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How to Think About Goldman's Q2 Results

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Goldman Sachs announced this morning that second quarter profit fell eleven percent, with net income dropping to $2.09 billion ($4.58/share) from last year's $2.33 billion ($4.93/share). The earnings, which beat analysts' prediction of $3.42/share, are the lowest second-quarter result since 2005. As you've probably heard, the decline has largely been attributed to debt-related losses. But we know the real story, which you can bet Lloyd hopes no analyst brings up during today's conference call.

We're talking about the ValueStockTipsGuy or, more specifically, his disappearance. That's right, VSTG is gone, at least in the online sense which, for our purposes, is the only one the matters. We're not sure when but at some point in the last two months, VSTG removed his Goldman-endorsing video from YouTube. This obviously had a dire affect on confidence in the company (though GS is up this morning, so far in 2008 the stock is down fifteen percent). People believed in Goldman on the basis of VSTG's recommendation. All of today's stories are emphasizing how well Goldman did this quarter compared to certain other securities firms. Not to get all Einhorny here but we think VSTG's departure is a sign that all is not well and, not to start a panic, but if there happened to a be a run on the bank in the next day or so, we would not be all that surprised. At this juncture, the only way we can see this bucket-shop being saved is by LB offering VSTG a job on the inside.
Press Release [Goldman Sachs]
Goldman's Earnings Slip 11% [WSJ]
Goldman Drops Less-Than-Estimated 11% on Debt Losses [Bloomberg]