Buy Goldman at 160, Sell Goldman in 90s???

MY FRIEND WROTE THIS BUT WORTH CONSIDERING!!!

I recommend shorting to a target of 50 a share for the next 6 months.

With Goldman reporting earnings at a major discount to what it has done in the past. It's apparent that Goldman cannot escape the spector of the credit crisis even with a pristine balance sheet. Goldman has to face the fact that its earnings come from trading, consulting, IPOs, debt issuance, etc. If there is a slowdown in these areas, it means revenues, too, go with everything else.

In 2000-2003, Goldman posted EPS of 6.350, 4.260, 4.020, and 5.870. This averages to 5.125, which is what I will assume they will make over the next 4 years in this market environment. Keep in mind, they could do better or worse.

I am going to assume that the P/E that will maintain will be around 10 on average, which is a safe bet since they are currently trading at a 7 P/E. They did trade on average at 15 during 2000-2003. This market environment will be different, because the last market environment did not have the type of meltdowns we are seeing. However, I will point out a positive in that Goldman will have the ability to eventually take more market share if desires with so many of its competitors knocked out, but the newly formed competitors will be biting at its heels. Again, I feel 10 P/E is a fair average.

I want to reiterate that the average PE and EPS from 2000-2003 would suggest the share price I'm calling for in the nexxt 6 months, because simply Toll Brothers has a supply glut of homes to sell in a market that has fallen apart. We have a deep recession looming from a credit overhang, which is so apparent from the demise of Bear, Lehman, Merrill, and CountryWide. We have Goldman Sachs and Morgan Stanley falling 33%. Goldman could see another 50% drop from it's current price of 100 today. Everything Hank Paulson, et al. have done has done nothing to halt the crisis, except further push us to the brink of a market seize up.

Simply put a P/E of 10 against EPS of 5.125 puts you in around 50 a share. And, this is where I see Goldman headed.

At the money April 2009 puts are not worth it at this point, but keep an eye out for anything that trades under 25 at the money. Being long put spreads may be worth while at various at the money and out of the money strike combinations. Consult your option specialist for the best bang for your buck.