Goldman has long been seen as the "Cream of the Crop" by most. By most I mean the people who don't bother to pull their heads out of their asses to see that Goldman Sach's shit stinks too. Cramer has recommended them at $220, $200, $175, $125 and $75. This was what he had to say late last year:
On his Mad Money show last night, Jim Cramer, a former Goldman-alum, said when the stock hits $75 per share 'buy it'. He said, "if you can buy a stock for $40 a share less than Warren Buffett, you're smart."
Cramer was referring to the $5 billion investment Buffett made in Goldman in September, but actually Buffett bought perpetual preferred with a 10% dividend and warrants to purchase $5 billion of common stock with a strike price of $115 per share. Goldman sold $5 billion common shares to the public at $123 per share.
But what if this $5B was not an investment at all, but instead it was sort of a 'margin call' ?? The Oracle of Omaha sold option contracts (naked puts) to private investors for roughly $5B. Goldman was reportedly the broker.
Jon Markman says, "because of its solid-gold credit rating, Berkshire Hathaway was not required to put up collateral to make this trade. But now rumors are flying on Wall Street that the owners of the contracts have demanded that broker Goldman Sachs put up collateral for the rest of the amount due. Since the value of the trade could be enormous, the collateral demands are said to be very large, and fears that Goldman will struggle to make good on its obligation has panicked shareholders."So most of this is old news, but the price action in GS suggests more of the same. While I can't speak to those who are Long GS / Short some other insolvent bank, but I will say Goldman Sachs will be back to the $40's soon enough. If the market takes out those lows I'm guessing Buffett will 'Invest' more in Goldman. The only revenue stream GS has is short-selling toxic derivatives to their customers.
