SEC accuses Goldman Sachs of civil fraud

The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.

The Securities and Exchange Commission announced Friday civil fraud charges against the Wall Street powerhouse and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create -- and then bet against -- subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities are alleged to have lost more than $1 billion, the SEC noted.

The Goldman client implicated in the fraud is one of the world's largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.

Goldman Sachs shares fell more than 10 percent after the SEC announcement.

The civil lawsuit filed by the SEC in federal court in Manhattan was the government's most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession.

A Goldman Sachs spokesman didn't immediately return a call seeking comment.

The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities.

The SEC is seeking unspecified fines and restitution from Goldman Sachs and Tourre.

"The product was new and complex, but the deception and conflicts are old and simple," SEC Enforcement Director Robert Khuzami said in a statement.

"Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."

In my humble opinion, I think the current rally has lasted too longer even though it is supported well by its fundamental. With Goldman Saches being charged with fraud over its handling of subprime mortgages, it would serve well as a reason to take some profit out of the stock market. It could be a long winding road for Goldman Saches and traders would be following closely this Goldman Saches case.

On Friday, General Electric (GE), Bank of America (BAC), Google, Advanced Micro Devices, Mattel and Gannett release better-than-expected quarterly financial reports but yet the market can't manage to keep its rally. Traders are profit-taking and running away.

Ok, good luck.

GOon

GE earned 21 cents a share, compared to analysts' estimates of earnings of 17 cents a share

For the recent period, the conglomerate /quotes/comstock/13*!ge/quotes/nls/ge (GE 19.89, +0.39, +2.00%) said earnings fell 32% to $1.87 billion, or 17 cents a share, as revenue fell 5% to $36.61 billion.

From continuing operations, the industrial bellwether said it earned 21 cents a share, compared to FactSet-compiled estimates of earnings of 17 cents a share on revenue of $37.3 billion.

GE, a component of the Dow Jones Industrial Average, said it may evaluate additional restructuring that will improve earnings power going forward.

"We saw encouraging economic signs, including increases in airline passenger miles and freight loadings, declines in receivables delinquencies, and growth in local advertising markets," said Chairman and CEO Jeff Immelt in a statement. He expects earnings and dividends to grow in 2011 and beyond.

GE's stock has climbed more than 66% in the last year after reaching a near 20-year low last March following the credit crisis.

In the first quarter, GE said its financial arm, GE Capital, saw its profit drop 41% to $607 million as revenue fell 10%. Immelt said he was "very encouraged" by the performance as losses and delinquencies declined.

Outperform Rating On General Electric Company (GE)

Bernstein Research Maintains Outperform Rating On General Electric Company (GE)

Analysts Steven E. Winoker and David Abrameto at Bernstein Research have released an update on General Electric Company (NYSE: GE).

GE will report its first-quarter earnings on April 16. Analysts expect the company to report EPS of $0.17 in its first-quarter. Industrial gross margin is expected to be at 25%-26%, while operating margin is expected to be at 10%-11%. Analysts expect GE to report consolidated revenue of $36.7 billion in the quarter.

Analysts at Bernstein Research have maintained their Outperform rating and $20 price target for General Electric Company.

The GE call warrant listed on KLSE, GE-C1, has jumped around 50% since February 2010. With GE-C1's discount status (discount around 3%) and positive rating of GE, GE-C1 would be considered as a good yet safe trading bet. Even if GE were to move side way, GE-C1 should provide us with a profit of 10% (3% discount x 3.3 gearing). Currently, GE-C1 is priced at RM0.145. The fair value would be RM0.16 if GE is to move side way.


Ok, good luck.

GOon

GE-C1 comes with disount of 5.6%

General Electric Company (NYSE:GE) is a mammoth company and can often provide a good gauge for the overall market. That is, when GE goes higher, the overall market often follows suit. GE has been making some recent highs and that bodes well for investors, and may be marking the end of the concerns about loan losses.

Rising Dividend Investing had these comments to add about GE:

"GE has recently broken above a several-month trading range on high volume. GE has many qualities that make it something of a microcosm of the US economy. Thus, its price breakout suggests that worries about its loan losses and perhaps loan losses for financial companies in general might be peaking.

GE has been in the middle of the financial crisis, and for it to power to a new post-crash high is big news. We've watched price graphs long enough to know that some very big money has just made some very big bets that the news for GE is going to get better over the coming months.

Additionally, because GE's business is so multi-faceted, there is reason to believe that good news for GE is probably good news for the whole economy and stocks.

Interestingly, GE had a couple of big days right after their CFO announced that the company was considering a dividend hike in 2011. In this regard, their message is similar to the one we suggested in last week's post about the banks. That is, companies, even companies in the financial services sector, appear to feel comfortable with their current levels of capital reserves. When GE starts talking about dividend hikes, it sends a clear message: they don't have any dilutive equity capital underwritings in the works. That is good news, but even more importantly, if they are talking dividend hikes, it follows that they must see an end to their loan losses. That's even better news."

Currently, there is a GE call warrant (GE-C1) listed on KLSE. In my humble opinion, it is one of the best and most attractive call warrants available in KLSE. The main reason i am saying this is because of its discount. Currently, GE-C1 comes with a discount of 5.6% and gearing 3.9. GE-C1 is trading at RM0.13. To erase all the discount, GE-C1 should move forward 22% (5.6 x 3.9) or RM0.03 (RM0.13 x 22%) to RM0.16. There are still another 2 months before it expires, soon or later the discount has to be realized. Since GE-C1 is a European style call warrant, we cant convert it now, not until its maturity date. GE's recent gain is supported by its fundamental, i think it still has the strength and momentum to move forward further.

GOon