Tuesday, July 31, 2007

New Goldman Sachs Debt Fund A Good Sign

In what may be a sign of a bottom, the Wall St. Journal reported Friday that Goldman Sachs (GS) is launching a $20 billion fund to invest in corporate debt, taking advantage of a turmoil in credit markets.

The fund was expected to be $12 billion but has been increased, the paper said, citing the typical unnamed sources. It has good company as a slew of hedge funds have been jumping on debt the past week as the "credit" crunch has lead to spectacular deals to be had. It is ironic as the talking heads on TV are pondering the effects of "tightening credit" on business when, at the same time, groups intimately familiar with the action are buying that very debt as fast as they can get their hands on it.

Sounds like the TV folks may be behind the curve here and the "issue" has already come and gone?

In another note, can anyone, anyone at all out there attempt to explain to me how a company like Goldman can trade for LESS than 9 times current earnings and LESS than 9 times next years? How? Can anyone please give me a reasonable explanation?

Goldman is by far the cream of the crop of the the investment bankers / brokers, almost no deal gets done out there that they do not have their hands in somehow. What is the logic to the current valuation? The current mortgage situation? Please, that barely qualifies as a blip on the screen for a company like Goldman. It isn't like they are Citigroup (C) that has had operational issues and it is not clear if they have totally solved them or a Bank of America (BAC) that is really tied to the US consumer. Goldman is firing on all cylinders and in all reality is not even totally tied to the US market as over 50% of its profits come from overseas operations and the last I checked, foreign economies were simply on fire.

I think financials, and Goldman in particular may end up being the ValuePlays of the year when all is said and done 12 months from now. Goldman is a screaming buy at these levels..

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