Banking News: Goldman Sachs (NYSE:GS) Shorting Wells Fargo (NYSE:WFC), Mastercard (NYSE: MA), PNC (NYSE: PNC) and AIG (NYSE: AIG)
I learned a long time ago to not listen to what people say but watch what they do, and in the case of Goldman Sachs (NYSE:GS), their net shorting of Wells Fargo (NYSE:GS), Mastercard (NYSE: MA), PNC (NYSE: PNC) and AIG (NYSE: AIG) reveals they’re not buying into the assertion that we’ve started to enter a period of economic recovery; on the contrary, they’re betting against it.
In their recent quarterly filing, which is called a 13F, Goldman asset managers revealed their largest positions in specific companies, and within those parameters, the largest short and long positions they have. That simply means what stocks they believe will go up or down in price going forward.
As far as the strategy Goldman is employing, they’re investing in shorts and longs, but when the smoke clears they’re net short on the four stocks mentioned above. Without getting into what that strategy means as far as how it protects from losses while promising the best gains, let’s look at what it means from Goldman’s current view of the economic crisis.
It’s simple really. Goldman is saying by their actions that the financial industry is still in shambles, and we are far from entering an economic recovery. You don’t offer net short positions unless you absolutely believe that. Consequently, Goldman believe the future doesn’t hold a lot of promise for these four financial stocks. I’m sure Citigroup (NYSE:C) would have been part of this as well, but shorting a $4 stock doesn’t leave a lot of room to make money.
As of the release of the report from their asset managers, the net short position of the four companies are this: Goldman has shorted Wells Fargo by $289 million, Mastercard by $266 million, PNC by 202 million, and AIG by $152 million. Together that’s over $900 million. Not a strong support for an economic recovery at all.
One interesting side on all this is Goldman itself is one of the most exposed financial companies in the world to derivatives, and when measured by derivatives as a percentage of assets, is over 8 times more exposed than their nearest competitor in the U.S. I wonder if Goldman shorted themselves?
I’ve been talking for some time on American Banking News on why the recession is far from over and the idea of recovery being a reality is ridiculous. Here’s another proof that others, within the industry itself, understand that as well.
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Great post but complicated to understand since I am from Faroe islands ;-) 
What would be your top three tips for anyone new to this topic?
Hey author – in your opening sentence and your title bar (and your link) you might want to correct the Wells Fargo stock symbol – WFC not GS.
Once again Gary, your bias is showing. You mention Goldman shorting Wells Fargo and indicate that they are all knowing, so that tells us all we need to know about Wells. However, where did you mention the recently released news that Berkshire Hathaway (thus Warren Buffet, and dare I say a more respected company than Goldman Sachs) has once again added more Wells Fargo stock to their holdings. You certainly have an agenda, don't you?
How is there no money to be made shorting a 4$ stock? You would just be able to buy more shares. Rather than buying x-units of WFC, they would be able to buy (WFC Price/4)*x units of Citigroup. Thus, if they fell by the same percentage, you'd have made the same amount on the short. Thus, if WFC fell by 5%, you'd make x*WFCPrice*.04, and if Citigroup fell by 4%, you'd make (WFCPrice/4)*x*4*.04=WFCPrice*X*.04. If you haven't gotten it yet, its the same.
Of course, the short rebate might be bad on Citigroup compared to the others, and that would be the reason. Not its stock price.
Perhaps there is an error. Please see the SEC FAQ section for form 13F:
http://www.sec.gov/answers/form13f.htm
Question 41
Q: What about short positions?
A: You should not include short positions on Form 13F. You also should not subtract your short position(s) in a security from your long position(s) in that same security; report only the long position.
How does the author calculate the net short position from a Form 13F?
Looking at Wells Fargo ( Filed on 11/13/09 ):
http://www.secinfo.com/dnFu6.sVs.htm#1stPage
I see Goldman is long puts, but this put position is not as large as the long call plus long stock position.
I would appreciate it if the author would site his sources. Perhaps the author is using more the 13F form to reach this conclusion?
What Goldman Sachs has done that the government knows about is the CDO'S.. Where Goldman bought loans, they sold pieces of each of these mortgages all over the world, got caught with their pants down last September and the financial crisis began.. Goldman owned Avelo Mortgage when this was occurring, then The Government got involved, Goldman then became a “Servicer” to
to all of these Mortgages with outside investors… Now we have Wells Fargo buying them up as AKA trust!!!!! If only they would just bring this to some sort of light and automatically redo these loans on a 30 year fixed rate we would recover all over the country alot faster!!!!!!
- Show quoted text -
What Goldman Sachs has done that the government knows about is the CDO'S.. Where Goldman bought loans, they sold pieces of each of these mortgages all over the world, got caught with their pants down last September and the financial crisis began.. Goldman owned Avelo Mortgage when this was occurring, then The Government got involved, Goldman then became a “Servicer” to
to all of these Mortgages with outside investors… Now we have Wells Fargo buying them up as AKA trust!!!!! If only they would just bring this to some sort of light and automatically redo these loans on a 30 year fixed rate we would recover all over the country alot faster!!!!!!
- Show quoted text -
What Goldman Sachs has done that the government knows about is the CDO'S.. Where Goldman bought loans, they sold pieces of each of these mortgages all over the world, got caught with their pants down last September and the financial crisis began.. Goldman owned Avelo Mortgage when this was occurring, then The Government got involved, Goldman then became a “Servicer” to
to all of these Mortgages with outside investors… Now we have Wells Fargo buying them up as AKA trust!!!!! If only they would just bring this to some sort of light and automatically redo these loans on a 30 year fixed rate we would recover all over the country alot faster!!!!!!
- Show quoted text -