Bullions of Gold

The good name of the investment bank Goldman Sachs [GS] is arguably the best in the investment banking / financial services industry.
A lot of that is not without reason. After all, the current market trends do favor that argument. We have seen the unfortunate demise of Bear Stearns & Co. [BSC] by its fire sale to J.P. Morgan & Co. [JPM] in a Fed Reserve mid-wifed deal. That was followed by a deja vu style trading of Lehman Brothers Holdings [LEH] that has been seen in previous financial blow-ups of Long-Term Capital Management, The Russian Debt default and the dot.com bubble burst. In most of these cases, if not all, LEH came precariously close to going under/being bought out. Most of those situations could be attributed to the short-selling activism and panic-spreading rumor mongering that seems to plague the beleaguered firm, being one of the smallest bulge-brackets [and at that time, a fairly under-diversified firm] on the street. The rest of the investment banks, Merrill Lynch, UBS, Morgan Stanley, Banc of America Securities, Deutsche Bank, Credit Suisse et al have largely been left to lick their sore wounds.

Goldman (Sachs) on the other hand has been resiliently defiant of the market trends. It made record profits while all was not honky-dory on the rest of the street. Along with John Paulson of hedge fund Paulson & Co., Goldman Sachs has reaped a wind fall of profits in the misery of the rest of the markets. Not that it is to be blamed for the alleged reckless and risky squandering [I think it was merely over placed riskiness at most in an industry that unfortunately blew in their face] of other investment banks. Or for the astute precision in identifying market trends long before the others probably saw doomsday coming.

That said and done, one cannot possibly ignore the rumors of manipulation that seem to mysteriously [allegedly] start from the firm. Allegations by Alan Schwartz, CEO of the erstwhile Bear Stearns and Dick Fuld of rumor mongering and stock manipulation seem to increasingly growing steam. Goldman was also involved in the Bob Freeman incident during the famous Ivan Boesky/Michael Milken insider trading/stock manipulation scams. While it was the individual employees that indulged in that, the unflinching and unconditional support to Freeman during the incident rather than siding the growing signs of possible wrong-doing left a bad taste in the mouth. Guess the average investor doesn't have the memory of an elephant and incidences such as these are short-lived.

Read an interesting article on Seeking Alpha.

Hope that all rise to their past glory and Wall Street is once again what it was!

Lehman's tryst with Short-Sellers - Déjà Vu

Lehman Brothers has been time and again the subject of short selling and rumours of discount and/or distressed selling that it is indeed not funny! CEO and Chairperson Dick Fuld has probably been through this more than once to realize that it will pass. Yet there is the scare that LEH may go the Bear Stearns & Co. way.

Three reasons why I [and a lot of people] think that LEH cannot go down the BSC way. For one, a run on the bank, if it were to happen, has been taken care of. Capital Reserves are in place and so is the Fed Reserve!

Second, they are far more diversified and have far more friends on the street than Bear. Just look at the timing of the favorable report from Morgan Stanley. Nothing about doubting the integrity of the equity research. It is exactly what the truth is. But the report did help arrest the fall of the stocks.


Finally, and most important, is the presence of Dick. None of the others at Wall Street have been at the helm longer than him. It is not just a function of time. It is the passion he has for a firm that he has nurtured and seen grow. One of the two people on the board who didn't want Lehman to merge with AmEx. It is like a child [or maybe a mother] that he has come to love and nurture. I believe that he will fight tooth and nail to sell it off. He is proud of what The Brothers have achieved.

Here is a nice report in the Financial Times that is good read on the subject.

Lehman Brothers Logo Source: Lehman.com
Dick Fuld Picture Source: Euromoney.com