Print
Hits: 1141176

Below are the results of my updated, proprietary GS model loosely based on the US government stress tests gs_stress_test_cover.jpg(albeit adjusted for reality via assumptions). The professional version is 132 pages of facts, figures and calculations. There is very little wording, so it is primarily for those who need to dig into the figures and don't have the manpower or expertise to go through the thousands of pages of reporting, particularly as it is now couched in accounting shenanigans.

Similar to the regional bank, asset manager and reinsurer stress tests soon to be released (in the next day or two, seriously), we have created 3 scenarios with RGE Monitor's estimates as the base case, The Fed's base line assumption as optimistic case and a distressed scenario. The Fed's baseline assumptions are on an average higher than RGE's estimates by a factor of 1.33x while under the adverse case the macroeconomic assumptions are lower by a factor of 0.80x. 

In addition to these three scenarios we have segregated accounting losses and economic losses since the new FASB guidelines gives more leeway to management regarding valuation of securities. This is a very big deal. I doubt there is such a report available anywhere on te net, and one has to wonder if even the government has access to such a high level of analysis. One tends to doubt that they do, considering the level of predictive ability demonstrated thus far.

Please take note of the new method of calculating the book value which should take some of the confusion out of fluctuating results that stem from the unprecedented market volatility over the last few quarters.

pdf  Goldman Sachs Stress Test Retail 2009-04-20 10:08:06 720.25 Kb - 17 pages

pdf  Goldman Sachs Stress Test Professional 2009-04-20 10:06:45 4.04 Mb - 131 pages

The completed table of contents:

Goldman Sachs 1Q09 results. 2

Summary. 4

Key assumptions. 4

GS' core business, Investment banking division, is expected to continue with its dismay performance in 2009. 5

Higher revenues from FICC is not expected to sustain going forward. 5

Plunging asset values and decline in AUM fee to impact asset management revenues  6

Investment write-downs. 6

Valuation.. 7

The Stress Test Results. 10

VAR and Risk Data. 10

Comparative Var Analysis. 12

CMBS Pressure Points and Other Risk Factors Not Reflect in VaR.. 16

Economic Writedowns. 20

Future Value of Assets (economic) 23

Future Value of Liabilities (economic) 32

Financial liabilities at fair value. 38

Movement in Level 3 Financial Assets and Financial Liabilities ($ mn) 44

Writedowns (accounting) 48

Future Value of Assets (accounting) 50

Financial Liabilities at Fair Value (accounting) 60

Movement in Level 3 Financial Assets and Financial Liabilities ($ mn) (accounting) 69

SFAS 157 and SFAS 159. 74

Debt Maturity. 76

Level Three Comparison.. 76

Level 2, Level 3, CDOs and Related Assets. 81

Revenue, Expense and Off Balance Sheet Loss Assumptions. 84

Relative Book Valuation.. 85

Financial Projections. 88

Income Drivers. 92

Key Ratios. 97

Unconsolidated Variable Interest Entity (VIE) Exposure. 99

Scenario Analysis. 103

Disclaimer 115

 

I encourage subscribers to discuss these documents and their own independent findings in detail in the private subscriber forums. I have had a rash of hedge fund managers sign up recently. This is a good time to put the brain trust to work!

 

Next on tap is the recast of the PNC Stress Test (with the new book value calculations and assumptions), Wells Fargo Stress test with the bifurcation of accounting and economic earnings (I will create two separate sets of books, just like WFC did!), and Morgan Stanley's Stress Test, as well as all of the other relevant research subjects I have covered that can benefit from the stress test, time and resources permitting.