Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17
7 Signs You Should Add Gold To Your Portfolio Now - 19th Jun 17
US Bonds and Related Market Indicators - 19th Jun 17
Wireless Wars: The Billion Dollar Tech Boom No One Is Talking About - 19th Jun 17
Amey Playing Cat and Mouse Game with Sheffield Residents and Tree Campaigners - 19th Jun 17
Positive Stock Market Expectations, But Will Uptrend Continue? - 19th Jun 17
Gold Proprietary Cycle Indicator Remains Down - 19th Jun 17
Stock Market Higher Highs Still Likely - 18th Jun 17
The US Government Clamps Down on Ability of Americans To Purchase Bitcoin - 18th Jun 17
NDX/NAZ Continue downward pressure on the US Stock Market - 18th Jun 17
Return of the Gold Bear? - 18th Jun 17
Are Sheffield's High Rise Tower Blocks Safe? Grenfell Cladding Fire Disaster! - 18th Jun 17
Globalist Takeover Of The Internet Moves Into Overdrive - 17th Jun 17
Crazy Charging Stocks Bull Market Random Thoughts - 17th Jun 17
Reflation, Deflation and Gold - 17th Jun 17
Here’s The Case For An Upside Risk In The Global Economy - 17th Jun 17
Gold Bullish on Fed Interest Rate Hike - 16th Jun 17
Drones Upending Business Models and Reshaping Industry Landscapes - 16th Jun 17
Grenfell Tower Cladding Fire Disaster, 4,000 Ticking Time Bombs, Sheffield Council Flats Panic! - 16th Jun 17
Heating Oil Bottom Is In.(probably) - 16th Jun 17
Here’s the Investing Reason Active Funds Can’t Beat Passive Funds—and It Worries Me a Lot - 16th Jun 17
Is There Gold “Hype” and is Gold an Emotional Trade? - 16th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

How to Profit Goldman Sachs Evil Genius

Companies / Market Manipulation Dec 14, 2009 - 09:49 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleJon D. Markman writes: When references are made to the world's "oldest profession," I sometimes wonder if we're not exactly referring to market manipulation. In this country alone, market operators have been employing all sorts of market manipulations for more than 100 years.

What may surprise you is that most of it isn't illegal or even improper; in institutional circles, it's actually viewed as shrewd business.


One such manipulation was put on display this week - a news development that had me howling in disbelief and left me in awe of the evil genius of Goldman Sachs Group Inc. (NYSE: GS).

But if we step back, there's a lesson here - a lesson that points to real potential profits if we stop to understand what's about to happen before our very eyes. It's a lesson that I preach to investors - that the institutions that operate the market and maintain its very framework, also "influence" that market's movements. In fact, this real-market "case study" confirms the profit strategy that I've set out in this special report.

These machinations are completely legal. But they do happen and those who understand that also have the opportunity to profit from that knowledge.  And you don't even have to be part of the institutional elite to do so if you know what to look for.

Let me explain...

Surely you have heard by now that the Goldman partners have decided to pay their top brass in stock instead of cash bonuses this year. So do you think it is any coincidence that Goldman shares have mysteriously declined recently? After one of the most profitable years of all time due to the company's involvement in dozens of sovereign and corporate debt and equity deals, and its successful prop-desk trading of the recent volatility? 

If you had the ability to drive down the shares of stock that you were about to receive, wouldn't you do it? Goldman doesn't actually have to sell its stock to drive its value down; all its treasury department needs to do is stop supporting it during the day with buybacks.

As noted, it's not improper, it's just smart business. You can see how much Goldman's stock has fallen - compared to an industrial company like 3M Co. (NYSE: MMM) in the chart above. Since mid-October, Goldman shares are down 12% while 3M is up 9%. I seriously doubt that the pounding of Goldman's stock relative to the shares of 3M is occurring on the basis of fundamentals; it's most likely all structural. 


You can be sure that some of Goldman's financial-industry cronies will be announcing the same sort of stock-based compensation too, and it will turn out to be no coincidence that their shares have fallen dramatically while most other sectors of the market have been buoyant. 

Once those bonuses have been paid and the prices recorded, expect the prices of these shares to levitate, as if by magic. My guess is that this will happen at the start of the New Year, if not late in December.

Be ready to swoop in and take advantage.

Week in Review

The past week amounted to a series of messy, choppy sessions that reflect normal, structural change that goes on at this time of year: Some fund managers engage in end-of-year tax-loss selling; other managers tidy up their accounts so that they look all nice and pretty for customers' last account statements of the year; and still others prey opportunistically on the prior two groups.

The choppiness occurs because of the meeting of these two opposite forces: Stocks that have been super-strong, like Apple Inc. (Nasdaq: AAPL), come under some pressure as investors rebalance their winners into other stocks. And of course others take advantage of those dips to add those winning names if they don't own them already. In short, there is just a ton of gamesmanship in the first two weeks of December that makes for uneven, seesaw action. 



After the first two weeks are over, the month can get down to business. I expect that to be a renewed move to the upside that will leave pessimists, skeptics, naysayers and doom-n-gloomers wondering what hit them.

If that doesn't happen, you are welcome to wag your finger mockingly at the screen. But I'm not too worried. And just in case, don't start wagging your finger until the month is entirely done.

This week featured renewed strength in the dollar, more weakness among the banks, a weekly jobs claims report that was weaker than expected, and basically a bunch of pangs of potential nastiness that would have crushed a fragile market. And yet stocks shrugged off these items like a dog shaking off water after a jump in a cold lake. That is a sign of strength.

Breadth was quite good, and the decline of small stocks was really just a minor concern. There have been plenty of entire years in which small stocks suffered almost every single day and it did not matter one bit to the big dogs in the major market benchmarks. The year 1999 comes to mind, as the Russell 2000 was only up 10% that year going into the second week of December back then, while the big-cap tech stocks of the Nasdaq 100 were already up 75% year to date.

Across the whole market, there were 10 times more new highs than new lows, including book publisher John Wiley & Sons Inc. (NYSE: JW.A,  JW.B), and one of my favorite health care values, Medicare specialist WellCare Health Plans Inc. (NYSE: WCG).

I am pretty sure that Wiley hit a new high in anticipation of the publication of my new book project, the first annotated edition of "Reminiscences of a Stock Operator."  I just received my first copy hot off the press last week, and if I do say so myself it does look great. I am too chicken to actually read it because I am sure that I will find a typo, but I am told by reliable sources that it's really good. In fact, famed hedge fund trader Paul Tudor Jones, who wrote the foreword, said he got his copy early this week and "loved it." So really, if Jones liked it, you will too, don't you think? You can buy it at Amazon.com now (link above), and it will be in bookstores very soon.

"Reminiscences" is the best book ever written about the stock market, and considering it was published in 1923 about events of the 1860s-1920s, there has been plenty of time for someone to top it. My annotations provide the historic context for the action, as well as profiles of key characters, notes on the gambling slang with which the book is suffused, analysis of the trading strategies its main characters employ, deep thoughts on the hidden meaning of the book, and much more. Whether you are a trader, an investor, someone who is interested in American financial history, or are fascinated by the psychology of the markets, you will find it a gripping read. Not to mention an outstanding gift.

I have read the "Reminiscences" text 100 times, now, and I still find it fascinating. The author, Edwin Lefevre, was a master of creating scenes in which the agony and ecstasy of trading -- outwitting brilliant competitors, being outwitted, creating deceptions and figuring out when you're being deceived -- are described in forceful but colorful language that is immediately accessible.



As far as the instruments to use to effect this idea, here's my strategy: If you decide to be invested, then generally it pays to be invested in riskier assets -- i.e. at this time, emerging markets in Latin America and Asia. That's why we are over-weighted internationally now. The non-USA markets are in a bit of a soft spot right now, but don't be alarmed. Sitting through these kinds of relatively minor fluctuations is the way to go.

The Week Ahead

December 14:
Nothing scheduled

December 15:
Producer Price Index (11/09)
Empire State Manufacturing Index (11/09)
Industrial Production (11/09)

December 16: 
Federal Reserve Open Market Committee announcement
Consumer price index (11/09)
Housing Starts (11/09)

December 17:
Conference Board's index of leading indicators (11/09)
Philadelphia Fed's Business Outlook Survey (11/09)
Jobless claims (week ending 12/11)

December 27:
Equity, commodity and futures options expire

[Editor's Note: For the first time in 70 years, U.S. T-bills are paying 0% interest, while U.S stocks are continuing to rise. According to Bloomberg News, this last happened in 1938, when T-bill yields fell from 0.45% to 0.05%. Then came 1939, when stocks began a three-year slide that took the Standard & Poor's down 34% after the U.S. Federal Reserve prematurely boosted borrowing costs to battle phantom inflation.

Sounds eerily like the present, doesn't it?

Very few market columnists see the parallels. And even fewer see the differences. But as this column demonstrates, veteran portfolio manager, commentator and author Jon Markman sees it all. And that's why investors subscribe to his Strategic Advantage newsletter every week.

To navigate today's markets, investors need a guide. Markman is the ideal choice.
For more information, please click here.]

Source: http://moneymorning.com/2009/12/14/how-to-profit-from-the-evil-genius-of-goldman-sachs/

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife