Kevin Walmsley

Goldman Starts Getting Smaller

Fair enough. Then again, somehow Goldman recorded a negative revenue number, of $1.58 billion. Didn't know that was possible either. Of course, I was just the CFO of a manufacturing company, not a Wall Street firm. So I guess if all the investment banks take back money they set aside for payroll, and give back billions of dollars worth of sales they made in prior quarters, they'll be profitable again in no time flat.

Or, maybe it's another example of the Enron syndrome: if you don't understand the accounting, there's a reason, and you should sell.

Goldman Starts Getting Smaller

We can put aside the idea that "compensation and benefits fell to a negative $490 million". Unless Goldman managed to force people to work, not only for free, but to pay GS for the privilege of showing up there every day, it's not possible for an expense to be a negative number. Perhaps they meant to say the expense GROWTH was negative, but I suppose that's what passes for research at Moody's these days. Quelle surprise.

And there is absolutely zero chance that Goldman made a profit this year. We can fully expect that future quarters will wipe away whatever phantom profits GS claimed to have earned in 2008. One of the great short sell candidates of 2009, considering it's one of the few with some meat still on the bone.

Why Did Warren and Hank Invest in Goldman?

Very good analysis. When I initially heard that Buffett had invested into Goldman, I thought he was out of his mind. Then when the terms of the deal came out, where he got a juicy dividend to hold perpetual calls on GS, it started to make more sense. Of course, his capital was blown through in about eight hours of trading, so time will tell. But the Buffett mystique has been badly damaged of late. He had a lot of investments in AIG, and owned 20% of Moody's, which famously hasn't gotten a single rating right in the mortgage-bond disaster. Makes me wonder what, exactly, Buffett does lately besides write big checks. If what happened at Moody's and AIG is what passes for oversight of his investments, he's done a crummy job.