Quote of the Day: GS & WMT

Spy_futures_111307

From market curmudgeon Bill King, who tells it like it is:

"Ironically, or rather idiotically, traders poured into stocks on Blankfein’s assertion that Goldie is doing well because Goldie is short mortgage-backed securities and CDOs. Blankfein believes the financial situation will worsen: “…many institutions don’t understand what the credit crunch is going to do to earnings and their balance sheets.”

So what we have is a huge rally because Goldie will profit from the US economy and financial system going to hell.  And people pay fortunes to go to Ivy League schools and B-schools to learn how to play the new economy!?!?!  Apparently a critical mass of traders believes that not only what is good for Goldman is good for America but as long as Goldman profits everything else is immaterial…

Wal-Mart admits that customer visits declined in Q3; but food sales increased 5.3% and pharmacy sales jumped 7.9%.  Thank God for food & drug inflation that is not recorded in official inflation!

Recession, inflation, dollar collapse, financial system implosion – no problemo, Goldie is making money so pour into stocks!  And let’s be merry and jiggy now because Wal-Mart is booking Christmas sales weeks before Thanksgiving and food inflation is virulent enough to significantly boost revenue!"

Thanks, Bill . . .

What's been said:

Discussions found on the web:
  1. SINGER commented on Nov 14

    Wasn’t the SP just due for a bounce…Shorts closed out big winners and alot of money got long to ride that wave, so the move was exacerbated…

    I don’t know anything and I was calling the near term rally in the indices….

  2. Winston Munn commented on Nov 14

    And what will happen when the bond insurers like Ambac are downgraded by Fitch?

    Little known factoid: Buying bond insurance transfers the insurer’s rating to the issuer. Thousands of bonds carry a AAA rating because they bought bond insurance for AAA rated insurance companies.

    And when those insurance companies’ ratings are downgraded….all those insured bonds face the same fate.

  3. joe commented on Nov 14

    I agree completely with the sentiment, except for one correction. WMT’s pharmacy sales didn’t rise because of drug inflation, in fact it was just the opposite. WMT’s $4 prescription drug program is massive drug deflation, but it’s driving huge volumes.

  4. Lawrence commented on Nov 14

    Barry, how did you get a Bloomberg chart in color? This smacks of time travel or occult.

  5. Matt M. commented on Nov 14

    I’m not familiar with Bill King, but he sure has a simplistic view of the markets, doesn’t he? Wow!

  6. Chuck Ponzi commented on Nov 14

    On the flipside,

    all of those dollars that G-Span and Helicopter Ben printed need to go somewhere. Stock market seems about a likely place as any.

    Inflation doesn’t just hit food & drugs. Assets go up too.

    If we could only funnel some of that money back into housing, we wouldn’t have the biggest housing bust in history. Alas, that dead cat has bounced.

    Chuck Ponzi
    http://www.socalbubble.com

  7. peter from oz commented on Nov 14

    couldn’t said it better myself
    plus Wal-Mart core demographic would be wanting one last “happy” Christmas in the house before it goes using the credit cards before they go!(also early “Xmas specials” is that obtuse channel stuffing?)
    meanwhile back at the Big End of Town “know thy counterparty” has no place in the accounts when you can book “profits”
    and thanks to Goldman HSBC sails through the fog missing November’s iceberg speeding towards February’s
    interesting to look at post 3pm today to see how much short covering/updraft punting there is while commodities bear no relation to industry activity
    rgds pcm

  8. super-anon commented on Nov 14

    I just assume after any major selloff there’s going to be a big short covering rally, or outright squeeze.

    People can read all the bad news in the papers, so I expect any slide is going to get loaded up with shorts, and a lot of that is going to be intentionally blown up into a squeeze by the “hedgies”.

    Maybe I’ve got it wrong, but so far it’s worked well for me.

  9. super-anon commented on Nov 14

    Barry, how did you get a Bloomberg chart in color? This smacks of time travel or occult.

    Look for a big box on your front porch or local post office that says “Super Bloomberg”.

  10. D. Park commented on Nov 14

    The American dream has become a dangerous marketing tool to promote mindless consumption. Not everyone should have a big house full of new furniture and two new cars in the drive!

    It used to be that home ownership was a sign of financial discipline because people had to typically save at least 25% of their own capital first before they could ask to borrow a mortgage and buy a house. In order to save for their first house people used to go without cars and expensive clothes, without dinning out, without trips, without whatever they could avoid, in order to amass some savings from their income. Once they had developed the self-discipline to amass the savings, it was then considered evidence of the “character”, “capacity” and “collateral” criteria for borrowing money in the first place.

    Not anymore. Today people are encouraged to borrow more than 100% to buy a home–no money down. On top of that, lax lending standards have approved the same people for new car loans, leases and a multitude of other cards and credit lines. We now have a whole society of apparent wealth and equity without actually having—well any! Not surprisingly many people find themselves with lots of “stuff” and absolutely no financial discipline, no personal habits that will enable them to amass money and keep it. The dream has become a nightmare.

  11. donna commented on Nov 14

    The traders are cut off from the reality of the people in Target debating whether or not they can afford to buy the toys the kids want this year, and wondering how much lead is in those toys anyway….

  12. xplore74 commented on Nov 14

    DID I just see CNBC report that FASB 157 will be delayed one year. This deserves an investigation, is Bob Rubin, and Hank Paulson making calls again???

  13. zao commented on Nov 14

    Another reason to buy stocks. FASB 157 postponed by a whole year. Eeeeha! we are becoming more transparent.

  14. michael schumacher commented on Nov 14

    Merill picks Thain over Fink because Fink wanted full disclosure. Funny that someone would actually want some disclosure when said firm owns roughly 49% of the firm you currently work for.

    So Merill just decided it was going to continue playing games and not have to actually be truthful with what is really going on.

    This is on par with Paulsen going to the the Treasurey…..keys to jail now presented to the inmates.

    With all the overt conflicts of interest going on how can they keep a straight face on any of this?

    Ciao
    MS

  15. Vermont Trader.. commented on Nov 14

    You can’t really blame traders for squeeaing the shorts on a quiet afternoon. I short a lot, but I know enough that on a quiet afternoon after a big selloff the desks are going to start moving things up to see if they can uncover some stops.

    Shorts, how many times this year have we been at the brink and suddenly the market recovers? This isn’t unusual, this is how stocks have always traded. The more they do this too you the more times you will expect it and get spooked at the slightest rally.

  16. Winston Munn commented on Nov 14

    If the story of FASB 157 delay is accurate, the credibility of the entire U.S. financial system could collapse, depending on the outcome of a couple of crucial factors.

    There are three legs to this stool: 1) the ratings agencies’ possible downgrade of major bond insurers; 2) the super-fund, whose creation was aided by the U.S. Treasury; 3) FASB 157.

    If the ratings agencies find the major bond insurers worthy of AAA ratings still, the super-fund allows the three big banks to temporarily off-loan their junk, and then FASB 157 is delayed to provide even more cushion to hide losses, it would point to collusion of a monumental magnitude.

    Isn’ this the same kind of “delaying the inevitable” action that Japan took with its banks?

    Is the world at large so blind as not to see through this ruse?

    Simply put, just how bad is the problem? Obfuscation of this magnitude leads one to believe the potential problems are of epic proportions – way beyond mere stock price manipulation.

  17. Estragon commented on Nov 14

    FASB 157 delay thing looks bogus to me. Nothing on fasb website, bloomberg, cnbc, etc.

  18. KP commented on Nov 14

    Holding Fasb 157 and more importantly 159 hostage for another year is going create greater risk than implementing it. At least if you implement it, you can still mark everything to level 3 make believe under the guise of following the rules…..but to refuse to enforce the rules while shaking a finger at China and the rest of the world’s markets for THEIR opaque accounting/reporting? Might as well get the dollar laid one last time and then buy him a steak, because he’s officially a goner.

  19. scorpio commented on Nov 14

    sure GS doesnt have “significant” writedowns to report, and why should they? no FASB 157 for a year, no FDIC or Fed to look into their books or understand their assets or derivatives position. even if they have losses, Bushco have given them the wink. that’s what Bernanke’s “new transparency” announced today amounts to: dont ask, dont tell.

  20. Ross commented on Nov 14

    Winston, agree 100%. This situation has been allowed to fester for decades. I am only sorry that we will leave this mess to our grandkids. Maybe Jimmy Rogers would like some neighbors?
    Yet it reminds me of the story of the Roman Senator who foresaw the collapse of the empire and moved his entire family across the Rhine. He was right. Two hundred years early but he was right.

  21. michael schumacher commented on Nov 14

    If the FASB rule were delayed I/one would think that yet another round of pump the market would be happening at this point.

    It is not…yet.

    Does anyone else see the irony of having Thain run Merill??? just a little bit?? Bueller???

    Ciao
    MS

  22. Northern Observer commented on Nov 14

    How dependent are the DOW and SnP on the American economy anymore anyway. Aren’t the earnings increasingly oversease for oversease owners? Maybe the main street wall street disconnect is deeper than it has ever been based on how corporations earn now. Maybe you can have a recession and a rising US stock market, especially if it is rising in falling US dollars.
    no?

  23. techy2468 commented on Nov 14

    sorry for this off topic comment:

    does anyone know why GM stock has not gone towards zero.

    how can they justify 18 billion in market cap, when they are 41 billion in negative equity??

  24. Unsympathetic commented on Nov 14

    When will it dawn on J6P that Wall Street’s collective American Dream is not to make America the best nation in the world.. but rather to take 100% of your money and live in another nation while we implode?

    The rally yesterday, and this article, are shams. The reason there was a market pump yesterday was because of the open market operations of the Fed. They left 11.25B on the table to play with on Tuesday. Sure, that money is due back Tuesday night.. but during Tuesday, all of it can go into stocks. Not surprising that on Monday when stocks had to trade on fundamentals, the market fell.

  25. michael schumacher commented on Nov 14

    northern observer-

    well aware of that dichotomy however I think the problem lies somewhere between the continual presentation of the economy as ok as long as you are a bank executive or a employed by a wall st. firm as opposed to what the rest of the world is seeing and feeling.

    Thee is just a wee bit of a disconnect between actualities and fantasy’s.

    Ciao
    MS

  26. John commented on Nov 14

    So what’s new Northern. I read about Blankfein’s statement yesterday and had the same takeaway. Goldie makes tons of money out of distress and that’s good news?. And then there was this hugh rally because of this and WM’s results which depended heavily on overseas performance or did I miss something. Bizarre. Today seems to suggest some morning after regrets but who can tell.

  27. Ross commented on Nov 14

    John Thain. The Thane of Cawdor? We know how that turned out.
    MacRoss

  28. OldVet commented on Nov 14

    From early this morning, “Stuart” reported and should get some recognition for the following:

    One rumor I heard as a partial explanation of today’s rally was the possibility of the FASB deferring implementation of rule 157. Outrage is not strong enough a term to describe my sentiment if the FASB dares defer the implementation of 157. That will be a blatant admission of acceptance of Enron style accounting practices, and at a time when more than ever, they need to be extinguished and confidence restored. Every foreign investor should immediately sell all US holdings and run like hell to get out of dodge for the “officials of the game” will have just denounced their neutrality in order to actively support the Wall street pigmen in their efforts to cover up deceit and fraud. If the Treasury sponsored super scam SIV wasn’t bad enough, now for the accounting standards board to sanction opaque accounting practices and deliberate misrepresentation of asset values, this is simply too much. If that happens, investing in the US financial markets will be no more trustworthy than investing in the Russian markets. Oh how the noble will have then fallen from their lofty heights, never to be trusted again.

    Posted by: Stuart | Nov 13, 2007 10:54:35 PM

  29. DavidB commented on Nov 14

    Due to the writers strike I will repeat myself:

    If Goldman were to buy Blackstone would the market own itself?

  30. Vermont Trader.. commented on Nov 14

    Well today’s early “rally” failed. Oddly enough, at the exact point that the arrow labeled “expiry rally intensifies in the afternoon” on your the chart points to.

    Buying the dips or dips buying?

    I hope you feel better Bill.

  31. John F. commented on Nov 14

    Clearly, we are looking for a label. We need a label brimming with health, and everything from a nosh pot to a white sliced will wear one with pride. And although I’m aware of the difficulties of coming to terms with this, it must be appreciated from the beginning that even the nosh pot must be low in something, and if it isn’t, it must be high in something else, and that is it’s health giving ingredient we will sell. (from How to Get Ahead in Advertising)

  32. VJ commented on Nov 14

    BUFFETT: TAX THE RICH MORE

    (AP) – Billionaire Warren Buffett, one of the world’s richest people, told the U.S. Senate Finance Committee on Wednesday that Congress should keep the federal estate tax rather than repeal it to help a few rich Americans like him.

    Buffett said inheritance taxes preserve a measure of meritocracy, and with it opportunity, by recycling portions of great wealth through public coffers. “The resources of society, I don’t think, should pass along in terms of an aristocratic dynasty of wealth,” Buffett told the panel. “I believe in keeping equality of opportunity as much as you can in this country.”

    Committee Chairman Max Baucus (D-Iowa) noted that the committee would be dealing with the issue of tax reform “aggressively” next year and asked Buffett for his views on how the tax code should be reformed.

    Buffett noted that he thought the code should be more progressive – meaning those who make more should pay even more than they do now relative to those who make less. “We ought to do more for [low-income Americans] and take more out of the hides of people like me.”
    .

  33. DP commented on Nov 14

    Just to clarify FASB only deferred SFAS 157 for non-financial assets & liabilities. Financial A&L still need to be fair valued.

  34. Snarky commented on Nov 14

    If Buffet wants to redistribute income more, he can pay my income taxes too.

  35. blam commented on Nov 14

    GS:
    “Across most sectors, there has been an increase in overlapping trades, a surge in volatility and an increase in correlations. These factors have combined to challenge many of the trading algorithms used in our quantitative strategies. We believe the current values that the market is assigning to the assets underlying various funds represent a discount that is not supported by the fundamentals.”

    The “noiv” of these cheeky bastards. My idea that Hank was a trojan horse sent by wall street to secure the SS money was wrong. It was to cover up the greatest financial crime in history.

  36. The Dirty Mac commented on Nov 14

    “We ought to do more for [low-income Americans] and take more out of the hides of people like me.”

    Maybe the low income Americans wouldn’t be low income Americans if not exploited by Buffet and his ilk.

  37. VennData commented on Nov 14

    BTW, how do you figure “rich” pay more of a percentage than the rentier class? With their Social security their Federal tax rates get up into the upper 30’s.

    The taxes on stock dividends (and carried interest) is 15%.

    All this take about Marginal tax rates you always here from the Bush apologists doesn’t give you the total tax rates, just the marginal ones.

  38. el loco commented on Nov 14

    I,m shorting that baby!

  39. Brian B. commented on Nov 14

    leave it to V.J. to post Buffett’s comments. V.J. isnt happy until there is complete income re-distribution in America. Obviously V.J.’s income is not very high. When you have more money than you can possibly spend, it doesnt sound so bad to pay more taxes, now for the rest of us no thanks.. I tell you what, if you want to send more of your income to the government, thats great!!! Just let me keep most of mine.

  40. VJ commented on Nov 15

    You really DO need to upgrade your reading skills. Buffett advocated LOWERING taxes on everyone else.
    .

  41. Francois Theberge commented on Nov 15

    All this hoola boola about WM earnings and the boost it is supposed to have given to the market is troublesome. When WM does well while specialty retailers are doing lousy means only one thing: WM is a recession stock.

    Hardly the stuff of celebration and partying a gogo.

    Francois

  42. wunsacon commented on Nov 15

    >> Maybe the low income Americans wouldn’t be low income Americans if not exploited by Buffet and his ilk.

    >> Posted by: The Dirty Mac | Nov 14, 2007 8:47:39 PM

    But, he’s playing by the rules, like everyone else. Just, he understands how the system naturally favors increasing concentration of wealth. Without redistribution, u get plutocracy, with the wealthy generally promoting their interests further. U get some selfless people like Buffett and what happens?? Folks like Dirty Mac decide to use Buffett’s success as an ad hominem attack!! WHEN, Dirty Mac, do you attack people-pro-whatever-u-support based on their *success*?

    >> If Buffet wants to redistribute income more, he can pay my income taxes too.
    >> Posted by: Snarky | Nov 14, 2007 8:15:19 PM

    That’s exactly what he’s saying. Only, he should not be forced to do it alone, without alot of other rich people contributing more as well.

    VJ is correct. A few of you need to read some more, probably from “source” rather than paraphrased thru whatever noise filter you’re getting your info from.

  43. The Dirty Mac commented on Nov 15

    “Without redistribution, u get plutocracy, with the wealthy generally promoting their interests further.”

    We have legislation designed to make sure that the plutocrats pay their fair share. Its called the Alternative Minimum Tax.

  44. The Dirty Mac commented on Nov 15

    “selfless people”

    But is not Berkshire Hathaway in the life insurance business? And don’t many (or most) wealthy people use life insurance products to cover their estate tax liabilities or otherwise transfer wealth?

  45. Brian B. commented on Nov 15

    V.J. exactly what I said income redistribution… ooohh, I see what you mean V.J. … take from me to give to you because you live in an apartment and cant make a living by yourself… ok, sorry you are right I didnt read that part…

  46. VJ commented on Nov 15

    How juvenile.
    .

  47. Brian B. commented on Nov 15

    yep…

    just like you hiding behind intials and refuse to give any of your life history or experiences.. easy to complain when you live in isolation… what you just dont seem to understand is that the government wastes HUGE amounts of money on any program they start,,, and no matter how poor I am or how rich Buffet is, I just dont know how you think its fair for the government to take from him and give to me? This is a great country that no matter who you are if you apply yourself and work hard you can make it… is it always fair? hell no!!! but thats life… get used to it…

  48. Tate commented on Nov 15

    maybe i’m missing something but since when does an increase in sales equate to price inflation?

  49. Glen Tomkins commented on Nov 15

    It ain’t over ’til all Four Horsemen have sung

    I’ve got to go with Blankfein on this one. I don’t see Plague on King’s glass-9/10-empty list of what’s going wrong that he thinks should trigger something less than the current buying frenzy. I’m not selling until I see some massive pandemic join the other three Horsemen.

  50. DC commented on Nov 17

    Brian B, where is your homepage link? I want to read your full bio. If you don’t post it, you are an intellectual fraud.

Read this next.

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