Thursday, September 18, 2008
Marginalizing The Best Of Breed
Yesterday shares of Goldman Sachs cratered. At one point they were down 35pts to a three-year low of 97.78 before closing at 114.50.
I did make one small option trade in the name a while back that worked out (I'll have to confirm) but Goldman has been a tough one to trade from the short side anyway. For the most part, I've steered well clear of this ticker. Admittedly, it has always scared me.
You can see from the chart above that after the *subprime* market woes of August 2007, Goldman rallied hard from 170 to 250. Then again after the selloff in March, it rallied from 150 back to 200. Clearly, it had been a short-seller frustrater.
But, at least on the doom-and-gloom blogs that I read, plenty of hardy souls have reasoned and wagered that Goldman would tank. Reggie Middleton comes to mind most prominently. On that recent link of his, you'll find references to his historical bearishness.
I don't do forensic accounting; nor am I well-versed in precisely how Goldman makes its money. With the demise of a couple of its rivals (Lehman and Bear Stearns), its well publicized victory shorting the subprime mortgage market last year, AND the fact that it's likely been gaining customer assets (from the dead dogs, LEH and BSC) the narrative became that Goldman Sachs would not only be a survivor from this *credit crisis* but that it would be triumphant.
AND the resilient stock action certainly also made a strong case that Goldman Sachs was bulletproof and *Best of Breed*.
With the stock tanking yesterday, I think it's safe to say that thesis has been debunked; that the receding tide is stranding all boats.
So why am I mentioning the saga of Goldman Sachs?
Well because two of my shorts: Wells Fargo and Simon Property Group have both been frustratingly strong.
Both of them are presumed by their cheerleaders to be *Best of Breed*, victorious survivors of this market meltdown.
Simon Malls has been publicly celebrating the wave of retail bankruptcies. They've boldly asserted that it's good for them; that they want their weak tenants to move out so they can replace them with *higher paying* ones.
Wells Fargo has also been out bragging. In mid-July its CEO John Stumpf declared, "We are open for business and getting lots of it."
Okay, John, but what about legacy losses on your mortgages and HELOCs?
I'll bet that handsome Weimeraner didn't win *Best of Breed* for more than a year or two either.