Another one of Warren’s much hearladed, best in breed financial companies (to the extent you can call a ratings agency a ‘financial’) is in deep deep trouble.  Just like Salomon in the 80’s and Goldman last week, it doesn’t take much for these financial stars to fall from Grace.

Amongst other problems at the company – like rating 90% of defaulting CDOs as AAA – it now appears that Moody’s CEO entered a big automatic stock sale order just 1 month before of the SEC served the company with what is known as a “Wells Notice”.  This notice might lead to the firm loosing its license which would send the shares crashing to ~0.  Unlikely to happen but selling your shares around this time is mighty suspicious.

Shares are currently @ $21.97 and have been falling hard since the news hit on Monday May 10 (having closed $23.36 the preceding friday)

Check out the full story here: http://bit.ly/dB9q2v

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Here come the Feds

April 30, 2010

ANT has been calling for and expecting see increase negativity around GS  for a while now and just as we suspected, things are spiraling further downhill for the storied firm.

Today AP is reporting that the Justice Department has opened a criminal investigation into the firms mortgage related dealing.

Read the whole story here.

ANT remains of the opinion that now is a great opportunity to short GS.  There is a big pipeline of news that will hit over the next few months and all of it is slanted to the negative side of ledger.  The financial reform bill seems to be picking up steam and looks like it might implement serious derivatives reform (which will hit GS in its biggest profit center) and the Volcker rule (which if implemented in its “strong” form might require the firm to split up or go private).

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UPDATE:

ANT has been working out in London (UK) for the last little while and the above post was written in the morning.  When the markets opened in NY later in the day GS opened sharply down.

GS Media Pile On

April 24, 2010

Today its the Yahoo homepage (one of the most widely read ‘things’ in the world).  This interesting thing to note is that the headline is almost tabloidic and isn’t substaniated by the quotes found in the article.  Thats the point of what we here at ANT have been pushing, once the initial shot was fired it was clear that a coordinated (in the loosest most decentralized sense of the word) global ‘pile on’ was about to occur.  When the history of the financial crisis is written there is no doubt here at ANT that GS will be its primary villain, and thats why its time to go short.

Courtesy of Associate Press:

E-mails show Goldman boasting as meltdown unfolds

In e-mails, Goldman Sachs executives boast of profit-taking as housing market collapses

….”Of course we didn’t dodge the mortgage mess,” CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to the documents released Saturday morning. “We lost money, then made more than we lost because of shorts.”

[IS THAT BOASTING, MORE LIKE A MEASURED STATEMENT OF FACT]

…Goldman Chief Financial Officer David Viniar says that in one day the firm made more than $50 million on bets that the housing market would collapse, according to a statement from Levin’s office.

Tells you what might be happening to people who don’t have the big short,” Viniar writes in the message dated July 25, 2007. Viniar is also scheduled to testify on Tuesday.

[AGAIN, BOASTING? INTERESTING USE OF A PHRASE THAT MIHCAEL LEWIS WOULD LATER PICK UP ON AND MAKE FAMOUS.]

GS Backlash Grows

April 22, 2010

**UPDATE to GS is the new TOXIC Asset**

  • German state bank has severed all ties to Goldman and French gov’t considering its own investigation – http://bit.ly/bgJw2Y
  • Seems GS GEO LB agrees with ANT’s view on this one (taken from BusinessInsider.com, a must read for anyone interested in finance or technology):In the conversations with private equity executives and others, Mr Blankfein left clients with the impression that he was eager to fight the charges in court. The SEC has requested a jury trial. “He was very aggressive,” said one person called by Mr Blankfein on Wednesday. “He feels that the government is out to kill them, that they are under attack and the whole thing is totally political.” Mr Blankfein said the SEC action “hurts America”, this person said.Read more: http://www.businessinsider.com/henry-blodget-goldmans-blankfein-sec-fraud-suit-is-just-a-political-hit-job-2010-4#ixzz0lpAsrDgP
Why?  Its just a fraud charge that the bank can easily afford and will likely settle.  Should barely effect quarterly performance, never mind a whole year.  At ANT we disagree on the basis of the reverse halo effect.  GS has the halo, smartest people, highest salaries, best connections, biggest returns…  This charge is the first shot of the US gov’t in financial reform wars and it rips the halo off the firms head.  The repercussions are already starting:
  • Clegg (the new media darling of the UK election) just called for the gov’t to stop using GS for advisory work.
  • German politicians are issuing similar claims after the Greece debt ‘hiding’ fiasco and the new revelation that it was GS and Paulson & Co. who took down IKB (what the traders in The Big Short call “Dusseldorf”)
  • **ANT doubts the Obama admin will be caught dead anywhere near the firm, and may be actively trying to ‘scape goat’ them as the most visible beneficiary of the financial crisis**

This goes to the heart of what makes GS special.  GS has always had the deep global network.  That was the key barrier to entry which forced the IB’s, all second rate to GS, to focus on other less profitable areas of differentiation.

GS is becoming as toxic as the sub-prime securities that it sold (and did so better than anyone else) to Dusseldorf, as Michael Lewis euphemistically called the moronic buyers of these too complex to understand securities.

This situation reminds us of Solomon brothers in the 1980’s.  The fraud of one trader (rigging treasury auctions) turned into a scandal that nearly destroyed the ‘best’ shop in the country.  It took none other than Warren Buffet himself to lend enough credibility to the firm (by making an investment he would soon come to regret) to save it from implosion.  We are not suggesting a GS implosion is in the cards but note that GS has already played the Buffet card.   Scandals like this, especially in politically heated times, have a way of spreading up the corporate ladder and will distract management.  They also scare the clients.

With the shares at $160.00, ANT speculatively (i.e. gut call without any real analysis) thinks that there could be a short opportunity.

The option market is offering 2 year puts (strike @ $155.00) for ~$26.00.  So for these long dated suckers to be in money the stock will need to fall to below $129.00.  Even if the price doesn’t fall that far, the value of the options will increase as the stock price falls closer towards being in the money.

This could be a good trade, but ANT doesn’t have sufficient capital to speculate in the options market, yet.