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  • Goldman Sachs' Most Dangerous Trade

    Here's something you probably don't know, and it will really tick you off.

    You probably do know the biggest banks in the world have commodities businesses.

    Those lines of business might include trading desks (trading everything from gold and copper to kilowatts), transportation (pipelines, railcars and tankers) and storage (warehousing) operations, mining operations, as well as production, refining, and raw and finished commodity distribution operations.

    What you probably don't know is that one of the "commodities" a few of these monster banks (Goldman Sachs and Deutsche Bank) trade is...are you ready?

    Okay, I'll tell... but you won't believe it.

    To continue reading, please click here...
  • Don't Be Fooled by Goldman Sachs' (NYSE: GS) Earnings Beat Stock Market Performance Today

    Goldman Sachs (NYSE: GS) stock rose 1.22% yesterday (Wednesday) to $178.75, ahead of today's Q4 earnings release.

    Analysts project EPS of $4.21 on revenue of $7.71 billion. Those figures are down from last year, when GS reported EPS of $5.60 on revenue of $9.24 billion.

    The bank is scheduled to report earnings at 7:30 A.M. EST and will follow up with a conference call at 9:30 A.M.

    GS stock has performed well lately, up 10% in the last three months and 29% in the last year.

    To continue reading, please click here...
  • Goldman Sachs, the Judas Penguin, and the Tip of the Iceberg Emperor Penguins

    News from Wall Street this week reminded me of the penguins that inhabit the icy, turbulent waters of the Southern Ocean.

    These penguins are preyed upon mercilessly by tremendous, ravenous orcas - a terrible beast to feel gnawing on your leg if you derive your daily bread from the frozen, watery wastes.

    But the penguins have devised a clever, if brutal, warning system.

    A flock of penguins will gather apprehensively at waters' edge... and one luckless penguin will be pushed into the sea. If the penguin is ripped to shreds by killer whales, the rest will hang back a while.

    Otherwise, the rest of the flock piles into the briny deep.

    Goldman Sachs Group (NYSE: GS) bond trader Fabrice Tourre is one of those luckless, doomed penguins.

    The predator in this case is unlikely: a normally toothless flounder otherwise known as the Securities & Exchange Commission.

    Fabrice Tourre, a bond trader of the middling ranks, was earlier this week found liable for six of seven fraud charges relating to Goldman Sachs' trading of toxic mortgage assets.

    The civil trial - a rare prosecution - provided a rare victory to the SEC, who, after a loss and a draw, are desperate for a win. At issue was whether or not a full $1 billion worth of collateralized debt obligations (CDOs) were fraudulently marketed.

    They were.

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  • Meet the New "Masters of the Universe" and Profit from Them When I first got into the financial industry some two decades ago, the hottest career was in investment banking, the home of the financial "Masters of the Universe."
    Hedge funds in particular were all the rage.
    A good gig at a company like Goldman Sachs was the place to be, so I joined Goldman in their hedge fund group to learn the business from some of the best and brightest minds.
    Working for a hedge fund quickly became Wall Street's glamor job, the new address for the Masters of the Universe.
    Then, after the financial crisis hit and many hedge funds took their licks, the smartest minds and smartest money moved elsewhere -- and unlike investment banking, this isn't off limits to you, the retail investor.
    Let's take a look at each one... Read More...
  • Goldman Sachs' "Warehouse Shuffle" Just Cost You $5 Billion Construction forklift

    It's just another game for Goldman Sachs Group (NYSE: GS) - a "warehouse shuffle" that moves aluminum around while the big bank collects rent on the metal.

    Although the rent on the stored aluminum - Goldman isn't allowed to actually own the commodity - is just pennies a day, the vast amount of the metal it has stored in its 27 Detroit warehouses and the "warehouse shuffle" strategy that enables it to extend the rental period for months on end adds up.

    Through the Metro International Trade Services subsidiary it bought in 2010, Goldman has accumulated 1.4 million tons of aluminum, which it stores at about 48 cents per ton per day. That's about $672,000 per day of revenue - nearly half a billion a year.

    Experts say the warehouse shuffle game ultimately raises the price of aluminum to manufacturers - everything from beer and soda companies to automakers. That extra cost, about $5 billion over the past three years, is passed on to consumers - you and me.

    To continue reading, please click here...

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  • The Dirty Secret Behind Goldman Sachs' Conviction Buy List Blank Clipboard

    When Goldman Sachs (NYSE: GS) kicked Apple Inc. (Nasdaq: AAPL) off its celebrated Conviction Buy List, casual observers might have seen the move as yet another blow to a battered stock.

    But don't be surprised if Apple stock rallies in the months ahead.

    That's because when you look at the record, most stocks that get dropped from Goldman's Conviction Buy List - a frequently updated list of equities the bank says will outperform the market - don't falter.

    In fact, over the past six months, most of the stocks that Goldman has booted off the Conviction Buy List have gone up, and several have actually outperformed the market.

    That might seem strange but for Goldman's checkered past.

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  • It Looks Like the Market Is Saying "OMG" Today I want to talk about a few things I've been scratching my head over lately.

    First, about those polls leading up to the presidential contest.

    How come they were so wrong? How come the candidates were inches apart right up to the finish line, and then it's like a "tortoise and the hare" kind of ending?

    Did Romney even finish? Is he finished? Is the Republican Party finished?

    Maybe the problem is the questions they ask, the pollsters, that is, or the way they ask them. Maybe they ask questions like a lawyer leading a witness would.

    You have to wonder who pays for those polls, too. Survey says: the Super PACs - or is that the stupid hacks? Don't you wish they'd post the questions they asked along with the "Survey Says" results?

    And, how stupid are the markets, make that investors, you know who you are. The day of the election, the market was anticipating a Romney victory, after all the polls said it was more than possible, so we got a smart little rally.

    Then reality set in. Four more years. And you think it's going to get better?

    Here's something else to chew on. If you think the Republicans are going to roll over and play dead, now that they are dead, think again.

    The only way to fight back when you're dead is to kill the other guy, so you're both dead. Then, of course, you say, I was dead first, I couldn't have killed the economy, I couldn't have driven us over the fiscal cliff, they did it!

    It looks like the market is saying, OMG (that's Oh My God, for you non-texters), we're going over the cliff and there's no stopping us.

    Trust me on this one, that cliff everyone's been talking about - it ain't the only cliff.

    To continue reading, please click here... Read More...
  • Forget Goldman Sachs; Only Fools Rush In Is Goldman Sachs (NYSE: GS) playing us all for Muppets when they say stocks now present a generational buying opportunity?

    The investment bank's 40-page bullish report, titled "The Long Good Buy: The Case for Equities," says to forget the huge run-up since 2009, forget the 25% rise in equities over the last five-and-a-half months, and forget bonds. This party is just getting started.

    Are they right? Yes, they are.

    Should you heed their advice and sell your bonds and load up the truck with equities? Hell no.

    Goldman's report is like me forecasting increasing dark towards evening. It's too obvious. Of course stocks are a better buy than bonds in the long run when bond yields are so low.

    But there's this little problem of timing that they don't address.

    If you load up on equities now, and there's a correction, or worse, a double-dip in major market economies, and you get taken to the cleaners, unless you're young enough to hold onto your stocks for a generation, you may be done... as in toast.

    Right now is not the time to jump onto the bull market. It looks great, I agree. But this creature is getting restless, and coming into the spring, some caution may be warranted.

    If you want to get in, have patience. There's plenty of time, if the markets are presenting a generational buying opportunity.

    By the way, they already have had a generational run, and you probably missed it. Did you load up in March 2009? Did you load up in October of last year?

    Piling on right now is exactly when the fools rush in. Forget Goldman. You know they fleece their clients. Just because you aren't a client doesn't mean they're not out to use you, too.

    The markets didn't rally on the Goldman report. They shrugged it off as mere public relations, perhaps to defray that conversation about the firm playing its clients like puppets.

    What drove markets last week was China. There are increasing worries that the Chinese economy may be slowing more than anticipated. If that is the case, if Chinese GDP growth slows to below 7.5%, global markets will cool down. If its GDP growth falls to 5%, or lower, global markets could crash.

    Yes, I mean crash, as in, drop 50% in short order.

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  • The "Sweet Spot": Goldman Sachs Bullish on Oil and Gas Pipeline Companies
    Nothing like having Goldman Sachs (NYSE: GS) confirm what we've already been saying for a year.

    But last week, Goldman Sachs reminded us that they are bullish on the oil and gas pipeline sector by upgrading a number of portfolio stocks that have been prominent features of our portfolios and discussion on the sector.

    Goldman analysts made headlines last week by adding a number of pipeline firms to their "Conviction Buy" list. The company added Williams Companies (NYSE: WMB) while dropping Buckeye Partners L.P. Nonetheless, Goldman still rates Buckeye as a "Buy."

    Goldman also raised a number of additional stocks to the buy list, including Plains All American Pipeline LP (NYSE: PAA), and maintained its "Buy" ratings on Enterprise Products Partners (NYSE: EPD), and Enduro Royalty Trust (NYSE: NDRO), and Magellan Midstream Partners (NYSE: MMP).

    The reason for these moves shouldn't be a surprise to anyone who follows us at Oil and Energy Investor.

    The Sweet Spot in Oil and Gas Pipeline Companies

    It's not surprising that Goldman Sachs is so bullish on the pipeline industry. After all, my colleague Dr. Kent Moors has been touting the best known secret on the markets for more than a year.

    If you want to make money in energy investing, you want to park yourself right in the middle of the supply chain. By doing so, you're far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels.

    Midstream companies, those that connect the upstream exploration and production companies to the downstream retail, refining and marketing channels, provide vital services in transportation, storage, and processing.

    Simply put, this is the "Sweet Spot" of energy investing.

    To continue reading, please click here.... Read More...
  • The Goldman Rule: Don't Let This Puppet Master Pull Your Strings Goldman Sachs Group Inc. (NYSE: GS) Chief Executive Officer Lloyd Blankfein was really on a roll speaking at an investment conference in New York last week.

    Among other things, he said there's no way we can conclude that a slowdown in banking and trading businesses is "secular, rather than cyclical."

    That alone was enough to make me laugh. But then he went on to address concerns about pending regulations that are coming as a result of the Dodd-Frank Financial Reform Act.

    "In our conversations with clients, they have expressed several concerns on the impact to their businesses," Blankfein said, making it clear that his firm will make client interests a theme of its arguments against the regulations. "What Goldman Sachs does for our clients is even more relevant and important."

    Now that should make you laugh - if, of course, you're not too afraid.

    The truth is that Goldman Sachs and the rest of the big banks on Wall Street - in the inimitable words of author Michael Lewis from his seminal book Liar's Poker - invariably "blow up" customers to make money for themselves.

    Not only do they run roughshod over their customers (trading partners) and clients (banking relationships), the big banks manipulate markets, industries, economies and countries to fatten their already gigantic bonus pools and personal fortunes.

    Now, I'm not singling out Goldman Sachs because it's the biggest and baddest bully on the block, which it is. I'm not blasting Goldman because I once idolized the firm - its culture, its talent, its sheer money-making prowess - and have seen its vision blinded by greed since going public in 1999. I'm not saying Goldman is the only self-serving, greedy, and pretentious firm on Wall Street. And, I'm certainly not calling out Lloyd Blankfein, whose extraordinary accomplishments as a trader are legendary, but whose leadership of Goldman has been marred by what might generously be described as "PR gaffes."

    What I am doing is using Goldman as proof positive that Wall Street banks are bad news.

    In fact, rather than seeing them rebound we would all be better off seeing them unwound.

    From Wall Street to K Street - And Back

    Let me start with the nexus of power and money in this country. That nexus resides exactly where Wall Street and Washington intersect. Each serves the other and the middle-class be damned.

    You see, the "revolving door" metaphor that's so often used to describe the relationship between Wall Street and Washington isn't exactly accurate.

    The reality is that there is no revolving door. There are no doors at all. It is more like one giant corridor where all the water cooler talk is about paying for campaigns, paying lobbyists, and paying bonuses.

    There's a reason why Goldman Sachs is derisively referred to as "Government Sachs." The flow of executives and operatives between Goldman and Washington, and even other world governments and central banks for that matter, is legendary.

    I can't point out all the connections - there are simply too many. But I will point out a few that you may not be aware of.

    To continue reading, please click here... Read More...
  • Big Banks Are About to Get Blasted by the Volcker Rule When the Volcker Rule regulations go into effect next year, its restrictions could slam the revenue of the fixed income trading operations of several major U.S. banks by as much as 25%.

    The Volker Rule is one of the elements required by the Dodd-Frank financial oversight law, which was written to rein in the sort of excessive Wall Street risk-taking that led to the financial crisis of 2008.

    A draft version of the rule was released this week by the U.S. Federal Reserve, which was approved by both the Federal Deposit Insurance Corporation (FDIC) on Tuesday and the Securities and Exchange Commission (SEC) yesterday (Wednesday).

    The rule aims to ban proprietary trading, in which the banks traded for their own benefit rather than for the benefit of their customers, but also will address other areas such as hedge fund investing.

    Since a significant chunk of the big banks' profits - especially that of Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) - come from various forms of proprietary trading, the Volcker Rule stands to cost the industry billions in revenue.

    To prevent cheating, complex compliance rules will require that banks prove that all their trading activities are for clients' benefit, and not proprietary. Compliance alone is expected to tack on another $2 billion in costs.

    "[The Volcker Rule will] diminish the flexibility and profitability of banks' valuable market-making operations and place them at a competitive disadvantage to firms not constrained by the rule," noted a report by Moody's Corp. (NYSE: MCO).

    The rule is named for former Fed Chairman Paul Volcker, who has made the case that such regulations are needed.

    The new regulations will deal another blow to an already-struggling industry, which has watched earnings sag as a result of a falloff in equity trading volume, weak demand for loans, and costly legal headaches.

    Although there's still time for the Volcker Rule to be tweaked before it takes effect on July 21, 2012, it will fundamentally change how the big banks operate.

    The rule's impact on Goldman Sachs and Morgan Stanley will be particularly brutal, especially if the final version imposes broader restrictions.

    To continue reading, please click here...

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  • Goldman Sachs Says Oil Prices Will Soar to $130 in 12 Months … We Told You That Weeks Ago Wall Street heavyweight Goldman Sachs Group Inc. (NYSE: GS) is now predicting that oil prices will soar in the next 12 months, with London-traded Brent crude reaching $130 a barrel and U.S.-traded West Texas Intermediate (WTI) crude reaching $126.50.

    The fact that oil prices will soar wasn't a surprise to readers of Private Briefing - we made a similar prediction to the charter subscribers of our new premium investment-advisory service six weeks ago.

    Furthermore, we showed subscribers how to profit.

    Goldman analysts really believe that oil prices will soar: From Monday's closing prices ($110.30 for Brent and $86.92 for WTI), the heavyweight investment bank's 12-month target prices for oil would represent an 18% gain for the London-traded crude and a 46% gain for its U.S.-traded counterpart.

    Worries that the U.S. malaise and Eurozone debt crises would sap global demand have caused oil prices to fall from higher levels back in the spring. In its forecast, Goldman echoed some of the same points that we have made repeatedly to Private Briefing readers since it debuted back on Aug. 11 - namely that demand in China, India and other emerging markets would compensate for weak growth in the developed economies.

    The bottom line: There's little doubt oil prices will soar. That makes oil-related stocks - and energy investments in general - "must have" portfolio holdings.

    The only question is: How do you play it?

    Here at Money Morning, and also in Private Briefing, our experts have said this time and again: The time to make energy-related investments is when energy prices are low. Although Private Briefing has been around for just a bit more than a month, subscribers who have followed our energy-related recommendations have already logged some nice returns of as much as 18%.

    And there's plenty of upside to come.

    Some of the energy-related columns that we've already published include:

    To continue reading, please click here... Read More...
  • Goldman's Facebook Deal Highlights the Dangers That Wall Street is Creating For Main Street Goldman Sachs Group Inc.'s (NYSE: GS) $2 billion deal to finance Facebook Inc. combines the worst features of the last two speculative manias - the dot-com bubble of 1999-2000 and the Wall Street financing bubble of 2006-08.

    At 25 times revenue and more than 100 times earnings, Goldman's Facebook deal smacks of the "dot-bomb" debacle. And the fact that this financing deal came to pass after a major Wall Street firm effectively drove a truck through two central features of securities regulation is more than a little reminiscent of the investment-banking shenanigans that fed into the global financial crisis.

    The fact that history is repeating itself on Wall Street shouldn't surprise us. Nor should the fact that the Wall Street "rent-extraction machine" is once again operating in high gear.

    One thing's for certain: One day the bubble will burst; and when that happens, the great bulk of the costs will be borne by ordinary Americans - as was the case back in 2008.

    To understand the Facebook deal's full potential fallout, please read on...

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  • What's Really Behind Goldman's Facebook Investment Talk about a social media bubble!

    Facebook has raised $500 million from Goldman Sachs Group Inc. (NYSE: GS) and Russian investment firm Digital Sky Technologies, which implies that the social media darling is valued at a staggering $50 billion.

    This reminds me of the valuations being assigned to Internet companies leading up to the "dot.bomb" crash. There's no way a company that relies on nothing more than bits of information – the vast majority of which are summarily ignored by the community that supposedly finds it so compelling – should have a valuation approaching The Walt Disney Co. (NYSE: DIS), equal to The Boeing Co. (NYSE: BA), and greater than Time Warner Inc. (NYSE: TWX).

    Still, for the sake of argument, let's play along and suppose that the $500 million capital infusion is for real and that the $50 billion valuation it implies is correct. Then the question becomes: What does the transaction say about Goldman Sachs, which arranged the deal, and the regulators supposedly overseeing it?

    To find out what Goldman has to gain from its Facebook investment, read on...

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  • Goldman Sachs (NYSE: GS) $450 Million Investment Fuels Facebook IPO Speculation Goldman Sachs Group Inc. (NYSE: GS) invested $450 million in Facebook, valuing the popular social networking site at $50 billion and heightening speculation on whether or not Facebook will go public this year.

    The deal, announced in a report in The New York Times Sunday night, makes Facebook worth more than Internet-related companies like eBay Inc. (Nasdaq: EBAY), Yahoo! Inc. (Nasdaq: YHOO) and Time Warner Inc. (NYSE: TWX). It'll give the company a competitive edge in the tech arena and allow it to pursue more acquisitions.

    Digital Sky Technologies, a Russian investment firm that has already put about half a billion dollars into Facebook, also invested an additional $50 million in the deal. Goldman has the right to sell up to $75 million of its stake to Digital Sky. Digital Sky started its involvement in the social networker in 2009 with a $200 million investment and now has about a 10% stake through stock purchases from Facebook employees.

    The deal highlights the booming popularity of social media sites like Facebook, Twitter and Groupon - all of which are gaining increased attention from investors. Facebook jumped ahead of Google Inc. (Nasdaq: GOOG) as the most-visited Web site in 2010, according to Internet research firm Experian Hitwise.

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