Goldman Explains "Where To Invest Now"

Tyler Durden's picture


Goldman's David Kostin has just released a whopper of a 72-page script for the latest episode of the "El Muerte De Muppet" telenovella in the form of a comprehensive report titled "Where to invest now - Cliff Notes". And since the qualifier is obviously a reference to the fiscal cliff which Congress will continue to ignore as long as the market is at or near 2012 highs courtesy of Ben Bernanke's politicized promises of massive easing on any market downtick, thus providing zero impetus for any proactive legislation that resolves the imminent GDP collapse, one can provide a not so rhetorical answer to Goldman's rhetorical question: "nowhere" (if one is limited to investing in paper-based pyramid schemes of course in which the "catalyst" is not hope and prayer for more printing or the emergence of a greater fool).

The "Cliff Notes" Cliff notes:

Our attached client handout “Where to Invest Now” includes key exhibits we use to analyze the US equity market. The subtitle of the presentation is “Cliff Notes” and refers to our view that many investors are too complacent regarding “fiscal cliff” risks for both the economy and stocks (pages 3-13). We show the weak outlook for sales, margins, and earnings (pages 14-27). We present six approaches to valuation (pages 28-33). We explore corporate and investor money flow trends (pages 34-39), review sectors (pages 40-44), and assess hedge fund positioning (pages 46-52). We conclude with our strategy basket recommendations (pages 53-64).

and the Cliff chart of the "Cliff Notes":

and full slideshow:


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Sat, 08/25/2012 - 09:11 | 2736614 Precious
Precious's picture

The fiscal cliff has already been factored into the stock market prices.

Otherwise, the S&P would be circa 1999 with today's ludicrously low interest rates..

Sat, 08/25/2012 - 09:16 | 2736621 selectricity
Sat, 08/25/2012 - 09:17 | 2736624 BigDuke6
BigDuke6's picture


With Goldman i always read 'Where NOT to invest now"


Sat, 08/25/2012 - 09:20 | 2736627 Haager
Haager's picture

Same as for Goldman is valid for BofA also, so I guess that the only winning move is not to play.

Sat, 08/25/2012 - 10:45 | 2736801 Jay Gould Esq.
Jay Gould Esq.'s picture

"Positives"..."Housing bottomed"

We need not read this "note" any further. Next article...

Sat, 08/25/2012 - 11:49 | 2736983 DeadFred
DeadFred's picture

This was an interesting title because yesterday my daughter asked me to evaluate her retirement invest options. After looking at the sad list of choices I told her to go with 7 day treasuries. Plan to buy in increments into the downturn if/when it happens but there is nothing available now that doesn't scream "Danger! Danger!"

Sat, 08/25/2012 - 14:07 | 2737304 DownsideHedge
DownsideHedge's picture

Funny, it was nearly the same advice I just gave to my two kids who have graduated from college and have "real jobs" now.  They are trying to decide what to do in their 401ks.  I told them to put a bit of money into gold and the rest into TIPS, short dated bonds, or cash.  Then wait because over the next several years they'll get the buying opportunity of a lifetime...or the world as we know it will end and it won't matter where they put their money.  I'm an optimist so I'm looking forward to the opportunity. 

Sat, 08/25/2012 - 11:51 | 2736987 petolo
petolo's picture

Think, i will stick to my tea leaves.

Sat, 08/25/2012 - 10:17 | 2736719 j.tennquist
j.tennquist's picture

Mon Dieu!  Business Insider! Just a little less trustworthy than Goldman Sachs.  And that's a hard place to reach I'll grant you.

Sat, 08/25/2012 - 09:18 | 2736626 Haager
Haager's picture

I thought that the S&P is heading to be somewhere near 1929-1933.

Sat, 08/25/2012 - 23:59 | 2737984 twotraps
twotraps's picture

Well done.

Sat, 08/25/2012 - 09:28 | 2736641 LowProfile
LowProfile's picture

I see what you did there.

Sat, 08/25/2012 - 11:19 | 2736884 stocktivity
stocktivity's picture

From FT -

Chancellor Angela Merkel said Germans were ready to help Greece “as much as we can” on Friday, but declined to support a Greek plea for more time to implement austerity measures and pay back eurozone loans.
Sat, 08/25/2012 - 14:50 | 2737370 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

Greeks being world class seaman are in need of long hard structural support, with depth.

Germans happen to be great at creating/building long hard structural devices capable of carrying greek seamen to great depths.

I see a win here.

Sat, 08/25/2012 - 09:12 | 2736615 Meesohaawnee
Meesohaawnee's picture

bullish you muppets!

Sat, 08/25/2012 - 09:18 | 2736625 teahouse
teahouse's picture

Not Facebook Yet ;-)

Sat, 08/25/2012 - 09:20 | 2736628 francis_sawyer
francis_sawyer's picture

Can someone please goddamn tell me how in the hell they can just toss out a number like EPS $106???

I guess they just pull the number out of thin air like the Fed prints money, or the BLS comes up with it's BS...

Sat, 08/25/2012 - 09:22 | 2736632 JackT
JackT's picture

Seems to me you already know the answer to your question. Perhaps it's just another "lucky number", because those have worked out so well for us in the past.

Sat, 08/25/2012 - 10:03 | 2736693 francis_sawyer
francis_sawyer's picture

I'm just going off the top of my head here (no charts)... But I seem to remember that Rosie (back in the 2008 & before TARP)... Had the EPS pushed way below $30 (something like $19), from what had been a RECORD somewhere around $80-$85 during the peak in '07 when:

- subprime was contained (cough cough)

- The S&P was at all time highs

- Official unemployment was below 5%

- 30 million LESS were on foodstamps

- The budget [remember those things] deficit was less than a half billion (or even 40% higher than the giddy 2007 forecasts, when housing hadn't even shown indications of an 'official' collapse)...

- gasoline prices had a "2" handle

So you want to tell me that 4 years later, with higher unemployment, gas prices, food stamp usage, more wars than ever before... That the EPS has gone up 5 fold?

Sat, 08/25/2012 - 11:22 | 2736893 blueridgeviews
blueridgeviews's picture

IMO it's called Central Bank manipulation of the Stock Market.

Sat, 08/25/2012 - 12:18 | 2737052 Vince Clortho
Vince Clortho's picture

It's all a joke.  They have the aiblity to make up any numbers they want.

Who has the ability to check all the sources?

Who has the resources to enforce any kind of legitimacy?

The S&P should be around 6-700 right now, if it were actually reflecting reality.

As soon as people stop believing it, the whole facade will collapse.

Sun, 08/26/2012 - 00:03 | 2737988 twotraps
twotraps's picture

Finally, thanks for pointing that out. The biggest risk by far for the govt......more so than any one bank or company just what you said, that everyone finds out that it was all a silly game all along , with no real rules or consequences for political players and the value of everything people hold is essentially worthless. That is real risk, and they know it.

Sat, 08/25/2012 - 09:34 | 2736647 Aquaman
Aquaman's picture

its not the air they pull it from. they pull it out of their gefiltefish-eating asses.

Sat, 08/25/2012 - 09:20 | 2736630 JackT
JackT's picture

You know you are up the creek when you have to list "Fed Model" as a positive. Ugh

Sat, 08/25/2012 - 09:51 | 2736668 mendigo
mendigo's picture

and Europe has "stabilized" perfectly true and yet pathologically inaccurate

Sat, 08/25/2012 - 09:27 | 2736639 mendigo
mendigo's picture

Isn't the fiscal cliff a paper tiger.
Isn't it something that the congress will may disappear with a wave of thier feather pen - and in so doing they will be heros of homeric proportions.
Isn't this a strawman used to generate interest in a jaded market - after the past year nothing can spoke this market while we are using daddys credit card.
Thanks to coordinated easing the is too much money with no safe place to rest. That is what is delaying the next payload - must be coordinated with Europe and China.

Sat, 08/25/2012 - 09:27 | 2736640 zilverreiger
zilverreiger's picture

..And zero hedge helps them a little.

Sat, 08/25/2012 - 12:19 | 2737053 mendigo
mendigo's picture

yes I thought we had agreed that Goldman was somewhere between worthless and manipulative. What gives?
So now the contrarian play is buy?

Sat, 08/25/2012 - 09:32 | 2736644 You Didn't Buil...
You Didn't Build That's picture
China confronts mounting piles of unsold goods

'People were expecting more sales over the summer, and it just didn’t happen ... Things are kind of crawling to a halt,' analyst says


After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown.

Problems in China give some economists nightmares in which, in the worst case, the United States and much of the world slip back into recession as the Chinese economy sputters, the European currency zone collapses and political gridlock paralyzes the United States.


This will "trickle down" into Australia which relies heavily on China's demand. House mortgage defaults are already rising in Ozland and sales also slow and prices plunge in Melbourne and Sydney.

Sat, 08/25/2012 - 09:38 | 2736650 timbo_em
timbo_em's picture

Accelerating EPS growth in this assumption based on an hopium overdose or is this another 'come on muppets buy some crap cuz our prop traders need to sell some crap'-scheme?

Sat, 08/25/2012 - 09:47 | 2736656 Abraxas
Abraxas's picture

"...or the emergence of a greater fool"

I have to admit that there's hardly a greater fool than myself when it comes to trading. I learned to ignore the "experts", take a position based on MY criteria and sit on my hands. I sleep better since. Nevertheless, it gets gut-wrenching from time to time, e.g. Sep/Oct last year, when my wife wanted to throw me out because of my over-confidence in the junior miners (I can't believe how stupid I was).

One thing I know for sure though is that we'd be all better off not to even know what GS recommends or doesn't.

Sat, 08/25/2012 - 13:15 | 2737187 laozi
laozi's picture

Agree, those guys are poison to the mind. I do -however - read Financial Times (european edition) daily, and I am surprised to say I like it. James Mackintosh Is sharp.

Sat, 08/25/2012 - 09:45 | 2736657 SafelyGraze
SafelyGraze's picture

(Reuters) - USADA, custodian for Tour de France Medals, reported today that some of its customers' physical holdings appear to have "vaporized".

Sat, 08/25/2012 - 09:46 | 2736659 forwardho
forwardho's picture

"El muerte de muppet" Coffee spurtin funny, (though sad at the same time). Tyler, great turn of a phase.

Sat, 08/25/2012 - 09:55 | 2736680 Paul E. Math
Paul E. Math's picture

I thought that was particularly awesome too.  Just read the phrase again and it made me chuckle one more time.

Sat, 08/25/2012 - 09:55 | 2736675 Ted Baker
Ted Baker's picture

HOUSING BOTTOM.? Is this a joke?

Sat, 08/25/2012 - 10:10 | 2736714 Manipulism
Manipulism's picture

Everyone who invest and work with Goldman deserves what he get.

Since Taibbi he should know better.

Sat, 08/25/2012 - 10:13 | 2736725 JR
JR's picture

If Bernanke studied the Great Depression, why then did he replicate the exact scenario that has led to the current world wide economic collapse?

Was it planned? The evidence is almost irrefutable.

Former Professor of Finance Michael Rozeff on Market Oracle points out that despite Bernanke’s blindness (willful?) to factors that caused the Great Depression, the truth is: the 1920s was a period of "sensational real estate speculation."

Rozeff, in Professor Bernanke’s Terrifying Blindness on the Great Depression, then chronicles the disastrous affects leading to America’s 30s Depression. And, here’s the clincher, those are the steps the Federal Reserve chairman, a self-called student of the Great Depression, has taken in the current buildup to severe crisis.

Here are excerpts from Rozeff’s blockbuster:

 “Because of this state of mind, Bernanke doesn’t see or speak of the common features between the latest banking/real estate fiasco and America’s Great Depression nor, for that matter, features common to most other of America’s economic collapses and depressions. These are fractional-reserve banking, bank financing of real estate and stock speculation, and financial fraud.”

Rozeff cites a 1933 article by Prof. Herbert D. Simpson in The American Economic Review titled "Real Estate Speculation and the Depression" that “emphasizes these very banking and real estate factors as bringing on the Great Depression.” Simpson gives an example:

"In Cook County, outside of Chicago, we had, in 1928, 151,000 improved lots and 335,000 vacant. On the basis of our Regional Plan Commission's estimates of future population increase, it will take until 1960 to absorb the vacant lots already subdivided in 1928. In fact, on the basis of these computations, we shall still have 25,000 of these vacant lots for sale in the summer of 1960. In one township, Niles Township, we have a population of 9,000, and enough vacant lots for a population of 190,000."

“In support of Simpson,” says Rozeff, “the Baker Library at Harvard writes of ‘The Forgotten Real Estate Boom of the 1920s,’ stating

’The famous stock market bubble of 1925–1929 has been closely analyzed. Less well known, and far less well documented, is the nationwide real estate bubble that began around 1921 and deflated around 1926.’"

Why the blackout by economists and analysts? Answers Rozeff: “They prefer other stories, such as that of Friedman and Schwartz which blames the FED for not inflating,” while in actuality it did inflate.

Bernanke, “by sealing off the 1930s from the 1920s” doesn’t have to examine the reality that the “money grew rapidly in the 1920s"…as did the banks’ investments in real estate, or the stock market booms of the 20s, or the malinvestments, or the consequence that “in 1934, the government-sponsored Home Owners’ Loan Corporation made 71 percent of all mortgage loans extended.”

Or that , “None of these government actions resolved the basic banking and money problems. All of them socialized finance. All of them led to new problems, including the establishment of Fannie Mae in 1938.”

No, according to Rozeff, Bernanke concluded that the free market failed, or, in his own words, “that the federally directed financial rehabilitation – which took strong measures against the problems of both creditors and debtors – was the only major New Deal program that successfully promoted economic recovery”…that "the government’s actions set the financial system on its way back to health."

Not only does “Simpson’s article view the banks and their real estate financing as a major cause of the subsequent depression,” but “Simpson alludes to illegality and fraud. These too were a serious part of the 1990s and 2000s (see here).”

The comparison of the real estate bubble is only one of an entire body of evidence Rozeff supplies that replicate today’s step-by-step re-creation of economic disaster. Rozeff continually shows Bernanke’s statements in light of the developments that indicate his ignorance of these causes.

Ignorance? Or is it fraud?

Sat, 08/25/2012 - 11:29 | 2736915 blueridgeviews
blueridgeviews's picture

Ignorance? Or is it fraud?


Considering the world around me I'd say FRAUD.

Sat, 08/25/2012 - 10:25 | 2736745 Careless Whisper
Careless Whisper's picture

how much did goldman pay to have this crap posted here?

Sat, 08/25/2012 - 11:44 | 2736966 disabledvet
disabledvet's picture

I agree. "stinkin' up the joint." fact is they're the perma bear...they're out the 100 billion plus on the Social Media...they need this market to come back their short interest...otherwise they're "double down." ZH should know better...

Sat, 08/25/2012 - 10:46 | 2736807 HungrySeagull
HungrySeagull's picture

If you have more money than brains, stick it into Silver and Gold Eagles, and TAKE delivery.


Thank me later.

Sat, 08/25/2012 - 11:09 | 2736845 knowshitsurelock
knowshitsurelock's picture

The Keynesian experiment has run it's course.  You add more fiat debt currency to the system, and it cannot be serviced.  You slow down fiat debt notes entering commerce, and it turns on itself and feeds on itself.  It's a mathematical inevitability, that no matter what the idiots in Washington "try" to do, they're fucked.

So, Goldman, the biggest wolf cannibal in the system, is going to tell us where to invest now?  That would almost be comical if it wasn't so tragic.

Sat, 08/25/2012 - 11:16 | 2736874 Dead Canary
Dead Canary's picture

Sooo.... Do they WANT everyone to sell so the Bernank will print?

Sat, 08/25/2012 - 11:29 | 2736919 Jack Burton
Jack Burton's picture

Remember that black guy many years ago that was unarmed and shot to death by NYC police in a doorway. I believe they pumped 50 shots into him. I saw the video of the shooting at the time. Not even the Nazi executed people with such relish!

If they have no scaled back their fire control, then I can believe most victims were caught in the police free fire zone.

Sat, 08/25/2012 - 11:43 | 2736960 Piranhanoia
Piranhanoia's picture

Kermit y Fozzie lean el minilibro de AuroHombre y encuentran las planas para destrucion do los otros Muppets.  Fue tiempo para Pronto y Enojado para el Lloyd de BlancoBien para pagar.

Sat, 08/25/2012 - 12:44 | 2737106 reader2010
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