Tuesday, November 17, 2009


BANZAI7 NEWS--Here are some very interesting tidbits published in a post on Seeking Alpha (http://seekingalpha.com/article/173592-the-financial-crisis-nowhere-near-over).

This first chart shows the derivative exposure of 25 US commercial banks that had trillions (with a “T”) of dollars’ worth of exposure to derivatives on their balance sheets. At the time, the writer observes that if 4% of the notional value of these derivatives was “at risk” and only 10% of that 4% went bad, that you would wipe out the total equity at the five largest US banks. Ouch!!!!'

Look at the figure for Goldman Sachs. Q: Who is the 2 biggest 2 faileth? Ouuuuuuuuuch!!

This next chart shows is sourced from an SEC filing by Goldman Sachs Asset Management. It shows the ten largest net short positions that they are running. For the layman, these means which stocks Goldman is betting will go down.

Here is what the writer has to say about this:

"For starters, four of the top 10 are financial companies. The largest financial short is Wells Fargo (WFC), which Goldman has committed $289 million to betting against. After that it’s Mastercard (MA) ($266 million), then PNC (PNC) ($202 million) and finally AIG (AIG) ($152 million).

Looking at Goldman’s positions, it’s plain as day that Wall Street’s “finest” do not believe the financial crisis is over (why would they be betting against the banks if they did?). It’s also clear that Goldman’s analysts have noted, as I have, that both Wells Fargo and PNC both have massive exposure to the derivatives market (the fact that Goldman also has massive derivative exposure is beyond ironic).

However, where things get absolutely absurd is Goldman’s short position of AIG. Goldman, as has been widely documented, was one of the largest benefactors of AIG’s bailout (the then investment bank had massive counter party exposure to AIG’s toxic balance sheet). To see Goldman now betting against AIG after receiving $13 billion in tax payer money to ensure that the former didn’t go under along with the latter is outrageous (if not infuriating) to say the least.

On a final note, I wanted to point out Goldman is also shorting a Euro index (betting against that currency) as well as two gold mining companies (Barrick (ABX) and Agnico Eagle Mines(AEM)). This indicates that Goldie is bearish on both the euro and gold. which hints that Wall Street’s finest are likely betting on a US Dollar rally (that would, after all, be the most obvious catalyst for a correction in gold and the euro).

To be blunt, it’s clear that Goldman (like me) believes the financial crisis is nowhere near over."


Betting against big financials with huge derivative exposures. Telling and ironic.

Betting against AIG. Disgusting.

Betting against the Euro and Gold. Hold onto your stimulis President Obama.

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