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Goldman Sachs On The State Of The Market
Hat tip to reader Tulip who points out this comprehensive presentation by Goldman Sachs on the State of the Markets, created by the firm's Hedge Fund strategies division. We recommend readers check it out for some pretty graphs and some good economic summaries. Some notable points:
- Consumers continue to delever, even as retail flows from money markets into risk assets
- Observations on the Savings Rate vs. Consumer Credit
- Sovereign CDS may present unusual opportunities (With US CDS at 25bps? It is so getting squeezed to negative numbers)
- Residential housing market continues to weaken
- Commercial real estate beginning to take center stage
- CRE equity may have further to fall or be completely wiped out
- Equity valuations driven by the consumer, with the cryptic proviso that "equity value might have downside" - no kidding
- And the best - REIT equity prices have risen... but property values continue to fall
- (One wonders what is up with all those solid buy ratings on assorted REITs compliments of GS' sell side research).
- And much, much more
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I guess GS is now shorting the market they help drive up.
Uhhh, you had any doubt? That's how the banks make sure to get all they can before the regulations they fought so hard to pull down (Glass-Steagall) are put back up.
you're an idiot. Glass-Steagal would break up with big universal banks. GS is 95% investment bank anyways, Glass-Steagal does not hurt them.
Looks like interesting stuff. Give it a better read over the weekend.
Why do you think GS sell side is so worse than any other shop?
Course they're shorting it.
That's why its gonna be their biggest profit record ever.
I have a new GS theory.
Instead of conspiring with the sell-side, the buy-side just gets the inside handle on what's going on and laughs at them and then shorts whatever they're up to.
This could be orchestrated from the top level by hiring incompetent (or perma-bull) sell-side analysts.
"Bounce may be driven by intervention" jajaja
Vampire Squid market update
TD -
Which division of Goldman Sachs did you interview with when you got out of school? Did they give you are reason for turning you down, or was it just a numbers issue?
Curious in NYC
Weak sh*t, bro. That the best you can come up with?
And double posting = automatic fail.
It wasn't meant to be a double posting. Just two flash postings and one didn't get cancelled in time as Zero caught the ping of the second opaque posting on its fail-safe system.
that was good.
So I'll ask you the same question - which GS division turned you down after b-school? Did you get an offer from Lehman or CSFB, or did you default to Deloiite & Touche Consulting?
They made me an offer I couldn't refuse.
Are you a Jenny Jones guest?
Can someone please explain why there was such a large difference in the jobless numbers reported by the government vs. the ADP report?
The government numbers usually go into alignment with
the ADP numbers after the government revisions months
later.
I haven't looked into the numbers, but ADP doesn't count government employment. And government is hiring, so, that could have something to do with it.
Plus, ADP is based much more on raw data, no revisions based on birth/death model and other stuff.
Just ask Charles Biderman. He'll tell you.
If the market were to tank again we can all rest assured that the banking system will be fine now. Thanks to coordinated efforts of the US Gov and the big banks, they have successfully inflated their toxic asset prices and this price appreciation has attracted opportunistic fund managers to buy their junk. These assets will most likely end up somewhere buried in your 401K holding or your pension plans investment holding.
When the asset inflation game is up your retirement fund will take the hit next time, not the banks.
I kinda second that.
I don't know if that's the way evryone gets screwed. But I'm sure evryone does get screwed. Except the banks.
So I'm buying up GS because when all this is over they are going to own America.
:(
Here is another theory:
The Obama administration knows that, long-term, an American economy dependent on an oversized and parasitic financial services sector is unsustainable. But how to move away from that state in the near-term without sending everything back to the stone age?
Simple. You turn more people off casino capitalism as their profession- how to do that? Well, another major crash after all this green shoots bullshit should just about do it. All this nonsense could have a purpose after all, and outfits like Goldman Sachs could be leading it in exchange for coming on board for other administration priorities (like energy policy).
This recovery is all fluff, intended to blow the remaining extra weight out of the financial industry. Long-term message? Stop trying to flip numbers on a screen, and get out there and finance a real company that is producing something of value to society.
Cause let's be honest, anyone who thinks the next economic cycle is going to be driven by 1) new housing construction or 2) financial services doing what they've been doing for the past 10 years is f*%&# kidding themselves.
Yea that's it....
"MARK IT ZERO, DUDE"
And another theory: Obama is a belligerent, smug, self absorbed fool who knows little. Agree with you, though, that the vast majority of the financial services industry is parasitic, purely designed to separate the customer from their money.
Yes, a financial system which is a net drain on a nation's economy could possibly, *possibly*, be problematic. However, the creation of more and more derivatives is an awfully convenient way to grow a nation's GDP--they're like a blossoming fractal pattern. Whether that should be considered malinvestment or not, well, who's to say what is responsible and wise?
Mel Simon
Imagine being Obama - meeting all these super smart ex GS types who talk a language you don't understand who tell you to do what they say or else it will be disaster.
They gave him a tatse in his first few months to soften him up - stock market tumbled to 666, end of the world at hand, but we can save you.
It would take an incredible amount of strength and understanding of economics and finance to go against them.
If they stuff up and it all goes to pieces he might do a U turn and look for new advisors - but it would take a crisis to do so.
Goldman sachs opines? This is the most notorious gangster clan in history. No other clan has stolen more money. More than even Stahlin's Marxists-Leninites. They tried to stop the banksters 60 years ago. Apparently some escaped. Since these folk dont respond to call to morality honesty dignity professionalism, history rells us they only respond to fist and gas.
My favorite is the "Green Shoots" label with an arrow on the graph on page 11... pointing to the all-time low and declining US housing starts.
Ahh We're getting a nice unstable schizophrenic thought wave pattern out of these guys. Should be confessing sins before too long. Won't be long before the true green shoots come up. Bank robbery supply stores. Collectable commemorative pretty boy floyd tommy guns.
oh for the days of the honest outlaw
TD-
lets switch focus and start picking on the legal system that is the death of our economy. We cannot compete with China on manufacturing largely due to no unions and no attorneys. What about an article that clear illustrates that the high cost of health care is due to all the extra cost incurred everyday to prevent future lawsuits. The government also did away with charity hospitals instead forcing all hospitals to provide charity. The Goldman story is starting to get stale.
Agree with the charity issue (govt squeezes out private charity), but the lawsuit thing is a red herring.
Govt reg. is mega costly and inefficient, lawsuits are relatively efficient to to put some governor on bad behavior/practice.
Are you serious? Deregulation is precisely what has put us in this too-big-too-fail bullshit paradigm whereby Goldman Sachs gets to pig out at the taxpayer trough while the rest of sign on the dotted line for that increasingly fatter check that Uncle Sam owes the world. The repeal of Glass Steagal has been in a disaster and may in fact be the primary cause of this country's decline to second rate nation status. My personal inclinations are of a libertarian bent ,but if this country is not willing to let banks fail, which apparently neither party is or was, then we might as well stop pretending that the banks or anyone else are interested in free markets.
The financial system is another issue.
Glass Steagal should not have been repealed, without concurrent removal of constraints on competition and barriers to entry. They were allowed to get too big to fail purposefully with the aid of other regulatory schemes and the full encouragement and cooperation of the government, despite the free market and not because of. Competition is the key, and a return to localized regulation, respect for state charters, and quieting of nationalization and globalism policy. Of course, conflicts of interest, stealing from clients, aiding the privileged, at the expense of the unconnected, are unethical, and sometimes fraudulent. Ethics and integrity have to be at the core of whatever we do. Free markets require acting like responsible participants. That cannot be legislated, but malfeasance must be unacceptable. Bigger is badder, and that ain't good.
Glass Steagal will never return. The US is not a vacuum, our banks would not be the world's biggest banks if we chained them with laws that allowed foreign banks to be "the big guys"... The argument they used to remove Glass Steagal was that if we didn't allow our banks to become super sized institutions then some other country would let their banks do it and they would rule the world some day. That argument is valid - greed is a planetary phenomena. You would need to apply a Glass Steagal like law globally. There is a reason corporations favor setting up in Delaware, corp law in that state favors corps in their day to day business dealings.
The thing to regulate most closely is FRAUD!! If mortgage creators were to discover that they ended up in jail whenever they wrote liar loans, then extremely few such loans would get created, and then they would not have been enough available to securitize even if the ratings agencies wanted to mark them incorrectly to help out their pals in the banking world. Policing the very lowest levels of markets, where things often get their base foothold, is always the best thing you can do... Tom
i cant open presentation - ahhhhhhhhhhhhh
If the chinese government is accused on manipulating the numbers, why would they be more clever than the multi-millionaire guys from GS, that cntrol de US.. ?
REIT equity vs. property value disparity? Nonsense, haven't you heard of Efficient Market Hypothesis?
Thank you very much for the report - much appreciated.
Agreed, thanks TD.
TD -
You said "One wonders what is up with all those solid buy ratings on assorted REITs compliments of GS' sell side research"
Well, here are the facts:
GS sell side has a CAUTIOUS view of the REIT sector
GS sell side REIT coverage team has only one stock on the GS CONVICTION list, and it is a SELL (Essex Property Trust)
Once again, TD your ignorance of the facts and bias against Goldman Sachs are damaging your credibility
Again, I must ask - which Division of Goldman Sachs turned you down when you graduated business school? If Lloyd took you to dinner to appologize for the obvious "slight", would that make it better?
I would like to ask you a question: Why is Goldman driving up the price of REITs through SLP and how do you explain their statistically impossible days of trading success?
Guys, there is a lot of money that has been printed and being printed and some of that has to come into the stock market immaterial of the fundamentals and that is exactly what is going on. Stock market is hardly a measure of the economic health since there are so many different ways to manipulate it.
thank you, someone who gets it. this level of money printing is going to pop up in all kinds of places. since we don't have an underlying economy to lend to, it goes into speculation. there is no where else left to put it.
stagflation is coming. i have no fucking clue what that means to the stock market, but i sure as hell know what that means for commodities prices. up, up, up.
And we have another green shoot coming down the pike--as if commercial property is in trouble---Zales closing ----
http://www.nationaljewelernetwork.com/njn/content_display/majors/financial-reporting/e3i33318fd8458cbc08abbc2713be7ec21e
Note slide #36:
Strategy: go long AAA CBS then the kicker:
"GS trading desks maintain an inventory of AAA CMBS bonds."
Profits await, suckers...
You're really reaching here. If they were short, you'd cry foul. If they didn't state that they held positions you scream bloody murder. If they didn't have a position at all you would ridicule them for recommending a long without putting their money where their mouth is. What do you want them to do? Please don't respond with "die", "burn in hell" etc. like the other jihadists.
Real reach indeed. Goldman Sachs would never, ever do anything to the detriment of their prey- I mean, customers. That they would be more than happy to move those fine, very, very profitable securities off their books and on to the next sucker, I have no doubt.
Sorry to hurt your feelings, tiger.
Why don't you answer the question, kitty kat?
"What do you want them to do?"
For starters, follow the logical conclusion of their own research. The slides immediately preceeding the strategy clearly show what a disaster the underlying of CMBS really is, and the 2006+ "bubble" vintages aren't even under roll-over pressure yet. But by all means buy AAA securitized tranches anyway! I didn't see any we-got-crap-on-the-books teasers about the crack spreads or aluminum straddles.
"What do you want them to do?"
Follow a business model that creates profit for their clients, and live off a cut of that profit, instead of screwing clients for a profit. That I even have to clarify this is an indication of how degenerate GS has become.
I am a bit worried about 'leaked' documents from the behemouth. Should we be worried? Will they be sitting behind every trade, doing exactly the opposite using there sizeable liquidity to force every position in their direction?
You conspiracy guys are unbelievable. You really think their business model is pump and dump? Right. Well, I was always told you can't argue with a fool.
You have to realize that GS clients are smart, sophisticated investors who are often more knowledgeable than GS. In essence you are claiming to be "wiser" than their clients, because from your Mom's basement you can tell that GS is "screwing" their clients and their clients are completely unaware of any potential risks. Get real.
Why don't you answer the question, kitty kat?