Tuesday, April 19, 2011

Dick Bove Cuts ‘Buy’ Rec on Goldman Sachs: Seven Reasons Why (and what do the VaR numbers tell us) GS; XLF

I still get a childlike [childish -ed] kick out of the bank analysts rating each other.
Just about every upgrade or downgrade reminds me of a September '07 post, Climateer "Line of the Day" and Day Trading Hot Chinese Alt-Energy (What could possibly go wrong?):
Speaking of the WSJ's Blog Empire (see below), Tim Annett posting at MarketBeat was yesterday's winner with a walk-off home run*:

Like a gang of clowns in a pie shop, Wall Street brokerages had a merry old time slapping one another with various downgrades, earnings-estimate parings and price-target reductions in the lead-up to their recent earnings announcements....
I've used that line a few times*, links below.
Here's MarketBeat with the latest bit of commedia dell'arte from one of our favorite bank analysts:
The Rochdale Securities Richard Bove chopped his rating from “buy” to “neutral” Tuesday. And in an email offered seven reasons why:
1. The S&P potential downgrade of U.S. debt will results in slower economic growth. This hurts every company that I follow.
2. The burst of trading activity in the first quarter will not be sustained. It is unlikely that there will be another Mid East blowup or Japanese meltdown. India and China must cut inflation and investors have de risked their balance sheets. This hurts all traders, also....MORE
I wasn't going to post on Goldman's earnings but since it was Bove...
Now, just one question: Does the drop in both total and equity Value at Risk combined with the big increase in commodities VaR tell us anything about the markets going forward? Here's Reuters:
UPDATE 1-Goldman Sachs commodities risk up 60 pct in Q1
(Adds details, comparison to JPMorgan and VaR table vs peers)
 NEW YORK, April 19 (Reuters) - Goldman Sachs Inc (GS.N: Quote), the largest
U.S. investment bank, raised its commodities trading risk by 60 percent in
the first quarter amid a rally in oil, metals and grains markets.
 Goldman's value-at risk (VaR) for commodities averaged $37 million in
the three months to March 31, versus $23 million in the previous quarter.
 But it was lower compared to the $49 million in the first quarter of
2010, financial results released on Tuesday showed.
 VaR is an industry measure for how much of a bank's money is at risk on
a day for trading a particular asset class.
 Profit at Goldman dropped 72 percent in the first quarter as it made
less money from trading bonds for clients. [ID:nN19274449] [ID:nN19271805]
 But net revenues from commodities traded on behalf of clients were
"solid and ... higher compared with the same prior year period", the bank
said in a statement.
 Goldman's commodities VaR for the first quarter was also markedly
higher than that assumed by key rival and No. 2 U.S. bank JPMorgan Chase
 Co. JPM.N....MORE
Mar 2009 
"Like a Gang of Clowns in a Pie Shop...": AIG Sues Countrywide, Countrywide Sues AIG. And Senator Dodd Stops by
May 2008  
"Like A Gang of Clowns in a Pie Shop": S&P Puts Moody's on Credit Watch (Negative)
Dec 2008 
Send in the Clowns: Citigroup Slashes Estimates and Price Target on Bank of America