• Tag Archives Goldman Sachs
  • Bank Deregulation Back in Vogue: It’s time to dance the last fandango!

    The Great Recession was so great for the only people who matter that it is time to do it all again. Time to shed those bulky new regulations that are like clod-hoppers on our heals and dance the light fantastic with your friendly bankster. Shed the encumbrances and get ready for the new roaring twenties.
    The banks need to be able to entice more people into debt because potential borrowers with good credit and easy access to financing are showing no interest in taking the banks’ current enticements toward greater debt. That could indicate the average person is smarter than the banks and apparently recognizes they are at their peak comfort levels with debt. The banks, on the other hand, want to reduce capital-reserve requirements in order to leverage up more.
    Thus, President Trump, blessed be he, is working (in consort with the Federal Reserve) on cutting bank stress tests in half to once every two years and working to significantly reduce the amount of reserve capital banks are required to keep. He also wants to make the stress tests a little easier to pass. Such are the plans of his Goldman Sachs economic overseers to whom Trump has given first chair in various illustrious White House departments.

    This post was published at GoldSeek on 26 July 2017.

  • How To Hedge Volatility With Gold… And Make Up To 92%

    While some it as a yellow pebble, it seems Goldman Sachs recognizes other ‘value’ in gold suggesting that amid the chaotic complacency of markets, precious metal derivatives could provide an attractive broad multi-asset hedge.
    Via Goldman Sachs,
    Gold implied volatility is at the 0th percentile and implied volatility is close to 1-month realised. As a broad portfolio hedge for both equity drawdown and rate shock risk, straddles on Gold appear attractive.

    This post was published at Zero Hedge on Jul 20, 2017.

  • Wall Street Efforts to Improve Its Image Fail to Sway Americans

    Bad news for financial titans like JPMorgan Chase & Co.’s Jamie Dimon and Goldman Sachs Group Inc.’s Lloyd Blankfein: Most Americans hold unfavorable views of Wall Street banks and corporate executives, and distrust billionaires more than they admire them.
    Despite efforts by Wall Street firms to regain trust since the 2008 financial crisis, fewer than a third of Americans view the industry positively — unchanged from 2009, according to the latest Bloomberg National Poll.
    Dimon, 61, and Blankfein, 62, each chief executive officers for more than a decade, have sought to influence the public policy debate on issues including infrastructure investment, regulation, education, immigration and corporate tax reform. Both were revealed as billionaires in 2015, according to the Bloomberg Billionaires Index.
    Yet the poll shows that Americans are much more likely to distrust billionaires than admire them, 53 percent to 31 percent. And just 31 percent look favorably on corporate executives and Wall Street.
    Big banks ‘are still pushing for deregulation and they are going to get us right back to where we were with the financial crisis,’ said poll participant Chad Boyd, 36, an independent voter and information technology worker who lives in Louisville, Colorado, about 10 miles east of Boulder.

    This post was published at bloomberg

  • Gold and Silver Shine in the Midst of Commodity Slump

    Banks active in commodities have been hammered so far in 2017.
    According to reporting in the Financial Times, income from commodity trading and related activities at Goldman Sachs, Citigroup, JPMorgan and nine other investment banks dropped 40% in Q1 2017, and the struggles have continued into the second quarter.
    Weakness in the energy sector generally, and the price of oil in particular, drug down commodity trading. Gold and silver were the bright spot – an exception to the general commodity trend.
    Revenues shrank as banks became more wary of doing business with cash-strapped oil companies after the price of crude dropped below $30 a barrel. At the same time, there was little or no incentive for producers to hedge output at loss-making prices.’
    Goldman Sachs was the hardest hit. Its problems extended into the second quarter with another 40% plunge in fixed income, currencies, and commodities revenues. According to CNBC, the bank recorded its worst commodities quarter ever. Goldman CFO Martin Chavez called it a ‘challenging environment on multiple fronts.’

    This post was published at Schiffgold on JULY 20, 2017.

  • Macro Manager Massarce: “Financial Markets No Longer Make Sense”

    Over the past several years we have repeatedly stated that despite protests to the contrary, the single biggest factor explaining the underperformance of the active community in general, and hedge funds in particular, has been the ubiquitous influence of the Fed and other central banks over the capital markets, coupled with the prevasive presence of quantitative strategies, HFTs, algo trading and more recently, a surge in price-indescriminate purchases by passive, ETF managers.
    Specifically, back in October 2015, we wrote that “as central planning has dominated every piece of fundamental news, and as capital flows trump actual underlying data (usually in an inverse way, with negative economic news leading to surging markets), the conventional asset management game has been turned on its head. We have said this every single year for the past 7, and we are confident that as long as the Fed and central banks double as Chief Risk Officers for the market, “hedge” funds will be on an accelerated path to extinction, quite simply because in a world where a central banker’s money printer is the best and only “hedge” (for now), there is no reason to fear capital loss – after all the bigger the drop, the greater the expected central bank response according to classical Pavlovian conditioning.”
    Several years later, Goldman Sachs confirmed that we were correct. In a note released this April, Goldman’s Robert Boroujerdi asked in a slide titled “Does Active Have A QE Hangover” and showed that the current run of active manager underperformance began shortly after the onset of QE.

    This post was published at Zero Hedge on Jul 10, 2017.

  • Is This a Contrarian Buy Signal for the Commodities Bust?

    Here’s how commodities fared in the first half. Some people might consider this development a flaming contrarian buy signal for commodities:
    ‘Goldman Sachs Group Inc., the dominant commodities trader on Wall Street, is reviewing the direction of the business after a slump in the first half of the year,’ Bloomberg reported, citing ‘people with knowledge of the matter.’
    Will Goldman exit commodities trading?
    In 2009, Goldman’s commodities trading revenues reached $3.4 billion. By 2016, it was down to $1.1 billion, ‘according to one of the people’ cited by Bloomberg. In April, Goldman blamed its lousy first-quarter results in part on ‘significantly lower’ net revenue from commodities trading. It pointed out at the time that client volumes suffered as crude oil volatility averaged the lowest level in over than two years.

    This post was published at Wolf Street on Jul 9, 2017.

  • These Charts Show the Fed’s Stress Tests as a Dangerous Illusion

    Sometimes a picture really is worth a thousand words. The charts above show how four of the largest Wall Street banks traded like clones of one another yesterday. Their share prices rallied at almost identical times and the rallies faded at almost identical times. The chart contrasting the trading pattern of JPMorgan Chase and Morgan Stanley is particularly interesting. JPMorgan’s Chase bank has thousands of retail commercial bank branches spread across the United States. Morgan Stanley, on the other hand, has approximately 17,000 retail stockbrokers, now known as financial advisors. What both firms have in common is that they are among the five banks in the country that control a monster pile of derivatives on Wall Street. Ditto for the other two banks illustrated above: Citigroup and Bank of America.
    According to the most recent data from the Office of the Comptroller of the Currency (OCC), the regulator of national banks, as of March 31, 2017 the following five bank holding companies controlled the lion’s share of the derivatives market: Citigroup held $54.8 trillion in notional (face amount) of derivatives; JPMorgan Chase held $48.6 trillion; Goldman Sachs Group had $45.6 trillion; Bank of America held $35.8 trillion while Morgan Stanley sat atop $30.8 trillion. According to the OCC report, the top 25 bank holding companies controlled a total of $242.3 trillion in notional derivatives at the end of the first quarter of 2017, with these five bank holding companies accounting for 89 percent of that amount.
    The Fed’s Comprehensive Capital Analysis and Review stress tests (CCAR), the results of which were announced on June 28, gave the green light to these mega Wall Street banks to eat away at their capital through monster share buybacks and increases in their dividends to shareholders. This effectively ignored the concentration of derivatives held by these five firms and their heavily intertwined connectivity that results from the obvious fact that they share many of the same counterparties to these derivative contracts. The reason these mega bank stocks trade like a herd in a stressed market environment is because these banks are a herd.

    This post was published at Wall Street On Parade on July 7, 2017.

  • War or Recession Might Be Needed to Break Low-Volatility, Goldman Says

    It’ll take more than central bank tightening to shake volatility from its yearlong slumber, according to Goldman Sachs Group Inc. A large shock such as recession or war is usually required.
    That’s generally been the case for the 14 similar low volatility ‘regimes’ since 1928, at least in equity markets, Goldman Sachs strategists Christian Mueller-Glissmann and Alessio Rizzi said. These periods on average lasted nearly two years, featured short-lived spikes and realized S&P 500 volatility was usually at or below 10.
    Swings picked up across assets in the past week and investors are positioning for a shift higher, in part because of fears of central bank tightening, the strategists wrote in a July 3 report. But a sustained breakout is unlikely without an escalation in uncertainty or recession risk, they said.
    ‘Volatility spikes have been hard to predict as they often occur after unpredictable major geopolitical events, such as wars and terror attacks, or adverse economic or financial shocks and so-called ‘unknown unknowns’ (e.g. Black Monday in 1987),’ London-based Mueller-Glissmann and Rizzi said. ‘Recessions and a slowing business cycle have historically resulted in a high vol regime across assets.’
    Goldman Sachs puts the chances of a recession in the next two years at 25 percent.

    This post was published at bloomberg

  • Goldman Sachs On What Happens Next – Recession, War, Or Goldilocks

    After several months of low volatility across assets since mid-2016, particularly in equities, markets were more volatile last week owing to fears of central bank tightening. Volatility picked up first in FX and rates, and then spilled over to equities. However, as Goldman notes, this might not be the end of the low vol regime yet.
    Via Goldman Sachs,
    Since 1928, there have been 14 comparable low vol regimes for the S&P 500 – on average, they lasted nearly two years and they had a median length of 15-16 months. Often they were supported by a very favourable macro backdrop, similar to the recent ‘Goldilocks scenario’. Breaking out of the low vol regime usually required a large shock, for example a recession or war. While central bank uncertainty can drive volatility in the near term, it is unlikely to drive a sustained high vol regime.
    Investors have recently started to position for higher volatility – the open interest n VIX calls has increased, inflows into the largest long VIX ETP have picked up and the net short on VIX futures has decreased. But the VIX call/put open interest ratio has little predictive power for large VIX spikes historically. We think short-dated S&P 500 put spreads best address the risk investors are facing in the near term – a consolidation but not yet a transition into a sustained higher vol regime.

    This post was published at Zero Hedge on Jul 3, 2017.

  • Planning To Sell Volatility? Goldman Explains Why It Will Buy From You

    Other than buying Ethereum, one strategy has stood out in investing circles – selling US equity market volatility, and as Goldman notes, the profitability of vol-selling strategies has accelerated in the last year. With vol at record lows, and after a long-run of success, Goldman unveils its guide to selling volatility, why it’s a good idea, and how to do it.
    Via Goldman Sachs,
    We are increasingly asked whether flows into options and VIX selling strategies are pressuring options prices and dampening stock price moves. Indeed, when an investor sells an option, the Market Maker on the other side of the trade ‘delta-hedges’ the portion of the trade where there is not a natural buyer. This ‘delta-hedging’ dampens the volatility of the underlying asset from the time of the trade until expiry, all else equal. In this report, we explore the public data that is available to assess whether options and VIX ETP flows have the potential to contribute to the decline in implied and realized volatility. While a significant portion of the options market trades in OTC markets (where public data is sparse), we believe trends in OTC markets are consistent with our findings in the listed markets. In fact, based on our discussions with those that run systematic options strategies, much of OTC volume is recycled into the listed market and likely to influence publically available data.
    Why are investors asking if options selling strategies are crowded?

    This post was published at Zero Hedge on Jun 28, 2017.

  • Tech Stocks Slammed Last Week: How Scary Is This Market?

    Mark this date on your calendar: Friday, June 9, 2017. That’s the date that the big downward move in the largest tech stocks began. The day also saw a rotation into big bank stocks (which is like swapping a land mine for a hand grenade – there’s going to be an explosion, it’s just a matter of degree).
    The selloff on Friday was triggered by a research report from Robert Boroujerdi of Goldman Sachs. The report compared today’s FAAMG tech stocks (Facebook, Apple, Amazon, Microsoft and Google-parent Alphabet) to the highfliers in the tech bubble that crashed in 2000: Microsoft, Cisco, Intel, Oracle and Lucent.
    Boroujerdi used a lexicon that the market did not want to hear: ‘death,’ ‘extremes,’ and ‘difficult to decipher risk narratives.’ The exact sentence went like this:
    ‘This outperformance, driven by secular growth and the death of the reflation narrative, has created positioning extremes, factor crowding and difficult-to-decipher risk narratives (e.g. FAAMG’s realized volatility is now below that of Staples and Utilities).

    This post was published at Wall Street On Parade on June 19, 2017.

  • DOJ Moves To Seize DiCaprio’s Picasso, Rights To “Dumb and Dumber To” As Part Of 1MDB Case

    As part of the ongoing money-laundering probe of Malaysia’s sovereign wealth fund, 1MDB, which is perhaps best known for Goldman’s enabling and participation in what may end up being one of the world’s biggest, multi-billion, cross-border embezzlement schemes, on Thursday the DOJ moved to seize a Picasso and Basquiat paintings given to Leonardo DiCaprio, as well as rights to two Hollywood comedies, in complaints filed to recover about $540 million they say was “stolen” from 1MDB (with Goldman’s help).
    The DOJ filing was the latest in a long series of legal actions tied to money laundering at the fund set up by Malaysian Prime Minister Najib Razak in 2009 – who still remains in power – to promote economic development. In the complaint filed overnight, the department alleged that more than $4.5 billion was taken from 1MDB by high-level fund officials and their associates. Fraud allegations against 1MDB go back to 2009 and the fund is subject to money laundering investigations in at least six countries, including Switzerland and Singapore.
    “This money financed the lavish lifestyles of the alleged co-conspirators at the expense and detriment of the Malaysian people,” Kenneth Blanco, acting assistant AG said in a statement. The name of Goldman Sachs, which participated and directly profited from many of the 1MDB transactions, was oddly missing from today’s filing.
    Najib has denied taking money from 1MDB or any other entity for personal gain, after it was reported that investigators traced nearly $700 million to bank accounts that were allegedly in his name.
    And while we won’t hold our breath to learn why Goldman’s involvement was mysteriously dropped, Reuters reported that Leonardo DiCaprio has turned over an Oscar won by Marlon Brando to U. S. investigators probing the 1MDB money laundering. DiCaprio also initiated the return of other, unidentified items that the actor said he accepted as gifts for a charity auction and which originated from people connected to the 1MDB wealth fund, they said in a statement.

    This post was published at Zero Hedge on Jun 15, 2017.

  • The Tech-Wreck – A Shot Across The Bow For “Passive Indexers”

    I wanted to pick up on a discussion I started in this past weekend’s missive, with respect to both Friday’s rout in technology stocks as well as Monday’s rather nasty open. While the issue seemed to be a simple short-term rotation in the markets from large capitalization Technology and Discretionary stocks into the lagging small and mid-capitalization stocks, the sharpness of the ‘Tech Break’ on Friday revealed an issue worth re-addressing. To wit:
    ‘Both Discretionary and Technology plunged on Friday as a headline from Goldman Sachs questioning ‘tech valuations’ sent algo’s running wild. The plunge was extremely sharp but fortunately regained composure and shares rebounded. A ‘flash crash.’
    One day, we will not be so lucky. But the point I want to highlight here is this is an example of the ‘price vacuum’ that can occur when computers lose control. I can not stress this enough.
    This is THE REASON why the next major crash will be worse than the last.’
    I am not alone in this reasoning. Just recently John Dizard wrote for the Financial Times:
    ‘The most serious risks arising from ETFs are the macro consequences of too much capital being committed in too few places at the same time. The vehicles for over-concentration change over time, such as the ‘Nifty Fifty’ stocks back in 1973, Mexican and Argentine bonds a few years after that, internet shares in 1999, and commercial property every other decade, but the outcome is the same. Investors’ cash goes to money heaven, and there is a pro-cyclical decline in productive investment.

    This post was published at Zero Hedge on Jun 13, 2017.

  • Sergey Aleynikov, Jailed by Goldman Sachs, May Be Just the Man to Stop Russian Hacking of U.S. Voting Systems

    If Goldman Sachs thinks this Russian computer genius is worthy of endless prosecution for the past eight years, despite two courts overturning their efforts, perhaps he’s just the man the Department of Homeland Security and FBI need to stop the Russian assault on the U. S. election system.
    This morning Bloomberg News is reporting that in the leadup to the Presidential election of 2016, Russian hackers hit voting systems in a total of 39 states, confirming other reports that the U. S. public has not previously been made of the extent of Russian hacking into state voting systems.
    In testimony before the Senate Intelligence Committee on June 8, former FBI Director James Comey stated in regard to Russian interference in our elections that ‘They’re coming after America,’ adding that ‘They will be back.’
    This is where computer experts on Wall Street could help the FBI and the Department of Homeland Security. Wall Street technology experts know something that, apparently, our government doesn’t: Many of the smartest programmers and hackers in the world are from Russia. If you want to catch one, you’d better hire one.

    This post was published at Wall Street On Parade on June 13, 2017.

  • LTCM Is Back: One Hedge Fund Uses 25x Leverage To Beat The Market

    Before we start, a little history lesson…
    At the beginning of 1998, Long-Term Capital Managementhad equity of $4.72 billion and had borrowed over $124.5 billion with assets of around $129 billion, for a debt-to-equity ratio of over 25 to 1.
    It was run by finance veterans, PhDs, professors, and two Nobel Prize winners. Everyone on Wall Street wanted a piece of their profits.
    But by 1998, that firm was primed to expose America’s largest banks to more than $1 trillion in default risks. The demise of the firm, LTCM, was swift and sudden. In less than one year, LTCM had lost $4.4 billion of its $4.7 billion in capital.
    The disaster had all the players – the Federal Reserve, which finally stepped in and organized a bailout, and all the major banks that did the heavy lifting: Bear Stearns, Salomon Smith Barney, Bankers Trust, J. P. Morgan, Lehman Brothers, Chase Manhattan, Merrill Lynch, Morgan Stanley, and Goldman Sachs.
    In desperate need of a $4 billion bailout, the crumbling firm was at the mercy of the banks it had once snubbed and manipulated.

    This post was published at Zero Hedge on Jun 11, 2017.

  • Bilderberg: The world’s most secretive conference is as out of touch as ever

    Say what you like about Bilderberg, but they’ve got a sense of humour. The agenda for this year’s secretive summit of the global elite is full of in-jokes. They get big laughs straight off the bat by describing themselves as ‘a diverse group of political leaders and experts’.
    They’re trumpeting the diversity of a conference where less than 25% of the participants are female. Which would be a huge step forward, if it were currently 1963.
    And as for racial diversity, there are more senior executives of Goldman Sachs at this year’s Bilderberg than there are people of colour.
    Perhaps by ‘diverse’ they mean that some of the participants own hedge funds, whereas others own vast industrial conglomerates. Some are on the board of HSBC, others are on the board of BP. Some are lobbyists, others are being lobbied. That sort of thing.
    Dafter still is the agenda item: ‘Can globalisation be slowed down?’ You think that the assembled heads of Google, AT&T, Bayer, Airbus, Deutsche Bank, Ryanair, Fiat Chrysler, and the Frankfurt Stock Exchange want to see a brake on globalisation? It’s the air that they breathe.

    This post was published at The Guardian

  • Russian Bank Chairman Met With Kushner, Citigroup and JPMorgan Chase

    Headline writers at the New York Times need to sharpen their pencils. Yesterday’s New York edition carried a front page article that links two of the biggest Wall Street banks, Citigroup and JPMorgan Chase, to the Jared Kushner affair with the Russian banker, Sergey Gorkov, Chairman of the state-owned Russian bank Vnesheconombank (VEB) which has been under U. S. sanctions since 2014. But readers would have missed that completely if they only read the softball headline, which failed to mention either bank.
    Everyone on Wall Street has been waiting for the next shoe to drop in the Jared Kushner episode. Kushner is under FBI and Congressional probes over allegations that he met in December with Gorkov while simultaneously attempting to set up a secret channel to communicate with Russia using its equipment inside its own embassy – ostensibly to thwart U. S. intelligence snooping. Kushner then failed to list that meeting, as well as one or more meetings with the Russian Ambassador, Sergey Kislyak, on his form for security clearance until the meetings became public knowledge.
    That shoe has now dropped. Wall Street On Parade reported on May 30 that some of the biggest names on Wall Street are sitting with hundreds of millions of dollars of that sanctioned Russian bank’s bonds and notes in their mutual fund portfolios. (See related article below.) Yesterday, the New York Times reported that when Gorkov came to Manhattan to meet with Kushner in December, he also ‘met with bankers at JPMorgan Chase, Citigroup and another, unidentified American financial institution.’ The article notes that ‘Goldman Sachs bankers also tried to arrange a meeting but ultimately had a scheduling conflict.’

    This post was published at Wall Street On Parade on June 6, 2017.

  • Central Banks Now Own A Third Of The Entire $54 Trillion Global Bond Market

    Two weeks ago we asked a question: maybe behind all the rhetoric and constant (ab)use of sophisticated terms like “gamma”, “vega”, CTAs, risk-parity, vol-neutral, central bank vol-suppression, (inverse) VIX ETFs and so forth to explain why despite the surging political uncertainty in recent years, and especially since the US election…
    … global equity volatility, both implied and realized, has tumbled to record lows, sliding below levels not even seen before the 2008 financial crisis, there was a far simpler reason for the plunge in vol: trading was slowly grinding to a halt.
    That’s what Goldman Sachs found when looking at 13F filings in Q1, when it emerged that the gross portfolio turnover of hedge funds had retreated to a record low of just 28%. In other words, few if any of the “smart money” was actually trading in size.

    This post was published at Zero Hedge on Jun 4, 2017.