Category Archives: Economy and Meltdown

Goldman's Releases Walkthru "Toolkit" Of How It Will Respond To Second Coming Of Greg Smith's Muppetgate

Ever since Goldman was publicly (if very much ineffectively) crucified in the spring of 2010 by Carl “Shitty Deal” Levin for the firm’s credit bubble CDO transgressions, Goldman Sachs did something very uncharacteristic, if wise: it evacuated the contents of its inksac and literally disappeared from the public spotlight, reappearing only periodically to report on its quarterly performance which until this quarter had been very ho-hum. Since then the firm has been very much delighted that the public’s attention shifted far away from the firm that Matt Taibbi immortalized as a bloodsucking mollusc, to other bailed out banks embroiled in epic cases of money laundering, those caught performing epic trade gaffes named after yet other marine creature, and many others.

Yet it all came back with a vengeance in March when a former employee of the firm, VP Greg Smith, made waves with a NYT Op-Ed alleging the firm was abusing its clients. This in itself was no surprise to anyone. What however did come as surprise subsequently, were the details of Smith’s departure from the firm, which painted him as a vindictive hypocritical malcontent, whose sole purpose in life ever since fortune smiled upon him and some NYT editor decided to publish his letter, was to ink a multi-million book deal (which in turn has spurred a media flame war against Smith by various other less fortunate financial journalists, and we use the term very loosely). Well, that book is now out, and as a result Smith, Goldman, and the infamous muppets are about to get their second half-life of 15 minute fame, starting with Smith’s interview by the just as dramatic Anderson Cooper in this weekend’s episode of 60 Minutes. And while nothing new will be disclosed about Goldman this time, the firm will for better or worse, be watercooler talk for at least a few days. The result is that after having to write a memo to his employees once already providing marching orders on how to handle the first iteration of muppetgate, a few hours ago Goldman again released a “briefing toolkit” titled “Media Interest in Greg Smith’s Book” in which it prepares its employees for the coming brief if acute storm of renewed public criticism as a result of Goldman once again being in the headlines, if only for another 15 or so minutes.

The core of the internally and now externally circulated memo, is the following:

 In the days ahead, Greg Smith, a former vice president of the firm who wrote an op-ed in The New York Times in March 2012 on the day he resigned, will be publicizing a book about his time at Goldman Sachs and his views of the financial services industry.


Greg is scheduled to appear on various television and radio shows to attract publicity for his book to drive higher sales. Some of these news outlets have signed deals with Greg’s publisher, which give them exclusive access to the book in advance of its publication, and we expect them to tell a more one-sided story than they might otherwise. We have provided the following statement to any media program that has requested a response from us:


“Mr. Smith’s op-ed portrayed a firm that is unrecognizable to us and directly opposite to the culture we work hard to foster, but we took his claims seriously and conducted a thorough review of them. That review found no evidence to support his claims, but did find that Mr. Smith appeared to be frustrated about his career and future prospects at Goldman Sachs.”


At the heart of Greg Smith’s complaint is an assertion that the firm’s culture and values have deteriorated, and, as stated above, we take those issues very seriously. That is why we did an extensive review of his claims, as vague as they were, and found no evidence to substantiate them.

And so prepare for even more drama and distractions, and absolutely nothing new of substance. Just as has been intended.

Full memo below


25 Years Later: The Dow's Biggest Loser (And Winner)

Of the current stack of 30 ‘Blue-Chip’ stocks that comprise the Dow Jones Industrial Average, Alcoa has managed to do the worst over the past 25 years – gaining a cumulative 63% in the last 25 years (or 2.2% annually). The Dow itself, based on Bloomberg’s Chart of the Day, has risen 627% since the crash in 1987 (or 8.6% annually) – almost 10x that of Alcoa; while McDonald’s (perhaps perfectly summarizing what America is all about) has risen on average 12.8% per year for a 1620% gain since Black Monday. But who has impacted the Dow the most since its highs in October of 2007? (Hint: they disappointed this week!)


The best and worst performer (among current Dow members – avoiding the BKs!) since the 1987 crash…


But perhaps most importantly – the Dow is around 850 points from its intraday highs in October 2007 – and of the members of the Dow at that point AIG and C did the most damage (accounting for 870 points of loss on their own); while IBM has been the true star adding a magnificent 568 points during that time.


We can only hope that IBM, MCD, and WMT do not start to disappoint…oh wait…


Charts: Bloomberg

If The Market's Disconnect With Economic Reality is Over, Watch Out Below

As market participants ponder the disappointing post-QEtc. performance on their ‘Bernanke/Draghi-Put’-floored equities, perhaps these three charts will help in comprehending just how much hope there is in the world’s equity markets. The disconnect from macro-fundamental is not unique, but has had significant and extremely rapid repercussions in the past. It seems, however, that just like AAPL, everyone believes everyone else to be the greater fool – and this time is different.


Germany’s DAX ‘disconnected’ from economic reality in 2007 (to the euphoric side) and in 2011 (to the dysphoric side). It seems once again that hope has taken over…


The S&P 500 also exhibits the same disconnect – though even more significantly…


This happened before in the US…


That didn’t end so well either…


Charts: Bloomberg

Ignore the Smell of Blood at Your Own Peril

What kind of batter crowds the plate after a pitcher has aimed a fastball at his head? “Batters” have been doing it routinely on Wall Street lately — most recently yesterday, when they held the broad averages buoyant while Google shares were getting pasted for 80 points. During this single-stock onslaught, the Dow Industrials were never down more than 50 points and closed off only slightly with GOOG still $53 in the hole. This wasn’t the first time bulls have leaned into the plate while “dusters” whizzed past their ears. A day earlier, they pushed the blue chip average to a small gain while IBM was getting savaged on earnings that only somewhat exceeded analysts’ expectations. Big Blue got schmeissed again yesterday along with Google, but the body blows that sent two corporate giants to the mat evidently weren’t enough to unsettle investors.


Invincible Buyers?

If bulls have been acting lately like they’re invincible, perhaps it’s because they appear to have shrugged off Apple’s nasty plunge in the last month. At its recent lows near $624, the stock had shed 11% of its value – a very big hit for portfolio managers, since the company is the world’s largest by capitalization. But so what? That seems to be the attitude on The Street, where the lotus-sniffing stewards of Other People’s Money have been curiously calm through it all. With three absolutely crucial bellwethers falling from the sky, the Dow currently sits a mere hundred points from new recovery highs.




It’s tempting to think DaBoyz are trying to fool widows and pensioners into believing things are hunky-dory while they distribute shares to the unwary by the trainload. As we know, however, individual investors deserted the stock market years ago, leaving only sharks to feed on chum limitlessly supplied by the Federal Reserve. Now, with the Dow Average acting as calm as a serial killer strapped to a polygraph, it beggars belief to think the sharks have not yet caught a whiff of blood from the likes of AAPL, IBM and GOOG. When the contagion of these bellwether stocks spreads to the broad averages, which could happen any day, don’t think you’ll have time to plot your escape. We’ve now got both feet out the fire-escape window, no longer persuaded by our own, purely technical and still-valid rally target at Dow 14969 that there’s a reason to stick around.


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The Spain Relief Rally is About to End


As I noted previous articles, Spain has essentially three options:


  1. Spain goes the “Greek route” of agreeing to austerity measures in exchange for bailouts (which will implode the economy).
  2. Prime Minister Rajoy refuses to impose austerity measures and is removed/ replaced by an EU technocrat who is pro-austerity measures (like Italy experienced last year)
  3. Spain defaults/ leaves the EU.


Thus far Spanish Prime Minister Rajoy has opted to go for #1. The end result has been riots, protests, and now the threat of Spain as a country breaking up. I’ve long averred that Spain will bring about the break up of the Euro. By the look of things, we’re not far from this.


To whit, as the above article notes, Germany, Holland, and Finland have decided to pull back on the promise of a €100 billion Spanish bank bailout first established in June. These countries are now stating that this bailout should be included as part of the ESM mega-bailout fund’s banking program that could take years to implement.


Spain doesn’t have time for this. As I’ve noted before, Spain is facing a full-scale bank run (Spaniards pulled another €17 billion from Spanish banks in August, bringing the year to date bank run to over 18% of total Spanish bank deposits).


Now add multiple regional bailout requests, as well as 25% total unemployment to the mix and Spain is an absolute disaster. The Spanish Ibex knows it too:



Congratulations Mario Draghi, you promised unlimited bond buying and you bought less than one month’s worth of gains for Spain. If you want proof positive that Central Banks are losing their grip on things, the above chart is it. The moment we take out that trendline again, it’s GAME OVER (what more can the ECB promise?)


Remember, Spain is currently drawing over €400 billion from the ECB.


Let’s put this number in perspective… in June before Spain requested a €100 billion bailout, the country was drawing only €300 billion from the ECB.


Since that time and now, the ECB has promised to provide unlimited bond buying… and even Germany has indicated it would be open to some sort of a Spanish bailout…


And yet, Spain is now borrowing even MORE than it was in June.


This is not progress in any way… if anything it indicates that things are worsening in the EU’s financial system at a staggering pace. The powers that be are keeping things calm until after the election… at which time there will be absolute hell to pay.


On that note, if you’ve yet to prepare for Europe’s BIG collapse…we’ve recently published a report showing investors how to prepare for this. It’s called What Europe’s Collapse Means For You and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.


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Best Regards,


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