Tuesday, July 14, 2009

Goldman's Earnings Announcement

Yesterday's 2.5% rise in the S&P500 has been attributed to Meredith Whitney's 'buy' rating on Goldman Sachs, just in advance of its earnings announcement.

Various superlatives have been used to describe the firm's quarterly earnings. And, coming on the heels of the prior 6 months of financial sector turmoil, in which Goldman had to give up being an investment bank, and become a commercial bank, the performance is somewhat surprising.

Then again, much of the gains were from trading- an old Goldman strength. And it's not clear how the Fed will continue to oversee and/or allow Goldman's current mix of business.

Frankly, I think the investor reaction which propelled the S&P to such a daily gain is misplaced. It's asking a lot to pin hopes on just one, and arguably the best bank's results.

Furthermore, it's not just Goldman's quarterly performance, but, allegedly, Whitney's stamp of approval with a 'buy' rating on the firm.

It's troubling when any single analyst has this type of power over companies with their recommendations. Additionally, while Goldman may be poised to continue its superior performance, that, in my opinion, is precisely why it is not a bellwether for either the sector or the economy in general.

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