Even Goldman Sachs Secretly Believes That An Economic Collapse Is Coming 9/02

[hvactec]

Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention.

There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.

According to the Wall Street Journal, Brazil believes that “as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.”

Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe.

For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog….

“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”

Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors.

The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.

But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe….

Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off

This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately

read more Even Goldman Sachs Secretly Believes That An Economic Collapse Is Coming - TheTradingReport

 

[iamwhatiseem]

All the government did was treat the symptoms and not the problems.

Problems not addressed:

1) Toxic assets are still on the books of most banks.
2) America's economy was based on extraordinary debt spending, people spending more money than they made...obviously this is unsustainable.
3) The entire housing market was a government-created housing bubble that the Democrats are actually trying to take steps to recreate.
4) Concentration of wealth has created a society in America where we are very quickly becoming an indentured nation..where it is absolutely essential that people start working as soon as possible (16 at the latest) and stay working until they are dead or only a few years from death.
5) Trade imbalance.
6) World-based economy...Europe goes...we go with it.

 

[waltky]

Uh-oh, here we go again - smells like another bailout comin'...

Goldman Sachs reports $393m loss on eurozone impact
18 October 2011 - Goldman said investor confidence had fallen

Goldman Sachs has reported a quarterly loss, after its trading was "significantly impacted" by the debt crisis in the eurozone and the wider global economic uncertainty. The US bank made a net loss of $393m (£250m) for the third quarter of 2011. A year earlier, it made $1.9bn profits. Goldman's group-wide revenues fell 60% to $3.6bn, revenues at its investment banking arm declined 33%. Its results come after Bank of America reported a profit for the same period.

European impact

Goldman's chief executive and chairman Lloyd Blankfein said: "Chief executive and investor confidence, as well as asset prices across markets, were lower in the third quarter given the uncertain macroeconomic and market conditions." Analyst Todd Schoenberger, managing director at Landcolt Trading, said the Goldman loss was not a big surprise. He added: "The underlying cancer on all these reports is Europe, all these banks have risk from Europe and that region will continue to have a negative impact."

Goldman's results were worse than market expectations, and it marked only the second time the bank has reported a quarterly loss since becoming a publicly listed company in 1999. Mr Blankfein added that the bank remained strong for the future. "We believe the strength of both our client franchise and our balance sheet positions us well for when economies and markets improve," he said.

Sell-off

Bank of America made a net income of $6.2bn (£3.9bn) for the three months to 30 September, helped by asset sales and accounting gains. Its profit is a big turnaround from a year ago, when the bank reported a net loss of $7.3bn after it was hit by a one-off accounting charge of $10bn. Bank of America said it had made a $3.6bn profit from selling half of its 10% stake in China Construction Bank. Bank of America is the largest bank in the US by assets. "Our focus this quarter was on strengthening the balance sheet by selling non-core assets and building capital to position the company for future growth," said Bank of America chief financial officer Bruce Thompson.

BBC News - Goldman Sachs reports $393m loss on eurozone impact