — The Wall Street that shaped the financial world for two decades ended last night, when Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken.

The Federal Reserve’s approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.

“The decision marks the end of Wall Street as we have known it,” said William Isaac, a former chairman of the Federal Deposit Insurance Corp. “It’s too bad.”

Goldman, whose alumni include Henry Paulson, the Treasury secretary presiding over a $700 billion bank bailout, and Morgan Stanley, a product of the 1933 Glass-Steagall Act that cleaved investment and commercial banks, insisted they didn’t need to change course, even as their shares plunged and their borrowing costs soared last week.

Read moreGoldman Sachs, Morgan Stanley Become Banks, Ending an Era for Wall Street

Pat Buchanan: The Party’s Over

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The Crash of 2008, which is now wiping out trillions of dollars of our people’s wealth, is, like the Crash of 1929, likely to mark the end of one era and the onset of another.

The new era will see a more sober and much diminished America. The “Omnipower” and “Indispensable Nation” we heard about in all the hubris and braggadocio following our Cold War victory is history.

Read morePat Buchanan: The Party’s Over

Capitalism in convulsion: Toxic assets head towards the public balance sheet

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In the space of just two momentous weeks, the landscape of global finance has been dramatically transformed. President George W. Bush’s administration has mounted a multi-billion-dollar rescue of the financial system at the cost of inflicting severe damage on the US model of free- market capitalism.

Heavy costs will be inflicted on the American taxpayer, who is now subsidising Wall Street – and indeed financial institutions around the world – in a bail-out of unprecedented size.

Read moreCapitalism in convulsion: Toxic assets head towards the public balance sheet

Fed to give AIG $85 billion loan and take 80% stake

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A man behind the door at an American International Group building in New York’s financial district on Tuesday. (Lucas Jackson/Reuters)

In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan.

The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.

Without the help, AIG was expected to be forced to file for bankruptcy protection.

Read moreFed to give AIG $85 billion loan and take 80% stake

Goldman profit plunges 70 pct amid market slump

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Goldman Sachs Group CEO Lloyd Blankfein

NEW YORK (Reuters) – Goldman Sachs Group Inc (GS.N) said quarterly profit plunged 70 percent as the worst market slump in decades led to weaker-than-expected revenues, knocking the stock to its lowest level in nearly three years.

Still, the larger of the two major U.S. investment banks still standing, beat profit expectations on Tuesday, even as it recorded $1.1 billion in write-downs and losses from its principal investments. It was the biggest earnings decline since Goldman went public in 1999.

Read moreGoldman profit plunges 70 pct amid market slump

Lehman survival questioned on scramble to sell assets

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NEW YORK (Reuters) – Lehman Brothers Holdings Inc’s survival was called into question as its chief executive scrambled to sell assets to cover losses from toxic real estate investments, sending shares down as much as 46 percent.

The investment bank’s need to raise desperately needed cash, broadly outlined by CEO Dick Fuld on Wednesday, failed to assuage investor concerns. The stock dropped $2.92, or 40 percent, to $4.33 on Thursday after falling as low as $3.88.

The steady stream of grim tidings and the dearth of details from the company stoked fears that some of Lehman’s clients and trading partners might take their business to more stable firms.

Read moreLehman survival questioned on scramble to sell assets

Lehman posts $4 billion quarterly loss, plans sales

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NEW YORK (Reuters) – Lehman Brothers Holdings Inc plans to sell a majority stake in its asset management unit and spin off commercial real estate holdings, hoping to restore investor confidence and ensure its survival after reporting a record quarterly loss of about $4 billion.

Shares failed to rebound on Wednesday morning after plunging 45 percent a day earlier, reflecting Wall Street disappointment that Lehman did not announce more concrete actions.

Read moreLehman posts $4 billion quarterly loss, plans sales

Merrill Lynch Cut to `Sell’ at Goldman on Writedowns

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Sept. 5 (Bloomberg) — Merrill Lynch & Co., down 50 percent in New York trading this year, was cut to “sell” at Goldman Sachs Group Inc. on concern the firm may post more writedowns tied to credit-related investments.

Goldman added the third-biggest U.S. securities company to its “conviction sell” list, according to a report by analysts including William Tanona. The share-price estimate on the stock was lowered 23 percent to $22, compared with yesterday’s closing price of $26.21.

Merrill, battered by more than $40 billion of credit market writedowns, has sold mortgage-linked assets to reduce risk and free up capital. The company trades at 1.25 times book value, compared with 0.95 for Citigroup Inc., the only firm that’s reported larger writedowns and losses stemming from the credit market crunch, according to data compiled by Bloomberg.

Read moreMerrill Lynch Cut to `Sell’ at Goldman on Writedowns

Coca-Cola to buy Huiyuan in largest China takeover

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HONG KONG (Reuters) – Coca-Cola Co (KO.N), the world’s largest soft drinks maker, offered to buy juice maker China Huiyuan (1886.HK) for a hefty premium, marking the biggest takeover in China by a foreign company.

The all-cash deal of $2.5 billion, which still requires regulatory approval, values Huiyuan at nearly three times its closing price on Friday.

Coca-Cola, which has offset flat sales at home by expanding globally, dominates a growing Chinese diluted-juice market and now hopes to make inroads into an untapped pure-juice sector.

Read moreCoca-Cola to buy Huiyuan in largest China takeover

A Few Speculators Dominate Vast Market for Oil Trading

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Regulators had long classified a private Swiss energy conglomerate called Vitol as a trader that primarily helped industrial firms that needed oil to run their businesses.

But when the Commodity Futures Trading Commission examined Vitol’s books last month, it found that the firm was in fact more of a speculator, holding oil contracts as a profit-making investment rather than a means of lining up the actual delivery of fuel. Even more surprising to the commodities markets was the massive size of Vitol’s portfolio — at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.

The discovery revealed how an individual financial player had gained enormous sway over the oil market without the knowledge of regulators. Other CFTC data showed that a significant amount of trading activity was concentrated in the hands of just a few speculators.

Read moreA Few Speculators Dominate Vast Market for Oil Trading

Goldman Sachs analyst recommends shorting shares of Citigroup

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NEW YORK (AP) — A Goldman Sachs analyst has recommended a short-selling strategy for shares of Citigroup Inc., noting the bank is still heavily exposed to the troubled mortgage and consumer credit markets.

In short-selling, an investor borrows shares of a company and sells them, betting the stock will go down. The investor then buys back the shares, repays the loan and — if the strategy worked — pockets the difference as a profit.

Read moreGoldman Sachs analyst recommends shorting shares of Citigroup

Wall Street banks hit by downgrades

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Goldman Sachs, JPMorgan Chase and Morgan Stanley were hit by a raft of analysts’ downgrades on Tuesday amid growing concerns that tough conditions in credit and equity markets will significantly reduce their profits.

The bearish comments by Wall Street analysts triggered a sell-off in banking shares that dragged the broader market lower, with the S&P 500 off 1.2 per cent.

Goldman’s shares fell 6 per cent after three analysts warned that the firm – which has outperformed rivals throughout the crisis – was experiencing a severe slowdown in its equity and investment banking businesses.

Shares in JPMorgan Chase dropped nearly 10 per cent – its biggest daily fall in six years – a day after it revealed that difficult credit markets had caused $1.5bn in writedowns in July.

Read moreWall Street banks hit by downgrades

Worried Banks Sharply Reduce Business Loans

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Drew Greenblatt of Marlin Steel Wire Products is having trouble getting a $300,000 loan to buy a robot for his Baltimore factory. “This is what a bank is supposed to do,” he said.

Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.

Read moreWorried Banks Sharply Reduce Business Loans

Is America too big to fail?

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NEW YORK: In the narrative that has governed American commercial life for the last quarter-century, saving companies from their own mistakes was not supposed to be part of the government’s job description. Economic policymakers in the United States took swaggering pride in the cutthroat but lucrative form of capitalism that was supposedly indigenous to their frontier nation.

Read moreIs America too big to fail?

Amber light flashing on U.S. dollar intervention

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So Inflation is really the greatest export of the US.
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LONDON (Reuters) – Three days before the last bout of coordinated central bank intervention to calm world currency markets, the International Monetary Fund’s top economist opined: “If not now, when?” Many experts are now asking the same.

Read moreAmber light flashing on U.S. dollar intervention

US faces global funding crisis, warns Merrill Lynch

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Merrill Lynch has warned that the United States could face a foreign “financing crisis” within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.


Draining away: The US may struggle to plug its capital gap

The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors.

Read moreUS faces global funding crisis, warns Merrill Lynch

The Wall Street Journal Senses Something is Wrong

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A subscription to the Wall Street Journal costs several hundred dollars a year, so most people out there don’t get it and DollarCollapse.com rarely posts links to its articles. But everybody should see today’s edition, which probably sets the modern-day record for disturbing headlines. Here’s a sampling of what subscribers read this morning:

Read moreThe Wall Street Journal Senses Something is Wrong

Five Years Late and a Trillion Dollars Short

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On Tuesday, the SEC issued an emergency rule in an attempt to curb naked short selling in 19 major financial institutions, including Goldman Sachs, Morgan Stanley, Citigroup, and JP Morgan Chase and Company.

Read moreFive Years Late and a Trillion Dollars Short