Goldman’s Controversial 2Q Profits

Back in the world of American finance, the mainstream is aghast at Goldman Sachs. The investment bank is expected to announce a $2 billion profit in its second-quarter earnings announcement tomorrow. The New York Times is wondering how Goldman “could have rebounded so drastically only months after the nation’s financial industry was shaken to its foundations.”

We’re wondering… just $2 billion?

GS is an “investment bank,” after all, and we hope they did a little investing during the biggest snap-back rally of our lifetime. During the second quarter, the S&P 500 rose 15%. 433 of its components registered a gain, including Goldman, which shot up 33%. From a January bottom, GS stock has more than doubled.


Goldman is one of the world’s biggest underwriters too… a fortunate place to be in the second quarter, one of the grandest periods of dilutive stock offerings in history. On top of that, they got a $10 billion taxpayer lifeline, a market value of $74 billion and recently issued $28 billion in ultra-cheap FDIC-backed debt.

So only $2 billion? Yawn… for the most politically connected bank in the world during the most rabid rebound rally since the Great depression, we’re not surprised. We suspect the second half of 2009 will be much more interesting.

Russia Champions New World Money

Check this out: Russian President Dmitry Medvedev is so serious about a new global reserve currency, he brought a demo to the G-8 meeting.


“This is a symbol of our unity and our desire to settle such issues jointly,” Medvedev said as he called for a “united future world currency.” The Russian didn’t really go into detail about how the money will be balanced or what nations will contribute, but we take note of two items:

Medvedev is the first to suggest that a new world reserve currency would actually be used by everyday people. The previously proposed Special Drawing Rights currency was supposed to be one of those shadow monies that doesn’t really exist… just this invisible running tab swapped back and forth between nations. Yet Medvedev suggested on Friday that his money be used by people around the world.

Second, we haven’t heard if there is physical gold in that coin… but we doubt the Russians picked that color just by chance.

The Daily Reckoning