Goldman Sachs Buyback Rumors

Posted by guest, Apr 02, 2008 1:40PM

@ 1:38:

You are a moron, buybacks are paid for mostly with retained earnings.

Posted by guest, Apr 02, 2008 1:44PM

Oh come on Carney, where's video of the Value Stock Picks guy?

Posted by guest, Apr 02, 2008 1:50PM

@1:40 Your comment is so goofy I can't let it rest. In a stock buyback a firm issues debt and retires equity. The stock buyback does in fact reduce retained earnings but its not "paid for" from retained earnings. Its paid for with the proceeds from a debt issuance.

Hence the bondholders are going to be angry: at the end of the day less equity, more debt and therefore a more highly levered firm. Leverage is generally thought of debt/(debt + equity). Maybe this will help you someday at a cocktail party or job interview.

Posted by guest, Apr 02, 2008 1:51PM

@1:38 - apples and oranges, you moron. Can we please set up commenter accounts with executions? Grounds for execution would include:

1. Not being funny, ever.
2. Consistently moronic statements.
3. Obvious ignorance of basic financial concepts.
4. Attempts to post pictures of Bess on the interwebs.
5. Any attempt to defend FBN.

Posted by guest, Apr 02, 2008 1:52PM

@1:44 only mistress bess gives us the valuestocktips guy.

Posted by guest, Apr 02, 2008 1:52PM

@1:40 - please take an into corp finance class sometime. Buybacks always come out of the bondholders' pocket, by essentially making their investment more risky due to the higher leverage.

Posted by guest, Apr 02, 2008 1:53PM

@1:51 - yeah, executing accounts is a great way to deal with anonymous guest users.

Also, btw, he was right.

Posted by guest, Apr 02, 2008 1:53PM

Intended reply to @1:40: Phew at least it seems that people will not let complete idiocy go un-answered. Retained earnings sit on a balance sheet for a reason and if they go something else comes in , be it new bond issuance or whatever other means of funding.

Posted by guest, Apr 02, 2008 1:57PM

@1:40 Are you now in a corner somewhere crying? You should be. Good thing we have no idea who you are. In the future be careful before you toss out that moron term.

Posted by guest, Apr 02, 2008 1:58PM

@1:40 your ignorance is startling. i'll give you a little while to think about the obvious relationship between retained earnings, equity, leverage, and a broker/dealer's need to borrow in capital markets

@1:53 holy hell you are even worse.

Posted by guest, Apr 02, 2008 2:02PM

@1:58 I think the problem with 1:53(1) is a misplaced modifier. Or something like that. Some English major is not going to be all over me. I think in the btw he means the next poster was right (not 1:40)

Posted by guest, Apr 02, 2008 2:03PM

@1:51. let me ask you something. suppose you lend me $100 cash because i have $10 in gold in a safe box and you figure hey if i don't pay you back, you can always go after the gold. right? okay. now say i then go and use my $10 lump of gold to buy something completely worthless to you, like some scraps of paper, which i then shred and incinerate.

as my lender, how do you feel?

Posted by guest, Apr 02, 2008 2:04PM

let's not trash 1:40 too much. It's uninformed but aggressive muppets like him that create the market inefficiencies from which the rest of us profit. Long live the idiots!

Posted by guest, Apr 02, 2008 2:06PM

Look even if there is NOT a new bond issue (which of course there EVENTUALLY will be) by spending equity on retiring shares you are disadvantaging your borrowers.

Guys this is corp finance 101 here please if you are 1:40 or someone who agrees with home do us a favor and go kill yourself.

Posted by guest, Apr 02, 2008 2:08PM

@2:02 sorry i should have been more clear, i meant 1:53(2) not the other guy

Posted by guest, Apr 02, 2008 2:08PM

2:03 That's clear as mud. You might be idiot #2 here today.

Posted by guest, Apr 02, 2008 2:12PM

@2:08 It's a pretty clear analogy to me, are you dyslexic?

Posted by guest, Apr 02, 2008 2:14PM

@diablo, It has been a busy period, markets have been so tight since august that every time you get a bit of positive sentiment the syndicates flood the market with new term deals because of the pent up demand for borrowing funds

Posted by guest, Apr 02, 2008 2:15PM

2:06 Again this lame idea of "spending equity". You cant spend equity. How can there not be a new bond issue? The only way to pay for retiring the equity is by issuing debt (or reducing investments, which will have the same impact on net debt as issuing new debt). Basic concepts here. Double entry accounting, the balance sheet balances. What's gonna happen when we get to the hard stuff.

Posted by guest, Apr 02, 2008 2:16PM

2:12 Explain it to be then smart boy. I'll make it simple Is he saying buybacks are A) good or B) bad for bondholders.

Posted by guest, Apr 02, 2008 2:21PM

@2:08 Is the lump of gold supposed to be the firm's equity? If so, bad analogy. A lump of gold has value in itself, while the value of equity is simply the difference between the firm's assets and liabilities. Its value is derived from that of everything else there.

Posted by guest, Apr 02, 2008 2:22PM

2:16 he's saying if all equity goes away then as an unsecured lender you now have a lower recovery value.

come on now. stock buybacks increase leverage, making existing (and future) debt more risky.

Posted by guest, Apr 02, 2008 2:25PM

2:03 sounds Indian

Posted by guest, Apr 02, 2008 2:25PM

2:03 sounds Indian

Posted by guest, Apr 02, 2008 2:28PM

Just guessing 1:40's accounting knowledge came from haning out in 14th floor restroom at 383 madison until recently.

Posted by guest, Apr 02, 2008 2:28PM

@2:15 are you willing to consider this scenario? you spend cash (asset decreases). you reduce equity by the same amount (equity decreases). the balance sheet still balances. Asset = Liability + Equity. Asset - X = Liability + Equity - X. tell me what you object to?

Posted by guest, Apr 02, 2008 2:30PM

@1:38 is right. end of story. risk to bondholders increase as leverage increases. haven't you guys been paying attention the last, oh, year and a half??

Posted by guest, Apr 02, 2008 2:35PM

@2:28 See my post. I said "or reducing investments, which will have the same impact on NET debt as issuing new debt". Leverage is generally measured using NET DEBT, that is debt less investments. In your scenario investments were liquidated to fund the stock buyback. That will in fact increase leverage even though no debt is issued.

Posted by guest, Apr 02, 2008 2:37PM

so we agree to agree then.

Posted by guest, Apr 02, 2008 2:47PM

Wow, financial accounting concepts are really tough to discuss when everyone's anonymous.

Posted by guest, Apr 02, 2008 2:53PM

I don't believe the rumor. Would be interesting if GS did a buyback and got the liquidity not from a bond issue but the Fed. They said they borrowed from Fed on 3/19, didn't disclose the size but it is cheap money at sub 3%. They basically put securities they can't repo or liquidate to the Fed. Take the Treasuries back from Fed and either repo, with low/minimal haircuts/rates, or liquidate them in the market. Now you easily have +$8bn in money at below market rates to buy your shares.

Don't think they are doing this but would be a good strategy if you weren't going to have any more write-downs. Biggest risk is Fed forcing you to take back the collateral but seems very low risk and likely only done if the market is improved enough that they could finance/liquidate the bad collateral easily.

Posted by guest, Apr 02, 2008 2:57PM

To the bond holder, it doesn't matter where they get the money, anything they do to increase leverage is coming out of the bond holder's pocket

Posted by guest, Apr 02, 2008 3:02PM

there is a new bond in the works....

http://www.reuters.com/article/marketsNews/idUKL0284871720080402?rpc=44

Posted by guest, Apr 02, 2008 3:02PM

2:53 - that's an interesting thought; the Fed is obviously the sucker in this game, and GS shouldn't hesitate to take advantage.

Posted by guest, Apr 02, 2008 3:05PM

@2.47 -- the posters at DB would lose most accounting/finance arguments if they argued with zoo animals. The posters would win sometimes because the animals would either fall asleep or get bored and walk away.

Posted by guest, Apr 02, 2008 3:26PM

the comments on this site have gone into the shitter.

Posted by guest, Apr 02, 2008 3:28PM

@Anonymous lol the name that keeps on giving

Posted by guest, Apr 02, 2008 3:31PM

Thats not very big they usually do a couple billion at a time, although not in sterling

Posted by guest, Apr 02, 2008 3:33PM

GS has over $13 billion maturing this year, obv they are going to have to do a deal every now and then

Posted by guest, Apr 02, 2008 3:43PM

commenter accounts make a lot of sense, given this scrum of "guests" blindly arguing with each other.

Posted by guest, Apr 02, 2008 3:45PM

i think most of them are arguing with 1:40.

Posted by guest, Apr 02, 2008 4:30PM

The reason traders get all the pussy is because it's easy to distract accountants as evidenced in this thread. While we're banging her like a screen door in a hurricane, acountants are still at the bar arguing over by which window of the room the debits go on paper.

Posted by guest, Apr 02, 2008 4:57PM

Right ... it's easy to distract accountants, they lack focus, traders on the other hand are known for their long attention spans.

Idiot.

Posted by guest, Apr 02, 2008 7:00PM

LEH already announced a big share buyback ...nobody noticed b/c they were too busy looking for GS cock to suck...

January 29, 2008 5:05 PM EST

Lehman Brothers Holdings Inc. (NYSE: LEH) increased its annual common stock dividend by 13 percent, from $0.60 per share to $0.68 per share. The dividend for the first quarter of the 2008 fiscal year is $0.17 per share, payable February 22, 2008, to shareholders of record as of February 15, 2008.

Lehman Brothers also announced today the continuation of its common stock repurchase program. The Firm's Board of Directors has authorized the repurchase, subject to market conditions, of up to 100 million shares of Lehman Brothers common stock.

Posted by guest, Apr 02, 2008 7:10PM

You're telling us now? We knew this this morning!! that's why we moved on to Goldman.

Posted by guest, Apr 03, 2008 8:34AM

Well that rumour worked out well didn't it? I am astonished that people would spread false rumours! What next?