Goldman Sachs Group Inc. (NYSE: GS) stock is up today (Tuesday) after GS earnings surprised Wall Street with a strong beat. The investment powerhouse reported second quarter results before Tuesday's opening bell.
Goldman Sachs Stock
Goldman Sachs (NYSE: GS) stock rose 1.22% yesterday (Wednesday) to $178.75, ahead of today's Q4 earnings release.
Analysts project EPS of $4.21 on revenue of $7.71 billion. Those figures are down from last year, when GS reported EPS of $5.60 on revenue of $9.24 billion.
The bank is scheduled to report earnings at 7:30 A.M. EST and will follow up with a conference call at 9:30 A.M.
GS stock has performed well lately, up 10% in the last three months and 29% in the last year.
It's not so good to know that the big banks and investment firms are still above the law.
This newest rub-your-nose-in-it story conjures so much frustration we may need a new word to describe it.
Here's our market roundup for investors:
- Earnings continue to beat estimates- The third quarter was supposed to be a dismal earnings season but lowered expectations are giving companies a boost. Johnson and Johnson (NYSE: JNJ) and Goldman Sachs Group Inc. (NYSE: GS) reported better-than-expected profits this morning and each offered investors something else to cheer about. JNJ's third-quarter profits fell 7% from last year but its adjusted EPS of $1.25 beat Wall Street's estimates of $1.21. Goldman had a third-quarter profit of $1.51 billion, compared with a year-earlier loss of $393 million and easily beat both earnings and revenue forecasts. Besides the strong earnings, Goldman announced that it would increase its quarterly dividend to 50 cents from 46 cents and JNJ raised its 2012 earnings forecast. JNJ stock is up 1.4% in early trading and GS stock is up 1.0%.
"Investors are cycling back into risk as earnings as well as economic numbers in the U.S. are somewhat better than expected," Chad Morganlander, a Florham Park, NJ-based fund manager at Stifel Nicolaus & Co. told Bloomberg News in a telephone interview. "Economic growth will continue to be sluggish even with the flickers of hope that we've seen this morning."
The investment banking giant's earnings per share came in at $1.78, blowing away analysts' estimates of $1.18. Revenue came in at $6.63 billion, better than the expected $6.28 billion.
A couple months ago these numbers would have actually disappointed.
In the last two months, expectations for the quarter had dwindled. The average earnings per share forecasts dropped to the current $1.18 per share from $2.16 in June and $2.87 in May. Looking back to the same quarter a year ago, earnings were $1.85 per share and revenue was $7.28 billion (8.9% better than the current quarter's revenue).
"During the second quarter, market conditions deteriorated and activity levels for both corporate and investing clients were lower given continued instability in Europe and concerns about global growth," Goldman Chairman and CEO Lloyd Blankfein said in a statement.
The weak economic environment will keep weighing on Goldman through the year.
The investment bank's 40-page bullish report, titled "The Long Good Buy: The Case for Equities," says to forget the huge run-up since 2009, forget the 25% rise in equities over the last five-and-a-half months, and forget bonds. This party is just getting started.
Are they right? Yes, they are.
Should you heed their advice and sell your bonds and load up the truck with equities? Hell no.
Goldman's report is like me forecasting increasing dark towards evening. It's too obvious. Of course stocks are a better buy than bonds in the long run when bond yields are so low.
But there's this little problem of timing that they don't address.
If you load up on equities now, and there's a correction, or worse, a double-dip in major market economies, and you get taken to the cleaners, unless you're young enough to hold onto your stocks for a generation, you may be done... as in toast.
Right now is not the time to jump onto the bull market. It looks great, I agree. But this creature is getting restless, and coming into the spring, some caution may be warranted.
If you want to get in, have patience. There's plenty of time, if the markets are presenting a generational buying opportunity.
By the way, they already have had a generational run, and you probably missed it. Did you load up in March 2009? Did you load up in October of last year?
Piling on right now is exactly when the fools rush in. Forget Goldman. You know they fleece their clients. Just because you aren't a client doesn't mean they're not out to use you, too.
The markets didn't rally on the Goldman report. They shrugged it off as mere public relations, perhaps to defray that conversation about the firm playing its clients like puppets.
What drove markets last week was China. There are increasing worries that the Chinese economy may be slowing more than anticipated. If that is the case, if Chinese GDP growth slows to below 7.5%, global markets will cool down. If its GDP growth falls to 5%, or lower, global markets could crash.
Yes, I mean crash, as in, drop 50% in short order.
"The prospects for future returns in equities relative to bonds are as good as they have been in a generation," Chief Global Equity Strategist Peter Oppenheimer wrote in the Goldman Sachs report, "The Long Good Buy; the Case for Equities." "Given current valuations, we think it's time to say a "long goodbye' to bonds, and embrace the "long good buy' for equities as we expect them to embark on an upward trend over the next few years."
The report's main focus is that when you compare the price and future returns of stocks to bonds, stocks are a much better deal. Inflation concerns are threatening the bull market in bonds, and a Treasury sell-off has pushed up yields.
The 10-year Treasury yield has risen more than 30 basis points (0.3 percentage point) in a week to close to 2.4%. The 10-year Treasury yield hit a record low of 1.67% in September last year.
"We would expect the early rises in bond yields to be positive for equity prices as they both become a reflection of rising growth and inflationary expectations, and could expect some equity re-rating in the initial stages of rising yields," Oppenheimer wrote in the report.
With Goldman Sachs' endorsement to buy stocks, investors following their call could push the market higher than the 12% gains netted already this year.
He's the former executive director of Goldman Sachs (NYSE: GS) who pulled a Jerry Maguire on Wednesday while resigning from the illustrious Vampire Squid.
In his New York Times op-ed piece, otherwise known as the scorched-earth letter, Mr. Smith explained that he resigned from Goldman because he could no longer abide by the firm's culture of ripping-off clients to line their own pockets.
The blunt frontal assault on the firm he once revered was a career move. What kind of career move remains to be seen.
But before I get into what really goes on behind Wall Street's velvet ropes and what Mr. Smith's pronouncements about Goldman's culture says about Goldman, let me say this about his future employment prospects.
I'd come out of retirement and start a new hedge fund if Mr. Smith would come on board.
In fact, after hearing all the hoopla about how he has burned any and all bridges he might have had as a Goldman alum and how he'll never work on The Street again, I can't help but laugh.
And I'm not the only one.
Bill Singer, a noted New York securities attorney who's not shy about speaking his mind openly and honestly, said to me, "Seriously, if the guy has as little as a $10 million book of business there'll be people all over him to come on-board. Not only that, but there are a lot of firms that would want to throw this in Goldman's face by hiring the guy."
Greg Smith's Jerry Maguire-like moment might just be the best career move he's ever made.
And I'm serious; I think he'd be a great addition to my new hedge fund operation. What do you say Greg?
Nothing New About Goldman SachsOne thing is for certain: as biting as Smith's commentary was on Goldman Sachs, there were no new revelations about how the firm operates.
The bottom line about Goldman, according to Smith's op-ed piece, is that "people [at Goldman] push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client's goals. Absolutely. Every day, in fact."
Like I said, Smith's not delivering any revelations. It's not an insight into just Goldman, either. This mantra is essentially the Street Creed.
Wall Street only needs clients to make money for itself.
If you don't understand that, you don't know how the game is played − or how it's won.
Goldman shares fell 3.4% Wednesday, the third-biggest decline in the Standard & Poor's 500 Financials Index.
Smith pointed to Chief Executive Officer Lloyd Blankfein and company president Gary D. Cohn as responsible for letting the firm falter.
"I truly believe that this decline in the firm's moral fiber represents the single most serious threat to its long-run survival," wrote Smith.
Smith painted a picture of executives with zero respect for their clients, saying it makes him "ill how callously people talk about ripping their clients off," and that in the past year he's heard five different managing directors refer to their clients as "muppets."
Even though Smith's Goldman letter weighed on the bank's share price Wednesday, shares had almost made up the losses by midday trading today (Thursday).
So just how much will the Goldman letter actually weigh on GS stock and popularity?