If our market takes an extended breather, and we head toward a double dip recession, there might finally be some examination of what is happening on Wall Street and K street.

The financial services lobby is probably the strongest that there is. Many politicians, their friends, and relatives work for (or sit on the boards of) the very same firms that they are tasked with overseeing.

From the beginning, the AIG bailout appeared to be a method to get money into the hands of a select number of financial services firms (primarily Goldman Sachs).  The more information that comes out confirms those details that we suspected long ago.  Not only that, it is even more than that.  If you read below, Geithner took the step to cover 100% of  certain instruments even when they could have been covered at a much lower number.

…the smoking gun for Secretary Geithner comes from a recent Bloomberg FOIA disclosure regarding events from last November. It was then that New York Federal Reserve Governor Tim Geithner decided to deliver 100 cents on the dollar, in secret no less, to pay off the counter parties to the worlds largest and still un-investigated insurance fraud — AIG. This full payoff with taxpayer dollars was carried out by Geithner after AIGs bank customers, such as Goldman Sachs, Deutsche Bank and Societe Generale, had already previously agreed to taking as little as 40 cents on the dollar. Even after the GM autoworkers, bondholders and vendors all received a government-enforced haircut on their contracts, he still had the audacity to claim the “sanctity of contracts” in the dealings with these companies like AIG.

via Its Time To Fire Tim Geithner.

If you love to read about the ways that this market we play in could be manipulated, you will love Philstockworld.com.  The site is terrific and filled with insight.  Great for option traders looking for plays.

Phil lays out the details behind the Goldman / Government / CIT rescue earlier in the year.  This gave Goldman a tidy profit, placed the burden on the taxpayer, and set Goldman up to replace the job that CIT provided by cherry picking clients who are worthy of lending to.

Surely you say, Goldman Sachs would never screw the government and US Taxpayers out of $2.3Bn “just” to make $1Bn for themselves?  Of course they wouldn’t…

Goldman Sachs

read all about it via Monday Market Manipulation – Goldman’s CIT Bonanza | Phil’s Stock World.

If you are interested in hearing more from the writer of the article in Rolling Stone regarding Goldman Sachs (Matt Taibbi), you should listen to the Adam Carolla Podcast from 8/10/2009.  There is some profanity in the podcast, so if you are easily offended…

If you aren’t familiar with Adam Carolla, give him a listen.  I have been an avid listener for years and his podcast is terrific.  Very smart humor from the guy that Jimmy Kimmel dubbed “American Genius”.

Adam Carolla Podcast

To say that Goldman is sailing along would be a major understatement.

However, when you control the sail and the wind, along with the tide and the water level, you should be able to sail like this.

Goldman Sachs $100 Million Trading Days Reach Record

Goldman Sachs

via Goldman Sachs $100 Million Trading Days Reach Record Update3 – Bloomberg.com.

Was the AIG Bailout a Goldman Bailout by Proxy?

This was something that I have discussed in the past.   Taking a single entity and making sure that it was doling out the billions the way that treasury saw fit was made easy.

By using this single entity to pay out to GS and many foreign entities the government kept things from toppling financially and politically.

I am still convinced that AIG is not long for the public market. Their job will be done, the trades will be unwound and then the gov’t will have an entity in place to bring the entire company in house.  There isn’t anything in place right now, but I expect there will be.

AIG continues to sell of the jewels in its crown and will soon be left with little to pay down the enormous debt load.

via Was the AIG Bailout a Goldman Bailout by Proxy? — Seeking Alpha.

Goldman Sachs became the first major bank to buy back warrants held by the US Treasury on Wednesday, allowing the group to shake off the last vestige of its participation in the government bail-out programme after just nine months.

Goldman paid $1,1bn to the US Treasury to buy back the warrants. which were granted as part of the government’s $10bn investment of troubled asset relief programme funds in the bank last year.

The bank paid back the Tarp funds last month, along with several other financial institutions that were deemed to be in good health following the government-run “stress tests”.

Goldman began negotiating to buy back the warrants several weeks ago, said a source familiar with the matter, and agreed to a deal on Wednesday after trying unsuccessfully to talk the Treasury down from its asking price of $1.1bn.

Assigning a value to the warrants has been a source of contention for the financial institutions seeking to buy them back. JP Morgan Chase has said the Treasury would sell its warrants at a public auction after the two sides disagreed over how to price them.

The government said it had earned an annualised return of 23 per cent from its investment in Goldman.

via FT.com / Companies / Banks – Goldman sheds bail-out legacy.

Goldman Sachs

I have a couple of topics to touch on with this entry.

First, pay attention when trading.

Second, stop fighting what you believe to be true

This isn’t the first time I have mentioned how important it is to have your head in the game when trading.  Not all trading software is dummy proof and you can make mistakes if you aren’t careful.  I was a bit fatigued today and decided to make a relatively small long term investment in a stock trading around $147 per share.  When trading, I get used to shares that are in a certain price range.  Determining the number of shares to buy or sell for a trade is generally in the hundreds or thousands of shares.  For example, a trade in MTB, GLW, or CELG would be in hudreds of shares.  A trade in shares of Citi (C) or AIB would be in thousands.

It isn’t often that I am trading something that is north of $100 per share.  Today was no exception.  I was INVESTING!  I decided to open a position in shares trading around $147.  I had a trade in my head as I was making this purchase and placed my order for 250 shares rather than 25 shares.  Due to my setup, I don’t get a total trading cost confirmation from my software until the trade goes off.  I had intended to purchase about $3600 worth of shares only to find I made a purchase of $36,000 worth of shares.  Oops!   Big oops.

I was in a position that has bitten me in the past.  Not one where I made a large trade by mistake, but one where I held onto something when I didn’t like the risk reward.  At the point the trade went off, I felt that there was possibly another $0.50 upside in the stock for the day.  I felt the downside probably carried about $2.00-3.00.  That kind of risk/reward didn’t suit me and I got rid of the excess shares within about 15 minutes of my trade.  Within about 2 hours, I was missing out on a gain of about $700.

The investment that I describe above was in shares of Goldman Sachs.

In earlier articles I mentioned how Goldman Sachs is at the center of it all.  Well, rather than continuing to fight (on whatever ground I was fighting) I decided to pick up some Goldman shares as a long term investment.  If I believe what I read, write, and discuss, Goldman will find a way to make money regardless of what the economy does or what the markets do.  They are a huge part of the market.  In some cases, they put themselves in the position to be the tail that wags the dog.

• Is there a bubble? Goldman will short it and cause the fall…
• Are things oversold?  Goldman will buy in with great entry points helped, in part, by their own research and trading action and participate in the upside movement.
• Is oil trading on supply and demand of the oil, or of the instrument that is used to trade the oil?  Doesn’t matter… Goldman will work it to their advantage.
• Compensation an issue with firms that took TARP money.  Easy one.  Pay it back and bring in the warrants at great prices.  Ahhhh.. it is good to have friends in high places.

Goldman Sachs

What will Goldman do with the riches that they will generate?  Well, for one, I now hope that their shares fly high.  However, I would imagine that their are some other classes of shares that participate in some rather sweet dividends.  I suppose that I could look that up, but I wouldn’t be allowed in the club anyway.  Goldman common is good enough for me.

We have all heard about program trading and their impact on the markets.  They can take a losing day and move it to a winner toward the close and the same on the flip side.  Well, the precious software that handles the trading at Goldman has been compromised (stolen).

The FBI is involved and this could get interesting in shedding some light on the Goldman operation.

Ex-Goldman Worker Is Arrested – WSJ.com.

Goldman Sachs has been at the center of every bubble in the economy. They are the smartest players at the table who know enough about where to spend their money to curry favor and to be sure that related parties have positions that most benefit Goldman Sachs.  Smart, cunning, ruthless?

http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine

Matt Taibbi video discussing his article on Goldman Sachs