Goldman Sachs has little to stand on now. After falling below its absolute support at $60 per share the stock has little much than one more leg to stand on. Goldman is the same as every other investment bank in the business, it was just better at hiding its assets from the general public and the analysts prying through the books.
Now investors finally have a look at what might be behind Goldman. Buffetts investment of $5 Billion won’t help the company now. His option to buy the stock at $115 per share looks like an absolute joke. Not even the king of investing can give enough credibility to this name that will likely be wiped off the map.
$60 per share was the last straw for Goldman. At this point it is only a matter of time until investors short it to zero and eliminate any chance of further private financing. Remember when Lehman Brothers was so short that its stock price plummeted and very few people were willing to loan it money unless it was collateralized by stock.
I wouldn’t touch Goldman with a twenty foot pole unless only to short. Its next hope it with Henry Paulson who used to work for the firm. With his new TARP powers he should be ready to give them a very nice bailout, but other than that the company will suffer from value losses until its gone. No bailout will save any of the companies on the chopping block today.
Options traders have the shorts priced in accordingly. At stock price of $55 per share, $55 puts are trading at a value of $12.50. That’s a priced in value of $42.50 by January 09, no doubt the stock will see that level.