$9 Billion Dollars!
That's how much Goldman Sachs (GS) took in in revenues in the second quarter. They then used $1.25Bn of it (14%) to buy back their own stock at an average cost of $161 per share and reduced the total number of shares by 17% which allowed them to "beat" estimates by earning $4.10 per share vs $3.70 last year (10.8% more).
That's right – it's a scam! The same scam GS advises it's client companies to do with their own stocks to APPARENTLY inflate their earnings while, in reality, earnings are fairly flat. The same scam, incidentally, GS had the entire country of Greece do – before that whole thing collapsed and took the Global economy with it a few years ago!
By trading heavily from inside this fishbowl, GS was able to bump up their Investment and Lending Revenues by 46%, to $2.07Bn and all those little moves allowed GS employees to take 46% of the profits in compensation – up 6% from last year at $3.92Bn, which is really cool as GS only has 32,600 employees – so that's $1.2M per employee but, somehow, I think the top 326 (0.1%) get a bit more than the other 32,274, don't you?
You would think GS shareholders would be angry that 50% of their revenues go to compensation. After all, a hedge fund only takes 20% of the profits as salary (and that plus 2% of AUM also covers the cost of all operations) but GS, after taking $3.92Bn, drops just $2Bn to the bottom line for their investors or, in other words, GS is like a hedge fund that takes 66% of the profits!
Still, with a p/e of 10, that 33% bone they throw investors is enough to keep them happy but, as with everything else, consider the conditions under which GS is able to make $6Bn in salaries and profits on $9Bn in revenues – Endless Free Money from the Fed, a stock market fueled by Mergers and Buybacks using the same Free Money, massive market manipulation by Central Banks around the World – many of whom are run by former GS employees and most of whom are advised by GS. Perhaps this is as good as it gets for them?
I'm not calling for a short on GS, yet – we'll just be watching them closely as a fantastic short once the market does turn down. Back in 2008 they fell from $250 to $50 (80%) and, so far, they are only back to $170 – so let's give the beautiful sheeple a chance to run in before we sharpen our knives.
Over $175 will be a bit tricky for GS because that's where they were rejected in early 2011 before tumbling to $85 (-50%) by the end of that year. $180 for GS will mark a 100% climb since May 2012 but they were already rejected there early in January and fell back to $155 (14%), but, as noted, since then they've bought back a lot of their own stock at an average of $160 to "fix" things.
Remember, we don't care IF the market is fixed as long as we can understand HOW the market is fixed and place our bets accordingly!
This morning, for example, we were able to play the Russell Futures (/TF) bullish off the 1,160 line in our Live Member Chat Room (you can join us here) just after the GS earnings were announce.
The Russell has nothing at all to do with GS earnings, so it was the laggy index (fresh horse) as the others took off so it was easy money to take it long off that strong support line and already, just one hour after my call for our Members, it's up $350 per contract at $163.50. Now we can set a stop at $163 and lock in a $300 gain and our Egg McMuffins are paid for!
We have a Live Trading Webinar this afternoon at 1pm EST, where we will be discussing Futures Trading Techniques – come join us HERE.
Speaking of Futures, oil (/CL) is failing $100 just a week after we come back from the July 4th holidays – exactly as we predicted when it was $107.50 three weeks ago. If you want to know what "banging the table" is on a trade, just check out my articles from June 12th to June 20th:
- Thursday Thrust – Rent-A-Rebel Pops Oil Over $106 Just in Time for the Holidays
- $500 Friday – Follow Philstockworld For Futures Fun!
- Monday Mayhem – Iraq Kicks it up a Notch
- $29 Trillion Tuesday – Central Banksters Gone Wild!
- Which Way Wednesday – Finally Fed Up?
- Federally Fueled Thursday – Traders get High with Janet
- Friday – NYMEX Terrorists Stop Delivery of 144M Barrels of Oil to US!
Oil was still $106.50 on Friday, June 20th and, had President Obama (or you) followed my advice to short all 314,447 open August oil contacts at $107.50, that $7,500 per contract gain could have made $2.36Bn in less than 30 days. That's more than GS made all quarter! Ha! Who needs GS when we have Oil Futures to trade?
As I said – we'll be doing our Webinar today at 1pm, EST, but we're done with oil for now – more likely we'll be looking to short some of the indexes as they re-test their highs like Dow (/YM) below 17,000, S&P (/ES) below 1,175, Nasdaq (/NQ) below 3,930 and if the Russell FAILS 1,160, we'll be happy to flip short for another ride down to 1,150.
Yellen speaks to the Senate at 10 and that is unlikely to kill the market but maybe in the afternoon, without new promises of MORE FREE MONEY – some of the air will begin to leak out of the market.
