Goldman's recent forecast calls for basically no gains on the S&P 500 over the next 12 months. That's got some investors spooked and looking for the exits.
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JP Morgan (NYSE: JPM) is about to become Goldman Sachs' newest toy. Except its version of "playing" is "smashing it into pieces."
That's right, Goldman Sachs has joined a bandwagon of analysts calling for JP Morgan Chase to break up. And since Goldman Sachs is simply the best at what it does - good and evil - their mission shouldn't be too hard.
The beginning of January marks the start of Q4 earnings season.
Among the first ones up this year include an aluminum producer, a tech giant, and a few massive banking firms.
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Goldman Sachs and the U.S. government have long had a special bond. In fact, that bond has its own name: Crony Capitalism.
Or maybe they're not just cronies; they're lovebirds. Will the public ever get a chance to see this close-fisted couple finally separate? The answer: Maybe. That's thanks to a trial that should have ended over a month ago - one in which 30,000 damning new documents have been made public.
Unbowed by fines and new regulations, Goldman Sachs (NYSE: GS) has simply looked elsewhere for fresh victims.
In a deal that barely registered with the mainstream media, Ecuador's central bank agreed earlier this week to swap half of its gold reserves - worth $580 million - with Goldman in exchange for liquid assets.
The Ecuadorian central bank thinks it's going to earn $16 million to $20 million in profit over the three-year duration of the deal.
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.
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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.
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.
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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...
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.
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.
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.
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.
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 CompaniesIt'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.
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 BackLet 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.