Bookkeeping: Closing Goldman Sachs (GS)

Goldman Sachs (GS) is rallying along with the rest of financials. Ironically, in this backwards market it has been a better strategy to buy the most putrid of stocks rather than the ones executing the best because those who have been performing dismally from a business standpoint bounce the best from oversold conditions. So while Goldman has actually lost some price over the past few months, Morgan Stanley (MS) which reported a far worse quarter actually has outperformed by a long shot of late. Goldman is down from where it was 2 months ago whereas MS is up nearly 20%. The irony is great.

We started Goldman in April as a best of breed stock, which is still true, but as I said above it would of been better to throw a dart at some of the refuse floating in the sewer in the financial pond, since when the market takes a sector up, almost everything gets bid up regardless of business fundamentals in this new era of "asset allocation" over "individual stock selection" and they take the worst of breed up the most (along with short covering exaggerating the move) So we have to rethink things in this constantly evolving market. Further, I expect with Goldman's heavy commodity exposure they are going to look like a lot of hedge funds who suffered greatly in July. So there is some worry on the next earnings report since Goldman is considered bullet proof.

Long story short, until the market wants to give better return to those who stick in best of breed rather than worst of breed in these sectors it makes little sense to own the best - it is sort of backwards but this is the way it is. We'll use Ultra Financial (UYG) for a proxy on the financial rebound instead of Goldman and consolidate the exposure we want with that vehicle instead of double hitting. We continue to streamline the portfolio and when 1 position can do the same as two, we'll cut it. This seems to be the case here.


We leave with about a $1100 loss as the stock of Goldman bounces sharply the past few days to now reach resistance.

The market continues to CHURN and continues to PUNISH anyone buying the breakouts. All those who bought this morning are now punished. Status quo. The rally in financials and consumer stocks is a mirage as far as I'm concerned - the consumer is not coming back at $3.79 gas, $3.59, or $3.29 no matter how loud the pundits scream it to be. We have much larger systematic issues such as a housing disaster and credit crunch. And people should be asking what weaker oil really signals globally for an economy living on exports. The action between now and Friday's job reports is all random white noise and we continue to be unable to break above that 50 day moving average at S&P 500 level 1300. Just another day in the many days that all are the same the past few months. Commodities hit today, in 2-3 days they will be the darlings and run up 5-10%, and consumer stocks that are today's darlings will take a big hit. Take today's trades, and reverse them every 48-72 hours. Yawn.

Long Ultra Financial in fund; no personal position