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.I'm not saying that's going to happen. But if it does, well, you might not want to dump all your government bonds just yet.
Now, about Jon Corzine…
Proof That Something Is Very Wrong with Our Legal System
Seriously, what is wrong with America's regulatory apparatus? We make laws that don't get enforced when the criminals are too powerful, too connected, and probably have too much dirt on too many other important people to be taken to task.
The guy authorized (forget that "allegedly" stuff; according to the person who he gave the instructions to, he did it) the transfer of customer funds out of MF Global to JPMorgan Chase.
Why? Because they needed to pony up some cash to maintain trading positions they had taken – speculative trading positions that helped sink the company.
There are CFTC regulations about co-mingling customer funds with firm accounts. There are regulations about safeguarding customer accounts. There are laws that support the regulations and penalties for breaking the laws. Regulations are laws.
What I don't understand is this.
Why isn't Corzine being charged with signing off on MF Global's bogus financials as its CEO and being prosecuted under Sarbanes-Oxley?
Stay tuned, because I'm more than curious why this whole affair has the stink of a government cover-up. There's more to this than meets the eye, and inquiring minds need to know.
Lastly, did you hear the one last Friday about BATS?
This Is BAT-ty as Hell
If you don't know, BATS stands for "Better Alternative Trading System." And it is a behemoth of a trading venue. It's an electronic exchange that accounts for more than 10% of total equity trading volume on any given day.
The firm was started by a high-frequency trading pioneer who wanted a better place to do his trading and a better place to attract flies to his spider web.
BATS wanted to raise $100 million in its own IPO last week. It didn't float its new shares on the NYSE. It didn't float them on Nasdaq. It floated its new shares on its own BATS network exchange.
This was a first for BATS. Their IPO was the first IPO to be launched at the BATS trading venue.
And what a blast they had, debuting their own stock on their own exchange.
It was unfortunate – some might call it plain old bad luck – that the day of the IPO, regulators said they were launching another deeper, longer look into the effects of high-frequency trading and the relationship some exchanges (can you say BATS out of Hell) have with high-frequency trading outfits. In other words, they want to know, are there any disadvantages to regular investors? DUH, are these people imbeciles, or what?
For your information, the NYSE and regulators approved a massive new computer warehouse the size of a few football fields across the Hudson from the NYSE, in beautiful New Jersey (maybe the Jersey Shore… and maybe it's run by someone called Snooki or The Situation).
Why so big? So that high-frequency trading firms and hedge funds can "co-locate" their servers right next to the Exchange's servers to reduce "latency" – which means the nano-seconds it takes to push orders around and get them filled.
DUH, these idiots gave HFT folks space next to their computers so they can trade faster, and they didn't know what they were doing? Please, this is comical.
Do I need to mention that Jon Corzine was New Jersey's governor when this was happening? No, you probably knew that.
Anyway, BATS had a bad morning, reading the news after it priced its IPO on Thursday night. But, as bad as the news was for BATS on Friday morning, things were about to get a lot worse.
BATS trading system blew up its own IPO. A software glitch sent the IPO share price from its debut at $15.25 (well below the $16 it was priced at the night before) down to a fraction of a penny in a matter of seconds.
It was all over in about nine-and-a-half seconds. The IPO was withdrawn, and a lot of insiders' dreams of summering on the Jersey Shore were squashed.
Now, don't get me wrong, I never wish anything bad on anyone. Well, usually not. But somehow I can't help but laugh at this extraordinary kerfuffle.
Related New and Articles:
- Money Morning:
A Flash Crash, Fat Fingers, and Positioning for a Correction
- Money Morning:
Liquidity Liquor and the Battle Ahead
- Money Morning:
Bank Stress Tests and the All-Clear-to-Rally Signal
- Money Morning:
Don't Be A Wall Street Patsy
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.