"It is becoming increasingly apparent that a terrible wrong may have been done to Goldman Sachs," Dick Bove writes in his latest note on the investment bank.
Goldman stands accused of possibly misleading a Senate panel that looked into the financial crisis. Executives at Goldman testified that their short positions on the U.S. housing market were hedges against long positions. The company was not "net short" the housing market, the executives said. Other evidence indicated that Goldman was net short. The chairman of the Senate investigations panel referred the case to the Justice Department for possible perjury charges against the Goldman executives.
"Evidence is now mounting that the company did not have a net short position at a crucial time under study, and that the Senate Committee may have misread the numbers,” Bove writes in his note.
He predicts that investigators will not charge Goldman with any wrong doing.
"This may sway investor sentiment toward the firm," Bove writes.
The real challenges for Goldman in the future will not come from legal risk, Bove argues. They will come from economic risk. Trading volumes in almost everything have declined: stocks, commodities, currencies, bonds. This could hurt Goldman's performance.
The earnings projections for Goldman are "much too high," Bove writes.
Bove is keeping his "sell" rating on Goldman’s stock, at least until "other analysts adjust their estimates on the company and the political entities begin withdrawing their attacks."
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