Goldman Sachs Takes a Dark View

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Goldman Sachs Takes a Dark View

Postby dyn » Wed Sep 07, 2011 17:15 UTC

In case you are wondering what this is about -- bottom line is, if Greece and perhaps Italy/Spain/Ireland and Portugal "default" on their debt (which means they can't pay it back) then worldwide economic collapse/depression may be triggered. First EUR then USD and the rest. If EUR crashes you have 2-3 weeks to get rid of all paper money (USD, GBP, ...). Some say Greece may default from December 2011- March 2012 and it can have "domino effect" on others. We will see, it is not the end of the world, but it may dwarf recession from 2008 in comparison.



Goldman Takes a Dark View (Goldman Sachs Issues Bleak Economic View)
http://online.wsj.com/article/SB10001424053111903895904576542703587784540.html

More info:
http://www.scribd.com/doc/63818804/GS-StateOf-the-Markets (original document)
http://www.economicvoice.com/goldman-sachs-says-that-the-economic-collapse-is-coming/50023394
http://www.businessinsider.com/goldman-the-worlds-going-to-hell-heres-how-to-cash-in-2011-8
http://theeconomiccollapseblog.com/archives/even-goldman-sachs-secretly-believes-that-an-economic-collapse-is-coming

Goldman Takes a Dark View
2011-09-01 00:01
By Susan Pulliam And Liz Rappaport

A top Goldman Sachs Group Inc. strategist has provided the firm's hedge-fund clients with a particularly gloomy economic outlook and suggestions for how these traders can take advantage of the financial crisis in Europe.

In a 54-page report sent to hundreds of Goldman's institutional clients dated Aug. 16, Alan Brazil-a Goldman strategist who sits on the firm's trading desk-argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable.

Among Mr. Brazil's ideas for trading on that downbeat analysis: a fancy option play that offers a way to take a bearish position on the euro, and a bearish bet through an index of insurance contracts on the credit of European financial stocks. The report also includes detailed information about European financial institutions and pointed language about the depth of the problems in Europe, the U.S. and China.

A Goldman Sachs spokesman said: "As a matter of course, financial institutions publish reports suggesting strategies to fit clients' needs. Whether clients want to hedge existing exposures or take long or short market positions, our goal is to help them meet the challenges the markets present." Through the spokesman, Mr. Brazil, who is 57 years old, declined to comment.

The report comes as Goldman and its major rivals vie for banking and advisory business from the same European nations whose fortunes it is counseling clients to bet against. On Wednesday, Goldman and two other major banks hosted a presentation in London in which the Spanish economics secretary, Jose Manuel Campa, planned to outline Spain's fiscal austerity measures and pitch Spain's case to investors, according to an invitation seen by The Wall Street Journal. Goldman has a leading position among banks in facilitating sales of Spanish sovereign debt.

Wall Street firms have sought to sell hedge funds ideas for trades that would pay off under dire circumstances in the past. Before the financial crisis of 2008, Goldman and other top Wall Street firms pitched their hedge-fund clients on bearish bets on the housing market involving credit default swaps-insurance-like contracts that rise in price if the value of the underlying asset falls-that the banks developed. Goldman sometimes took the bearish end of such trades even as it was selling the bullish end to clients.

The trading ideas in Mr. Brazil's report, however, are different from the mortgage-related products sold by Goldman, because these suggestions involve existing financial products, such as options and indexes. As a "market maker" in the products listed in Mr. Brazil's report, Goldman is offering to put together the trades it describes. When Goldman handles such trades, it pockets bigger fees than when it executes stock trades, which yield just pennies a share. Goldman's own trading positions potentially could benefit if hedge funds and other clients make trades based on the report. Goldman says in bold letters at the top of the report that other Goldman traders, or "Goldman Sachs personnel," may already have acted on the material in the report.

Of course, Mr. Brazil isn't alone in his dark view on Europe: Bearishness on Europe abounds these days on Wall Street. Neither does Mr. Brazil have a lock on the financial instruments in the report. For instance, the Global Economics, Commodities and Strategy Research unit at Goldman put out a foreign-exchange report in July that mentions the prospects of bearish bets against the euro versus both the U.S. dollar and the Swiss franc. Other investment banks have strategists who provide hedge funds with trading ideas, as well.

The report, released by the Hedge Fund Strategies group in Goldman's securities division, provides a glimpse into the trading ideas that are generated for hedge funds through strategists, such as Mr. Brazil, who are part of Goldman's trading operation rather than its research group.

Such strategists sit alongside the traders who are executing trades for their clients. Unlike analysts in firms' research divisions-who are supposed to be walled off from information about the activity of the firm's clients-these desk strategists have a front-row seat for viewing the ebb and flow of clients' investment plays.

They can see if there is a groundswell of interest among hedge funds in taking bearish bets in a certain sector, and they watch trading volumes dry up or explode. Their point of view is informed by more, and often confidential, information about clients than analysts' opinions, making their research and ideas highly prized by traders.

The report itself makes note that the information included isn't considered research by Goldman. "This material is not independent advice and is not a product of Global Investment Research," the report notes. Hedge-fund managers are discouraged from circulating Mr. Brazil's reports, and each page bears the name of the hedge-fund client on it. It isn't clear whether any clients made trades based on the advice the report offered.

Mr. Brazil's report carries language and details about the markets' problems that normally don't appear in research for public consumption. Hedge funds should batten down the hatches, he suggests.
"Here we go again," he says in the report, amid a number of charts displaying negative statistics similar to those that portended problems before the 2008 financial panic. Mr. Brazil writes: "Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world's base currency?" he asks.

Mr. Brazil spells out in detail the borrowing by 77 European financial institutions, identifying some that are especially highly leveraged. Such details are valuable for investors who are looking to make bearish bets through credit default swaps on individual European banks, hedge-fund managers say.

For investors who want to make a broader bet against European financial institutions, Mr. Brazil suggests buying a five-year credit default swap on an index, which reflects the credit of a number of European companies. About 20% of the members of the index, the "iTraxx Europe series 9," are banks and insurance companies, Mr. Brazil writes.

He also suggests a six-month "put option" giving investors the right to bet against the euro versus the Swiss franc. The euro, "may weaken if additional financial support packages or stimulus measures are passed by European governments," he writes.

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Re: Goldman Sachs Takes a Dark View

Postby dyn » Wed Sep 07, 2011 17:18 UTC


Gerald Celente: Money Addicts! 1/2




Gerald Celente: Money Addicts! 2/2

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Re: Goldman Sachs Takes a Dark View

Postby dyn » Wed Sep 07, 2011 17:30 UTC


Max Keiser: Hit in The Eye like a Big Pizza Pie! It's Austerity! 1/2




Max Keiser: Hit in The Eye like a Big Pizza Pie! It's Austerity! 2/2

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Re: Goldman Sachs Takes a Dark View

Postby dyn » Thu Sep 08, 2011 15:07 UTC

In case you are wondering what this is about -- bottom line is, if Greece and perhaps Italy/Spain/Ireland and Portugal "default" on their debt (which means they can't pay it back) then worldwide economic collapse/depression may be triggered. First EUR then USD and the rest. If EUR crashes you have 2-3 weeks to get rid of all paper money (USD, GBP, ...). Some say Greece may default from December 2011- March 2012 and it can have "domino effect" on others. We will see, it is not the end of the world, but it may dwarf recession from 2008 in comparison.
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Re: Goldman Sachs Takes a Dark View

Postby dyn » Wed Sep 14, 2011 15:14 UTC

Greece almost defaulted this weekend, at least market expected it, and we all know what market dictates soon becomes reality. Everyone expected this to happen in Dec '11 or perhaps Mar 2012. We will see. [ more news ]

Meanwhile in America...

US Poverty at 30-Year High [Associated Press]

"The U.S. census bureau says 46 million people now live in poverty. 70 miles outside Chicago is Pembroke, where 50 percent of the people are unemployed. (Sept. 13)"
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