In finishing up the GS Stress Test, I decided to throw in this chart to the free part of the blog as well. The Goldman Stress test is a Tour de Force, and I seriously doubt if the government has put as much into uncovering the truth as I have.
Reference the CMBS exposure that Goldman has above (at no less than 14x leverage), then reference this chart directly below.
We are talking a 6x increase in CMBS spreads that GS is rife with at a minimum of 14x leverage over a comparable time period (and a 30x increase all in all). This will just get worse as we get more of this: For those that attempt to argue that short sellers are bad for the market, I bring you GGP! and GGP has finally filed Bankruptcy, Proving My Analysis to be On Point Over the Course of 18 Months. With this GGP bankruptcy, spreads will blow out even wider as asset values drop farther. Then there are all of the other REITs who share similar problems, just on a lower scale (at least thus far).
With the advent of the new FASB Fantasy Accounting Rules, it is possible that Goldman can hide these stresses and losses from average institutional and retail investors as well as the government. Well, they can't hide it from BoomBustBlog subscribers. Bear Stearns and Lehman Brothers had very, very similar real estate exposure. Look at where they are now! As a matter of fact, there are charts comparing the exposure of Goldman, Lehman, Merrill Lynch and Morgan Stanley in the Stress Test that I am about to release. It is revealing and interesting indeed. Goldman is trading at nearly $130...
As I have stated, I believe the Goldman Research to be above and beyond anything available to the typical instituional or retail investor, and I am sure I have covered (or uncovered) bases that the government has failed to. Here is an (unfinished) table of contents (the Pro report is over 100 pages long, consiting primarily of numbers, tables and stats) as I wrap up the report to release some time today for Professional Level users (along with a summary for Retail subscibers):
Contents
Goldman Sachs 1Q09 results 2
Reggie Middleton's Goldman Sachs Stress Test 4
Summary 4
Stress Test Macro Assumptions 5
VAR and Risk Data 6
Comparative Var Analysis 8
CMBS Pressure Points and Other Risk Factors Not Reflect in VaR 12
Economic Writedowns 16
Future Value of Assets (economic) 19
Future Value of Liabilities (economic) 28
Financial liabilities at fair value 34
Movement in Level 3 Financial Assets and Financial Liabilities ($ mn) 40
Writedowns (accounting) 44
Future Value of Assets (accounting) 46
Financial Liabilities at Fair Value (accounting) 56
Movement in Level 3 Financial Assets and Financial Liabilities ($ mn) (accounting) 65
SFAS 157 and SFAS 159 70
Debt Maturity 72
Level Three Comparison 72
Level 2, Level 3, CDOs and Related Assets 77
Revenue, Expense and Off Balance Sheet Loss Assumptions 80
Relative Book Valuation 81
Financial Projections 84
Income Drivers 88
Key Ratios 93
Unconsolidated Variable Interest Entity (VIE) Exposure 95
Scenario Analysis 99
Disclaimer 111
