Business As Usual

Goldman Sachs reported record earnings this morning. In the immortal words of Derrick Coleman - "Woopti Dam Doo!" The expectations from the talking parrots were between $4 bucks a share to $4.15. Goldman did a Costanza ("Smoked him I say") coming in at $5.59. Frankly, I though the Jerkstore would come in higher than that, but its still a nice number. The stock is rallying a buck or so at the moment. But actually running a business is secondary at the moment on Broad Street. Its all about "Fabulous Fab" and A-BACK-US. It's sure nice that the media has something to talk about in between how dominating the Yanks are and how pathetic the Mets are, but lets be honest, most of the ones commenting are talking out of their backsides, most are not lawyers even though they might be sleeping with one. Lets get this clear with a little help from Tom Cruise. Its not what the facts are or even what the truth is, its what can be proven in a court of law that matters. The last time I checked we do somewhat live in a society ruled by law. I am not naive to think its a fair system, but everyone is entitled to their day in court. If we all convicted people and or corporations on the basis of blogs and or public opinion, Exxon would have been liquidated after they ruined the ecosystem in Alaska, OJ would have gotten the needle, John Delorean would be sharing a cell with the Unibomber. There was ample evidence, maybe overriding evidence of immense guilt in all of these cases, but at the end of the day, it was decided in a court of law with flashy lawyers that they they either were not guilty or just not as guilty as previously seen. I personally think that this doesn't even go to court. Goldman will pay a fine. The cost of doing business. They will neither admit guilt or innocence. The SEC will tell everyone that in between watching trany porn on the Internet they were able to get a "conviction." Obama will surely praise the legal system that it does work for everyone. Well of course not for IKB or ACA, but you get the picture.

Its all an immense scam. Its the SEC telling people that they care about securities fraud. Please! Fraud is at the heart of Wall Street from the beginning of time. Fraud and Wall Street go together like Ginger Rodgers and Fred Astaire. How are they going to clean up a rotten to the core system? It's impossible. This is why people look the other way and just participate in it. This is a play to placate the masses into thinking that the powers that be actually believe in truth and honest fair play. Its the same thing all through out history. Huge scandals unfold under the watchful eye, sometimes even helped out by the regulators, the regulators have to save face and this is all that it is at the moment. Back in the 20's and 30's, the mafia ruled the streets. They paid off law enforcement and judges to look the other way. Its no different today, except the methods are more complicated and covert. What needs to happen is a Elliot Ness moment when someone who is not entrenched into the fabric of Wall Street decides to take them down. We all know that Obama, Geithner, Bernanke, and Congress are not up to snuff. Obama doesn't have the stomach to take on Dimon and the Blankfein, because the money that flows is so intoxicating. I can't blame Obama. The yellow stripe painted on his back was already there before he took office.

Back to Goldman....

We all know that Goldman trades against their clients interests. The proof is in the earnings release this morning where 61% of their revenues come from trading. As a former trader I can tell you that there was questionable activity going on here. What is breathtaking and numbing is that people are shocked at it. When you step off the airplane and on to the strip at Las Vegas, don't be surprised to find gambling going on. Fraud is highly expected and downright forgivable on Wall Street. Goldman couldn't care less about its reputation behind close doors. Publicly they will tow the line, but privately they know they got the system by the jewels. Investors know this. If you want to drink the water, you might have to go to the bathroom to quench your thirst.

We all know that these Synthetic CDO's were only created for:

1-To minimize their existing RMBS exposure and to outright get short residential housing.
2-Fee generation.
3-Because clients wanted RMBS exposure on both sides of the market. S-CDO's are the prefect vehicle as its a zero sum binary investment.
4-Because this is what Goldman does. They create complex hard to calculate unicorn structured products. The more complex layers that are embedded the more difficult it is to get them with their hands in the cookie jar.

We all know what their motives are and were.
The question is:
Is it convictable in a court of law?
Is there ample evidence of fraud?
Is the SEC going to take on the Boys Of Broad Street?
Are the gloves coming off?

We all should be smart enough by now to know the answers. The bigger macro question is will this be a springboard to real reform/regulation of the financial markets? To answer this very fundamental question. Has Obama given us any indication he has wiped off the yellow paint on his back?