Gold und Silber... Informationen und Vermutungen I

Goldman's glory may be short-lived

By John Gapper
Thursday Dec 6 2007 02:20

When a company is doing noticeably better than competitors in its industry there are three possible explanations: skill, luck or edge.

Which of these factors explains the success of Goldman Sachs (NYSE:GS) ? There has to be a reason why it has carried on undisturbed while other banks have been plunged into problems from the housing slump and the credit squeeze. The answer is: all three.

Citigroup (NYSE:C) has lost Chuck Prince, its former chairman and chief executive; Morgan Stanley (AMEX:MWD) has ejected Zoe Cruz, its former co-president; Stan O'Neal, Merrill Lynch's former chairman and chief executive, had to resign. And what of Lloyd Blankfein, Goldman's chairman and chief executive? His bonus will probably outstrip last year's $53m despite problems at a couple of its hedge funds.

A big reason for this is Goldman's alacrity at the start of this year in paring down its exposure to subprime mortgages and structured credit, and hedging the remainder. That bet came good as market turmoil struck all investment banks and financial institution in August, leading to some writing down billions.

The official explanation is skill. Most of Goldman's 35,000 employees are intelligent and hard-working. Even more crucially, as John Plender pointed out yesterday on Wednesday in the FT, it has a highly developed culture of teamwork rather than a star system. John Thain, the former Goldman co-president who has just moved from the NYSE Group to head Merrill Lynch, says that one of his first tasks is to instil more teamwork.

This matters when it comes to risk management. The atomised culture of many banks works fine when times are good and small teams can be trusted with capital with which to build businesses. But it creates a distorted incentive to take - and to hide - excessive risks.

Goldman bankers say it is impressed upon them that they must tell others of any concerns they have about clients or investments: the biggest offence is to keep secrets. The reward for honesty is that Goldman is slow to punish those who make well-intentioned errors.

The collective approach was in evidence when David Viniar, Goldman's chief financial officer, gathered a group of trading heads and risk controllers at the end of last year to discuss whether the bank was over-exposed to the weak US housing market. After everyone had talked over the bank's overall trading positions, its leaders astutely decided to hedge its mortgage book.

Luck has also played a role, as Mr Blankfein admits. Despite the air of infallibility that Goldman has at the moment, it has been bruised by past Wall Street crises. It was so badly caught by the short-term rate rises of 1994 that Stephen Friedman, then its senior partner, handed over the reins to Jon Corzine. It was also hurt, with the rest of Wall Street, in the 1998 Russian debt crisis.

The fact that it has done well this time is no guarantee that it will float through the next bout of turmoil.

This brings us to the third factor: Goldman's edge. No institution makes itself popular by doing better than others and financiers and observers talk darkly in private about its way of doing business. Two commentators have now broken cover to accuse Goldman of behaving unethically and perhaps of breaking the law.

Ben Stein, a columnist in the New York Times, this week suggested that Jan Hatzius, Goldman's chief US economist, was "selling fear" to boost Goldman's short position when he predicted a $2,000bn drop in lending. John Crudele of the New York Post had earlier attacked Hank Paulson, US Treasury secretary and former Goldman chief executive, for saying it was his job to talk to market participants (such as his "old friends" at Goldman) about markets.

Mr Stein's article in particular has caused a stir and Christopher Dodd, chairman of the Senate banking committee, said this week that Mr Paulson ought to address Mr Stein's doubts about Goldman underwriting collateralised mortgage obligations while he was in charge. Mr Dodd said that Mr Paulson may be investigated by the banking committee if he does not respond adequately.

But there is no evidence that Goldman did wrong by issuing Mr Hatzius's research or conversing with Mr Paulson about financial conditions, if it actually did the latter. I do not believe that Goldman broke insider trading laws. It would be stupid to risk its reputation in this way and it is anything but stupid.

The real question is whether Goldman bends Wall Street's rules in its favour. There is plenty of evidence that the bank does this and that it gains an edge from it.

Big investment banks run advisory, securities and investment businesses but keep them walled off from each other to avoid conflicts of interest and trading on inside information. Goldman has been more aggressive than any other bank in putting the three together - it often advises a company on a transaction, finances it and invests its own money.

That regularly puts Goldman in delicate spots. It swaps from advising on a sale to bidding for the property, or its private equity arm co-invests with another fund in a company its bankers have found for sale. It often faces accusations of conflicts of interest over its overlapping roles but it brushes them off by saying that its job is to "manage conflicts".

It has got away with this because it is too powerful to ignore. Private equity firms grumble that Goldman advises them on deals and competes with them but they accept it because it has such a big network of corporate clients that they cannot cut it off. One day, however, this balancing act will blow up in its face.

Goldman's skill, luck and edge have combined this year to produce its great escape. The three will not always align so well.

http://us.ft.com/ftgateway/sup…&referrer_id=yahoofinance

DECEMBER 5 2007 2:30PM

For the past week, gold and silver have traded within a range as a firming dollar and weakening crude oil have pressured prices. My sense is that PM prices would be lower at this point if not for the Fed meeting next week. The current speculation is that the Fed might lower rates by 50 basis points, which would be dollar bearish and PM bullish, but strong economic data released this week has tampered that "hope". If the Fed were to lower rates by less than 50 bp and thereby surprise a significant portion of the market, gold and silver prices may drop substantially, perhaps even below the $750/$13.50 targets. On the other hand, if the PMs can remain above these levels into the middle of December, this would be a very good reason to believe that we are seeing an ongoing consolidation which may result in a powerful breakout to new highs early next year. Crucial support remains at $710 for gold and $12.90 for silver. These prices are now actually at or below the respective 200 day moving averages, which are rising fast (meaning that these support levels will become irrelevant in the next few weeks).

From a fundamental perspective, we are seeing just the scenario I laid out previously: physical buying combined with a fall in futures open interest. This is a recipe for a repeat of the 2005-2006 PM run, boding well for short term (3-12 months) investment and speculative strategies in the PMs. On the other hand, the physical buying hasn't been as robust recently as I would like, with only the London silver ETF (PHAG) really doing a brisk business of adding to holdings.

Meanwhile, physical deliveries in the December silver COMEX futures have been very firm, running at double the 2007 average (30 million ounces vs. the usual 15 million). Fortunately, open interest in December contracts is dwindling and the fact that prices have not declined sequentially since November 30 likely means that the greater-than-normal silver deliveries are more of a sign of robust physical demand from buyers rather than dumping of excess supply by sellers. On the other hand, deliveries in COMEX gold have been very curious, running at a rate just 2/3rd of the typical for the year (1 million ounces vs. 1.5 million). Considering the extreme size of the open interest in COMEX gold, this might mean one of two things: gold available for delivery is in tight supply and/or the overwhelming majority of demand is speculative. Thus, we have an overall mixed bag in terms of December deliveries with no clear hook on which either bulls or bears can hang their hats.

On the other hand, an interesting thing has been happening in silver "lease" rates as the shorter maturities have reversed strongly from negative levels and the 12 month rate seems to be stabilizing. Because the basis has never confirmed the negative "lease" rates, there is a chance that climbing rates at this point are an indication that market participants are becoming more comfortable with the financial-monetary risks that are out there. If true, this might mean that another credit scare could be necessary in order to sustain flight to safety buying of gold and silver. Thus, a lull in bad news may remove from the equation a major driver for gold and silver buying. In effect, it would be PM bearish to see a return to the historic level of "lease" rates after having come so tantalizingly close to the point of no return.

I am hearing quite a bit of frustration out there from PM investors, particularly with respect to the under-performance by silver and junior stocks in the past few months. With respect to silver, all I can say is that silver trailing gold is a good indication that the current PM rally still has legs. I wish I could be so sanguine about the junior stocks. Unfortunately, equity markets are much more localized than the commodity markets, so often they have very different dynamics driving them. For example, the juniors trade primarily in Canada. The investors are mostly Canadians along with a small subset of German and U.S. investors. There is only a limited amount of investment funds held by these market participants, and without new funds or new participants, stock prices can stagnate. In effect, junior resource investors are pretty much "all in". If there is no new money chasing the juniors, it stands to reason that their prices will not go much higher. This is unlike the big cap resource stocks, most of which trade on the NYSE, AMEX or Nasdaq and therefore have a worldwide investment base. The result is that the seniors (HUI, XAU) have been outperforming the juniors.

So, how will this situation resolve? Clearly, the junior market needs to attract more money. That means new investors, whether another segment of the U.S. or global investment base, or majors starting to buy up their undervalued siblings. In some ways, the latter is already happening: we are seeing that junior financings are increasingly being led by larger resource companies. For example, Silver Wheaton has acquired significant stakes in several silver companies. But this can only go so far. At the end of the day, there needs to be new money from investors themselves. A few possibilities are on the horizon: integrated global trading accounts like those being proposed by E-Trade and others will provide better access to Canadian markets for the retail investor; an increase in Canadian juniors listing on the AMEX; liberalization of stock trading in China, U.K., etc. Until some of this happens, I don't believe the junior sector will be capable of +100% type moves as a whole, although individual stocks should still be able to make spectacular returns.

In conclusion, the best strategy until we see signs of new investors entering the junior sector, might be to make sure a PM portfolio includes plenty of exposure to bullion itself as well as some quality majors. At the same time, investors may wish to focus on a smaller list of high quality juniors instead of diversifying into too many names.

This will be one of the goals of the new service to be launched in January. And of course, if you have followed my commentary at all in the past year, you will already know that I have a rather healthy disdain for base metal projects at this point, preferring gold and silver above all else.

linar

Das mit Gsax ist ein grosses cover-up der vom FED unterstuetzt wird.

Vorhin sagten sie auf CNBC das Bush bzw. die FED den Homeowner eine Garantie gibt wo ihre Homeloanzinsen fuer 5 Jahre nicht angehoben werden.

Nun machen sie alles moegliche vor Weihnachten damit sie alle wieder happy sind und druckt weiter wie ein Weltmeister.

Unwahrscheinlich was die machen, irgendwann wirkt der Zauber aber nicht mehr.

Jetzt kommen noch ein paar frisierte US Wirtschaftdaten und die Zinssenkung und schon wirkt die Tablette.

Durch diese Aktionen vom FED sowie anstieg vom USD wird sich eine Erholung der Edelmetalle und PM Aktien leider weiter hinausziehen.

Wie schon erwaenht, ich bin froh wenn Gold ueber 800$ steht und der HUI bei 420 bis Jahresende.

Mehr erwarte ich nicht mehr in diesen Monat, noch zwei Wochen und die Trader sowie Manipulierer sind dann alle im Urlaub.

Gruss

Eldo

Now that the US Dollar has made an upside reversal from its weekly capitulation reading we should be looking forward to a rally back to the 20-week exponential moving average before the next round of sustained weakness. While we could thrash around at the lower levels for a week or two, the action of the past twenty years indicates that it would be normal to expect to take five to eight weeks to reach the average.

This provides a time window of December 28th through January 18th.

The first week in which the Dollar closes above the average has been an optimum point to move to an overweight position in gold bullion.

IMO bei...1.15 SFR/USD & 1.44 USD/Euro & 1.14 CAD/USD ????

http://www.321gold.com/editorials/hoye/hoye120607.html

Schablonski

Die Zinsen die sie angeblich senken am 10.Dezember hat der USD/Dow/Gold/Silber bereits einkalkuliert.
Um den $ zu halten hat man oder kommt man noch mit guten Wirtschaftsdaten die dagegen wirken was du hier andeutest.
Da passiert nicht viel sage ich dir wenn man die Zinsen wieder senkt beim naechsten meeting. ...NIX !...ausser der Dow steigt leicht an.
Der Markt rechnet schon damit weil es keine Ueberraschung mehr ist.
Ben sagte schon er senkt die Zinsen ...wieviel ?...0.25 oder 0.5 %...egal !
Am besten wird gehen jetzt schon auf Urlaub und schaun in Januar wieder auf Gold und Silber sowie Aktien.
Fuer mich ist es wichtig der Schutzengel passt gut auf die 777 und 400 HUI.
Die lassen keine Sau mehr raus vor Sylvester, egal welche.

Wuh-hahahaha ...der Durchschnitt zaehlt fuer mich.

Ich wechsel ja bald wieder...

Die EZB haltet die Zinsen bei 4% sagen sie gerade.

Expect the unexpected, ich vermute der USD trotz der Zinsenkung kann bis 0.78 U$ IDX ansteigen mit guten Nachrichten ala don't worry be happy auf CNBC.

Wenn er dann wieder bei 73 ist dann kaufe ich wieder USD mit dem anderen Fiat und gleich das minus beim USD wieder aus.

Mit Fingerspitzengefuehl und ein wenig Glueck koennte man schnell ca. 3 - 5% verdienen in ca. 8 Wochen.

Theoretisch !

Btw, die 530 Euro pro Unze Gold sowie 9.60 Euro/Silber als Boden sollten halten, egal was die Mafia macht .

Wer jetzt physisch kauft oder ZSIL/CEF der macht nichts falsch meiner Meinung.

...alle Angaben ohne Gewehr...

In Genesis 4:23b, 24 the number 7 signifies complete wrath or mercy shown to another

....so have mercy with the goldbugs...Gsax !

Ich lese nur eines aus seiner Chart, schreibt er auch, bis Gold die 827$ knackt und haelt sollten wir uns mit was anderen beschaeftigen.

@Evil

Empfindlich bin ich dann wenn einer wie du eine Aktie um zwei drittel guenstiger kauft als ich bei 54 cents und bei 52 cents gleich wieder eine PN schickt wo er sich Sorgen macht und fragt wie weit es nun runter geht. Ich habe dir die SWG nicht aufgeschwatzt, angedreht, und sage nochmals ich bin fuer nichts verantwortlich wenn einer meiner Aktien im Depot kauft. Wenn ich dann schreibe er geht mir nun am Wecker und sperre ihm von weiteren PN's der darf sich nicht wundern.
Bei manchen hier kotzt mich die Gier echt an, das muss ich noch los werden.

wenn ich schon lese...ich habe noch 2000 Euro fluessig die will ich schnell verdoppeln als Weihnachtsgeld, rueck mal ein paar tipps rueber.

...Uhh, jetzt verliere ich gerade 74 Euro

Ich habe gestern wieder 50t Aktien bei 53 cents gekauft damit du eine Ruhe gibst und die nicht weiter abfaellt.

Ausserdem habe ich gestern laut UXG geschriehen ""vor dem opening"".

Got it now ???....hier wird keiner schnell reich !
Beschwer dich bei Goldman Sachs...oder beim CEO der Mine.

Brrrrrrrrrrrrrrrrrrrrrrrrrrrrr.

XEX