Sunday, April 18, 2010

Goldman cracks?

The Goldman news that broke last Friday is BIG news. In essence they are accused of letting a client that was short CDOs help select the underlying securities. This is like letting a lotto addict pull the winning numbers.

There are lots of good insights around the web on what this means for the markets and the financial industry, but I'd expect to see:

1) More lawsuits coming against Goldman and other firms.

2) A strong push from lawmakers to tie this story in with Financial Reform legislation. The timing of this story breaking as Sen. Dodd rolls out Financial Reform has not gone unnoticed.

3) 1-800-HELP-LAW infomercials looking to file lawsuits on behalf of "investors that bought CDOs from Goldman or ever looked at a Prius"

Again, this story coupled with the Iceland volcanic activity might dominate the headlines tomorrow.
Friday's Consumer Confidence numbers got lost in the Goldman/Volcano stories but it's worth noting that the numbers were took a turn for the worse.

Confidence fell to 69.5 from 73.6 and hit it's lowest point in 6 mths. What really surprised me was that the Economic Outlook fell sharply to 62.3 which is the lowest level since March 2009 - remember that was when it looked like the world was falling apart at the seams. Gas prices probably played a major role in this move as gas has run up toward $3.00/gallon again.

Another disappointing stat last week was when Unemployment Insurance claims which jumped to 484k vs. expectations of 440k. However, the line that truly jumps off the page is when the Labor Dept blames "holidays" including Cesar Chavez Day for the jump.

"A Labor Department economist said this latest rise can be pegged to lag effects from the spring holidays, including Easter and Cesar Chavez Day, which is celebrated in worker-heavy California." Either economists making the forecasts are unaware of the holidays or their forecasts should have reflected those holidays and the jump has to be attributed to something other than a date on the calendar.

I'm a big fan of solar power efforts particularly efforts to lower costs and increase manufacturing capacity, but this story is beyond comical - bear with the rough Google translation.

"After press reports, it was established during inspections that several solar power plants were generating current and feeding it into the net at night. To simulate a larger installation capacity, the operators connected diesel generators.

“This is just the tip of the iceberg,” said one industry expert to the newspaper “El Mundo”, which brought the scandal to light. If solar systems apparently produce current in the dark, the will be noticed sooner or later. However, if electricity generators were connected during daytime, the swindle would hardly be noticed."

The subsidies are so substantial for solar power generation in Spain that companies were running diesel generators and pushing that electricity into the grid and pocketing the difference. Brilliant!


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