Tagged: Goldman Sachs

The Audience

“I’m going to write a four-letter word meaning intercourse,” my speech-class colleague Jim announced, striding to the chalk board. It was 1986.

Stunned, the rest of us stared open-mouthed.  The chalk clicked.  Jim stepped back and with a flourish gestured at what he’d written.

“Talk,” he declared.

Freshman college speech burned into my mind the importance of knowing your audience.  Seated there in the IR chair, who’s yours?

As you tee up an answer, let me tell you a story. It must’ve been a long last Sunday at Goldman Sachs.  Late Oct 26, with fanfare and after machinating immense quantities of data or perhaps just looking at sliding oil prices since August, the firm pronounced a new view for the energy sector. Oil, it said, would be priced lower than previously thought.

I’m poking fun, yet it was anything but for many in the energy sector Monday as the Goldman Tsunami appeared to crash over its investing audience, driving some energy and chemicals companies down 4-5% on a flat market day.

Okay, stop for a moment. It’s not your sector so you want to move on to your Twitter feed. Right? Stay put.  The same may apply to you and your peers.

Back to our story, the conclusion one would infer is that having waited for the vaunted Wall Street firm to speak, investors, teeth gnashing, doused themselves with ashes, donned sackcloth, and punched out of petroleum. (more…)

Volcker Rocks IR

Volcker would be a great name for a shred-metal band. It seems vaguely gothic and you can picture musicians in leather with guitars and tattoos. Maybe colored hair.

Alas, no. The Volcker Rule is no band. But it’s prompting musical chairs that may rock IR. I’ll tell you how in a moment. First, this:

If you’re a member of MAPI, I’ll be regaling your IR council Friday Sept 14 with tales of the tape. If your IR program is stuck in the 1980s with a mullet and a Wurlitzer, come occupy a seat at the Intercontinental.

Second, a word on markets: No clanging claxons but we’re tapping the tam-tam on market risk. Hedging is up. Sentiment is vastly neutral – like painting the ceiling gray. Market structure to end August was a restive crowd in a mall at closing time.

Paul Volcker calmed the crowd. The six-foot-seven-inch Fed chairman loomed over markets from 1979-1987, earning praise for heeling rampant inflation. In 2010, a section of Dodd-Frank aimed at halting speculative trading by large commercial banks came to be called the Volcker Rule because the eminent economist had proposed it.

The rule hasn’t yet taken effect but Wall Street is already scurrying like a school when the bell rings. An exodus of proprietary traders – professionals deploying a bank’s own assets for return – from names like Goldman Sachs and Morgan Stanley is setting up shop. (more…)

When Investors Buy and Sell

When investors buy and sell shares, what happens?

The logical answer is “stocks go up and down.” Let’s get more specific. Among the 20 largest asset managers at the end of 2009, ten were bank-owned, says consulting firm Towers Watson. The five largest – Blackrock, State Street, Allianz, Fidelity and Vanguard – are independents that pass the preponderance of their buying and selling through the biggest sellside firms on passive equity and ETF trading programs.

The banks behind ten of the twenty largest asset managers include BNP Paribas, Deutsche Bank, JP Morgan, BNY Mellon, Credit Agricole, UBS, Goldman Sachs, HSBC and Bank of America.

The top ten futures brokers for 2009 were Newedge (Societe General/Credit Agricole joint venture), Goldman Sachs, JP Morgan, Deutsche Bank, Citigroup, UBS, BofA, MF Global, Morgan Stanley and Barclays. (more…)

Market Mayhem and Large Traders

Why are markets dropping like the thermometer at 8pm on Pike’s Peak?

Debt chaos, sour economic data, sure. We’re not market prognosticators, we track behavioral data. Under the skin of the news at market level, institutions shifted to managing portfolio risk about July 21. These events were observable. Algorithmic execution changed, and we saw what started it and what followed.

Large diversified asset managers swapped out of equities. That means they assigned the risk in portfolios to others through agreements that traded risk for safety at a cost. Why not just say “investors sold to manage risk”? It’s not accurate and it won’t be reflected in settlement data.

Of course, hedging produces a range of consequences too. Those underwriting hedges themselves hedge the risk they assume. That prompts speculating in whatever instruments are being used to hedge the hedges. The idea is to offset every point of exposure – like double-entry accounting, a credit for every debit.

Consider the Treasurys market – the one in peril till today. Primary dealers ranging from Banc of America to Goldman Sachs make markets in Treasurys. Average daily trading volume in Treasurys is more than $500 billion. Bond trading in total in the US averages more than $950 billion daily and nearly 80% is government securities.

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Facing the Book Facts

My flight today to Cincinnati through Atlanta froze in the blizzard of lost travel dreams. Which proved fortuitous, as I was able to skip Atlanta and flight straight to Cincinnati, saving me five hours. I love blizzards.

Speaking of sharing personal details, Facebook is the biggest entrepreneurial deal of the current day. It’s also a focal point for the widening divide between public markets and growth enterprises. Facebook may or may not go public. If it does, much of its prodigious progress will already have been funded, and the public markets will serve more as a wealth-transfer device than a capital-raising tool.

It’s a microcosm for investor relations. Speaking of speaking, I’m at the NIRI Tri-State Chapter tomorrow for what I have assured my hosts will be a riveting exploration of how to be cool in an IR seat heated to silliness by transient trading. Hope to see you locals there, by sled, snowmobile or telemark!

Anyway, according to the stock-market newsletter Crosscurrents, the average holding time for institutional positions is now 2.8 months. “The theory that buy-and-hold was the superior way to ensure gains over the long term, has been ditched completely in favor of technology,” writes Alan Newman, its author. (more…)

Nobody Wants to See You Naked

Should we ban nakedness?

The SEC thinks so. Continuing a raft of rules in response to the Flash Crash, the commissioners voted last week to restrict “naked access,” or trading at somebody else’s terminal.

Executives and IR professionals, you’ll get questions. Your shares are affected by these rules. What do you know about naked access, and is stopping it good? (more…)

Trading Goes Beyond the Edge

We were in Lake Jackson, TX, last week for Karen’s HS reunion. South Texas is a sweat lodge this time of year, but the Saint Augustine grass lies lush and luminescent under the sycamores and live oaks. And we saw not one tar ball on Surfside Beach in Freeport.

A word on trading: We expected money to move after options expirations, but changes to program-trading plans came early, on July 14, we observed in the data. So with expirations July 15-16, markets were shellacked when money shifted to other assets. The past two days have given us massive arbitrage around this shift and ahead of tomorrow’s volatility expirations. Thus, the week could end on a rough note, we fear. (more…)

Loveland Ski Resort an hour up I-70 from downtown Denver logged 26 inches of snow in the past five days. We’ve had to cover patio plants the past two nights as temperatures dipped to 30. It’s bright and clear. But winter has had a hard time letting go this year.

Meanwhile in Europe, Morgan Stanley launched a lending book for European Exchange Traded Funds (ETFs) today. Here is the key to understanding financial reform currently mucking up Congress. It encapsulates everything that’s wrong with today’s capital markets. (more…)

Goldman Sachs or Expirations?

We hope none of you are marooned in Europe by volcanic ash. If you are, we’ll try to keep your minds off the extra money you’re spending with the shocking suggestion that markets writhed last week not for Goldman Sachs but for expirations.

The SEC last week sued Goldman Sachs for misleading investors about certain collateralized debt obligations during the subprime mortgage meltdown. (more…)

The derivative we need is a weather swap. The Winter Olympics would pay a premium for that spare snow lying around unused on the east coast.

Speaking of derivatives, the dollar retreated today, and US equities rebounded. We all want it to be about investing. Commentary everywhere today polished bullishness to an economic sheen. But that won’t make it reflect reality. Money keeps buying short-term love because the direction of the dollar is like a blacksmith’s bellows on equities. (more…)