Financial, Real Estate, Stock Markets Trends and Current Affairs

Notes of interest as I browse through the Goldman Q4-2011 earnings release...

1. Many analysts dropped their estimates for Goldman (considerably after I warned on the firm), setting up the old Wall Street bait and switch move... Yet, despite this setup on reduced earnings, Goldman STILL MISSED on the top line! This is the most important number and has trended downward sharply.
2. Goldman has padded earnings by slashing its compensation. For this I query my hyperintelligent BoomBustBloggers (and anyone else who has a synapse or two to spark), exactly what is that Goldman makes again? What's their prized formula? Their secret sauce? Their patented product? Oh yeah, they really don't have any thing of the sorts outside of their human capital - their employees. Those very same employees in which Goldman is not making a negative investment in order to make numbers (on earnings, they can't do anything about missing the top line). As a result, Goldman's only true product - their only real inventory, is heading for the hills. What does this bode for the future? Well, you guys are smart. You know its bullish when companies invest heavily for the future. What is it when they pare investment back significantly???
   1. The earnings pad is not even as optimistic as it seems. Revenues have decreased more than the effective reduction in compensation, thus it can be argued that effective comp as a % of revenues has increased. Should shareholders be excited about the proportion of their revenues increasing to compensate those who have underperformed so drastically???
3. The net gain attributable to the impact of changes in the firm’s own credit spreads on borrowings for which the fair value option was elected was approximately $600 million for 2011.
   1. So, the firm's actual cash earnings decrease was materially higher than appears on the surface...

4. During the year, the firm repurchased 47.0 million shares of its common stock at an average cost per share of $128.33, for a total cost of $6.04 billion, including 9.2 million shares during the fourth quarter at an average cost of $98.54, for a total cost of $908 million. The remaining share authorization under the firm’s existing repurchase program is 63.5 million shares.

   1. Goldman has taken a $1.3B loss on its share buybacks for 2011! Keep that in mind when taking their investment recommendations to heart! I've Told You Before, And I'll Tell You Again - Goldman Sachs Investment Advice Sucks!!! Even when they are advising themselves on share buybacks though???
5. The MSM news organizations forgot to mention that althought Goldman's asset base is shrinking, it is shifting ever more of those shrinking (read devaluing) assets into the level three category.

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I will extend this note for subscribers if I find anything of interest in subsequent filings or the conference call notes.

Here are some links that you are unlikely to find anywhere else...

Just As I Predicted Last Quarter, The World's First FDIC Insured Hedge Fund Takes A Fat Trading Loss

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