Mad Hedge Fund Trader

When Goldman Might Have Failed

No doubt. It looks like Goldman Sachs (GS) is going to leg over the Treasury once again. It is buying back the warrants it issued the Feds as part of its TARP dole out for a mere $1.1 billion, giving a 23% annualized return on the investment. Why is the government selling? Do you think GS knows something about its future earnings the government doesn’t? Could this be the greatest example of insider trading of all time? Has anyone at the Treasury considered keeping free calls on GS to maturity, as Warren Buffet is with his paper? Then they might be worth $10 billion, or even $100 billion. I know that if hedge funds could get these warrants at the same terms as the Treasury, they’d be loading the boat. Safe to say that when GS shakes your hand, you want to count all of your fingers afterward.

Now Playing: Zombie Condos in Manhattan

Finally people are writing about this! The Manhattan residential market is now in free fall, after holding up better than every major market in the country for years. Rents have fallen up to 25% since the Lehman bankruptcy in September, dragging down condominium and co-op prices almost as fast. Hardest hit have been units priced in the $1-$2 million range that appealed to up and coming Wall Street traders. This class of newly unemployed former owners is now fleeing the Big Apple en masse. The stratospheric end of the market, the mega mansions and penthouses with those fabulous Central Park views and live-in nanny suites in the $30 million on up range, are still holding up. With industry job losses this year expected to exceed 100,000, expect this downtrend to continue.

Bank Nationalization and the TARP

Good Idea! Bank of America’s (BAC) Ken Lewis says that he won’t resign until he pays back the $45 billion in TARP money he owes the government. So paying $50 billion for something that is really worth a negative $170 billion is a bad career move? That’s a revelation! I can see that secrecy is a concept that is forever banished from the investment community. CEO’s won’t be able to make an acquisition, nor fund managers raise a single nickel from here on, without a complete undressing, and a full proctologic exam!