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Coca-Cola (KO) accuses Goldman Sachs (GS), owner of the largest metals warehouse in the LME...

Coca-Cola (KO) accuses Goldman Sachs (GS), owner of the largest metals warehouse in the LME system, of inflating prices by restricting the amount of metal released to customers. "It takes two weeks to put aluminum in, and six months to get it out," says Coke's strategic procurement manager. "The situation has been organized artificially to drive premiums up."
Comments (54)
  • Ed's perspective
    , contributor
    Comments (262) | Send Message
     
    W O W . . .

     

    Public statement from COKE ... literally provoking a response . . . is way outside the box for their behavior / norms.

     

    THIS will be interesting ....
    a heavyweight fight.

     

    My money is on COKE.
    20 Jun 2011, 06:26 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1595) | Send Message
     
    Seems like an attempt by a customer to escalate a price dispute by claiming an antitrust violation. Relatively rare but does happen in business--usually one side (here KO) has to be pretty pissed to resort to this "nuclear" option. I'm sure KO also sent a letter to the DOJ, as is common in this kind of dispute.
    20 Jun 2011, 06:35 PM Reply Like
  • 2PP
    , contributor
    Comments (349) | Send Message
     
    Goldman Sachs is as corrupt an organization that exists and this statement from Coke is no surprise.
    20 Jun 2011, 06:37 PM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    Did Coke (KO) take tarp money too?
    20 Jun 2011, 06:40 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    What is wrong with that? When crude prices goes up it takes few second to increase prices at pump. When crude prices goes down it takes month to lower prices at pump. KO should complained about that.
    20 Jun 2011, 06:46 PM Reply Like
  • Windsun33
    , contributor
    Comments (4280) | Send Message
     
    We are not talking about prices here, we are talking about the actual metals stored in a warehouse.

     

    Offhand I can only think of two reasons for doing that - (1) they don't have the metals to supply because they oversold, or (2) they are holding off on delivery hoping to get it at a lower price than what Coke bought it for.
    20 Jun 2011, 10:38 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Everything is related to the price and all companies look for the profits.
    21 Jun 2011, 09:32 AM Reply Like
  • Joe Morgan
    , contributor
    Comments (1544) | Send Message
     
    Goldman Sachs is doing what everyone tries to do, increase profits, it is the basis of Capitalism.....

     

    Having said that, Goldman should not restrict for so long such valuable commodity....

     

    This is not the Goldman Sachs I knew from the 1980s......
    20 Jun 2011, 06:59 PM Reply Like
  • montanamark
    , contributor
    Comments (1444) | Send Message
     
    LOL - you supporting GS

     

    you call what GS does - "capitalism" ha
    20 Jun 2011, 07:58 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    This is not "increasing profits," this is rigging the game, just as they did with the housing shorts.

     

    Joe do you not see a pattern here?

     

    Finally somebody "legit" like Coke stepped forward and said what alot of us pinko/Commie/liberal/eco terrorist/US haters have been saying the whole damn time.

     

    Why does it take someone like Coke to say it before it gets through to you?
    20 Jun 2011, 08:00 PM Reply Like
  • Joe Morgan
    , contributor
    Comments (1544) | Send Message
     
    Lightway, about the housing shorts, if you are referring to the Abacus Deal, that is just plain nonsense.....

     

    As the market maker and underwriter of the CDO deal, Goldman Sachs had fiduciary disclosures to make, they could have missed something, but not mentioning Paulson is immaterial. They were not shorts, they were
    trying to offset pricing risks as detailed by their models that housing prices
    were deteriorating. They had long exposure to it too, so the net position of
    it was neutral. That it was market makers do everyday. The tranches were
    revised by ACA and they had the ultimate word on which RMBS were
    going to the Portfolio, they had the ultimate decision. IKB with their
    petulant arrogance thought housing prices would continue to go up, so
    they didn't complain in anything and saw the portfolio and agreed to
    it.....Why? because all this bonds were rated top notch by credit
    agencies....IKB did an detailed analysis of the portfolio and proceed it with
    putting a long exposure. They knew there was someone shorting the deal,
    but as in all these complex transactions , there is someone long or short
    depending on their circumstances and the looks of the market in
    general.....

     

    Could they had committed some stupid errors on the disclosure, yes....do they wanted the deal to crash...no....

     

    By the way, they have already resolved this, and their current disclosures are more standardized with current laws.
    20 Jun 2011, 09:48 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    We've already gone over this Joe, and stop trying to blame the credit ratings agencies (who do suck but that's a different issue). Net position was not neutral, blah blah "market makers," same canned Blankenfeld talking points, etc., etc.

     

    I'm talking about the new stuff being charged by the Senate and referred to Justice on top of all this crap.

     

    They willingly sold crap to their own clients, knew it was crap, then took the other side of the bet.
    20 Jun 2011, 10:33 PM Reply Like
  • Windsun33
    , contributor
    Comments (4280) | Send Message
     
    I don't think it takes a pinko commie lib to see corruption. The problem with pinko commies or with Nazi right wing extremists is that they see only one side of the corruption and ignore the other half.
    20 Jun 2011, 10:44 PM Reply Like
  • Joe Morgan
    , contributor
    Comments (1544) | Send Message
     
    They don't sold anything, they were underwriters of a portfolio created by ACA....ACA determined the RMBS.....IKB was a BIG bank that knew how to work CDOs....they were not clients per se of Goldman Sachs....Goldman Sachs took a short position, but they had long exposure to it, they lost money on the long side.....check the P/L statement on the deal, it was NEUTRAL.....

     

    I don't care and no one cares if IKB didn't due diligence, and thought Home prices were to continue raising...IKB invested because they thought home prices would keep rising as simple as that......enough said, keep the nonsense lies to yourself....
    20 Jun 2011, 10:51 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Windsun33
    The problem with pinko commies or with Nazi right wing extremists is that they see only one side of the corruption and ignore the other half.
    ======================...
    Historically proven, they see both sides and ignore none. Their goal is utilize it for grab of power and then for own benefit
    20 Jun 2011, 11:20 PM Reply Like
  • Joe Morgan
    , contributor
    Comments (1544) | Send Message
     
    I am going to finish this:

     

    IKB wanted long exposure to housing markets so they came to GS, GS prepared ACA as the portfolio manager. After ACA finished, IKB research team analyzed each tranche and they thought were excellent for one reason, they thought housing prices were going to keep rising. Remember
    that if housing prices would had continue to go up, the CDO would have
    been intact and IKB would had not lost money. After analyzing, the IKB
    research team give green light, and they bought it. And you say that GS
    knew it was crap.....how they could have knew it was crap? Yes, because
    Goldman Sachs's research team did a better job and got to the conclusion
    that home prices could fall. But it was all hindsight, each party had
    excellent research teams....

     

    Does GS made a mistake on some part of the disclosure, maybe....but every Investment Bank INCLUDING IKB knows market makers offset
    positions always.....

     

    They paid a fine that evaporated whatever gain they could have made, if they made one......so they already paid for whatever mistake they supposedly made.....

     

    By the way, Goldman Sachs clients have not departed the firm and they have been loyal.....

     

    So end of the story.
    20 Jun 2011, 11:29 PM Reply Like
  • Windsun33
    , contributor
    Comments (4280) | Send Message
     
    You have a point there. Better to use it than get rid of it.
    21 Jun 2011, 08:28 AM Reply Like
  • gclan
    , contributor
    Comments (45) | Send Message
     
    Yes. This GS should be liquidated and a lot of the senior executives should be in prison.
    21 Jun 2011, 10:34 PM Reply Like
  • dieuwer
    , contributor
    Comments (2552) | Send Message
     
    My money is on GS. Goldman will reply by slapping a "sell" rating on KO with the explanation that KO is showing bad price-and inventory control management
    20 Jun 2011, 08:00 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    I hope they do. Give the Justice Dept. more ammo.
    20 Jun 2011, 08:06 PM Reply Like
  • jstratt
    , contributor
    Comments (2785) | Send Message
     
    Go get em COKE!

     

    I liked banks back in the old days when they had a license to print money. Now with to big to fail they have a license to steal. I dont like that.

     

    The truth is TBTF banks are more powerful than the government. They own the government and will pour billions into the next election. If you are a Coke however you might get a side deal.

     

    The rest of us are screwed!
    20 Jun 2011, 08:19 PM Reply Like
  • KJP712
    , contributor
    Comments (454) | Send Message
     
    Stop making soda deliveries to GS Headquarters.That will teach them.
    20 Jun 2011, 09:06 PM Reply Like
  • nmelendez
    , contributor
    Comments (1622) | Send Message
     
    Yea, let them switch to pepsi, see how they like it. jajajajaja
    20 Jun 2011, 09:10 PM Reply Like
  • kmi
    , contributor
    Comments (4292) | Send Message
     
    Once again banks getting involved in businesses they should not be in and making a mess that hurts everyone.
    20 Jun 2011, 09:53 PM Reply Like
  • WMARKW
    , contributor
    Comments (10683) | Send Message
     
    Let's see. KO's market cap is twice GS's market cap. While the CFO of a small medical device manufacturer we had a variety of discussions about sole source suppliers, geographic dispersion of risk, etc. If I were KO and had KO's resources, there is NADA, ZERO, ZIP, NO way that anyone would EVER disrupt my supply or materials. Heck...I'd probably own aluminum mines sufficient to guarantee me a supply under any circumstances.

     

    Now, just curious about the cost differential between an aluminum can and a plastic bottle.
    20 Jun 2011, 10:44 PM Reply Like
  • WMARKW
    , contributor
    Comments (10683) | Send Message
     
    Option 2: KO takes $3.5 billion of their $20 billion in cash, etc. and buys a 5% stake in GS and demands a seat(s) on the board.

     

    Option 3: KO takes $xxx of their stash and buys a controlling interest in the LME. That would solve this problem in an instant.
    20 Jun 2011, 10:55 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    This is the same thing farmers do when the pile the corn up outside their grain bin and wait for prices to rise. Pure speculation.

     

    Not sure I like it but commodity producers engage it this practice all the time.
    20 Jun 2011, 11:45 PM Reply Like
  • kmi
    , contributor
    Comments (4292) | Send Message
     
    Banks using other people's money to speculate in a good they neither produce nor consume is not the same thing.
    21 Jun 2011, 09:28 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    This story is about GS and they really are not a traditional bank nor do they take retail deposits.

     

    Farmers take subsidies for crops and then hold the crops in a speculative move to maximize their gain. Hmmmmmm.

     

    Try again.
    21 Jun 2011, 04:59 PM Reply Like
  • kmi
    , contributor
    Comments (4292) | Send Message
     
    TVP, claiming GS is equivalent to farmers is probably some of the silliest commentary I may have ever seen on the internet.
    21 Jun 2011, 06:37 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    They also filed to convert to a national bank in 2008 as part of their bailout.
    21 Jun 2011, 08:12 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    kmi

     

    Not saying they are the same but it is the same practice.

     

    If you don't like people speculating which is as old as man then you are selectively self righteous.
    21 Jun 2011, 08:38 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Light

     

    Known fact they took a bank charter in 2008. However they are not a traditional bank with corner branches looking to open checking and savings accounts which refutes the arguement they are using other peoples' money.
    21 Jun 2011, 08:45 PM Reply Like
  • kmi
    , contributor
    Comments (4292) | Send Message
     
    Speculating is fine, but you are severely underestimating the sheer amount of weight GS can bring down on -anything- by virtue of its position as a financial institution.

     

    By artificially creating a low supply situation they are creating artificial inflationary pressure on aluminum which impacts -everyone, from the producers of aluminum, to the consumers of it like Coke to the guy buying a can of soda.

     

    This isn't some small farmer betting on a poor crop season and storing a portion of his crop to see if prices go up, this is a huge institution with access to limitless amounts of currency capable of pushing the global economy around at a whim.

     

    If you don't see a problem with that, I don't know what to tell you.
    22 Jun 2011, 10:53 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    kmi

     

    I understand all that but do you see anything illegal? You or I may not like it but they are speculating and can also lose their shirts if wrong. Other IB's may be shorting the commodity so are we worried about them?

     

    GS is also making a market for investors to participate in the play. Pension funds and all kinds of players participate. They in turn represent thousands if not millions of investors.

     

    Farmers are not very small anymore and corporate farms produce a huge amount of cash crop production. If they speculate en masse they also are guilty of moving markets.

     

    GS does not have unlimited amounts of currency. That is an exaggeration which does not help your point. If you don't like speculation then you need to throw out a model where it is allowed and not allowed and that makes sense. Good luck with that effort.
    22 Jun 2011, 06:03 PM Reply Like
  • kmi
    , contributor
    Comments (4292) | Send Message
     
    You're right TVP it isn't illegal anymore. Curiously, it stopped being illegal right around the time these banks started to excersize an inordinate amount of influence in every sphere of the country and right around the time commodities experienced a huge, and apparently permanent, price increase.
    22 Jun 2011, 07:29 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    TomasViewPoint
    You or I may not like it but they are speculating
    ======================...
    Not really they are speculating.
    Somewhere in between of speculation and manipulation they are
    Sidney Weinberg is not smiling to them from the Sky.
    22 Jun 2011, 09:23 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    kmi

     

    Cite the law if it was illegal before. I am not aware of it.

     

    And why did we not sue OPEC which has been in this business of curtailing supply for 40 years?
    22 Jun 2011, 10:23 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    coddy

     

    You can only say they are manipulating if they take a large enough position to move the price by cornering the market. Not apparent they are doing it in this case.

     

    I would like to know who invested in this position with GS. That would be interesting. If you want to break this up then explore that angle as the negative publicity might cause people to pull funds.
    22 Jun 2011, 10:27 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    Coke obviously disagrees with you Tomas

     

    And regarding suing OPEC, we don't have to, we did something much more sinister and invaded the place with an army.

     

    Saudis give us our oil and keep everybody in line and in turn we ignore all the dumb crap they do.
    22 Jun 2011, 11:31 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    So what if Coke disagrees. They are going to lobby for their own interests and that entails presenting their position not the bigger picture.

     

    OPEC has been curtailing supply for 40 plus years we just went in during the 1990's and we did not take any oil but rather did regime change and nation building. Bizarre philosophy of war.

     

    Understand your point on SA although I believe techncially we don't get oil from them. But we are dancing together and enabling a control of the oil supply eventhough it works against us. Never mind they fund a lot of the radical Sunni schools and other things around the world. Very incestous and not healthy for the US.
    22 Jun 2011, 11:38 PM Reply Like
  • coddy0
    , contributor
    Comments (1182) | Send Message
     
    Comparing OPEC to GS is not necessarily correct
    GS is not producing Coke
    GS is not producing cans

     

    GS and some others positioned itself in the middle of the process and (according to Coke) trying to get bigger piece of pie by slowing process down.

     

    I am not arguing legality of what they are doing

     

    I simply trying to say that Sidney Weinberg is not smiling to them from the Sky.

     

    23 Jun 2011, 12:22 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    coddy

     

    There are rarely perfect analogies. That does not mean the behavior is not similair.

     

    I am sure Sidney W is not thinking about a piddly IB here on planet earth wherever he is.
    23 Jun 2011, 12:32 AM Reply Like
  • kmi
    , contributor
    Comments (4292) | Send Message
     
    Citation:

     

    Commodity Futures Modernization Act of 2000,

     

    also see here:

     

    en.wikipedia.org/wiki/...

     

    "Since 1991 the CFTC has given secret exemptions from hedging regulations to 19 major banks and market participants, allowing them to accumulate essentially unlimited positions"

     

    Enjoy reading this too if you like:

     

    www.foreignpolicy.com/...

     

    There's lots of stuff just like that all over the place, feel free to explore.
    23 Jun 2011, 09:44 AM Reply Like
  • Scootger
    , contributor
    Comments (228) | Send Message
     
    BS story. GS has no control over commodity prices. If you think GS controls KO's input costs and the price of tin cans you are wacked in the head. The Huffington Post is the Inquirer of Wall Street. Full disclosure, if you dont own GS stock at these levels you dont want to make money, that was easy.
    21 Jun 2011, 12:32 AM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    Wall Street Journal also checked out the story. What say you now sir?
    21 Jun 2011, 12:44 AM Reply Like
  • Windsun33
    , contributor
    Comments (4280) | Send Message
     
    Reading wins, you failed. The story is not about prices, it is about delivery of the metal.
    21 Jun 2011, 11:01 AM Reply Like
  • Scootger
    , contributor
    Comments (228) | Send Message
     
    time is money
    21 Jun 2011, 03:21 PM Reply Like
  • 2PP
    , contributor
    Comments (349) | Send Message
     
    I worked for KO for 26 years. I started in production and moved to distribution and I know the business backwards, very little glass production, half plastic, but no aluminum means no 12 oz production. This is about money and control, we could always have empty cans shipped in to the bottler from another bottler, but it just cost more. KO is getting out ahead of a bottleneck and possible shakedown by GS. Why is does a bank own the largest metals warehouse in the LME system and why are they slowing distribution of their product other than to create a shortage?
    21 Jun 2011, 09:41 PM Reply Like
  • WMARKW
    , contributor
    Comments (10683) | Send Message
     
    2PP - can you provide cost difference on 12 oz can vs. 12 oz plastic?
    WMW
    23 Jun 2011, 03:06 AM Reply Like
  • 2PP
    , contributor
    Comments (349) | Send Message
     
    I have never seen the data on manufacturing cost differences can vs plastic. (above my pay grade) The real cost difference is transportation to end user, a tractor trailer load of canned product is 2304 cases of 12oz cans and weighs anywhere from 43,200lb for Diet Coke to 50,400lbs for Sprite. A similar full load (24 pallets) of product in plastic bottles would only contain 1008 cases thus more than doubling the distribution cost of plastic.
    23 Jun 2011, 11:25 AM Reply Like
  • WMARKW
    , contributor
    Comments (10683) | Send Message
     
    Definitely the can has a better shape for cubic packaging. The neck at the top of a plastic bottle is a volume waster.
    23 Jun 2011, 04:39 PM Reply Like
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