Odd Timing

Just when it appeared that all signs pointed towards recovery, just as the market cracked 11K and some companies such as Apple and Amazon were hitting new highs, a wrench in the works appeared in the form of an SEC lawsuit against Goldman. Forget the Greece debacle, we've been privy to that for months along with the rest of debt filled Europe. Wasn't the initial Greek bailout supposed to be $30 billion, now $146 billion? No, it's the GS case that seems to come at an inopportune time for our oligarchs.

The SEC has sat idly by (or maybe passed the time watching porn) as some of the greatest crimes committed in the history of our country came and went. Stated-income loans, Countrywide, WaMu....the AIG rescue, all under a blanket of excuses and incompetency. Now, with GS striding towards $200 and the market regaining 80% of its losses, our biggest demon comes under the microscope. Forget the correlation with the Dodd bill too; banks know regulation is coming and we've already seen the derivatives component of the bill scrapped. No, this seems out of character for our SEC, the same agency that ignored ten years of evidence against Madoff.

Whether anyone ends up going to jail or GS is slapped with a mere billion dollar fine remains to be seen. But what is even more odd is that this trade with Paulson has been chronicled for 3 years, it's what made Paulson the premier hedge fund guru in the world. Only now is the SEC finding the position GS took illegal? This is what GS does! They make markets in murky waters with losers on both ends. They trade with computers that view blocks and prices before they commit to a position. Did anyone watch Blankfein before Congress? He clearly refused to answer questions he had direct knowledge of.

So what of it? Too late to short GS as it was never a cheap trade to begin with, unless you really think it will collapse into the ground which I think is highly unlikely. Oil and gold have actually rallied in the wake of this disaster, spurred not only by safe haven flight but the continuous money pumping our world banks have committed to in order to save one failing country after another. I think there is better leverage in short term SPY and DIA shorts than GS, and AIG should be shorted every month with OOM puts in case this month truly is their last. It's clear they have no equity once preferred shares are paid out. Should be a long and interesting year ahead....