Goldman Sachs Still Bullish, Despite Recent Plunge

Big hedge fund managers my be taking risk off the table, but Goldman Sachs remains bullish on the broader market and notes the recent pullback is totally consistent with a recovery. From the firm’s latest Kickstart report:

Author:: Zachery Kouwe
Updated:: Jan 14, 2019
Original:: May 24, 2010

Big hedge fund managers my be taking risk off the table, but Goldman Sachs remains bullish on the broader market and notes the recent pullback is totally consistent with a recovery. Goldman believes the S&P 500 will hit 1,300 by mi-year before pulling back to about 1,250 at the end of the year.

From the firm’s latest Kickstart report:

“Developments over the past two weeks have not altered our fundamental view. The market has plunged 12% in four weeks, but remains 60% higher than in March 2009. The pull-back has been consistent with sell-offs that occurred in recoveries following bottoms in 1974, 1982, 1987, 1990 and 2002. The correction has been orderly in that sector returns have been exactly in-line with beta-adjusted expected performance.”
“We expect the S&P 500 to rise to 1300 by mid-year (+21%), before ending 2010 at 1250 (+17%).”
"We recognize the dramatic decline in the Euro, and the potential impact it may have on reported US corporate earnings if it persists through year-end. We acknowledge the risk that European economic growth may be weaker than many currently expect as a result of pending fiscal tightening. However, we remind equity investors that US companies in the S&P 500 have total annual revenues of $8.4 trillion and Europe, Middle East and Africa combined explicitly account for just 10% of the total (and if charitably inclined, perhaps as much as 15% of the total if a generous allocation of sales to “Other” regions is allocated to Europe)."

Goldman is also out with its latest Hedge Fund Trend Monitor report, which tracks 629 hedge funds with $701 billion in long equity assets and $400 billion of short equity positions. The performance of hedge fund positions during the recent pullback has only solidified the firm's position on the market.

The Financial Crisis Inquiry Commission slapped Goldman Sachs with a subpoena for documents and emails the bank has failed to turn over "in a timely manner," according to a press release from the Commission.

The cuts aren't expected to go too deep but every man, woman, and plant counts. David A. Viniar, Goldman's chief financial officer, said the latest round of belt-tightening by the New York company might include job losses for "a couple of hundred people." By year end, Goldman will reduce total expenses by $500 million on top of about $1.4 billion in cuts since last spring. Goldman To Tighten Belt Further [WSJ] Related: Goldman Sachs’ Philodendrons In The Line Of Fire

Back in August, a Dartmouth student named Andrew Lohse made a simple request of his peers: to stop being whores for Wall Street. "Should landing jobs prestigious 16-hour-a-day jobs at some faceless hedge fund, where they'll learn about manipulating capital instead of imagining a freer and more just world be the goal of the valedictorians of Ivy League institutions," Lohse asked and then answered, "No matter how hard I try, I cannot think of more pathetic ambitions." Lohse charged the undergraduates to "do better" and by better he meant resist being "pulled into what is essentially a vulgar and extortionate system of lending and predatory capitalism which is increasingly underwritten by what remains of the public’s coffers." Was Lohse's argument a persuasive one? Did the image of him "vomiting in my mouth" at the idea of his peers becoming financial services employees cause anyone to reconsider? Apparently, not so much. Wall Street’s allure may have dimmed for some of America’s sharpest young minds in recent years, but a quick look at the top of Dartmouth College’s class of 2012 shows that the appeal seems to remain strong. At its commencement on Sunday, Dartmouth recognized four valedictorians who graduated with perfect 4.0 grade-point averages. Three are headed to work on Wall Street at major investment banks, and one will go to the giant business consulting firm that advises them. “Certain people have the view where finance is perceived in a more negative light,” said David Rogg, one of the valedictorians, noting that there was an active chapter of the Occupy movement on Dartmouth’s campus. “But a lot of people still find it to be a very positive industry.” He has a job lined up at Goldman Sachs, as does another of the valedictorians, Jie Zhong; a third, Wills Begor, will go to Morgan Stanley. The other valedictorian, Glynnis Kearney, will work at McKinsey & Company. Mr. Begor said some of his peers’ interest in Wall Street had diminished, “but for me, it’s an extension of the academic challenges at Dartmouth, to learn about finance, which is something we don’t get exposed to at a liberal arts college.” Begor did add that his gig is "just for two years" and "has been accepted to Harvard Business School, starting in 2014," so perhaps Andy got under his skin a little. Finance Jobs Still Appeal To Graduates At Darmouth [NYT] Related: Bridgewater Accuser/Dartmouth Fraternity Brother-Cum-Reformer Surprised Find Himself Not Covered By Whistleblowing Protection Laws

Now, Goldman Sachs may have to deal with another lawsuit from a bunch of blokes at an Australian hedge fund. Goldman has been tussling behind the scenes with lawyers from the firm, called the Basis Yield Alpha Fund, over a $100 million slice of the Goldman-sponsored Timberwolf CDO that the Aussies bought right before the shit hit the fan.

A week ago today, a man named Greg Smith resigned from Goldman Sachs. As a sort of exit interview, Smith explained his reasons for departing the firm in a New York Times Op-Ed entitled "Why I Am Leaving Goldman Sachs." The equity derivatives VP wrote that Goldman had "veered so far from the place I joined right out of college that I can no longer in good conscience say I identify with what it stands for." Smith went on to note that whereas the Goldman of today is "just about making money," the Goldman he knew as a young pup "revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients." It was a culture that made him "love working for the firm" and its absence had stripped him of "pride and belief" he once held in the place. While claiming that Goldman Sachs has become virtually unrecognizable from the institution founded by Marcus (Goldman) and Samuel (Sachs), which put clients ahead of its own interests, is hardly a new argument, there was something about Smith's words that gave readers a moment's pause. He was so deeply distraught over the differences between the Goldman of 2012 and the Goldman of 2000 (when he was hired) that suggested...more. That he'd seen things. Things that had made an imprint on his soul. Things that he couldn't forget. Things that he held up in his heart for how Goldman should be and things that made it all the more difficult to ignore when it failed to live up to that ideal. Things like this: