Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:1261 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:1460 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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It's the Real Estate Crash That I Warned…

20-03-2017 Hits:1947 BoomBustBlog Reggie Middleton

It's the Real Estate Crash That I Warned You About (again)

I've issued several warnings late last year warning of the real estate bubble peaking and popping. I feel I'm especially qualified to do such since I quite accurately called the...

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When It Comes Time To Show and Prove, Eq…

20-03-2017 Hits:1675 BoomBustBlog Reggie Middleton

When It Comes Time To Show and Prove, Equity Markets May Drop Hard

The markets have gotten euphoric since the Trump election, apparently because someone believed what he was selling. Take a look at the broad market jump (powered greatly by the bank...

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So, Brexit Is Now Almost Official. Is Th…

20-03-2017 Hits:830 BoomBustBlog Reggie Middleton

Note: All downloadable legacy content is for subscribers only. We currently have a sale for $11 per month for basic access. Professional subscribers are now evevated to have direct access...

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In Less Than Two Weeks, Another Bitcoin …

17-03-2017 Hits:2459 BoomBustBlog Reggie Middleton

In Less Than Two Weeks, Another Bitcoin ETF Faces SEC Deadline - It's Denial Is NOT A Bearish Event

LedgerX's "SOLIDX BITCOIN TRUST" has an approval deadline this March 30th, 2017.If it is approved, Bitcoin is due for one hell of a bump, but...  

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The Fed Raises Rates While Still Baby Fe…

17-03-2017 Hits:2274 BoomBustBlog Reggie Middleton

The Fed Raises Rates While Still Baby Feeding the MBS Market With Billions in Monthly Purchases

The Fed has raised rates, officially making real what was mere signaling of the end of its expansionary era... Or is it? You see, from a practical perspective, QE is...

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A Bitcoin ETF or Similar Regulated Insti…

16-03-2017 Hits:2834 BoomBustBlog Reggie Middleton

A Bitcoin ETF or Similar Regulated Institutional Vehicle is a Forgone Conclusion - What Happens Next?

Someone with over 53 years on Wall Street sent me this article from Lex of the Financial Times...

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Why the Winelvoss Bitcoin ETF Was Reject…

13-03-2017 Hits:3646 BoomBustBlog Reggie Middleton

Why the Winelvoss Bitcoin ETF Was Rejected and How to Create a Regulated Vehicle That Passes Muster

 The Winkelvoss ETF application was rejected by the SEC, and bitcoin dropped about 20% in price. I repetitively warned those that followed me that a very low risk buying opportunity...

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Trump Calls Obama's Policies On Russia W…

10-03-2017 Hits:3307 BoomBustBlog Reggie Middleton

 Donald Trump's recent Tweet discusses how Russia has gotten stronger at the behest of President Obama.   For eight years Russia "ran over" President Obama, got stronger and stronger, picked-off Crimea and...

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SNAP's Greed Derived Self-Inflicted Woun…

08-03-2017 Hits:4369 BoomBustBlog Reggie Middleton

SNAP's Greed Derived Self-Inflicted Wounds Continue to Manifest

The day before the SNAP IPO, I penned "Goldman Sachs & Morgan Stanley Pull Off the Heist of the Decade, Bends Over Those Who Don't Read BoomBustBlog". Despite being rather...

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Bitcoin Is Reaching the Point of No Retu…

08-03-2017 Hits:4111 BoomBustBlog Reggie Middleton

Bitcoin Is Reaching the Point of No Return - Buy Side Should Take Note

Many bitcoin aficionados are waiting with baited breath as the SEC is to announce by this Friday whether they will approve the first registered bitcoin ETF. This is not the...

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Below are our initial observations on Goldman Sachs as compared to its peers. I've had a burning sensation telling me that GS is grossly overvalued, but I haven't had a chance to prove it empirically. I am now diverting the resources necessary to prove or disprove this "feeling". I will keep the blog posted.

 

Bank Level 1 Assets Level 2 Assets Level 3 Assets Shareholder Equity Total Assets Level 1 Assets-to-Total Assets Level 3 Assets-to-Equity Leverage (X)
Citigroup $223 $934 $133 $114 $2,183 10.20% 117% 19.21
Merrill Lynch $122 $768 $41 $32 $1,020 12.00% 130% 31.94
Lehman Brothers $73 $177 $39 $26 $786 9.20% 152% 30.59
Goldman Sachs $135 $621 $96 $43 $1,189 11.40% 226% 27.89
Morgan Stanley $115 $226 $74 $31 $1,045 11.00% 236% 33.43
                 
Based on 1Q2008 reported data          

 

·        At the end of 1Q2008 Goldman Sachs had second highest proportion of level 3 assets to total shareholder’s equity. Goldman Sachs’s level 3 assets as proportion of adjusted shareholder’s equity has increased from 161% in 2Q2007 to 258% at the end of 1Q2008. Although Goldman Sachs has high proportion of level 3 assets it has not reported significant write-downs. On the contrary the bank has reported net gains on its mark-to-market valuation adjustment on its level 3 assets of $2.0 bn in 1Q2008 as losses on securities were more than offset by gain of $5.1 bn on derivatives contracts indicating effectiveness of timeliness of derivative position under current crunch financial market conditions.  In 4Q2007 and 3Q2007 GS reported mark-to-market valuation gain(loss) on its level 3 assets of $(360) mn and $ 620 mn, respectively.

 

·        Goldman Sachs leverage is comparable to its peer group with leverage ratio of 27.89x

 

·        Goldman Sachs adjusted P/B of 1.75x is relatively high compared to its peer group. However, the same can be attributed to relatively better quality of its assets and its ability to better withstand the current problem in the financial and capital markets.

 

·        However, on the other side, Goldman Sachs has highest VaR of $171 mn  ahead of Morgan Stanley’s VaR of $107 mn and Lehman Brothers VaR of $106 mn.

·        Its investment banking and asset management fee based revenues have slowed down significantly over the past few quarters due to slow down in the capital market activities.

 

Based on these initial observations, while the stock does seem to command higher pricing multiples compared to its peers, it is likely it may be over-valued at the current price. We will have to dig deeper to precisely check if the stock is materially overvalued. I will have my team further explore Goldman Sachs’ relative strengths and weakness with respective to its peers regarding exposure of assets, revenues and will I wll post my findings.