E.D. Hart

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  • How Much Are Goldman's Level 3 Assets Worth?
    Gary,
    I agree with most of what you said, particularly that the premium is coming off GS. I have friends who work for GS, and they are very worried.

    Here is another analogy: You bought a house for 670,000 but two years later it is appraised for 1 Million Dollars. (spoken like Mike Myers).

    But then you find you have termites, and you call out the inspector/pest control guy--but they cant look at the foundation--they can only look at the upper floors.

    And you ask him--well what will it take to kill the termites? And he cant tell you, he's not allowed to look at the foundation. And you get the hosue appraised again, and you ask the appraiser--what is my house worth? And he says between $50,000 and $900,000, depending on what it costs to fix the foundation. We may have to destroy the whole house ($2 buyout).

    Its toxic waste, but I prefer "termites in the foundation" metaphor and no one knows (except perhaps the banks) how bad they are.

    Unlike in real estate, however, that have full disclosure laws when you buy a house, when you buy a bank stock, you have no idea whats in the foundation, or on the balance sheet. (or off the balance sheet).

    We may see GS hit 125. I also believe that DOW 9000 is more likely in next 24 months, than DOW 15,000.
    Disclosure: I have now position in GS, short or long.

    My question: What do regulators do for a living?
    Apr 14 01:02 am |Rating: 0 0 |Link to Comment |View article

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