Today the market gapped up early (and overnight) on news that Warren Buffet had "invested" in Goldman Sachs and shown confidence in them.
In the end the market closed DOWN and our favorite sector to short (Russell) was cracked again, under 700. I'll stick to my 350 Russell target, so there's still a helluva lot of downside!
OK, so you want the real deal? Here goes; it's a complete and utter distortion to call what Buffet did an "investmtent". He did NOT invest in Goldman Sachs, not at all. What he did is make a bet that Goldman won't go completely under, ie bankrupt the way Lehman and Bear Stearns did. That's all.
He got an unreal deal, a deal I'd personally do. He did a BRIDGE LOAN, nothing more and nothing less - BUT - he got the best freakin' bridge loan deal of all time!
He gets shares at current market price, $5 BIL worth, he gets another $5 BIL worth of warrants to buy shares of GS at $115 in the future, and he gets, best of all, 10% DIVIDEND on his $5 BIL! So, he gets $500 MILLION a year on his money, plus he has the upside on the shares, and the warrants!
Warren Buffet is not dumb enough to invest $5 BIL in a stock that is 99.9% to be under $50 in a year in my opinion. In fact, Goldman Sachs is near the top of my list, still, as far as GIMME shorts! This thing is going down and the people buying it here are out of their minds.
GS will have such a SICK wall to climb to make ANY money moving forward. They only make a billion a year or so and now $500 MIL of that is GONE, to the smartest guy around - BUFFET!
How in the world is Goldman going to make money in this market, with a dead core business, and fork over $500 MILLION to the Buffster? Answer - the SUCKERS buying GS here are just that - suckers. Booyahhead can scream all he wants that GS is a great buy here and this proves it, but he is the same knucklehead touting BSC at $80 and GS at $200s and AAPL at $200, etc,etc. GS will be $25, you can mark it down and say I suck if I'm wrong, but 18 months from now, or before, GS will be $25 or less.
You have to remember, this deal doesn't make GS worth more, it makes them worth a LOT LOT less! The stock should have been down $20+ off this news, but because GS is one of those cultish stocks, it was up big time even in a bad tape.
Now, back to the hearings, it appears that the powers that be may actually do the right thing and force the banks to give up equity/warrants to taxpayers. If so, that should drive down financial shares dramatically, there will be no bailout. The only real hope that the banks have/had is for the government to basically give them a free bailout pass, but that appears highly unlikely. In that case then WB, C, COF and many many others are in serious trouble and should fold. SOV is also trading like it wants to go under.
In the meantime, we really should get a move higher either Thursday or Friday as shorts have to cover into the weekend. NO one will want to be short and worry that the Fed is going to do something and we gap up 300 points. I think whatever gap we get will ultimately fail, just like everything else has. I think we will see below 10,000 by year end, and it may happen in a big bunches. It will not mark anything but a pause in a very bad market.
This is tough dudes and dudesses, but the market is cluing us in. Look at MS today, it gapped with GS but couldn't hold it and then collapsed into the close AND then had bad news after the close. This is a market that is revealing a lot of TELLS, we just have to listen closely!
See ya manana, I'll be taking a class trip with my daughter and then back on Friday, so trade safe and trade smart! CASH IS KING! CASH IS KINGGGGGGGG!
See ya on the other side,