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Taibbi writes: "Goldman is building an impressive resume of sweepingly bullish predictions that later on, in retrospect, look more like signals to investors that they should run screaming in the opposite direction."

Matt Taibbi at Skylight Studio in New York, 10/27/10. (photo: Neilson Barnard/Getty Images)
Matt Taibbi at Skylight Studio in New York, 10/27/10. (photo: Neilson Barnard/Getty Images)



Goldman's Latest Boiler-Room Stock: America

By Matt Taibbi, Rolling Stone

02 December 12

 

appy New Year, everyone. Hope you all had a great holiday...

Have a column on Iowa coming soon, but first, a quick but absurd note from the world of high finance.

It seems Jim O'Neill, the head of Goldman's Asset Management department, is predicting that the United States stock market may go up "15 to 20 percent." O'Neill apparently believes Ben Bernanke and the Federal Reserve will resort to another round of money-printing, and finally green-light the long-awaited "Qe3," or third round of "Quantitative Easing."

Printing hundreds of billions of dollars and pumping them into the marketplace, where they ostensibly stimulate the economy (although recent experience tells us that the money mostly ends up being swallowed by the financial services industry - but that's another subject for another time). Anyway, Bernanke declined to go ahead with a third QE program in late 2011, but O'Neill apparently thinks we'll get it in 2012. From Bloomberg:

"If QE2 doesn’t work, then we’ll get QE3," said O’Neill, who was named chairman of the money manager in September after working as the co-head of global economics research and chief currency economist at New York-based Goldman Sachs Group Inc. since 1995. There’s a "good chance" the S&P 500 will rise 15 percent to 20 percent in the next 12 months, he said.

O'Neill added that he thought a 20 percent bump would be "relatively straightforward" for the U.S. S&P.

Goldman is building an impressive resume of sweepingly bullish predictions that later on, in retrospect, look more like signals to investors that they should run screaming in the opposite direction. A good example might be May of 2008, when Goldman boldly predicted that oil would go to $200 a barrel; oil would go on to peak at $147 less than two months later and crash to the floor soon after.

O'Neill himself famously coined the infamous "BRIC" term (Brazil, Russia, India and China), urging investors to throw their money at those emerging markets, arguing that those markets would eclipse the U.S. and Japan as the world's biggest economies by 2050. Mutual fund investors responded by pouring $70 billion into BRIC over the last decade, but that run looks over now, as $15 billion flowed out of BRIC funds in this past year alone, and some analysts are predicting a $20 percent drop this year.

Even Goldman wrote in a Dec. 7 report that that BRIC has already seen its crest. "We have likely seen the peak in potential growth for the BRICs as a group," Goldman analyst Dominic Wilson wrote in the Dec. 7 report.

I laughed when I read Wilson's quote, wondering exactly how long ago the bank privately came to that conclusion and started shorting BRIC countries. Goldman's Dec. 7 report, incidentally, arrived just before O'Neill released his new book, a Tom Friedmanesque volume of cheerleading nonsense called The Growth Map: Economic Opportunity in the BRICs and Beyond. That book was published on December 8, meaning O'Neill was seen spending 256 pages predicting "rosy prospects" for the BRIC bloc exactly one day after Goldman itself had officially bailed on its own cheesy marketing gimmick.

Anyway, every time I read one of these rah-rah predictions, I get this feeling that I've seen this movie before. When it comes time to do Goldman, Sachs: The Movie!, I'll be bummed beyond belief if Vin Diesel doesn't get to play Jim O'Neill.

The folks at Zero Hedge long ago caught on to Goldman's JT-Marlin pump-and-dump vibe. Here's what they said when Goldman upgraded European bank stocks a few weeks ago:

Goldman has just started selling European bank stocks to its clients, whom it is telling to buy European bank stocks. Said otherwise, the Stolpering of clients gullible enough to do what Goldman says and not does, has recommenced. Our advice, as always, do what Goldman's flow desk is doing as it begins to unload inventory of bank stocks. Translation: run from European bank exposure.

Sure enough, Euro bank stocks plummeted a few days after that ZH post.

I don't know much about the stock market, but when the O'Neills of the world start telling me what a great investment opportunity the American stock market is, I start getting the urge to buy canned food ...

 

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+21 # Willman 2012-01-02 21:17
Wall street would be much less of a force if a few million people stopped serial investing. They need the "churn" to enhance their profit. Buy and hold if you must invest with the bankstahs.
 
 
+32 # Tippitc 2012-01-02 22:12
Should I invest in the stock market or go to the casino?! I guess my odds at the casino would be better than listening to some BS from Goldman - actually, a coffee can in the backyard looks pretty good and they are plastic now so it won't rust!! Bonus!!
 
 
+29 # James38 2012-01-03 00:43
The banks and other institutions and their leaders who caused the crash should be prosecuted, right along with Bush the W and Cheney and a few others. Also, and probably most realistically, get after The Major Supreme Turkey, Clarence Thomas. He has committed so many ethics violations, he is a fish in a barrel, a sitting duck, and needs to be ousted from the Court.

We need to start seriously cleaning up the USA. We have become far too ethically challenged as a country, and the excesses have encouraged the growth of some of the right wingnut factions.

The chicanery of the Goldman Sachs cabal is possible because the whole society has developed a major case of moral rot. Greed has replaced respect and honesty to an absurd degree. Idealistic talk and concepts are regarded as naive by people who have "succeeded" financially while entering into a pretend level of superiority and worthiness. Actually, they are living a sham, and their lives are fragile as thin glass. One of the worst results is the concomitant growth of denial and ignorance of the Global Warming crisis, which will destroy the lives of the children and grandchildren of the bogus rich along with the lives of the children of the rest of us.

Read the book, "Storms of My Grandchildren" by Dr James E Hansen. It is a call to honest action based on a profound and fascinating lifetime of science. It is one of the books every caring human should read.
 
 
+22 # stan van houcke 2012-01-03 02:26
While America shuts down fire houses, cuts infant nutrition, US subsidizes Israel army sushi courses http://electronicintifada.net/blog/ali-abunimah/w...

what is wrong with the american elite?
 
 
+16 # Ralph Averill 2012-01-03 03:16
Anybody who takes Goldman-Sachs' advice at this point deserves what they get. The same for the bond rating agencies.
Burn me once; shame on you. Burn me twice....
 
 
+10 # sharsand 2012-01-03 06:49
A comment about oil: the price of oil rarely reflects supply and demand of oil itself anymore; it does reflect the gyrations of Wall Street. I have an opinion that it will never go above $4.00 or $4.50 a gallon anymore because at that point, people rush into their car dealerships to buy hybrids and other fuel efficient cars. If it went to $5.00, there would be a great demand for plug-ins or hydrogen or other no-gas cars, which could have already dominated the marketplace were it not for the power of the oil industry that is determined to keep us dependent on them.
 
 
+6 # wleming 2012-01-03 10:17
goldman sachs has stabbed so many in the back
it behooves them to say: its all ok
when its truth you're after
never talk to a wall street grafter
 
 
0 # AndreM5 2012-01-03 17:29
Do you mean "grifter?" Wrecks the rhyme.
 
 
+3 # jimyoung 2012-01-03 10:58
In a similar tradition,take a look at http://www.sec.gov/news/speech/2006/spch120506cc.htm
An excerpt:
Thank you, Jim [Glassman, Senior Fellow, American Enterprise Institute] for that kind introduction. It really is a pleasure to be introduced by Jim Glassman. He is the consummate optimist. And it's always nice to be introduced by someone who's upbeat.

Of course it takes a true optimist to write a book, right on the eve of the dot-com crash, titled "Dow 36,000." I had to laugh the other day, when I was doing a little Internet research on Jim — because I knew he was going to be introducing me — and I found his book on Amazon.com. And you know how Amazon always tells you, "Customers who bought this item also bought" some other book? And you know what the #1 book that customers who bought Jim Glassman's "Dow 36,000" also bought was? It was John Kenneth Galbraith's "The Great Crash of 1929."

Note: Jim Glassman is now the host of the George W. bush Institute's "Ideas in Action" show, still trying to sell us on ideas that haven't worked any better before the Great Depression than they have before the Great Recession (at least not for anyone but short term specultors who don't care what it does to the Country). Seems to fit the definition of insanity to me.
 

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