Goldman: The Worlds' Going To Heck In a Handbasket - Here's How To Play It
September 1, 2011
Goldman Sachs has published a semi-secret 54-page report for institutional and hedge-fund clients arguing that the world's going to heck in a handbasket and recommending ways to cash in on what looks to be more global pain.
The WSJ's Susan Pulliam and Liz Rappaport got their hands on a copy.
According to a Goldman spokesman, the report is not an official Goldman research report but rather a special offering as a way to lure hedge funds’ business.
It's an unofficial Goldman research report—the kind you really want to read if you want to know what’s going in the world of the macro hedge funds. And after the 2008 credit crisis debacle, which some analysts blame on the hedge funds and their computer-based algorithmic trading, this is the type of stuff you may want to know about.
In the report, Goldman strategist Alan Brazil argues that:
- European banks need $1 trillion of additional capital to shore up balance sheets
- US small businesses are still languishing (and for the record, it’s small businesses that create jobs)
- China's growth is probably not sustainable
- Solving a debt problem (ours) with more debt isn’t likely to work
On the issue of U.S. debt, the Journal writes,
Brazil also recommends ways to "play" this debacle. The report suggests the following:
- Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently
referred to as the most overvalued in the world)
- Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off
Unfortunately, lest you think your knowledge of this semi-secret report will finally allow you to out-trade hedge funds, it won't. The hedge funds got the report on August 16th. As usual, you're the last to know what is happening in the inner circle on Wall Street.
This report is an assimilation of a report from our friends at Business Insider
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