April 18, 2010

How Will Goldman Sachs (GS) Affect Markets This Week?

Here is a very interesting view on Goldman Sachs` (GS) possible medium term impact on stocks in general and on banking shares in particular:

"Perhaps most alarming with regards to the Goldman news is the level of uncertainty it will create. At first glance the reaction to the Goldman news looks excessive, but this could have widespread ramifications. First, this lawsuit looks like a carefully crafted political move that will make financial reform far more stringent than bank investors had been expecting. President Obama was out Friday saying that he will veto any bill that does not contain derivatives reform. JP Morgan CEO Jamie Dimon has previously mentioned that this portion of the bill would cost the bank between $500MM – $700MM. The Goldman lawsuit appears to make derivatives reform a slam dunk. This would likely shave billions in easy profits from total S&P 500 earnings. The President has also expressed a willingness to drop the $50B bailout fund. Mr. Obama is flexing his muscles now and looking to slam thru his second big bill in a matter of months. That’s good news for Main Street. Harsh reform is necessary to protect us all from ever allowing these firms to put us in this position again. Unfortunately, what’s good for Main Street is not always good for Wall Street. I wouldn’t be surprised if bank stock puke all over themselves for several weeks until the dust settles." in The Pragmatic Capitalist

Related ETF`s: Financial Select Sector SPDR (ETF) (Public, NYSE:XLF), Direxion Daily Finan. Bear 3X Shs(ETF) (Public, NYSE:FAZ), ProShares UltraShort S&P500 (ETF) (Public, NYSE:SDS) and SPDR S&P 500 ETF (Public, NYSE:SPY)

Related Stocks: Goldman Sachs Group, Inc. (Public, NYSE:GS), Bank of America Corporation (Public, NYSE:BAC), JPMorgan Chase & Co. (Public, NYSE:JPM) and Morgan Stanley (Public, NYSE:MS)

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