Monday, April 13, 2009

Wall Street Emperor reports, sans appendage

In continuation of Wall Street's quarterly fantasy role playing game known as "gumptions and braggins", the Q1 Financial reporting charade I mean parade continues unabated with Wall Street Prince of Darkness firm Goldman Sachs reporting what looked like a blowout quarter until you read past the headlines to find that Goldman would have missed Analyst Estimates( oh the Horror!) if they stuck to their normal quarterly reporting cycle of Dec-Feb.

Is it any wonder that Goldman Lawyers are busy suing the new blogging site dedicated to uncovering their economically toxic machinations?

It's unclear whether or not they are suing due to the said site's reference to Goldman or to the number of the Beast or do they hold the rights to both?

Not only did TARP bail out Goldman Sachs to the tune of around 25 Billion, but it also allowed them to skip their $2.15 per share/ 1 Billion loss incurred during December.( Isn't 1 Billion too round a number? hmmm...)

How are they allowed to get away with this you ask?

In our increasingly fictitious/fascist collusive Government/Media/Corporate environment, apparently being allowed to convert into a Bank holding company can allow you to skip a bad month if you choose to and you get a free pass from everybody including the media.

Why should the media shine a light to expose the truth yadda yadda yadda..... just give me my money and you can put my name next to the byline.

Out of more than 10 reports from mainstream financial media sources,

I've only noticed one glance over the "orphan" month of December 2008:

"Shifting the start of its fiscal year certainly helped the bank's overall results, said Denise Valentine, senior analyst at Aite Group, a Boston-based research firm.

"It's a little bit of fancy footwork, but for the market as a whole it's good news and it was needed," she said. "When your star does well or does what is expected, you breathe a little easier."


"Fancy footwork" You say? or is your job on the line if you say what you really mean about Goldman Sachs' accounting trickery?

Not only is Goldman Sachs seemingly allowed to report fictitious "mark to market" results that can only be generously referred to as "mark to fantasy" based on relaxed financial reporting regulations, now they can also skip reporting whole months altogether.

What's next in this rigged game?

Queue generic CFO voice: "Ladies and Gentlemen, we are proud to announce record profits this quarter and every quarter into the foreseeable future now that we are allowed to spin off our losing months into separate entities according to TARP...Sorry, I meant PRAT(Profit Realization Accretion Transfer).

Voila, I've made our massive losses vanish into the SEC ether. Now hurry up and dilute the bagholders which allows us to pay the TARP back so I can get my damned bonus thanks to the PRAT act."

The quarterly reporting Emperor, apparently having no shame in addition to his lack of wardrobe, has decided to leave one of his sight for sore eyes limbs in the castle before venturing out into the open.

update: There is some reporting of the accounting loophole that caused Goldman to "smash" analysts estimates.

by Dan Wilchins


But Goldman's report was not all positive. The bank said its net loss for common shareholders was $1.03 billion in December, prompting some to question whether the change in financial years had allowed Goldman to dump much of its bad news into that one-off period and start afresh in the first quarter.

"December was a rare opportunity for both Goldman Sachs and Morgan Stanley," said Brad Hintz, an analyst at Sanford Bernstein. "A single month, without any comparisons that can be made with any other months, so none of us will ever know what goes into the month of December. It's one of those rare opportunities that CFOs dream about." Hintz is a former Lehman Brothers chief financial officer.

The bank said in January that it recorded a roughly $850 million loss from loans extended to units of chemicals company LyondellBasell in December, though the units filed for bankruptcy in January.

Between the December losses and the subsequent profit, Goldman's tangible book value per common share was essentially unchanged from the end of November, at $88.02, the bank said. Tangible common equity is a measure of the bank's net worth, ignoring intangible assets such as goodwill.

A measure of the bank's trading risk, average daily value-at-risk, surged to $240 million in the first quarter of 2009, compared with $157 million for the three months ended February 28, 2008, implying that the bank took more trading risk."

It is good to know that there are still some reporters like Dan Wilchins with enough backbone who are digging deeper but unfortunately for every one sentient report, there are 10 mindless company PR rehashes that drown them out.

The question to ask on the conference call in a couple of hours is how much they made in profit in their march 2009 quarter since it is taking place of their orphaned 1 Billion loss Dec 2008.

A safe estimate based on the frozen credit markets might imply that their Dec 2008 loss would have wiped out their profits from Jan and Feb of 2009 leaving them missing Analyst estimates by a country mile instead of crushing them.

But then again, we are not in the midst of a financial based economic collapse in spite of the accounting gimmicks of Wall Street firms but due primarily to the lax accounting standards that allow such chicanery to exist.

Another piece of irony is that Goldman made most of their profits using the same tactics of excessive leverage that have led to the horrendous tax payer money bailout of these bankers and it does not seem these bankers have learned any lessons about risk and leverage.

How long can they continue the same old same old while fleecing the public?

We shall see.


Anonymous said...

Thanks for exposing these hooligans (aka Goldman Sachs & Co.). Of course the taxpayers are bailing them out. It is disgusting.

Anonymous said...

It's disgusting how they still let them get away with accounting "magic" - the FRAUD continues...

Anonymous said...

What can the average person do to help curb this usury ?

Anonymous said...

Huh? GS did report the Dec period separately, and they were forced to adopt the new accounting periods because all U.S. bank holding companies must report on an annual fiscal calendar. Maybe Dec-Feb might have missed a few analyst calls but Jan-Mar blew them away, and they would never have shifted their entire firm's accouting to a new fiscal year (expensive) simply to game a single period's results.

Your blog is silly.

fUny1 said...

"Maybe Dec-Feb might have missed a few analyst calls but Jan-Mar blew them away, and they would never have shifted their entire firm's accouting to a new fiscal year (expensive) simply to game a single period's results"

Maybe they might have missed?

Dec's loss of $2.15/share would have wiped out whatever gains they had in Jan and Feb.There is no maybe about that. They would also be deep in the red for the quarter and miss by a mile without march's great gains.

I love your comment about how it would be costly for them if they are gaming a single period's results.

What about the 5 billion in cash they raised riding the wave of euphoria off of their sneaky quarterly smash beat the street scam?

Since they are going to use this money to get the Government off their back in order to get themselves even fatter bonuses costs be damned, If that is not gaming I don't know what is.

When they are raising the % of bonus as part of total revenue during collapsing results, controlling costs and looking out for shareholders is the last of their concern.

As for the Blog, It would be interesting to see how you feel about it in a few year's when you're in the middle of "it" but thanks for taking the time to comment.

Chris T. said...

The wide-eyed anonymous poster, who calls this blog silly, is hopefully invested in GS right now. Yeah, its going up, 60+ was the ultimate bottom.

All of you reading this blog who agree with this commenter, PLEASE, PLEASE keep adding to your GS holdings, so that those of us who are going short, or LEAPing puts, can buy for less.

It was about time someone took the trouble to assemble all the "godd" GS news in one place.

Maybe you guys can become the GATA of the (I)-banks.

If you do not already look at, you may want to do that as well, he also has interesting things to say about GS now and then.

Anonymous said...

I would like to know what happened between December 26 to December 31 at GS? Bet ya that's when they booked there $850 million dollar loss. How much did GS lose for those days? From Dec 1 to Dec 25 GS lost ($2.15) but the rest of the month is unaccounted for because they changed their fiscal year end twice. The second time was a switch from the last friday of the December to the last day of December. According to GS the SEC does not require a company to report what happens when the year end is changed by less than a week. So not only do they not have to include December 2008 in an annual report but also they never have to report what happened the last few days of December 2008 at all. Can't wait for the 10Q.