Europe Will Save Goldman Sachs
The Dynamic Wealth Report
May 3, 2010
by Brian T Mikes, Editor
Just last week I wrote about the financial industry. I noted they were
being assaulted by (and rightfully so) government investigations,
charges of securities law violations, and even regulatory overhaul. Despite these attacks, the industry was holding up.
One of the big players, Goldman Sachs (GS), is under the microscope these
days.
The interrogation of executive management by the Senate didn’t make them
a lot of friends. But despite all the harsh criticism, I think now
might be a great time to buy Goldman stock!
Think I’m crazy?
Follow my thinking here.
Right now the whole nation is in an uproar over Goldman’s activities. If
you missed the news, the SEC recently charged Goldman with certain
securities violations. Goldman bond trader, Fabrice Tourre, is being
charged with fraud.
His activity was very shady.
He failed to tell investors the group structuring the bonds he was
selling was betting against those bonds. Like I said last week, “It’s
like having a contractor build you a house… then finding out the
contractor’s bought insurance that pays him if the house falls down.”
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Because of this news, customers are dropping Goldman like a bad habit.
Goldman has become the whipping boy for anyone with a complaint about
the credit crisis and recession. Every crisis needs a scapegoat, and now
it’s Goldman’s turn.
The news is horrible. And Goldman’s stock is taking a beating.
Just look
at the chart…
You can see it clear as day… Goldman is being spanked, and spanked hard. Investors are talking about a loss of confidence in Goldman. Some are
saying this activity will destroy their business.
I say hogwash!
In my opinion, this is a very difficult short-term issue. However,
Goldman should be able to see it’s way past this in short order. In the
next six months, Goldman and the SEC will be working on a settlement…
nobody wants to go to court.
It’s not like the SEC found the next Enron.
Goldman’s not committing accounting fraud. All of these problems are
from one bond sale… Do you have any idea how many transactions Goldman
does in a year… it’s a lot!
It doesn’t make what Goldman did any better, but again,
this won’t
destroy their business.
Within a few weeks, this issue won’t garner front page news status. A
settlement announcement will be buried in the middle of the
Wall Street
Journal.
Goldman will probably pay a big fat fine…
and that will be the end of
it.
In the meantime, the spotlight’s already shifting away from Goldman. Just
look at the recent oil spill in the Gulf.
Or better yet, look at Greece.
The EuroZone is getting ugly, and it’s not long before we see fireworks
there! Greece is basically insolvent. To get a bailout, they have to
implement extreme austerity measures.
And the Greeks are rioting!
It’s getting worse. Following in the footsteps of Greece, ratings
agencies recently downgraded Spain and Portugal too. These countries
can’t afford to pay their debt. Unemployment is a problem. And taxes are
sky high.
What’s next?
Might Greece erupt in revolution? Might Spain default on their bonds?
Might another European Union country (like Ireland) need a bail out?
The EuroZone is on rocky ground… one slip and the entire economy could
re-enter the recession. Or worse, the EU could fall apart and the Euro
implode.
It’s scary thoughts like these that take over front page news… and cause
Goldman stories to fade into the background.
I believe once the spotlight shifts onto other issues, Goldman stock
will once again start climbing. It’s a risky call, no doubt. But if you
don’t mind taking a risk, consider picking up some Goldman shares… they
might serve you well in the long run.
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• Furnishings Industry (Up 14.8%)
Now that we’re seeing some life in both the housing market and consumer
confidence numbers, the furnishings industry was a big winner this last
month. The industry is up over 14% and it’s being led higher by
companies like Select Comfort (SCSS), up 42%, and Furniture Brands (FBN),
up 28%.
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