Don't Listen to Goldman on Commodity Prices

[excerpted from Bill Cara's Daily Report]

After Wednesday’s session, which was boosted by huge rallies in Japan and Hong Kong due to the $60 billion Fed aid to South Korea and Singapore, I stated yesterday morning, “I am not yet convinced the US market is ready to soar, but the pivot point is looking more and more like it’s based on the election results. As I stated here yesterday, I think the real big money is staying on the sidelines until the managers see the results of the US election next Tuesday.”

What was concerning me was the action of the Financials on Wed. XLF had plunged -6.2% and the yield on US 3-month T-Bills had dropped into the danger zone from 0.750% to 0.565%. There was a report that HB&B was short of cash.

Then yesterday, after a strong day where only 11 or the Cara 100 were negative and all ten sectors were strong, I noted that Goldman Sachs shares (GS) plunged -6.7%. I think the cash squeeze is happening at Goldman Sachs and I also think, without proof, that they started selling oil and gold yesterday about 8:15am ET. By the time I had finished publishing the CC and DR reports shortly afterwards, I started our firm’s trader squawk box noting that gold (and oil) had just broken the recently established bullish trendline. What happened for the next couple hours was that gold and oil contracts tanked. I think this is forced selling.

So, volatility is huge, and the nexus seems to me to be Goldman Sachs. There is stress there that is apparent but not explained. The problem, as I see it, is rooted in hedge fund redemptions, particularly commodity related. Hence, I would not at this point listen to a word the Goldman Sachs analysts or spokespeople have to say about commodity prices.

Comments

[John Cordes:]

There's a reason GS is also know as BS. Market analysts, no, market manipulators.

2008 Nov 01 08:54 AM

[ron_paulite:]

Sorry I'm a somewhat slow, but what you do mean by this:

“I am not yet convinced the US market is ready to soar, but the pivot point is looking more and more like it’s based on the election results. As I stated here yesterday, I think the real big money is staying on the sidelines until the managers see the results of the US election next Tuesday.”

Are you saying that the US market is not ready to soar because the election is not yet over? Once it is over, it will soar if the results are in line with market expectations? And what do you think the managers now sitting on the sidelines are expecting from the election? A convincing win by Obama means a bull run? Or an upset by McCain a bull run? A narrow win by Obama means the market will fall?

Please enlighten us, the less intellectually endowed. Thank you.

2008 Nov 01 05:35 PM

[cjct:]

Couldn't agree more on GS commodity analysts. Same goes for the UBS insurance analyst who just downgraded AIG from buy to hold after riding it all the way down to 1.60...immediately after which AIG stock turned around and closed up 17% for the day. Pretty much as good a contrary indicator as their is, just wonder why they get paid any money since the I-banks could just install random Buy/Sell/Hold generators and produce the same manipulative effect.

2008 Nov 02 01:49 AM

[dr.doolittle:]

this is good stuff at just the right time. really like the fact you're reporting on the "crisis" from the Bahama's, and I'm not being a wise-guy when I say that. I think people do too much "extrapolating" in a "crisis" such as this. Bottom line is that governments are simply flooding the world with paper currencies because there is known lack of ethics in our "financiers." In others words the folks got to be in charge by lying all the way to the top. GS is simply the institutional manifestation of a lie, nothing more, and the "market" (aka the law) is now supplying the "discipline." Its former chairman is now trying to prevent the "less lying" institutions from failing in order to prevent a further "deflation," otherwise known as "you the truth teller really were right all along about all of us being lying sacks of poo-poo." Why not hang out in the Bahamas? Says there's reward in truth. I don't buy gold, although precious coins seem very valuable to me. They are a sign of truth as opposed to fiction. Now if JP Morgan would only bring back his "dollar" then I think we'd be "getting it" so to speak.

2008 Nov 02 12:44 PM