Goldman'$ LEVERAGE ?

Apparently GLOBAL investment banker Goldman Sachs (GS) has no qualms about its current 'LEVERAGE situation'. Check out the quoted material below that I grabbed from the linked Bloomberg article written today, April 7th:

"Goldman alone is holding course, refusing to trim its leverage, a measure of how reliant a firm is on debt. The adjusted leverage ratio of assets to equity jumped to 18.6 at the end of February, from 17.5 at the end of November. ``We have no need as we sit here right now to shrink our balance sheet,'' Viniar told analysts on the March 18 conference call...That bravado suggests Goldman, having outmaneuvered New York-based competitors last year by making money in the falling mortgage-backed securities market, is once again poised to take a different -- and potentially more profitable -- tack from the rest of the industry...At Lehman Brothers Holdings Inc. (LEH), CFO Erin Callan told analysts the same day that the firm's ratio of net assets to tangible equity, the way it measures leverage, dropped to 15.4 at the end of February, from 16.1 at the end of November. ``Our goal is to continue to take that leverage down,'' Callan said...Goldman's leverage is also more sustainable because the firm's borrowing costs haven't jumped as much as that of rivals such as Lehman, Morgan Stanley and Merrill Lynch & Co., the No. 3 U.S. securities firm. Goldman, unlike Lehman and Merrill, has maintained a AA rating from all three credit-rating firms. Goldman debt that matures in January 2018 is yielding 2.41 percentage points more than comparable government bonds, while Lehman notes that mature in September 2017 trade at 3.02 points more than Treasuries...When prices of real estate and related securities eventually hit rock bottom, Goldman may have more flexibility than its competitors to start buying assets and add to its leverage, Hendler said.

``That's where Goldman may be able to differentiate itself because it has the capital to go in and take a chance, whereas some of these other guys, especially with regulatory scrutiny, it may be a little more difficult,'' Hendler said.

Another source of comfort for Goldman may be the way it finances its balance sheet. Only 14.8 percent of its borrowing comes from short-term REPO markets, in which firms sell assets and then repurchase them, according to Bank of America's Hecht. ``Our overriding concern has always been liquidity,'' van Praag said. ``The guiding principal is to borrow more, for longer.'' Bear Stearns, the fifth-largest securities firm, had relied on repos for 26.7 percent of its borrowing at the end of fiscal 2007, Hecht wrote. When other market participants became skittish about Bear Stearns's finances, they became less willing to engage in repo transactions, depriving the New York-based company of a key source of funding. Lehman has the highest reliance on repo funding of the industry's five biggest firms, at 27.2 percent of liabilities, Hecht said. "

http://www.bloomberg.com/apps/news?pid=20601109&sid=aA1scZyHazOI&refer=home

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*Regarding GS and ALL of their LEVERAGE - Am I FOOLISH to doubt them? Or FOOLISH to trust them given what's happened to now defunct Bear Sterns (it was levered at 30 x) ? I think of that question and then I WAKE UP and realize that these guys are #1 at LEGALLY minting money..no joke..until that blows up I'm sticking with Goldman.


Data Courtesy: Bloomberg.com, snagged on 4/07/08.
Full Disclosure: I own shares of GS.