I have an investor with a large position in Goldman Sachs. I got a phone call today. I followed up with an email to this investor. Figured I’d share.
These are my thoughts:
Omaha, Neb. (TheStreet — Warren Buffett issued his first public words in regards to the Goldman Sachs legal crisis on Friday morning, and said he plans to discuss the embattled Wall Street firm at the Berkshire Hathaway(BRK.B) annual meeting on Saturday.
Munger made sure that Journal readers knew that Berkshire Hathaway continues to believe that Goldman did nothing illegal and that the firm is “more prudent and ethical” than its major Wall Street competitors.
Buffett owns GS, Buffett has the ability to describe things in a way that make sense to most people.
Based on this event alone, I think GS will be higher on Monday.
That said, the short term price implications of the mass media proclaiming that GS is the devil is going to cause people to panic sell, along with the fact the stock price is lower. At this rate, 15% or more of the company will be traded today.
Do note that Goldman in 2008 became a bank holding company. Somehow they still do this trading activity. A possibility is that they are forced to spin off their trading arm to someone else.
It seems to me that we are surrounded in misinformation. In the past, good people who haven’t done anything wrong have gone to jail. Even though I think Goldman Sachs hasn’t done anything wrong, except that it still doesn’t make sense to me how they are a bank holding company and they do all this trading stuff on the side, I think that the government in an effort to save face and prosecute the evil on walstreet which most mainstreeters attribute to firms like GS, will move on and press charges anyway.
Rumor has it that the questions and charges they are pressing sound like the type of questions you’d get when you’re in school and you get a guest speaker and that kid you don’t know stands up and asks a question of necessity in order to get class participation points rather than to further any learning.
Then, it’s up in the air whether they’ll win or not.
Sure, if they survive unharmed they are worth $200, but companies can sell at discounts to their intrinsic value indefinately. As a whole, the financial stocks 1 year from today will be higher than they are now. You’re looking at a 15% cut (long term gains) to cut out and switch to something that doesn’t have the whole press problem like Banc of America, Fifth Third, Huntington, etc.
A lot of my trading decisions in March 2009 were based on the premise: “Where is the easy money?” Aka, which stocks are going down for no reason because business is booming and things are great, but hedge funds are being forced to sell. I can’t say that this is the situation for GS. There could definitely be large problems. To me, there are better alternatives. I can think of a handful in the US financial sector off the top of my head. To me, I’d own something else. But, that’s always been the case here which is why I’ve never owned it.
I was out there selling stuff at 50% of what I paid for it, even though a year from then it’s up 100% from where I bought. You don’t have to make your money back the same way you lost it. I was selling undervalued opportunities to buy into even stronger more undervalued opportunities.
That’s the winning mentality. Good luck.
This guy appears to have the same opinion on what’s going on as me:
http://www.thestreet.com/story/10742429/1/stop-turning-goldman-into-scapegoat-opinion.html