4 ms·

Might. Or might not. The last authority on that IMO is an investment bank with no skin in the game. If they really thought it’s true, they would trade on it th

Might. Or might not. The last authority on that IMO is an investment bank with no skin in the game. If they really thought it’s true, they would trade on it themselves (they can now, really) or at least keep quiet about it and tell their top-paying clients privately.

meepmorp 5y ago
I'm not advocating for or against GS here, but wouldn't an investment bank with no skin in the game be a bit more trustworthy? If there's no money on the line, there's no incentive/pressure to conform their analyses to their lines of business.
- asdfasgasdgasdg 5y ago
  A few things. It's a big assumption to guess they have no skin in the game. They could and likely do have a net position one way or another in the oil market. There are a few ways that could work. They could both believe this is true, and also have a position in that direction. So publicizing this view might help their position realize gains sooner than expected. This is somewhat of an opposite to how short sellers work, where they will take a position then publish an expose. But suppose they have no skin in the game. Is that necessarily better? It implies they don't know enough about the market to actually take a position, which calls into question the value of their research. Of course both of these are huge simplifications. They ignore that GS is a huge organization, not a single person. As schizophrenic we people can be, corporations are that much more so. The left hand literally might not know what the right is doing. Who published this paper may not have authority to trade, or the ears of those who do. Or many other possible explanations. Anyway, the general point is that disinterest and neutrality do not universally make opinions more reliable.
  - InitialLastName 5y ago
    As big in both organizational size and managed volume as Goldman Sachs is (and as substantial and fundamental a portion of the global market as oil is), it's almost inconceivable that they wouldn't have any exposure in the oil market. In fact, I'll bet that across the organization GS is currently holding multiple different (potentially mutually contradictory) positions in the oil market.
gjm11 5y ago
I have to say that my immediate interpretation of the title is: "Goldman Sachs: We've bought some oil futures".
- NovemberWhiskey 5y ago
  Except that, post Volcker, banks are prohibited from proprietary trading; and also except that there exist strong mandatory separations ("Chinese walls") between investment research and the investment banking and trading parts of banks.
  - dig1 5y ago
    Assuming they bought futures, "Goldman Sachs Futures Pte Ltd" is officially located in Singapore and Volcker Rule doesn't affect companies that are doing trades outside of US or makes trade decisions outside US. Volcker Rule does affect banks that are controlled by US banks, but if Goldman did paperwork correctly (of course they did), beside the name similarity, you won't be able to link it with US Goldman.
  - beervirus 5y ago
    GS is an investment bank, not a commercial bank.
    - NovemberWhiskey 5y ago
      GS is actually a bank holding company; I'm not sure what your comment is actually trying to say though - does it intend to contradict some part of what I wrote?
      - beervirus 5y ago
        The point is that they have an investment banking arm that is absolutely doing prop trading.
    - a11r 5y ago
      This stopped being true during the 2008 financial crisis. See https://www.marcus.com/us/en https://www.marcus.com/us/en .
beamatronic 5y ago
Someone with a Bloomberg terminal could backtest whether trading with (or against) Goldman's public advice works (or not) over time
- rich_sasha 5y ago
  Doesn’t :)
  - koolba 5y ago
    Fun fact: it was consistently wrong that’d be just as useful.
    - doovd 5y ago
      This is not necessarily the case, due to market spread. It's very easy to build a strategy that's consistently wrong, but by flipping the signs you will still be consistently wrong because of market spread.
baq 5y ago
quoting wikipedia > and "by 2008, eight investment banks accounted for 32% of the total oil futures market". don't know the current state of affairs, but you can be sure goldman bought oil. in june. last year.
- rich_sasha 5y ago
  Rules changes and investment banks cannot do prop trading now. Though I hear they changed again, quietly, and now they sort of can. The point is, this is some analyst writing it. I’m sure it doesn’t go against the business and trading positions of GS, but it is some minor part of a big picture. Overall, public analyst recommendation are pretty much uncorrelated with future returns.
Mikeb85 5y ago
GS definitely buys and sells oil futures. https://markets.businessinsider.com/news/stocks/goldman-sachs-commodity-market-traders-billion-short-oil-price-plunge-2020-6 https://markets.businessinsider.com/news/stocks/goldman-sach...
nightski 5y ago
I feel like it would be pretty hard for any investment bank to have no skin in the game. Many if not most of the companies in the stock market are affected by rising oil/energy prices.
- rich_sasha 5y ago
  Banks make money off fees for trading and loans (and complicated products that end up being a mix of the two). The recommendation business is mostly a marketing effort to drum up business. Their clients will be split roughly 50:50 on views on oil going or down. They don’t care. For every client losing money, another makes money too and has more money to spend on trading fees. Banks used to be allowed to trade on their own accounts, but that was a massive invitation for abuse. This got at least massively scaled down, if not outright banned. Sometimes investment banks do find themselves with an exposure they have to actively hedge; maybe they sold some complex product and it backfired on them, etc. But that’s rarer and a lot harder to game.

meepmorp 5y ago

I'm not advocating for or against GS here, but wouldn't an investment bank with no skin in the game be a bit more trustworthy? If there's no money on the line, there's no incentive/pressure to conform their analyses to their lines of business.

asdfasgasdgasdg 5y ago
A few things. It's a big assumption to guess they have no skin in the game. They could and likely do have a net position one way or another in the oil market. There are a few ways that could work. They could both believe this is true, and also have a position in that direction. So publicizing this view might help their position realize gains sooner than expected. This is somewhat of an opposite to how short sellers work, where they will take a position then publish an expose. But suppose they have no skin in the game. Is that necessarily better? It implies they don't know enough about the market to actually take a position, which calls into question the value of their research. Of course both of these are huge simplifications. They ignore that GS is a huge organization, not a single person. As schizophrenic we people can be, corporations are that much more so. The left hand literally might not know what the right is doing. Who published this paper may not have authority to trade, or the ears of those who do. Or many other possible explanations. Anyway, the general point is that disinterest and neutrality do not universally make opinions more reliable.
- InitialLastName 5y ago
  As big in both organizational size and managed volume as Goldman Sachs is (and as substantial and fundamental a portion of the global market as oil is), it's almost inconceivable that they wouldn't have any exposure in the oil market. In fact, I'll bet that across the organization GS is currently holding multiple different (potentially mutually contradictory) positions in the oil market.

gjm11 5y ago

I have to say that my immediate interpretation of the title is: "Goldman Sachs: We've bought some oil futures".

NovemberWhiskey 5y ago
Except that, post Volcker, banks are prohibited from proprietary trading; and also except that there exist strong mandatory separations ("Chinese walls") between investment research and the investment banking and trading parts of banks.
- dig1 5y ago
  Assuming they bought futures, "Goldman Sachs Futures Pte Ltd" is officially located in Singapore and Volcker Rule doesn't affect companies that are doing trades outside of US or makes trade decisions outside US. Volcker Rule does affect banks that are controlled by US banks, but if Goldman did paperwork correctly (of course they did), beside the name similarity, you won't be able to link it with US Goldman.
- beervirus 5y ago
  GS is an investment bank, not a commercial bank.
  - NovemberWhiskey 5y ago
    GS is actually a bank holding company; I'm not sure what your comment is actually trying to say though - does it intend to contradict some part of what I wrote?
    - beervirus 5y ago
      The point is that they have an investment banking arm that is absolutely doing prop trading.
  - a11r 5y ago
    This stopped being true during the 2008 financial crisis. See https://www.marcus.com/us/en https://www.marcus.com/us/en .

beamatronic 5y ago

Someone with a Bloomberg terminal could backtest whether trading with (or against) Goldman's public advice works (or not) over time

rich_sasha 5y ago
Doesn’t :)
- koolba 5y ago
  Fun fact: it was consistently wrong that’d be just as useful.
  - doovd 5y ago
    This is not necessarily the case, due to market spread. It's very easy to build a strategy that's consistently wrong, but by flipping the signs you will still be consistently wrong because of market spread.

baq 5y ago

quoting wikipedia > and "by 2008, eight investment banks accounted for 32% of the total oil futures market". don't know the current state of affairs, but you can be sure goldman bought oil. in june. last year.

rich_sasha 5y ago
Rules changes and investment banks cannot do prop trading now. Though I hear they changed again, quietly, and now they sort of can. The point is, this is some analyst writing it. I’m sure it doesn’t go against the business and trading positions of GS, but it is some minor part of a big picture. Overall, public analyst recommendation are pretty much uncorrelated with future returns.

Mikeb85 5y ago

GS definitely buys and sells oil futures. https://markets.businessinsider.com/news/stocks/goldman-sachs-commodity-market-traders-billion-short-oil-price-plunge-2020-6 https://markets.businessinsider.com/news/stocks/goldman-sach...

nightski 5y ago

I feel like it would be pretty hard for any investment bank to have no skin in the game. Many if not most of the companies in the stock market are affected by rising oil/energy prices.

rich_sasha 5y ago
Banks make money off fees for trading and loans (and complicated products that end up being a mix of the two). The recommendation business is mostly a marketing effort to drum up business. Their clients will be split roughly 50:50 on views on oil going or down. They don’t care. For every client losing money, another makes money too and has more money to spend on trading fees. Banks used to be allowed to trade on their own accounts, but that was a massive invitation for abuse. This got at least massively scaled down, if not outright banned. Sometimes investment banks do find themselves with an exposure they have to actively hedge; maybe they sold some complex product and it backfired on them, etc. But that’s rarer and a lot harder to game.