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Goldman Sachs Wrong on Economic Recovery...

Discussion in 'The Economy' started by Tropo, 2nd Sep, 2009.

  1. Tropo

    Tropo Well-Known Member

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    Goldman Sachs Wrong on Economic Recovery, Macro Hedge Funds Say

    Sept. 1 (Bloomberg) -- Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery.
    Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff.
    The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.
    “If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices.
    “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”
    Goldman Sachs Wrong on Economic Recovery, Macro Hedge Funds Say - Bloomberg.com
     
  2. Chris C

    Chris C Well-Known Member

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    Takes a brave mob to suggest Goldman and Morgan Stanley are wrong, because they have an interesting habit of "just knowing things"... and let's not forget they have already made billions while others were losing their shirts...

    Then again I'm sure Goldman would have no ethical dilemma of calling the recovery to provide opportunity to dump their own holdings... who knows. I'm sure hindsight will be 20 20.
     
  3. Tropo

    Tropo Well-Known Member

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    "Then again I'm sure Goldman would have no ethical dilemma of calling the recovery to provide opportunity to dump their own holdings..."

    This kind of activity (illegal) is known as ramping.
     
  4. Chris C

    Chris C Well-Known Member

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    So are you implying Goldman and MS wouldn't covertly engage in this sort of activity?
     
  5. Tropo

    Tropo Well-Known Member

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    No, I am not saying that...
    One can only suspect ramping, but it is hard to prove it.
     
  6. Kipps

    Kipps Member

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    Ramping is rampant lets face it. Its near on impossible to prove or disprove.
     
  7. Oracle_of_Melbourne

    Oracle_of_Melbourne New Member

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    Did you forget that they both nearly went under in September? No one knows what the economy is going to do, but everyone likes to guess.

    It seems to me like greed is again the name of the game in the markets and individuals are again becoming irrationally exuberant.
     
  8. lorrimer

    lorrimer Well-Known Member

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    Let's turn the clock back to 2007 before the US sub prime crisis hit.
    The world economy was expanding, companies were making good profits, employment was high.
    The whole thing came tumbling down because it came to light that many companies and individuals were hugely over leveraged. Now we have a situation where numerous companies including some of the worlds largest banks have gone under, thousands have lost their homes and governments around the globe have been forced to pump trillions of dollars into the system to prevent a depression. It seems to have worked, except we now have the benefit of historically low interest rates providing a strong tail wind to propel us forward.
    The stock market is bouncing back off extremely low lows, a strong and powerful rally was always on the cards. The companies that survived will now have less competition, less dept and should hopefully be better managed. New industries will have be born out of the crisis providing additional employment and further boosting the economy.
    The big question that remains is how is all the government debt going to be repaid?
    I suspect that this will be a long gradual process that will most likely be left for future generations to resolve.
     
  9. Chris C

    Chris C Well-Known Member

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    Goldman was never really in trouble like some of the other investment banks obviously were, sure their share price tanked, but it's already well on its way back to its all time highs.

    Sometimes it pays to have a few dollars riding on the "guys in the know" especially when Warren Buffet another well known "guy in the know" has a big stake in the company.

    Unfortunately being "over leveraged" aka having "too much debt" is not something that goes away over night. It takes years, even decades to pay down excessive amounts of debt.

    Just because those companies and individuals that were over exposed have been bankrupted doesn't fix the system, they just become bad loans that the financial system needs to wear. Nor does it mean there isn't a huge volume of highly indebted individuals and companies still operating that will be spending a lot of their future incomes and profit into paying down debt rather than increasing investment and spending levels.

    Don't forget about inflation - central banks can't just print bucket loads of money and not expect it have an impact in the longer term, and higher levels of inflation means higher interest rates despite the slow rates of growth.