I’m always interested in how Government ties in with the markets. It’s been a bit of a hobby of mine, along with WWII battles, over the past 2-3 years and there’s no bigger tie then Goldman and the Government then recently…and BOY is it bigger then we know! In my recent late night surfing I came across Greg Roy. Greg recently released a special report with the same title of this blog post, Goldman Sachs’ Next Slaughter of the Stock Market Lambs, and being the digger I am, I read the full report and cold called him. I asked if I could repost a part of the report for my Trader’s Blog members. After some convincing he said ok.

This guy knows what he is talking about… Here is an exclusive excerpt from his newly released report Goldman Sachs’ Next Slaughter of the Stock Market Lambs.

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Goldman Sachs

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Naturally, at the focus of renewed market pessimism is a struggling financial: CIT Group. (NYSE:CIT) The company — a hundred-year-old staple of small/medium business lending — is no stranger to walking the credit tightrope. They narrowly averted fiscal meltdown late last year with $2.3 billion in TARP bucks… then again in July by goosing bondholders with a $3 billion a debt-to-equity deal. Back then we joked, “Look for this crisis to repeat in a couple weeks.” We were wrong… it took a couple months.

So with some historic irony, one year and two weeks after Lehman Bros. bit the dust, another debt-burdened, credit-reliant, potentially “too big to fail” institution is looking to either stick its bondholders with a raw deal or enter sudden bankruptcy. We won’t pretend to know exactly how this one will end, but the market has certainly voiced its opinion:

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Pop quiz: what happened a year ago today?

Here’s a hint:

The House put the kibosh on the first rendition of The Emergency Economic Stabilization Act of 2008 — Former Treasury Sec’y Hank Paulson’s three-page request for a $700 billion blank check for his buddies on Wall Street.

“Investors” threw a tantrum, crashing the Dow 777 points — its biggest point loss in history. Approximately $1.2 trillion in Wall Street shareholder value was wiped out, also a record. This day a year ago, the real market pain began. The S&P fell about 20% over the next two weeks.

The House eventually passed a package — aimed at cleaning up “toxic assets” on big Wall Street balance sheets, but also rife with pork barrel spending. A year later… the stock market has recovered, Congress has spent plenty o’

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[Editorial Note - Jim Musselwhite, Publisher

What follows is a perspective of our nation's financial mess that EVERY American (OK, not the fat cats on Wall Street or the idiots running the Fed and Treasury Department) can understand and appreciate. The system is broken, has been broken for decades, and there is no real sign of a turnaround. What's worse, the American people have all but let Wall Street and the Fed off the hook since we have allowed them (thanks to all those in Congress who have been praising Bernanke as a hero) to get away with the most scandalous affair in U.S. financial history.

Graham Summers says it plain and simple. What's outrageous and sad is that our chance to throw the bums out has all but passed.

But we can do something about it for ourselves. Take precautions and get a free copy of www.gainspainscapital.com/roundtwo.html. I know …

 Goldman Sachs Would Have Collapsed If Not For Henry Paulson.

The Dow slipped a bit yesterday – only 39 points. Everyone is watching. They want to see how far this rally carries on. Many think it is more than a bear market bounce; they think it is for real.

The prevailing opinion is that quick action by the feds avoided a more serious meltdown. Ben Bernanke says he was working to prevent a “second great depression.”

And now that the crisis is past, the economy is slowly climbing out of its hole. The second quarter showed GDP falling at 1% per year in the US… rather than the 6.4% rate recorded earlier in the year. Housing sales have perked up. Oil is trading above $71 – a sign of renewed economic activity. And gold seems to be getting ready for another assault on the $1,000 mark – a sign of growing inflation pressures.

At

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Goldman earned more than $1 billion a month in the second quarter – much of it from scavenging on fixed income, currency and commodities deals created by the credit crisis.

About six months ago, Goldman itself was on its hands and knees looking to get a part of Hank Paulson’s $700 billion TARP fund. Back then, Goldman posed a “systematic risk” to the system. Handily, the firm’s former CEO happened to be Treasury Secretary. And Goldman was granted bank holding status and TARP rescue money lickety-split.

Back in the last depression, the Pecora Commission went straight for bankers’ gonads. Examples were set. Bigwigs were forced to resign. And landmark legislation was put in place (think Glass-Steagall) to keep the “banksters” in their place.

These days are different. Washington seems less keen to go after their pals on Wall Street or ask too many awkward questions. Instead, the pols are rejoicing in Goldman’s record

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I am experiencing Internet problems and have difficulty accessing my data sources. This week’s video compilation is therefore posted without the usual introductory paragraphs. But I’m sure the interesting clips will speak for themselves.

Wall St Cheat Sheet: AIG - writing stories about people who play “it” safe “Evidently, AIG is a company that plays ‘it’ safe (whatever the hell that means) and knows how to manage risk better than anyone else in the known universe. Don’t believe me? Take their word for it. We let corporations falsely advertise all the time, and here is a perfect example of the cost.”

Source: Damien Hoffman, Wall St Cheat Sheet, July 15, 2009.

Bloomberg: Shiller, Roubini discuss “anemic” economic recovery “Nouriel Roubini, professor at New York University’s Stern School of Business, and Robert Shiller, chief economist and co-founder

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Woohoo!…U.S. stocks racked up their biggest quarterly advance since 1998! The Standard & Poor’s 500 Index soared more than 15% between March 31 and June 30 - lifting its year-to-date performance marginally into the black, and breaking a streak of six consecutive quarterly declines for the S&P 500, the longest since 1970.

This champagne-cork-popping performance obscures a few trends that should be worrisome to the celebrants. First, the S&P 500 has gained no ground whatsoever since May 8, the first trading day after the Federal Reserve triumphantly announced the results of its banking sector “stress tests.” Second, the BKX Index of financial stocks has DROPPED more than 16% since May 8. (As we have noted in prior editions of the Rude Awakening, the finance sector has been leading the overall stock market - both to the upside and downside - for the better part of four years.

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It is becoming clearer and clearer what it means to have government involved in the affairs of banks and businesses. Where all the initial talk was about the “moral hazard” presented by government bailing out the private sector and how this just means that in the future banks, and other organizations, will just take on more and more risk because they know that if things go bad, the government will be there with a rescue net to save the institution.

Now, we are seeing the other side of the bailout business. In the AIG [AIG: 1.46, 0.00 (0.00%)] case executives and others were angry because the government interfered with bonuses and other executive decisions. And, we have the government putting lids on executive pay. And, we have government wanting to rewrite mortgages, and cap interest rates on credit card debt, and so on and

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The biggest financial reform of our generation… The 5 dives headfirst into Obama’s new plan… Stock market sell-off pauses… Wayne Burritt with the next short-term technical target… Dollar dips on new government reform… Chris Mayer on the near certainty of inflation… Paul Van Eden packs some sober advice on gold… Plus, feeling frustrated by the Fed’s free reign? A cause worth supporting, below…

Are we reading this right? The new president wants to give the Federal Reserve… more power?  The very body that’s easy credit policies over the past 15 years helped fulminate the largest speculative bubble in history… could soon oversee nearly every major company in the U.S.?

In a surprisingly brief (for Washington standards) 88-page plan released yesterday, President Obama revealed the first steps toward the biggest financial overhaul since post-Depression reform. We could fill the next five minutes with juicy bits from the plan,

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