Goldman Sachs

Fred Mishkin's "Outside Compensation" List Revealed

Federal Reserve Bank of New York, Lexington Partners; Tudor Investment, Brevan Howard, Goldman Sachs, UBS, Bank of Korea; BNP Paribas, Fidelity Investments, Deutsche Bank,, Freeman and Co., Bank America, National Bureau of Economic Research, FDIC, Interamerican Development Bank; 4 hedge funds, BTG Pactual, Gavea Investimentos; Reserve Bank of Australia, Federal Reserve Bank of San Francisco, Einaudi Institute, Bank of Italy; Swiss National Bank; Pension Real Estate Association; Goodwin Proctor, Penn State University, Villanova University, Shroeder’s Investment Management, Premiere, Inc, Muira Global, Bidvest, NRUCF, BTG Asset Management, Futures Industry Association, ACLI, Handelsbanken, National Business Travel Association, Urban Land Institute, Deloitte, CME Group; Barclays Capiital, Treasury Mangement Association, International Monetary Fund; Kairos Investments, Deloitte and Touche, Instituto para el Desarrollo Empreserial de lat Argentina, Handelsbanken, Danske Capital, WIPRO, University of Calgary, Pictet & Cie, Zurich Insurance Company, Central Bank of Chile, and many, many more.


Memo To Japan: It Is Going To Be A Cold, Expensive Winter

While Abenomics has failed in spurring exports, while the rise in the Nikkei has benefited some 1-2% of the population, the most direct consequence of crushing the yen some 20% is that energy costs, virtually all of them imported, are if not surging, then about to soar to all time highs.  In other words, our sincerest condolences to Japan, for whom this winter will be a very cold one (and a very hot summer follows), unless of course in Japan, like in the US, energy costs don't matter when calculating CPI and inflation and the consumer can spend any amount to keep themelves warm, or cold as the case may be.

UK's George Osborne Responds To Moody's Downgrade

Osborne's statement was prepared well in advance, which means Moody's action was not only prepared and distributed long ago but it got the blessing of both the UK government and Goldman Sachs. And why not: so far it has achieved precisely what it was intended to: crush the Pound. The next question: when does talk of GBP-EUR parity begin?

Zimbabwe's Mugabe Proclaims Himself Africa's Goldman Sachs

Since we first started discussing the new frontier of investment (or economic hitmen), Africa has been appearing more and more in the headlines - from labor conditions in the South to military action in the North. Natural resources and leverageable assets remain key as the infamous Zimbabwean 'dictator' Robert Mugabe, fighting for re-election at the age of 89, maintains that Zimbabwe's difficulties stem from a Western plot to re-colonize it. With more than 80% of the country unemployed but rampant inflation somewhat calmed, Reuters notes that Mugabe believes "It's God's choice" that he is running in this close election. Just like Goldman Sachs "doing God's work", Mugabe believes "this is a task the Lord might have wanted me to fulfill among my people...," regarding the liberation struggle for black economic empowerment. More than 4,000 out of an original 4,500 white-owned farms have been seized since 2000 under a program he says is aimed at correcting land ownership imbalances created by colonialism. The consensus is that a free and fair election will create a true democratic outcome, but as one local noted "with his record I just don't see how Mugabe can win a free and fair election." Indeed, though the jackals remain.

Heinz Insider Trader Revealed: A Goldman Client

The saga of the Heinz call option insider trade, first profiled here, and the Goldman trail, also first observed here ("Does GS stand for Goldman Sachs one wonders"), just got even more fun as revelations that it was none other than a client of Goldman's Private Wealth group out of Zurich that hit the buy key on those thousands in call options one day ahead of the announcement. From Reuters: "A Goldman Sachs private wealth client is the holder of the Swiss account at the center of an investigation into insider trading in H.J. Heinz Co options, regulators said in a court filing late Wednesday." Alas, and as before, the question of who leaked the inside information to this Goldman client still remains unanswered.

Hedge Funds Have Never Been More Bullish Stocks (And Bearish Gold)

Across the universe of hedge funds that Goldman Sachs covers, the net long exposure to the market reached a record-breaking 52% in Q4 2012 - the most bullish level on record. It would appear, as we noted here, that the 2-and-20 crowd of alpha generators have merely been corralled into beta-chasers as, just as they did in the run-up to the 2007/8 highs, their exposure is mirroring the broad market performance. It strikes us that a 'hedge' fund should, in general, be contrarily reducing exposure as the market rises but with turnover of all positions also at record lows it would appear the managers have set out their chips and are all holding on - as the reality of relative returns (in a fickle investing environment) trump absolute returns. Despite low turnover, hedge funds notably reduced holdings of underperforming long-time favorites Apple and gold (lowest holdings since the crisis began) while raising allocations to rallying Financials. Seems like deja vu to us?

European "Democracy" Full Frontal - EU Parliament Head Tells Italians Not To Vote For Silvio

To say that Germany does not love Silvio Berlusconi would be an understatement. But not even we thought European "democracy" would stoop so low as to tell Italians not to bring Bunga back or else. As Reuters reports, the German president of the European Parliament, once compared to a Nazi concentration camp guard by former Italian prime minister Silvio Berlusconi, warned Italians on Thursday not to back the scandal-ridden media tycoon at the ballot box. Martin Schulz is the latest in a line of German politicians to express fears about a possible Berlusconi comeback largely due to worries he will halt Rome's reform drive that has helped to lift investor confidence in the euro zone. "Silvio Berlusconi has already sent Italy into a tailspin with irresponsible behavior in government and personal escapades," Schulz was quoted as saying in German daily Bild.

America's TBTF Bank Subsidy From Taxpayers: $83 Billion Per Year

Day after day, whenever anyone challenges the TBTF banks' scale, they are slammed down with a mutually assured destruction message that limitations would impair profitability and weaken the country's position in global finance. So what if you were to discover, based on Bloomberg's calculations, that the largest banks aren't really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers? The stunning truth is that the top-five banks account for $64 billion of an implicit subsidy based on the ludicrous (but entirely real) logic that: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Once shareholders fully recognized how poorly the biggest banks perform without government support, they would be motivated to demand better. The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.

Blast From The Past As Cable Plunges To Seven Month Low

And now for a quick blast from the past: on November 26, moments after Mark Carney was announced as the Bank of England's next "shocking" head (confirming our prediction that just this would happen), we made a very simple prediction, one which ran contrary to the conventional wisdom of the day, that Carney would pursue a sensible policy of preserving the strength of the British pound, namely the following:

Sure enough, after rising very modestly in the days after Carney's coronation, cable has since imploded and moment ago touched on a new seven month low. Those who have been long the GBPUSD throughout the ensuing 700 pip plunge, can invoice Goldman Sachs with their therapy bills.

The Real Reason Boomers Buy Bonds

Day after day we are inundated with the apparent 'idiocy' of investors putting their hard earned money into Treasury bonds when they only earn 2% yields. Hour after hour, we hear why investors should buy stocks, 'get paid to wait', and bonds are in a bubble. So why is it that day after day, an entire generation appears to have found a new mantra of investing, preferring less risk to more, satisfied with less return as opposed to more. The simple answer comes down to two words - often misunderstood - risk and drawdown. While most consider the former to be some quantifiable measure of uncertainty (more is better because think of the upside potential); it is the latter that ends careers, crushes retirement hopes, and scars pysches for life - and is often ignored. As we discussed here previously - must read, comparing (risky uncertain cashflow stream) equity dividend yields to (risk-free certain cashflow stream) Treasuries is like comparing apples to unicorns, but more importantly as Boomers retire en masse, this chart explains why there is a third leg to the investment decision - risk, reward, and regret; and equity drawdowns are the real 'risk'. Oaktree Capital's Howard Marks explains...

2013 Earnings: Just Insert Hockeystick

We have discussed various incarnations of market-reality separation from underlying-reality but none had quite the unbelievability of the following chart of earnings-growth expectations currently foreseen by the consensus of linear-extrapolaters and hockey-stickers known as the sell-side. Behold - hope, defined...

These 10 Stocks Account For Over 20% Of The S&P 500's Market Cap

The S&P 500 represents the broad US equity market. It is the bogey for countless herding asset managers and is seen as the professional's index as opposed to retail's Dow. But, a scratch under the surface of the magnificent 500 company index shows it to be extremely top-heavy. From Intel to Apple, the following 10 companies represent over 20% of the 500 name index - and these 20 stocks account for 42% of all S&P 500 margin.

"Great Rotation", Over

It would appear that the hopes and commissions of each and every talking head wealth manager and/or central banker has been dashed on the rocks of 'fiscal cliff' tax-hike front-running and a citizenry who remain far more cognizant of the unreality of the real world than the reality being preached by the market. There were some fund flows this week into equity funds (the lowest in six weeks) but, as Reuters notes, it was all into international funds as domestic funds saw outflows and domestic bond funds once again saw inflows. As Goldman Sachs' funds flow and positioning monitor shows - Rotation, Over.

Biases, Biases Everywhere

Look around the investing world and biases are pervasive, from clustering estimates around company guidance (anchoring) to avoiding a stock that has already outperformed (mental accounts). And these biases make a difference. To provide an example, buying Stoxx 600 companies on low P/E multiples (and selling high) would have generated ~25% annual alpha over the last decade using 12-month forward actual reported earnings, but would have lost ~3% per annum using consensus estimates. Interestingly, you would lose less money applying historical earnings (-2% alpha p.a.) than by using consensus estimates! Simply put, biases make consensus estimates worthless.