Reggie Middleton's Boom Bust Blog

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My warnings on Goldman Sachs, Morgan Stanley, and CDS have born fruit, by the bushels, for those who have heeded it. The Doo Doo 32 and commercial real estate shorts will be revisited soon, for they are in for a round of hell after this malaise. My industrial shorts will follow, as well as my lesser known real estate and finance services positions and research.

Goldman is down over $50 per share (from about $185 to $134) since I issued my warnings and forensic analysis. Many thought they were too connected to fall with the crowd. That is not a scientific approach to these markets. It's simple math, they are at extreme risk and trade at a significant premium. For those who are hesitant to subscribe to my proprietary research, this trade (off of a relatively small commitment) would have paid the professional subscription for several years, with plenty left over. We have been hitting on all cylinders with the investment banks. I expect the Goldman trade to be more profitable than the Bear Stearns trade where the research came out at about $105 or so and eventually warned that a long would make sense at $3 and it was bought at $10 (see More on the accuracy of this blog's research and Performance of This Site for historical details of much of the research performance). The market is starting to see Morgan Stanley as the bastion of risk that I see it as, and it is paying off. I'll assume that there is no need to comment on how we did with the Lehman research and forewarning.

Reference the Moody's and S&P downgrades of AIG to see how my multiple warnings of the risks the CDS markets will pose come to pass. Bloomberg - AIG's Ratings Lowered by S&P, Moody's, Threatening Efforts to Raise Funds:

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I really think that I will scream if I hear another pundit or regulator comment on how the injection of liquidity will help this or that bank or lending institition. Haven't we all learned by now that the problem is insolvency, not liquidity? The Fed has created an alphabet soup of lending programs, discount windows and mechanisms to provide literally unlimited liquidity to the banks, even the option to offer stock as collateral! That's right, the US government has become the world's largest broker dealer, offering margin lending for stock accounts, mortgage financing and M&A deal finacing and advisory.

From CNBC:

 Investors will wake up to see their portfolios shrunk compared to close of trading on Friday and there will be some panic selling in the U.S. market Monday morning, but the Lehman collapse is unlikely to bring any more investment bank bankruptcies, Dennis Gartman, founder of the Gartman Letter, told CNBC.

Isn't this what was said when Bear Stearns blew up?! 

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