We The Sheeplez- The Coming Economic Collapse.."A Nation Of Sheep Ruled By Wolves" Thomas Jefferson

It's Not 2008, It Is 2007: Goldman Global Alpha Just Blew Up All Over Again

Those who have been around for more than one trading generation (which in the old days was 3-4 years, but in the current centrally-planned, vacuum tube-traded times, is more like 3-4 months), will distinctly recall that the first rumbling of the financial crisis started not with the bankruptcy of Lehman, or even the handoff of Bear (and its massive silver legacy short) to Jamie Dimon, but in August 2007, when days after the market hit its all time high, something went massively wrong in the quant market segment (nobody still knows what it was but many speculate that is was simply every algo being on the same side of the trade and trading out all at the same time following the blow up of the Bear Stearns hedge funds). What the first week of August 2007 was notable for, in addition to massive losses for such legendary quants as RenTec (very well described in Scott Patterson's book titled appropriately enough "The Quants"), was that for the first time ever, the infallible Goldman Sachs... fell. Specifically, its heretofore mythical Global Alpha quant fund, which had the mythical allure of a 33rd degree Freemason dinner, imploded, and crashed, forcing the end of a quant generation, and the beginning of the end of Goldman's aura of invincibility. As Bloomberg recalls those August 2007 days: "Goldman Sachs Group Inc.'s $8 billion Global Alpha hedge fund has fallen 26 percent so far this year, a decline that may prompt more investors to withdraw their money, according to people familiar with the fund...On June 26, Goldman said Eric Schwartz, co-head of asset management since 2003, would step down in the next few months and leave Peter Kraus in charge of the fund unit. Global Alpha decreased 8 percent during the last full week of July and was down 16 percent from the beginning of January through Aug. 3. There is an Aug. 15 deadline for Global Alpha investors who want to redeem money on Sept. 30." Well, the reason we bring all of this up, is because unlike what everyone claims, it is not 2008.... it is 2007 all over again. To wit: Goldman Global Alpha just blew up, for the second and probably last time.

Sprott Shifts From Gold Bullion To Gold Stocks, Explains Why

From Eric Sprott: "In many of the funds we manage at Sprott, we’ve transitioned out of gold bullion and into gold equities to better participate in the continuation of the trend indicated above. As long-time investors in this space, we can assure you that the production growth rates will be significantly higher in the junior stocks. They continue to trade at discounted valuations, and we believe they offer the best opportunity to build exposure. Margin expansion is the key metric for this industry, and the market is now acknowledging the miners’ improvement in margin capture – which has occurred despite the increase in capital and operating costs. We meet with a large number of gold mining management teams on a weekly basis, and based on those meetings, it appears that the average cost of producing an ounce of gold today, all in, is now around $800. At $1,200 gold, these companies can capture roughly $400 in EBITDA. At $1800 gold, however, they’re now capturing $1,000 per ounce in EBITDA - representing an increase of 150% in profit margin. That is significantly far above what any other equity sector has been able to generate over the past year. Amazingly – despite this new reality for gold producers, we are still finding opportunities in select gold and silver mining companies that can be purchased today at 2-3 times their 2-year-out forecasted cash flow. These multiples are based on the current gold and silver spot price, and if these companies hit their production targets, and gold and silver continue their appreciation – we may discover that these stocks were trading at less than 1 times 2-year-out cash flow today. Having been in the business for many years, we can tell you that investing in a stock at 1 times 2-year-out cash flow tends to be a winning proposition – let alone in an industry that literally mines the world’s reserve currency out of the ground."

The Raids Continue and the Banking Cartel facing a Brick Wall/French banks downgraded

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 1 hour ago

Good evening Ladies and Gentlemen: The world is now realizing that manipulation and control of the gold and silver price is mandatory by the bankers. I am afraid that they will continue to bash gold and silver until Greece implodes. Many are starting to question the obliteration of free markets. The price of gold was hit early in the session but rebounded nicely before comex closing time. Gold

Guest Post: The Great American Economic Lie

The idea that the economy has grown at roughly 5% since 1980 is a lie. In reality the economic growth of the U.S. has been declining rapidly over the past 30 years supported only by a massive push into deficit spending. From 1950-1980 the economy grew at an annualized rate of 7.70%. This was accomplished with a total credit market debt to GDP ratio of less 150%. The CRITICAL factor to note is that economic growth was trending higher during this span going from roughly 5% to a peak of nearly 15%. There were a couple of reasons for this. First, lower levels of debt allowed for personal savings to remain robust which fueled productive investment in the economy. Secondly, the economy was focused primarily in production and manufacturing which has a high multiplier effect on the economy. This feat of growth also occurred in the face of steadily rising interest rates which peaked with economic expansion in 1980. As we have discussed previously in "The Breaking Point" and "The End Of Keynesian Economics", beginning in 1980 the shift of the economic makeup from a manufacturing and production based economy to a service and finance economy, where there is a low economic multiplier effect, is partially responsible for this transformation. The decline in economic output was further exacerbated by increased productivity through technological advances, which while advancing our society, plagued the economy with steadily decreasing wages. Unlike the steadily growing economic environment prior to 1980; the post 1980 economy has experienced by a steady decline. Therefore, a statement that the economy has been growing at 5% since 1980 is grossly misleading. The trend of the growth is far more important, and telling, than the average growth rate over time.

Goldman Cuts 2011 S&P Price Target From 1400 To 1250

As usual, Goldman saves the best for last. From David Kostin: "We are cutting our year-end 2011 price target for the S&P 500 to 1250 from 1400. Our new target reflects a potential return of 5% from the current index level. Our revised price target reflects the heightened uncertainty that characterizes global equity markets today. Our earnings, dividend, and economics forecasts remain unchanged. The unstable macro environment appears likely to persist for the foreseeable future. Downside risk exists to our forecast if the European sovereign debt crisis deteriorates while upside exists if substantial progress is made in addressing the problem." And since Goldman is leaving its S&P EPS forecast untouched, this is merely a contraction in the multiple from 14 to 12.5. Now if one assumes that David Rosenberg, who earlier speculated that the real S&P EPS is closer to 75 than 96, is correct, and applies the revised Goldman multiple, that means that the S&P has about 400 points of downside. Of course all of this means that one can predict the future. Which is impossible. Which leads us to believe that today's firing of David Bianco was merely due to him refusing to play along with the revised script. Which is as follows: the banks are buying everything that their clients have to sell in advance of, you guessed QE3 in the US and more QE in the UK, Europe and Japan for one last record bonus hurrah. While we can only hope we are wrong, if we are right this means the short squeeze on the market is about to slam shut and Goldman will make out like a bandit as usual, with the S&P soaring several hundred points on ever worse macroeconomic and geopolitcal data.

Dear Ben, Please Make Us Trillionaires

Posted by : testosteronepit

Post date: 09/14/2011 - 18:08

Trillionaires. Just the sound of it! It's beautiful, Ben. But without your help, we'll never get there. So, at your big meeting next week, think about us. Because the way you make trillionaires is by...