byrnemm

There's Only So Much That Goldman Can Do

While I do not know how leveraged GS is, or how much counterparty risk they have, or how much their book value matters in the current market conditions, I will say that it appears that a lot of the pro-GS statements made in the comments are emotionally derived.

"Goldman Sachs can't do badly because it is Goldman Sachs."

That is the same kind of thinking that got Lehman Bros. chapter 11 instead of a buyer--"our assets cant be worth that little"; that caused the investment banks to leverage themselves so greatly--"real estate cant go down because its real estate."

While I agree that the management of GS is some of the best out there and that is what creates its value in the long term, I would not lightly disagree with those who avoid GS out of concerns of a systemic crisis in the financials market. It seems likely that from here on to the unforseeable future, all the other dominoes falling, even if GS avoids becoming one, will in some way latch on to GS and try to bring it down with them. Recovery does not look imminent.

Long live (or die) the derivatives market.