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I seem to have been one of the very few was bearish on Goldman and
Morgan Stanley in early 2008 (see links at the bottom of this post as
well as Get Your Federally Insured Hedge Fund Here, Twice the Price Sale Going on Now! and It appears as if the patina on Goldman's Stock is fading... and The Riskiest Bank on the Street).
As illustrated to subscribers in the 
Morgan Stanley Forensic Outlook: Q1 2010 2010-01-05 04:20:36 504.53 Kb,
the bulk of the valuation increase for the big investment banks stems
from the peer group bear rally premium of the last 9 months. If, or
more accurately, when that premium dissipates, the whole sector will
drop in fundamental value. I don't believe the banks are worth what
they are trading at now, but comps are comps. Let's take a look at the
comp trend.
ibank_comps_trend.pngibank_comps_trend.png
As you can see, thanks to the bear market rally, the enire I bank peer
group has enjoyed a big bump in valuation - one that I believe will
prove to be transient, to say the least.
bank_comps_bvps.pngbank_comps_bvps.png
If I am right, then these I bank stocks will collapse for the value
drivers just aren't there to drive the valuation. Nearly all business
units are trending down save a bump or two, FICC and trading arbitrage
can't last forever (some analysts say the party is over already), and
eventually the credit losses and asset devaluations on the balance
sheet will come a knockin', despite the "get 4 quarters' worth of free
mark to market lies" from the powers that be. Residential real estate
is resuming its downtrend (see If Anybody Bothered to Take a Close Look at the Latest Housing Numbers...) as credit loses resume their uptrend (seeThe Truth! The Truth? Banker's Can't Handle the Truth!!! andResidential Lending Credit Losses Worsen as Unstainable Government Support Proves... Unsustainable).
Check out Goldman Sachs today, and for the last 30 days.
goldman_-_1-12-10.pnggoldman_-_1-12-10.png
goldman_-_1-12-10_3_months.pnggoldman_-_1-12-10_3_months.png
More of Reggie on Goldman Sachs
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Free research and opinion
- Reggie Middleton on Goldman Sachs' fourth quarter, 2008 results
- Goldman and Morgan losses in the news, about 11 months late
- Blog vs. Broker, whom do you trust!
- Monkey business on Goldman Superheroes
- Reggie Middleton asks, "Do you guys know who you're messin' with?"
- Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis
- Reggie Middleton on Goldman Sachs Q3 2008
§ As Reality hits, the Masters of the Universe are starting to look like regular bank employees
Reggie Middleton's Goldman Sach's Stress Test: Breaking Ranks with the Crowd Once Again!
Who is the Newest Riskiest Bank on the Street?
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Reggie Middleton on Goldman Sachs' fourth quarter, 2008 results
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On Morgan Stanley - The Riskiest Bank on the Street
The latest update for all subscribers: Morgan Stanley Forensic Outlook: Q1 2010 2010-01-05 04:20:36 504.53 Kb
Free Research: The Riskiest Bank on the Street
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Historical Subscription Research
Morgan Stanley_final_040408 2008-08-30 06:37:54 1.38 Mb
MS Simulated Government Stress Test 2009-05-05 11:36:25 2.49 Mb
