Goldman Sachs Makes The Call. Thanks.June 21, 2012 @ 8:28 PM EST
A couple of months ago, senior Goldman Sachs executives were all over the media telling us the markets were a “buying opportunity of a lifetime.”
Peter Oppenheimer, the firm's chief global equity strategist, famously said in late March that given current valuations, it is time to say "a long goodbye to bonds" and embrace the "long good buy for equities," which he expected to embark on an upward global trend over the next few years.
As recently as late May, other Goldman officials were throwing out targets of 1500 plus on the S&P and telling us that they thought the big risk was things being better than people expected.
Jim O’Neill, Chairman of GS Asset Management also said famously early this year, “Who cares about Greece? China creates a new Greece every eleven weeks.”
But today Goldman roiled already shaky markets with a call to short the SPX, with an immediate plunge of 8-10 points on the S&P and then continued hard selling all day.
We were a bit surprised by the call. Not because Goldman is not permitted to change its mind on things. That is smart.
But ever since Goldman took such heat for shorting the mortgage market during 2008-09, they have been relatively cautious on appearing to being publicly negative on market calls. It is a well-known “secret”, according to many reports, that Goldman kept a low profile in the shorting of European sovereign debt, both for appearances purposes, and, we suspect, because they might be advising some of those very governments.
But back to today.
"This morning, the Philly Fed print of -16.6, down sequentially and worse than expected, provides further evidence that weakness has extended into June," Goldman said in a note to clients. "We now think, with incremental U.S. monetary policy on hold, the market will need to confront a deteriorating growth picture near term.”
According to Associated Press,
“Goldman analysts also noted the continued signs of sluggishness in the U.S. economy, a cooling off of China's previously red-hot growth, and infighting over Europe's heavy debt burden. They predicted that the S&P could fall to 1,285, which would be about 5 percent below Wednesday's closing price.”
According to StreetInsider, Goldman's call was “just like telling a suicidal man to jump,” based on all the fear and skepticism in the market recently (despite a more benign VIX).
Jeff Macke of Minyanville and Yahoo tweeted, “GS goes short exactly 3-mos after the once in a generation buying opp call. If they weren't soulless vultures that would be embarrassing.”
And the always cynical Zero Hedge was all over it, pointing out how the call to short the SPX was flying in the face of other very recent recommendations given to clients, and recently stated “Goldman, at least in its open sell side research, continues to have a sub 0.500 batting average in its recommendations.”
As far as we are concerned, Goldman can say anything they like, and in fact, have acted more like a contrarian indicator in many calls than a predictor. But their call today surely did not help matters for the bulls and, frankly, was very annoying. And the paranoid among us have to wonder about its timing, release, and fast distribution today, and whether it helped fuel as Dave M. tweeted, “an intraday self-fulfilling prophecy.”
And we can’t resist posting some recent comments which have been passed around about Goldman, covering a wide variety of somewhat embarrassing and seemingly conflicted GS positions:
“The embarrassing thing for Goldman is that their uncertainty and disagreement over where markets are going reflects that the masters of the universe — no matter how well connected — are just as clueless as the rest of us.
The problem for muppets (i.e. Goldman clients) is that it is impossible to be both short and long. Muppets will have to decide whose arguments to listen to for themselves, and will have to be responsible for gains or losses. The difference between the masters and their muppets is that Goldman doesn’t have to take responsibility for its actions.”
David W. (aka The Underground Trader)
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