Whenever I write about Goldman Sachs (like the other day) three things happen:
1. Ellen gets nervous because she thinks they are watching and may come for me. I say at least we will have this blog as evidence.
2. Bank lovers…like Fat Nixon supporters, troll me.
3. My Goldman friends who have left Goldman agree with everything I said.
My pal Josh does a better job than me explaining what I was trying to convey about the ‘new’ Goldman Sachs, with more words, in this EXCELLENT post titled ‘When everything that counts can’t be counted‘.
The gist: What if the cost of capital never rises again?
Josh concludes with:
In the battle for capital right now, the brands and intangibles and user bases and networks are winning by a landslide against the things that used to be important. And the companies that are rich in those old fashioned things, like Walmart, Disney and McDonalds, are spending all of their time and attention to transform themselves into the spitting image of their upstart competitors. Disney wants to look like Netflix, Walmart wants to retail like Amazon, McDonalds wants to be as habit-forming and celebrated for its freshness as its former protege Chipotle is. Goldman Sachs wants to grow up to be BlackRock. And in emulating these younger models, they hope, their multiples will soon be following suit.
And as for those stodgy old stalwarts of the 20th century that aren’t pursuing this transformation…it remains to be seen whether the rusty old assets they do possess will ever matter to investors ever again.
I do not think Goldman can become the next Blackrock, because Goldman will never give up the margins of pillaging and Marcus will eventually pay the price of the parent brand trying to hide behind Marcus. Like I said in my post, even Hasan doing Patriot on Netflix is on to them. If I am wrong, I can correct myself if the stock gets back above $250 and sticks.
I already own McDonald’s and Disney because they have been busy fixing their distribution and product for a long time. Both are well on the way with healthy margins still intact. The multiples have followed suit and should now play catch up if the cost of capital theme stays the same. As I have built my 8 to 80 list of stocks I own over the years, I have been taking the habit forming, network focused, high margin, low cost of capital enduring brands loved by 8 to 80 year olds into consideration only.
My biggest takeaway from Josh’s post and this era is every parent and kid should study to become an RIA because he/she or their friends is going to be rich and need a money manager. No joke. I have been.
Now go back and read Josh’s post (and my Goldman one) again.