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Saturday, April 17, 2010

A word on GS

There is some really good commentary on the Goldman situation on Cramer and Fast Money presented some solid arguments to put this situation in perspective. (Seeing how these characters are the insiders, I would pay attention.)

The one theme I agree on is that this will add fuel to the fire to get financial reform completed. Combine the public anger with the potential republicans that will break rank and vote for reform, it will happen.

I am a fan of reform, but smart reform. I am of the belief big banks can exist so long as their units are isolated, and each trading operation has its own sufficient capital requirements. (If AIG's derivative subsidiary had a large capital requirement they would not have been allowed to sell so much bullshit paper, and the risk to the system would have been contained. That concept should be applied across the board.)

IMO, the plays to get into from the weakness here are Citi, MF or other smaller players that will build out their new business with the new rules in place. Versus JPM, BAC or GS that will have to increase capital requirements or shrink their current business'.

I still think JPM, BAC or GS are good names, but the financial reform adds uncertainty to their current biz. And anytime uncertainty is present, stocks get discounted. Although the lower GS goes, the more attractive it becomes.

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