Goldman Sachs bets on economic collapse

Graham_Devon

Goldman Sachs (GS) is doing it again: telling the public that everything is going to be just fine, but meanwhile advising their top clients to bet on a huge financial collapse.

On August 16, a 54-page report 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 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.

http://seekingalpha.com/article/291405-even-goldman-sachs-now-expects-a-tremendous-financial-collapse

Seems they advise short selling?

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.

michaels

1) Surely even if an event has only a low probability but a large impact it should be addressed and where possible mitigating actions put in place - hence hedging against a crash makes sense as part of a balanced portfolio.

2) If the expectation is meltdown then any transaction such as short selling can only be profitable if the counter party remains solvent - if you really expect complete financial armageddon then short selling would not be my top investment priority.

IronWolf

lol, like investment banks know what they're talking about. Who was it that lost hundreds of billions in the first place?

StevieJ

If the bank advisors knew their !!!! from their elbow we wouldn't be in this mess.

Thrugelmir

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.

What's new?

I doubt that financial institutions are on the point of collapse. The ECB has been regularly stress testing banks. Those that fail are required to hold in essence higher capital reserves. Something which all banks are addressing every working day as they progressively reduce the size of their balance sheets.

worldtraveller

What seems to be interesting though is that the first to lose confidence in the European banking system seems to maybe be the European banking system itself. :think:

Thrugelmir

worldtraveller wrote: »

What seems to be interesting though is that the first to lose confidence in the European banking system seems to maybe be the European banking system itself. :think:

Are we? Or merely seeing banks contracting to their home bases.

Do you regard HSBC (as an example) as a UK bank?

worldtraveller

Thrugelmir wrote: »

Are we? Or merely seeing banks contracting to their home bases.

Do you regard HSBC (as an example) as a UK bank?

HSBC is of course a UK based bank, but an international banking organisation, but I totally understand your thought line. However, these are apparently European MFIs though, moving funds to accounts held in U.S. banks, not their own bank bases.

Unfortunately there is not sufficient information in the article, or probably available generally to be sure, although the US Federal Reserve calls these "foreign" banks, while separate data from the ECB shows that "European" banks have been withdrawing their cash from the European system. Nevertheless, either way, the flow of funds and the amounts involved is interesting IMHO.

Thrugelmir

worldtraveller wrote: »

HSBC is of course a UK based bank, but an international banking organisation,

The only reason HSBC has a London head office is that it was a requirement of the Midland Bank take over.

As of 2010, so now outdated.

HSBC has around 8,000 offices in 87 countries & territories, 210,000 shareholders, 300,000 staff and 128 million customers worldwide.

So its UK operation forms a very small part.

worldtraveller

Thrugelmir wrote: »

The only reason HSBC has a London head office is that it was a requirement of the Midland Bank take over.

As of 2010, so now outdated.

HSBC has around 8,000 offices in 87 countries & territories, 210,000 shareholders, 300,000 staff and 128 million customers worldwide.

So its UK operation forms a very small part.

I know, I used to have a Midland Bank account and I'm a shareholder in HSBC, as most people with any pension probably are in the UK.

I'm not disagreeing with you at all about HSBC and that it's an international bank and I was not even thinking that it's UK operation was anything but a small part.

vax2002

IronWolf wrote: »

lol, like investment banks know what they're talking about. Who was it that lost hundreds of billions in the first place?

Nobody !
Because it never existed in the first place to loose..
If i loose my wallet in with £100 inside, someone has £100
So when the banks lost hundreds of billions..
Who had the Hundreds of billions ?

In Other Words where is the lost money ?
The same place it always was, nowhere because it never existed to loose.