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Obama’s ‘Debt Tsunami’ Sends Market Higher

The Good News Just Keeps Coming

By: Brian Faughnan (Diary)  |  July 13th, 2009 at 03:59 PM  | 

RESIZE: AAA

What was it that touched off today’s market rally? According to the UK Telegraph, it was due to analyst Meredith Whitney’s urge to buy Goldman Sachs. Why is Whitney so confident about Goldman Sach’s future performance?

Our more bullish outlook on Goldman Sachs shares is deeply rooted in our sustained bearish stance on the U.S. economy and the state of U.S. financials at large. Specifically, we expect a tsunami of debt issuance from federal/sovereign, state, and local governments ramping up debt issuance to fund woefully underfunded budget gaps. In addition, we expect corporate debt issuance to be at least 60% as strong as peak cycle levels, reflecting sizable debt maturity rolls. What’s more, given fewer players in the market, not only is GS benefiting from market share gains on these products but more widely in the derivatives products.

It’s an ill wind that blows no good. This is one case where GS investors are going to make out like bandits because of a continuing bad economy and an unprecedented level of borrowing. Good news, huh?

This may be the right time to buy shares of Goldman Sachs – provided you haven’t lost your job or exhausted your savings.

And you can thank Barack Obama

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COMMENTS

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  • http://impudent.blognation.us/blog kyle8

    How much longer will the fed and the treasury be able to keep inflation low with all this borrowing?

    Is there any chance at all they are not forced to monetize this debt?

    • 6eorge Jetson

      OK, I’m off by a Dr Evil order-of-magnitude.

      The debt is already being monetized to keep Treasury rates below what the market would fund at higher auction rates. As with our govt spending, it could be reversed given the will to endure the short term consequences for the long term good.

      How much probablistic weight does the market/an investor give to the scenario that this Obamenous cloud passes as the country votes for fiscal sanity (and conservatives–not RINOs–that will actually legislate w/ fiscal prudence)?

      I know it looks grim now, but how would the market respond to “You know all that stupid costly stuff that looked like it was going to pass? November 2010 fools! Nothing of the sort!” I’d think we’d see a rally.

  • amigag

    I had heard (Rush?) or read that GS was going to handle all of the “Trade” if
    Cap & Trade passed . I do not understand much about all of this, but it was my first thought.

  • Alberta

    And then, of course, the politically connected shook down the tax payers to the tune of systematic risk! systematic risk! annie get your gun!

    And 15 trillion later the DOW is at the 8000 mark, Which all the smarties said would happen if we DIDNT bail out the banks (the banks being GS, and anyone who owed GS money, cough AIG cough) .

    GS already made out like the bandits. The company was bankrupt before we stepped in, and now they are posting billions in profits that they shouldnt be able to even assume the risk to generate. Is fascism too rude? Corporatism then.

    I wish my bank owned a government.

  • Tbone

    I just read in the Telegraph he claims will be that the recession will be over in a few months.

    Can he say Calyforneeaa? Does he think recessions end with unemployment +9%? Michigan won’t be out of recession until probably two weeks after Haley’s Comet’s next visit.

    These people should all be tried for idiocy along with their looting of the treasury. It’s little wonder he didn’t file his taxes, he couldn’t figure how to open his W-2 envelope.

    • molybdanthan
    • http://www.redstate.com/britcom/ Britcom

      .