Why are you bearish on Goldman?
“I think the company has something like $700 billion in securities on its books and we have no idea what those securities are...." explains Bove. “I’m convinced that a lot of those securities have been overvalued which means we don’t know what the book value of Goldman Sachs is. And if you don’t know the value of a brokerage stock, you ought to sell it.”
He adds, “A number of brokerage stocks went down (Wednesday) because the whole structure around their trading operation has changed. There are fewer instruments that are coming along that are highly profitable….What I think you’re going to see over the next couple of years is a gradual working out of problem debt at Goldman Sachs and other brokerage firms.”
But under that rationale you wouldn’t own any investment firm?
“When the market is going up you buy them and when the market is going down you sell,” replies Bove. “But it’s more of a religious experience, because you have faith that the company will do well when the market is doing well.”
He adds, “The turn hasn’t really happened yet (in GS share price). I think it’s going back to $160 where it was a couple of weeks ago.”
He also adds “For three years we were on the buy side of this.. but ultimately you reach a point where the company overstretches itself to serve its markets.”
Pete Najarian tells the panel he thinks GS is a sell right now – but only because the run has taken place. (Pete is bullish on GS long term.)
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Trader disclosure: On Sept. 19, 2007, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (SWY); Najarian Is Short (ETFC); Najarian Owns (GS) Options; Finerman's Firm Owns (BWS), (COP), (GCO), (NMX), (LTD); Finerman's Firm Owns S&P 500 Puts And Calls; Finerman's Firm Owns Russell 2000 Puts
Dick Bove and or his company owns Goldman Sachs Group (GS), Morgan Stanley (MS), JPMorgan Chase & Co. (JPM), Lehman Brothers Holdings (LEH), Bear Stearns Companies (BSC), Citigroup (C), Bank of America (BAC), Merrill Lynch & Co. (MER), E Trade Financial (ETFC), TD Ameritrade Holding (AMTD), Charles Schwab (SCHW)
A Member Of Bove's Family Owns (JPM), (C), (BAC)