Fast, Accurate, Actionable, Unbiased: Part 72

• Posted by Adam Warner
• on April 17th, 2010

Note to self: If you ever want to become a regular on CNBC, just blindly agree with the hosts. Unlike the interloper here. I’ll let ZeroHedge explain.

Any time Erin Burnett tells a guest “You will not be back, you have to be more polite than that” you know the “guest” is telling the truth, the one commodity rarely if ever discussed on General Electric’s circus station. Enter (or rather, exit) R&R Consulting’s Sylvain Raynes, a structured finance expert, who at 3:10 into the clip takes on what he calls the “public relations officers” for Goldman, and asks “is it all right if I am a little critical?” Apparently the answer is no. First, Sylvain completely destroys Cramer’s false “breaking news” about Goldman being long Abacus, using the same logic we discussed earlier: “It’s quite possible that Goldman had an equity position, they probably wrote it off on the closing date. So they stood to lose a few million and make a few hundred million… Goldman was clearly in the know, they knew what they were doing. In fact, if they are defending themselves against a fraud charge they will have to make a case that they didn’t know. I think too highly of Goldman Sachs to think that they didn’t know what they were doing… These deals were made to be shorted.” And the kicker “We don’t have time to go into details, I want to remain shallow in deference to Mr. Cramer.” At which point all hell breaks loose and the Goldman alumni just blow their collective lids. Best CNBC comedy since the Pisani-Liesman/Jeff Macke chronicles.

Well, actually what he says is, “I’m pleased to be on your show, since most of your previous guests were public relations officers for Goldman”. He wasn’t dissing this particular grouping (Erin, Faber and Cramer) I believe, just the parade of guests all afternoon.

Been avoiding Bubblevision this year, but heard they were in particularly rare form today, so tuned it in after watching the pretty objective Bloomberg reportage all day.

And the guest is spot on, CNBC was again, truly embarrassing. Saw a panel about 2:40 that consisted of these 3, plus Ole’ Yeller Santelli and some unknown Approving Nodder. The take? Blame the System! The Rating Agencies! The GSE’s! Ben Roethlisberger Taking It Out! Anyone but GS.

I’m sure it’s willful for Bubblevision to turn the the case into some sort of referendum on the whole mess, but it’s a pretty narrow, specific “alleged” crime. I don’t agree with Blodgett here, but at least he addresses the ACTUAL CHARGES.

CNBC just loves letting interested parties use their “talent” (in this case, Cramer) as a useful idiots through which they can filter their stories under the guise of vetted fact. Congrats, I’m sure you got good ratings on the big news day, so keep up the fine work!

And here’s something shocking, the “defense” someone articulated through Cramer’s mouth appears BS, as per Zerohedge above, or it you prefer, Karl Denninger.

Cramer came on CNBS this afternoon saying that he “heard on good authority” that Goldman was actually long Abacus.

…..Well, duh!  They structured the deal!

Again, back to The Audacity of Synthetics:

A synthetic CDO is, as the name implies, not made up of actual bonds.  Instead, the issuer writes a naked credit-default swap on the underlying reference(s) they use.

So Goldman had to be long the credit, since they wrote the initial credit-default swaps which formed the CDO!

When you write a credit-default swap you are long the underlying credit.

Paulson’s hedge fund bought the CDS that made up the CDO (becoming short the credit) and the tranches were then sold to investors (relieving Goldman of their “long” position.)

Goldman was probably residually long post-origination and distribution, and it is also almost-certain that they then bought a CDS as an offset to hedge whatever they couldn’t sell (likely from AIG), thereby becoming delta neutral.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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