MARKET COMMENT
Dave Fry at ETF Digest, March 19, 2009
"Did Goldman, Sachs and Company organize the Goldman, Sachs Trading Corporation?" Senator Couzens asked.
"Yes, sir," Mr. Sachs replied
.
"And it sold its stock to the public?"
"A portion of it. The firm invested originally in 10 percent of the entire issue for the sum of $10 million."
"And the other 90 percent was sold to the public?"
"Yes, sir."
"At what price?"
"At 104. That is the old stock … the stock was split two for one."
"And what is the price of the stock now?"
"Approximately 1 ¾."
US Senator James Couzens with Walter Sachs CEO Goldman Sachs
Senate Hearings June 1932
So now GS is in the spotlight as shown in this Reuters article. It reminded of the above 1932 testimony which I posted a couple of years ago. This is why congress then enacted the Glass-Steagall Act to prevent banks from dealing in securities that can become toxic waste. This is why the act needs to be reinstated to prevent a reoccurrence of abuses that we see today. You could easily substitute current names and facts today and see how history has repeated itself.
After the major news from the Fed yesterday equity and bond markets have paused since they got rapidly overbought. Commodity and currency markets didn’t take the day off. Inflation is what participants there sense and they’re going with it.
Volume was lower from the Fed Day spike and breadth was slightly negative.
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If we’re going to have a 1970s like reprise then the place to be will be tech and commodity markets. The difference is of course Fed policy. Then authorities were fighting inflation and now the opposite. Current policies seem desperate and ultimately inflationary; at least that’s the current verdict from investors.
The downward move in the dollar is discouraging and is the price evidently authorities were willing to pay to move markets and the economy. Perhaps investors will take a step back and realize that these Fed moves are an indication that economic conditions are much worse than most pundits were stating. That’s scary.
I don’t think authorities were prepared, from a regulatory view, for the consequences of ending Glass-Steagall. The drive to eliminate the barrier prohibiting brokers and banks from joint ownership and securities dealings was lead by bipartisan forces from Phil Gramm and Alan Greenspan to Bill Clinton and Robert Rubin. Toss in the man behind the curtain “Teflon Sandy Weill” and the current result was inevitable. It’s pretty disgusting. Perhaps even more disgusting is the theater of the absurd taking place in the congress regarding bonuses which no doubt is unconstitutional.
Tomorrow is quadruple witching and volume should spike along with volatility. There wasn’t a lot of follow-through from bond markets perhaps because yields can only go so low or buyers are just skittish.
Have a great weekend!
Disclaimer: Among other issues the ETF Digest maintains positions in: GLD, DGP, DBP, DBB and USL.
The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.
