Yet another shoe to drop?
This is not going to be an "I told you so" post, because I agreed to it.
But GS have been down sharply this week while XLF has been rallying; the divergence seems to be +20% over just a few days. Anyone know/hear what's up??
posted by Junk Bonds @ 10/30/2008 11:51:00 AM
2 Comments:
Over one month (the approximate time of our club's holding) GS vs XLF is about even. I hadn't noticed about the last few days but the question you're asking is if there is some skeleton in the closet? I wish I knew, but the boys at GS have friends in high places. I remember a rumor back when AIG was nationalized the same week LEH went under. It basically said that the largest counterparty to AIG's CDS positions was guess who - Goldman. This is why AIG (GS) was saved and not LEH. Also the other rumor was that foreigners owned more CDS through AIG than LEH.
I believe, the club's collective thinking was that GS was going to be one of the survivors and potential consolidator in the industry. This will take some time. If you just want to play the bounces and trade in/out of the financial sector maybe XLF would be better?
One question I have is as the banking landscape changes with further defaults and nationalizations, what happens to an index like XLF? I see that AIG,and etrade are now very small components and were once much larger.
I caught a bit of Fast Money last night and they were talking about the GS slump. No one was sure, but it seems like the markets still does not like GS and MS leverage ratios, and are not convinced how these 2 plan to make money now they are registered as banks. They have to de-lever to qualify for certain programs as a bank which would affect their profits. But they are "the smartest guys in the room" so let's see what they can do...
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