Portfolio Pruning

I took off the long Goldman Sachs/ short Bank of America trade for a modest profit on both sides of the trade. I still think the trade works but I have decided to move on.


PJ said...

Did my comment sway you?

The bull case on GS is that this year's earnings were really more like $35 than $20, they took big writedowns on CRE to mask their outrageous profits, so they're overprovisioned compared to other banks.

The bear case is they'll never again have clients with $1.5 trn (the Fed) and $700 bn (Treasury) trading through them, whom they can frontrun.

Really hard to extrapolate the future for GS. My view on it is that aside from political influence, there's not much profit in their business model. Lehman and Bear and Merrill went under, Morgan Stanley was inches away. The Internet has taken the profit out of brokering functions, and that was the investment banks' bread and butter.

I'm sort of neutral on GS, but I don't see any source of growth for them. At least they won't lose solvency.

Anonymous said...

Call me crazy dawg but I think C is the best blue chip/big cap long financial plays alive. With the rest it's like squeezing water from your shirts on the tumble dry circle after 20 minutes. Not worth the effort.

Anonymous said...

shit I meant cycle not circle

Anonymous said...

who is to say that people who work at GS are smarter than people at leh ms or bac. speaking from experience let me just tell u that the reputation far outweighs the substance

Tsachy Mishal said...

The two stocks were trading in tandem. My conviction on the trade was not that high because its impossible to really know whats going on with these financials. It just seemed there were better trades.