Europe Will Save Goldman Sachs
Just last week I wrote about the financial industry. I noted they were being assaulted by (and rightfully so) government investigations, charges of securities law violations, and even regulatory overhaul. Despite these attacks, the industry was holding up.
One of the big players, Goldman Sachs (GS), is under the microscope these days.
The interrogation of executive management by the Senate didn’t make them a lot of friends. But despite all the harsh criticism, I think now might be a great time to buy Goldman stock!
Think I’m crazy?
Follow my thinking here.
Right now the whole nation is in an uproar over Goldman’s activities. If you missed the news, the SEC recently charged Goldman with certain securities violations. Goldman bond trader, Fabrice Tourre, is being charged with fraud.
His activity was very shady.
He failed to tell investors the group structuring the bonds he was selling was betting against those bonds. Like I said last week, “It’s like having a contractor build you a house… then finding out the contractor’s bought insurance that pays him if the house falls down.”
Because of this news, customers are dropping Goldman like a bad habit.
Goldman has become the whipping boy for anyone with a complaint about the credit crisis and recession. Every crisis needs a scapegoat, and now it’s Goldman’s turn.
The news is horrible. And Goldman’s stock is taking a beating.
Goldman is being spanked, and spanked hard. Investors are talking about a loss of confidence in Goldman. Some are saying this activity will destroy their business.
I say hogwash!
In my opinion, this is a very difficult short-term issue. However, Goldman should be able to see it’s way past this in short order. In the next six months, Goldman and the SEC will be working on a settlement… nobody wants to go to court.
It’s not like the SEC found the next Enron.
Goldman’s not committing accounting fraud. All of these problems are from one bond sale… Do you have any idea how many transactions Goldman does in a year… it’s a lot!
It doesn’t make what Goldman did any better, but again, this won’t destroy their business.
Within a few weeks, this issue won’t garner front page news status. A settlement announcement will be buried in the middle of the Wall Street Journal.
Goldman will probably pay a big fat fine… and that will be the end of it.
In the meantime, the spotlight’s already shifting away from Goldman. Just look at the recent oil spill in the Gulf.
Or better yet, look at Greece.
The EuroZone is getting ugly, and it’s not long before we see fireworks there! Greece is basically insolvent. To get a bailout, they have to implement extreme austerity measures.
And the Greeks are rioting!
It’s getting worse. Following in the footsteps of Greece, ratings agencies recently downgraded Spain and Portugal too. These countries can’t afford to pay their debt. Unemployment is a problem. And taxes are sky high.
What’s next?
Might Greece erupt in revolution? Might Spain default on their bonds? Might another European Union country (like Ireland) need a bail out?
The EuroZone is on rocky ground… one slip and the entire economy could re-enter the recession. Or worse, the EU could fall apart and the Euro implode.
It’s scary thoughts like these that take over front page news… and cause Goldman stories to fade into the background.
I believe once the spotlight shifts onto other issues, Goldman stock will once again start climbing. It’s a risky call, no doubt. But if you don’t mind taking a risk, consider picking up some Goldman shares… they might serve you well in the long run.
Category: Stocks
