The Market Ticker - Earnings

P/E Is Improving (It Is, Right?)

nospam@example.com (Karl Denninger) — Thu, 05 Nov 2009 12:21:10 -0500

Really. It is.

October's numbers are now in the S&P table. Here 'ya go:

S&P 500 Statistics
As of October 30, 2009

Total Market Value ($ Billion) 9,124

Mean Market Value ($ Million) 18,248

Median Market Value ($ Million) 7,635

Weighted Ave. Market Value ($ Million) 75,767

Largest Cos. Market Value ($ Million) 344,431

Smallest Cos. Market Value ($ Million) 642

Median Share Price ($) 31.800

P/E Ratio* 137.98

Indicated Dividend Yield (%) 2.09
NM - Not Meaningful

*Based on As Reported Earnings.

Ok, the P/E dropped by two points in the last month, with nearly all of the S&P 500 now having reported earnings.

Roughly.

Is The Bloom Coming Off The Rose?

nospam@example.com (Karl Denninger) — Thu, 15 Oct 2009 08:40:00 -0400

Citibank and Goldman reported this morning and both put up what looked at first blush to be better-than-expected numbers.

But both sold off in the premarket. Why?

The bulls were expecting not just beats, but stunning blowouts.

But what we are not hearing from the banking industry is "we have enough loss reserves allocated and will not have to allocate more as loss rates are and will continue to come down."

That's the problem at the end of the day - where is the end of the line? Asset quality continues to deteriorate pretty significantly and this deterioration is driven by unemployment and over-leveraged consumers and businesses - trading revenues are great but in a fractional system loan losses always sink you because of the multiplier effect.

Harley Davidson (HOG) reported a miss on slightly-higher revenue. The key here is that once again sales (units) declined although they said that the rate of decline "moderated". So how does revenue go up? Driving prices higher? Not sure at first blush, but the firm is also talking about divesting or winding up Buell and Augusta. Neither of those actions are going to be revenue positive going forward. The money quote on operating results is here:

Worldwide retail sales of new Harley-Davidson® motorcycles declined 21.3 percent in the third quarter compared to last year's third quarter, an improvement from the 30.1 percent decline in this year's second quarter.

That's not a good sign, especially when one looks at the US picture:

Retail Motorcycle Sales. During the third quarter, retail sales of Harley-Davidson motorcycles decreased 21.3 percent worldwide, 24.3 percent in the U.S. and 13.1 percent in international markets, compared to the prior-year quarter.

Ah, US weaker than rest-of-world.

Again, as with J&J yesterday.

This is the problem that with so-called "stimulus" and similar games; it leaves an overhang. Yes, last year's "stimulus" (and this spring's) contributed to reported GDP but it leaves an overhang and debt that has to be repaid, which in turn translates to deterioration in our home market compared to abroad.

Put more generally, "there ain't no such thing as a free lunch", or TANSTAAFL. The "stimulus" of today comes with a depression of potential expansion in the future.

The "magic" of so-called "stimulus" is that if you can kick private-activity borrowing in the rear and get people off their duff in that regard then "government stimulus" acts as if you're priming a pump, and the return is several times the original "investment." This is the the boiled-down reality of Keynesian thought and the attraction of it as an economic theory - you get leverage for your actions as a government.

But when private credit-market capacity has been reached (on a carrying basis) this "kicking" fails - the default rates are not a consequence of inventory overhang but rather are a consequence of too much credit outstanding compared with income. "Stimulus" that goes toward debt paydown prevents some defaults but fails to spur private economic activity and that activity which does occur turns out to be a false signal as private credit expansion fails to take hold.

Firms that respond to this "signal" with inventory builds get destroyed further down the line as the so-called "economic activity" turns out to be false and unsustainable as now you add inventory overhang to credit distress.

This was the error of trying to "manage" the Depression in this fashion. Note that coming off the 1921 economic contraction Warren Harding (then-President) along with The Fed took a hands-off approach and the market forced the malinvestment from the system; the consequence was that in less than two years unemployment fell from 12% to 3.2% and the economy roared back.

Contrast this "hands off" approach to that of just a decade later when instead of forcing the bubble credit expansion of the late 1920s out of the system The Government instead undertook to "manage" the problem - and turned a speculative bubble bust into a decade-long economic mess.

FDR and The Fed wasn't the solution to The Depression - they were in fact the cause of it, turning a necessary credit contraction into an economic disaster, and we're now doing our level best to repeat those mistakes.

Best Buy (BBY) Results Out

nospam@example.com (Karl Denninger) — Tue, 15 Sep 2009 08:25:00 -0400

Eek - I don't like this report....

Same-store sales down 3.9% isn't good, but what's worse is the SG&A numbers rising from 20.8% to 21.8%.

That's overhead - and this is exactly what I was expecting to start seeing. There's only so much "fat" you can trim from companies, and at that point you have big trouble because there are fixed costs that are difficult or impossible to drop in line with decreasing sales.

What I like even less in this report is that revenues were up (topline) y/o/y but net earnings were down big, about 20%. Topline is up as a consequence of new stores and Europe being added, but its not flowing through to the bottom line. That smacks of a nasty shift in the items being purchased, and is in line with what I have observed at the store around here - people are buying what they need, but "need" is being defined down. A netbook instead of a full-fledged notebook computer, for example, which whacks on margins in a bad way.

With this coming in the "back to school" quarter it is a screaming warning on the upcoming holiday season; this is the first of the big retail chains to report actual earnings (as opposed to just "sales" numbers on a weekly or rolling basis) and if this sort of shift continues to show up in other retailers there is going to be a lot of pain to come in the third and fourth quarters.

Finally, remember that Best Buy has tremendously benefited from Circuit City's demise; the removal of what had been a major competitor never hurts your results. That they were unable to capitalize on this says that most of that business appears to have gone elsewhere - perhaps to WalMart? Or worse, it just disappeared!

The company increased guidance but what I see here is a sales trend shift on ticket size and profitability that is likely to continue in the wrong direction going into the Holiday Season. Should that occur the potential for a monstrous miss in the holiday quarter goes up dramatically. The PUTs are expensive comparatively and I believe upside price action is capped around the 08 level in the mid 40s; should we get a move up into the $45 level that looks like a gift from God as a short entry, and I have every intention of taking it.

Disclosure: No current position but tracking for a short entry.

Insider Trading (Again - DELL)

nospam@example.com (Karl Denninger) — Fri, 28 Aug 2009 09:40:00 -0400

From Marketwatch:

Dell's release slipped out about three minutes before the market closed Thursday, giving the company's shares a boost of 98 cents, or 6.7%, to end at $15.65. The stock topped $16 ahead of Friday's opening bell.

Really? You sure about that Marketwatch?

This is about as blatant as it gets - a huge ramp, on huge volume.

"Someone" (or a bunch of someones) had that report 17 minutes before the bell, and if you were one of the "chosen few" you had a "high frequency" 14 minute window to loot the joint - again.

This sort of scam is so "in your face" that it leaves open not only the question of whether there are any cops (answer: No) but also whether one should have any confidence in our markets as a fair place for people to invest (again: No.)

In a nation honoring the rule of law this sort of trading pattern would result in an immediate investigation and a literal blizzard of subpoenas within minutes.

But we don't live in that sort of nation, do we?

Morning Earnings Call

nospam@example.com (Karl Denninger) — Thu, 23 Jul 2009 09:09:00 -0400

This morning we got a passel of earnings that I found quite interesting.

Let's start with McDonalds (MCD) since everyone loves the American Heart Attack symbol dotting the landscape (just kidding - kinda):

The Oak Brook, Ill.-based fast-food chain said net income fell to $1.09 billion, or 98 cents per share, from $1.19 billion, or $1.04 per share in last year's quarter.

Excluding a 10-cent-per-share gain a year ago from the sale of McDonald's minority interest in Pret A Manger, the company earned 94 cents per share in the 2008 quarter.

That's a bit of a miss. Same-store sales, however, were bright, rising 4.8% globally and 3.5% in the US. Revenue was down 7% but this was blamed on currency translation - I'll buy that explanation given the same-store sales numbers.

One thing I've commented on in the past is that McDonalds has over the last few years gone from "a cheap place to stuff your face right now" to a "moderately cheap place to stuff your face right now." More to the point I distinctly recall 99 cent quarter-pounders (another 20 cents for the cheese) and 99 cent Cokes, leading to a $2 meal (even if it did set you up for $250,000 bypass surgery 20 years later!) I confess to eating many of those $2 lunches.

Try that today; although the company has brought the "McDouble" back in most outlets at a buck its not a quarter pounder, and the drinks, well, consider that a fountain drink costs the company more for the cup than the soda in it. Nice margin.

Point being that people expected significantly-stronger same-store sales from the company's coffee push and the "trade down" effect but it looks like while their coffee bar concept is working the "trade down" may be going all the way down to Americans' kitchens, instead of stopping at McDonalds! Shares are under a bit of pressure this morning.

3M (MMM) was indicated significantly higher this morning after reporting earnings that were down 15.8% - a beat of expectations, however, at $1.12/share .vs. estimates of 94 cents. Revenues were off 15% though, although the company did raise estimates for full-year results based on stronger health-care and consumer electronics expectations. The latter looks more like seasonal demand and a shift toward "eco-friendly" products (3M makes components that go into LCD panels) and the former due to H1N1 (Swine Flu) - specifically, the firm's line of surgical masks that have flown off shelves worldwide. Expect the latter to get even more legs if the flu bites hard in Round #2 this fall and winter in the US (an outcome that I am expecting, sadly.)

AT&T (T) continued the trend with a report of 54 cents a share down from 63 last year, but again, three cents ahead of a bar placed on the ground and easily walked over. More troubling was the fact that AT&T added 1.4 million net subscribers, most of them contract (1.2 million) but revenue declined by 0.45 percent. In other words the subsidies for the iPhone and operating expenses are not being cut fast enough to keep up with what looks like a decline in ARPU. That's going to bite them in coming quarters if they don't do something about it, and "doing something about it" is likely to prove difficult. The street reaction was to pop the stock somewhat pre-market, but I'd be very cautious here - the big attraction in this stock appears to be the dividend which is a rich 6.7% at yesterday's closing price - if they can maintain it.

Finally, UPS (UPS). You can't like this; profit was down by nearly 50% on a yearly-comparison basis to 44 cents, adjusted reported as 49, a "meet" on expectations. But revenue was down to 10.83 billion from 13.0 billion a year earlier, continuing the trend of significant revenue declines. Their CEO said:

"Declines in both our domestic and international businesses appear to be stabilizing but volumes will remain significantly below last year's levels."

Yeah, not good; volume was down across the board both domestic and international. The stock got hit a bit - down about a buck and a half premarket.

UPS' report should make one wonder about Amazon, due out this evening. Nearly everything that they sell ships via UPS; the stock has been skyrocketing and eBAY's results last night (which I didn't think was all that great) ramped them even higher in the aftermarket. If Amazon surprises to the downside things get interesting fast, and those UPS numbers certainly should make one wonder..... we'll see what we get after the market today.

Also due out after the bell is Broadcom (BRCM); given Qualcomm's (QCOM) results (one of their competitors) and the market's reaction (pretty bad) this is also an earnings report I will be watching for. I consider Broadcom to be one of the best-run firms out there in the custom hybrid ASIC market - an essential component of high-tech communications devices (cellphones and similar), and they've also been on an absolute tear stock wise the last couple of weeks. Last night in my technical video (available to gold donors on the forum at http://tickerforum.org) I mentioned that I might be inclined to put on a bearish put spread or even short Broadcom outright today ahead of earnings - I'll be watching their price action closely today and if we get yet another Nasdaq ramp job I'm likely to enter that trade today going into the bell.

Disclosure: No direct positions in any of the mentioned companies; contemplating a bearish play on Broadcom today.

More 30% Trouble

nospam@example.com (Karl Denninger) — Mon, 20 Jul 2009 20:17:00 -0400

The bad news trumpeted from the rafters as "green shoots" continues, beginning with Eaton Corporation (ETN):

The company beat Wall Street earnings expectations when one-time items are excluded, but it cut its full-year forecast for the third time.

Wall Street applauded the performance in a tough environment: Eaton shares rose $3.99, or 8.9 percent, to close at $48.94 Monday. Eaton has traded in a 52-week range of $30.02 to $75.72.

Eaton provides electrical components and systems for power quality, distribution and control. It also makes hydraulic, aerospace and vehicle parts and systems.

Their CEO said:

"As we survey our end markets, the year is shaping up to be considerably weaker than we had forecast in April," said Chairman and CEO Alexander Cutler.

"We now anticipate our overall end markets will decline by between 21 and 22 percent versus our earlier forecast of a decline between 15 and 16 percent. We see our U.S. markets declining by 25 percent, while our non-U.S. markets are expected to decline by 19 percent."

I thought the recession was over?! Larry Kudlow and Dennis Kneale say it is!

Oh, and as for revenues?

Revenue fell 32 percent to $2.9 billion from $4.28 billion a year ago. Analysts surveyed by Thomson Reuters were expecting revenue of $3.04 billion.

32%.... there's that 30% number again.

The market loved it, but what did they love, other than the incessant pumping on CNBC and analysts making calls for the economy that the company doesn't validate?

Next, this evening we got Texas Instruments (TXN):

"End demand is still low in relation to where it was six to 12 months ago. We need to be prepared for slow to no growth for a while," TI Chief Financial Officer Kevin March told Reuters in an interview.

But wait - I thought we were recovering? Slow to no growth for a while - at least the next 6-12 months?

Revenue fell 27 percent to $2.46 billion, close to the average Wall Street forecast of $2.42 billion.

There's that number again..... 27%, awfully close to 30%.

Oh yes, I know TI had a sequentially strong quarter. I would certainly hope so - build for back-to-school and Christmas begins in the second quarter, and seasonally it is always stronger than the first for this reason.

Then there was this:

July 20 (Bloomberg) -- Advanta Corp., the credit-card company that cut off almost 1 million small-business accounts after posting three quarterly losses, said the default rate more than doubled in June from May to 56.95 percent.

Excuse me? 57% delinquent credit cards among small business? You mean to tell me that nearly six out of ten small business accounts can't pay their bills? This is bullish? Small business provide the bulk of job and economic growth - how are they going to do that when 6 out of 10 can't pay their credit card bills?

Ignore the idiots, look at the trends and what CEOs are telling you: There is no recovery evident in the economy; at best expectations are that things are flattening out, but they're flattening out down THIRTY PERCENT from where they were a year ago and THIRTY TO FORTY PERCENT FROM THE TOP!

There is no recovery in sight and you are once again being led down the primrose path by those who have repeatedly misled you through The Internet Bubble and then The Housing Bubble, and now they're desperately trying to get you to buy stocks from those institutional players who desperately need you to take them - before prices one again crash lower, sticking them (instead of you) with the loss.

Don't fall for it.

If you're going to call these sorts of results "green shoots" you first need to get the Federal Government to legalize marijuana so you don't get arrested for smoking them.

The Thesis Continues To Validate: GE

nospam@example.com (Karl Denninger) — Fri, 17 Jul 2009 07:13:00 -0400

GE (NYSE: GE) was out this morning with earnings and continues to validate my central thesis: severe economic contraction.

Revenues were down 17% - another double-digit contraction, and this is particularly troublesome in what it says about the global economy, given GE's global reach.

Again, we continue to see the same sort of theme in industrial and consumer products reporting - Harley Davidson (NYSE: HOG) reported units shipped down 30% year over year yesterday, and now GE out with a 17% year over year revenue decline.

Stocks are, at their core, priced on earnings growth, with the most-common ratio used for such metrics being P/E/G, or Price-to-earnings-growth.

But earnings are not growing, they're contracting - dramatically - in percentage terms over year-ago levels. How can it be otherwise? Even with no inefficiencies due to firms having too many employees for the revenue contraction that is occurring, a 30% reduction in business done should lead to a 30% decline in profits earned. Add to that the fact that firms are nearly always behind the curve and you have profit declines that are much larger - in some cases 100% or even going from a profit to a loss.

This is not a circumstance that will reverse in the immediate future; in order for it to do so, revenue must come back up, and in order for revenue to come back to pre-bust levels, we would have to re-inflate the credit bubble - which simply cannot happen.

Multiples are going to continue to contract. Those analysts and market callers who are all over the momentum trade can in fact make a good buck trading the momentum, but that's all they're trading - they sure aren't trading earnings acceleration or even stabilization.

The move in the market off the 666 levels in March has been driven by a false premise, egged on by CNBC and the other "mainstream media" - that this is a typical recession, it is short-lived, and we will soon go back to previous spending and business patterns.

That is not going to happen, yet it is what everyone in the media and analyst community is looking for and basing their valuation and market timing calls on.

I don't know how long we have to continue to put up numbers like this before people wake up, but wake up they eventually will. When Harley Davidson ships 30% fewer motorcycles, when GE sells 17% less "stuff" (including their financial cooking) and when company after company, including Intel, IBM and others come out with revenue numbers that are down double-digit percentages on an annualized basis, there is no possible way you can justify the multiples that these firms are selling at.

When The Port of Long Beach shows container shipments down nearly 30%, when freight carloadings are down nearly 25% year over year, when sales tax receipts are down in the double digits and when income tax collections, both personal and corporate have effectively collapsed there is simply no argument that "the recession is over" or that "trend growth is around the corner."

The fact of the matter is that port, rail and tax receipts are not subject to being "gamed" by government number-crunchers, they do not play "seasonal adjustments" (since they're year-over-year numbers), they do not represent wishes, dreams, or desires.

They represent real-time, high-frequency, "right now and in your face" economic performance metrics and are impossible to argue with.

If you, as an investor, are trying to use the market as a "forward indicator" of economic conditions, you need to look at these numbers to see whether or not what the stock market is telling you can be validated with actual economic performance - not in quarterly reports to be published in a few months (the typical economic lead-time cited for the market) but in the "right here and now" reality of economic activity.

What those high-frequency data sources are telling us, here and now, today, is that we are in the middle of a 25-30% economic contraction - exactly as I predicted would occur in 2007.

The problem with this level of indicated weakness in the economy is that we have shielded firms, especially banks, from taking the losses that should have come last year and in 2007 related to their over-extension of credit. Now those institutions are going to have to live with the reality of a much smaller economy, meaning that they will be forced to turn to dramatically increasing credit costs to customers to avoid drowning (e.g. increasing credit card rates and spreads), which is exactly what they're doing. This in turn will suck even more money out of consumers pockets, dragging consumption down even further and will force even more defaults.

This is a vicious cycle that can only be broken when the defaults that are being hidden behind the curtain of our financial institutions are forced into the open and disposed of. Yes, this will likely cause those firms to go bust. But the economic penalty we are and will continue to pay for allowing The Bezzle to continue in these firms will, if not stopped, soon choke off any hope of recovery, just as it did in 1930, and lead to precisely the same sort of economic result.

Everyone seems to be hollering about the "wonderful performance" of the banks that have reported thus far, but let's be honest - if you can borrow for nothing and charge 30% interest on plastic, you make a fortune, right? Well, for a while - until the squeeze of contracting incomes and increasing interest charges force your customers to default, at which point the charge-offs and defaults this forces in the rest of your portfolio (e.g. mortgages) kill you dead.

I see exactly nothing in any of the reported numbers thus far this quarter suggesting that we've turned an economic corner or that there will be a recovery this year or even next.

We could be near or at the bottom, but we're not, and it is precisely because we have protected the financial institutions from the consequences of their own folly in preference to the borrower (to a large degree the consumer) that this has happened. I have warned repeatedly that the actions of our regulators and government, on the path they are on, will make durable economic recovery impossible.

The anvil of these bad loans, being carried far above actual fair-market value, will remain as a millstone around the neck until we either earn them out or default them.

Our government and regulators have chosen "earn them out". The problem is that this path cannot succeed because "earn them out" requires that the economy return to trend growth - that is, 3-4% GDP - before next year. That is not going to happen; the government backstop and artificial support only work so long as they continue, and we cannot continue to borrow two trillion a year for the purpose of propping up these institutions in excess of their natural earnings power in the economy.

Yet without defaulting the bad debt that's exactly what has to happen.

If Roubini's prediction of sub-1% growth (if that) for the next couple of years is correct the squeeze between available revenue and required cash-flow from operations to keep the numbers black at the bottom of the page will become python-like over the next 12-18 months, and as the grip tightens reportable earnings will continue to contract, ultimately leading to a collapse when cash flow is exceeded by expenses.

This is the dreaded "double dip", except that it won't be a "W" as Roubini has postulated - it will look like the first three legs, but the right side "/" will instead be a flat line as credit capacity on the borrowing side collapses, destroying the banks ability to profit - without borrowers there is no interest to charge and no money to make!

Bottom line: Those who bet on the market "going much higher" from here are going to find themselves once again holding a bag handed to them by the media and market callers, just like they did in 2000 when it was said "this is just a small correction in the market" as the Nasdaq came off 5,000.

Citigroup, GE and More

nospam@example.com (Karl Denninger) — Fri, 17 Apr 2009 08:02:39 -0400

Gee, if there's a "banking crisis" and all these "unusual and exigent" circumstances exist, how come this happened?

April 17 (Bloomberg) -- Citigroup Inc., the U.S. bank rescued by $45 billion in U.S. taxpayer funds, ended a five- quarter losing streak with a $1.6 billion profit on trading gains and an accounting benefit for companies in distress.

Or this?

“Amid a continued weak economy, we’re performing well and our backlog remains strong,” Chief Executive Officer Jeffrey Immelt said in the statement. GE rose 32 cents, or 2.7 percent, to $12.60 at 7:37 a.m., before the regular open of New York Stock Exchange composite trading. The company has lost about 67 percent of its market value in the year since Immelt surprised investors with a first- quarter 2008 profit decline and lowered annual forecast.

The Law is that The Fed can only have these programs open with "unusual and exigent circumstances."

Recessions are neither unusual or exigent, and bank after bank has been reporting positive earnings - which is what one would expect as "usual" and "not exigent."

Time to shut it down Ben!

Really folks, that's only half tongue-in-cheek.

I haven't gone through the quarterlies for these firms yet, although I will. But I probably won't have to write about it separately, because in all probability the same thing is going on here that is going on in these other banks: the "profits" are really a matter of shifted loss reserves, shifted "asset" buckets and other sorts of balance-sheet machination.

Is this "illegal"? No. But does it mean that the cash flow is coming in and happy days have returned?

Lookie here:

While the bank cut compensation costs and took fewer writedowns, it couldn’t halt rising delinquencies on home and credit-card loans. Citigroup benefited from higher fixed-income trading revenue that also bolstered earnings at Goldman Sachs Group Inc. and JPMorgan Chase & Co.

In other words, the banks are gambling with the free money we the taxpayers have given them, along with boosting our costs. Between the two even though credit quality is going through the floor they're managing to siphon off even more money for their executives, and because this sort of thing makes stock prices go up the government likes it.

Don't get me wrong - I like rising stock prices too. But I like them to rise due to real business conditions being favorable, because (1) that's sustainable and (2) that means I don't have to keep looking for the magical disappearing floor, and can actually invest.

Neither (1) or (2) is true here.

Oh by the way, here's another reason that Citigroup posted these numbers:

Citigroup posted a $2.5 billion gain because of an accounting change adopted in 2007. Under the rule, companies are allowed to record any declines in the market value of their own debt as an unrealized gain. The rule reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit.

If you want to talk about obscene, that is obscene balance sheet game-playing. What this means is that a firm that has its credit quality decrease, and therefore the trading price of its bonds go down (meaning the market thinks the firm is more likely to default) is able to claim that change as a profit!

Why? Because the firm could "buy back its own debt" at a discount.

Note carefully - the firm doesn't actually have to buy it back (that would be reasonable - book the profit from an actual realized gain) but because it could it gets to book that as a paper "profit" on its financials.

This is the sort of outright in "accounting" that makes market analysts and investors like me grab for the blood-pressure cuff to see if we're about to have a CVA. See, a firm that is in distress like this is extremely unlikely to buy back its own debt because the reason it is in distress is that the market believes it lacks sufficient cash earnings power to cover its liabilities! That is, the market is discounting the probability of bankruptcy by trading its debt at a significant discount - and this gets counted as a profit?

This sort of nonsense isn't new; in point of fact the banks have been doing this all through this downturn! But this is a particularly-egregious example, so here's the white-hot spotlight Mr. Pandit.

Hope you've got some SPF-200 suntan lotion handy.

Goldman: Clarity? It Appears So!

nospam@example.com (Karl Denninger) — Tue, 14 Apr 2009 15:01:00 -0400

Clarification?

When AIG was rescued, Goldman Sachs had $10 billion of exposure to the insurance company that was offset with $7.5 billion of collateral as well as credit-default swaps that would have paid off in the event of an AIG bankruptcy, Viniar said on the March 20 call.

He also said on the call that Goldman Sachs recorded a gain “over time” on the value of the hedges it bought to guard against a default on AIG, even though the government enabled the insurer to honor its obligations. In today’s interview, he said those gains were booked “from 2006 to now” and that any gains booked in the first quarter “would have been very, very small.”

My point from the previous Ticker was this:

If in fact Goldman (or anyone else) was "hedged" against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!

Now I know that people speak "imprecisely" and reporters do not always get it right, but I think what was said in that Bloomberg article is:

Goldman got paid over time for their hedge (e.g. they bought CDS that went into the money, they were short the AIG equity as a hedge, etc.)
The "current" gain (in the last quarter) was basically zero on that hedge (if they were short the equity, for example, this would be expected, as the price of the stock is basically zero and has been all quarter.)

Ergo, they got paid previously on the hedge over the previous two years and change and as such the question still stands, and is in fact amplified: IT APPEARS GOLDMAN GOT PAID TWICE FOR THE SAME RISK AND THE SECOND PAYMENT CAME STRAIGHT OUT OF THE TAXPAYER'S HIDE.

If so, that transfer payment was improper as Goldman had already collected on the bet and thus must be clawed back.

S&P 500 Statistics As of October 30, 2009

Total Market Value ($ Billion)		9,124
Mean Market Value ($ Million)		18,248
Median Market Value ($ Million)		7,635
Weighted Ave. Market Value ($ Million)		75,767
Largest Cos. Market Value ($ Million)		344,431
Smallest Cos. Market Value ($ Million)		642
Median Share Price ($)		31.800
P/E Ratio*		137.98
Indicated Dividend Yield (%)		2.09