Monday, July 13, 2009

Meredith Whitney Upgrades Goldman Sachs (GS) Ahead of Earnings

Rarely will an analyst take action ahead of earnings (Goldman Sachs reports Tuesday) but noted bank bear Meredith Whitney is out this morning with an upgrade of the 5th arm of government. This has futures improving. You might recall in my earnings preview Friday I (not a noted banking analyst) wrote

Goldman Sachs (GS) - what more can be said, Goldman has basically cleared the path to prosperity for another generation or two. All major competitors have been destroyed or weakened measurably... transplants live throughout national government... the world is their oyster. All they need to worry about is insiders apparently taking some of their HAL9000 code and trying to get rich off it.

This could be an epic quarter for Goldman - record breaking issuance of stocks - especially financials, in Q2; massive issuance of bonds as credit markets re-opened; massive dominance of weekly program trading. They are everywhere and as less competitors remains their spreads (fancy word for profit margins) widened. I expect a monster beat; it is just a matter of "if it's in the stock".

Via Bloomberg
  • Meredith Whitney gave Goldman Sachs Group Inc. her only “buy” recommendation among the eight banks she covers, saying the shares may climb 30 percent. Whitney, the founder of Meredith Whitney Advisory Group LLC, hasn’t recommended buying shares of New York-based Goldman Sachs since January 2008, when she was an analyst at Oppenheimer & Co. The stock may reach $186 from $141.87 on July 10, the analyst said in a note to clients today.
  • Goldman Sachs, which plans to release second-quarter results tomorrow, is going to post “enormous” revenue from its fixed-income, currencies and commodities business, Whitney said in an interview on CNBC. “Goldman is going to surprise big on the upside,” she said.
  • Goldman Sachs may post the largest profit since it set an earnings record in 2007.
Check out these numbers
  • Goldman Sachs managed $27.9 billion of global equity and equity-linked offerings in the quarter, up from $1.5 billion in the first quarter, and $3.98 billion of high-yield debt sales, compared with $798 million in the first quarter, according to data compiled by Bloomberg.
  • The collapse of rivals including Lehman Brothers Holdings Inc. and Bear Stearns Cos. may help Goldman Sachs beat its 2007 trading-revenue record....

Remember, you are only allowed in Goldman's sandbox because they want you here. You humor them with your presence. And this crisis probably has worked out better than they ever could of anticipated, obliterating any foes they once had. They love it when a plan comes together.

[Jun 25, 2009: Rolling Stone - Goldman Sachs; the Wall Street Bubble Mafia]
[Apr 13, 2009: Goldman Sachs PreAnnounces 14 Hours Early]
[Mar 17, 2009: Your TARP Dollars Hard at Work Supporting Goldman Sachs Employees]
[Jul 21, 2008: It's Goldman Sachs World - We Just Live in It]

Also below are 2 videos from this morning with Whitney's views on banks in general

12 minutes

Specific to earnings reports - 5 minutes

[Mar 18, 2009: CNBC - Meredith Whitney's Latest Views]
[Jan 30, 2009: Meredith Whitney Joins Roubini & Soros in Smothering the Kool Aid]
[Sep 23, 2008: Meredith Whitney and I Continue to Agree, Bailout or No Bailout]
[Aug 4, 2008: Meredith Whitney Continues to be Negative on Financials (and Housing)]
[Mar 26, 2008: I'm on Meredith Whitney's Side]

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