Other news media wait until the market closes before reporting on trader chatter and market rumors because they don’t think you are smart enough to handle the half-truths. We have more faith in our readers. So we bring it to you straight and without condescending censorship
Today the chatter is about Goldman Sachs. People say lots of things, but today they are saying that Goldman will announce a major stock buyback tonight after the market closes. They’re even putting a number on it: $8 billion. Of course, the people saying this are in no condition to know and last week they probably would have told you that Lehman Brothers would be worth $2 on Monday. (But a couple weeks before that they were right about Bear Stearns.) Make of it what you will.
A side note: it’s kind of nice to report on bullish rumors about an investment bank. When was the last this happened?
Goldman Sachs didn’t comment on this because they wouldn’t anyway so we didn’t call them.
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Yeah bondholders will be thrilled to fork over the cash to fund that buyback
@ 1:38:
You are a moron, buybacks are paid for mostly with retained earnings.
Oh come on Carney, where’s video of the Value Stock Picks guy?
JC – Could ya give Cramer a call and tell him in time for his half-hour comedy act? I’m sure he really wants to recommend GS, but what with the BSC history and all, he might be a wee bit gun-shy.
1:40,
You’re right. I plan to sell my GS shares back to GS for retained earnings. I don’t plan on receiving any cash for the trade.
@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.
@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.
@1:44 only mistress bess gives us the valuestocktips guy.
@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.
@1:51 – yeah, executing accounts is a great way to deal with anonymous guest users.
Also, btw, he was right.
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.
@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.
@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.
@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)
@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?
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!
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.
@2:02 sorry i should have been more clear, i meant 1:53(2) not the other guy
2:03 That’s clear as mud. You might be idiot #2 here today.
OK, long-term corp debt issuance is accelerating. Looks like them treasurers feel LT rates are going up, better catch the low rates now. Confirmed?
@2:08 It’s a pretty clear analogy to me, are you dyslexic?
@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
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.
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.
@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.
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.
2:03 sounds Indian
2:03 sounds Indian
Just guessing 1:40′s accounting knowledge came from haning out in 14th floor restroom at 383 madison until recently.
@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?
@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??
dear 1:38-2:22,
Clarence: Fuck you, fuck you, and fuck you! Who’s next?
@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.
so we agree to agree then.
Wow, financial accounting concepts are really tough to discuss when everyone’s anonymous.
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.
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
there is a new bond in the works….
http://www.reuters.com/article/marketsNews/idUKL0284871720080402?rpc=44
2:53 – that’s an interesting thought; the Fed is obviously the sucker in this game, and GS shouldn’t hesitate to take advantage.
@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.
2:47, I’m fucking anonymous.
the comments on this site have gone into the shitter.
@Anonymous lol the name that keeps on giving
Thats not very big they usually do a couple billion at a time, although not in sterling
GS has over $13 billion maturing this year, obv they are going to have to do a deal every now and then
commenter accounts make a lot of sense, given this scrum of “guests” blindly arguing with each other.
i think most of them are arguing with 1:40.
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.
Right … it’s easy to distract accountants, they lack focus, traders on the other hand are known for their long attention spans.
Idiot.
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.
You’re telling us now? We knew this this morning!! that’s why we moved on to Goldman.
Well that rumour worked out well didn’t it? I am astonished that people would spread false rumours! What next?