Posts filed under “Corporate Management”

Goldman Sells GSCI to S&P

We’ve mentioned the role Goldman Sachs has played in energy prices last year. They have been accused of manipulating GSCI for trading gains, political advantage, etc. When Oil first dropped, I doubted there was any political manipulation until I could see a market mechanism. It turns out the GSCI was that mechanism.

Now, GS has decided to get rid of the index. From an S&P Press Release:

Standard & Poor’s will acquire the market leading Goldman Sachs Commodity Index (“GSCI”) and two equity index families from the Goldman Sachs, the two companies announced today. Terms of the transaction were not disclosed.

The GSCI, created in 1991, currently includes 24 commodities and is designed to provide investors with a reliable and publicly available benchmark for investment performance in the commodity markets.

The clear commodity index leader, the GSCI has an estimated $60 billion in institutional investor funds tracking it, the majority of that coming through over-the-counter derivatives transactions.

After a brief transition period, the index will be renamed the S&P GSCI Commodity Index. (emphasis added)

Hmmm, I wonder when the honchos over at GS decided "we no longer have a need for that index?" 

I guess Goldman Sachs naked attempts at manipulating commodity prices, indirectly the equity markets, and possibly even the mid-term elections is now past its "Sell-By" date. I cannot say there was much of a public relations backlash — a smallish NYTimes article, and the slings and arrows from a few outraged bloggers. But that was pretty much it.

The suspect timing of the unscheduled GSCI rebalancing last July left one to consider to possibilities: that GS is either a collective of naive dolts, or they were blatantly attempting to manipulate the outcome of the mid-term elections. The public clearly thought there was price manipulation going on; they weren’t fooled. And the appointment of their Chairman Hank Paulson to Treasury Secretary just before these changes must have been just one of those serendipitous coincidences. 

The changes in the GSCI led to a subsequent sell off in the gasoline futures market. After a 5 year run in energy prices, there was a 30% drop in the price of oil after their rebalancing — and during the 2 months prior to the election. Another lucky coincidence!

Another fortuitous coincidence: GS had a blockbuster quarter following the ramp of the markets.

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There were enough conflicts of interest in place that the markets — and maybe even GS itsef — are better off with the index in the hands of a more neutral 3rd party . . .

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Update February 13, 2007 4:32pm

A friend notes that following article form 2005:

The Seats of Power
Goldman Sachs rules the Street with smarts and tough tactics. But has it gone too far with the Big Board deal?

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Hat tip: Naked Shorts

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Source:
Standard & Poor’s To Acquire Goldman Sachs’ GSCI
Press release Feb. 6 2007
http://www2.standardandpoors.com/spf/pdf/index/020607_GSCI.pdf

Category: Commodities, Corporate Management, Index/ETFs

Insider Selling

Category: Corporate Management, Investing, Markets, Psychology

A Merry Corporate Christmas

Category: Corporate Management, Earnings, Economy, Politics

RIAA: More full of S#@$ than ever before

Category: Corporate Management, Music

Backdating Options Scorecard

Here’s a nice free feature courtesy of the online WSJ.com:  They posted an updated look at more than 120 companies that have come under scrutiny for past stock-option grants. Note: This list contains companies that have disclosed government probes, misdated options, restatements and/or executive departures. Some companies that have undertaken or disclosed internal probes but…Read More

Category: Corporate Management, Earnings, Options

IBM Suing Amazon over Patents

Category: Corporate Management, Intellectual Property, Technology, Web/Tech

We’re # 2!

Category: Corporate Management, Retail, Web/Tech

Google Buys YouTube — for Free

Category: Corporate Management, Markets, Technology

Blog Spotlight: Mish’s Global Economic Trend Analysis

Another edition of our new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked
blog that deserves a greater audience. Expect to see a post from a
different featured blogger here every Tuesday and Thursday evening,
around 7pm.

Second up in our Blogger Spotlight:  Michael Shedlock and Mish’s Global Economic Trend Analysis. Mike is one of the editors of The Survival Report, covering stocks and the economy. He also writes for the Daily Reckoning, and co-edits Whiskey & Gunpowder. He also runs stock boards on the Motley Fool, Silicon Investor, and TheMarketTraders. He is an avid photographer, when not writing about stocks or the economy, with over 80 magazine and book covers to his credit.

Mish_geta

Today’s focus commentary is called Falling Dominoes and addresses the impact of Housing’s decline on the economy:

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The Sentinel is reporting State targeting abusive lenders.

The [Massachusetts] state Division of Banks is cracking down this month on what it sees as abusive business practices by mortgage lenders and brokers.

The agency issued a series of new emergency regulations earlier this month, requiring better documentation from lenders and prohibiting them from pressuring consumers into taking out mortgages they can’t afford or working without their own independent lawyers. It also forced four companies — two of them located Worcester — to close immediately and place all pending mortgages with another, more established lender.

Commissioner of Banks Steven L. Antonakes said in a recent interview that division examiners found a pattern of deceptive business practices by some lenders during their most recent round of company inspections.

"We want to spell out in very plain English to send a message to lenders and brokers that these specific acts, whether they’re very obviously unfair or deceptive, or more subtle, they weren’t going to be tolerated," he said. "And you would put your license at risk by engaging in this kind of activity."

Abusive lending practices can destabilize the entire real-estate market. As an example, he described a hypothetical street containing 10 homes, each worth a certain amount of money.

"If loans were originated for two of those homes, in which the loan was made that the broker knows the consumer has no hope of repaying those loans, very likely the borrower will become delinquent," he said. "In the worst case, the home will be foreclosed upon, and that kind of activity could result in the home being sold for less than its value and before you know it, you have a domino effect."

But the slowdown has also put lenders in a tough position, said Christopher J. Iosua, president of the Mortgage Connection Inc. "When business slows down the way it has in the past six to nine months, new loan originators and those without a strong base of customers do things they probably wouldn’t normally do," he said.

The idea that lenders are doing things they may not have done in "normal conditions" may have some merit for some lenders but when 40% of the loans sold in California before the bust were either stated income loans or pay option arms, I think the idea if more fiction than fact. Anything and everything was done to keep the bubble booming, and that was as I said happening well before the bust.

With every bubble comes fraud. The two go hand in hand and housing is not unique in this respect. We are only beginning to scratch the surface of the fraud that supported this bubble. Lending standards are going to tighten as a result, and will continue to tighten as more and more of the fraudulent activity is exposed. I consider fraud and tightening of lending standards to be two big dominoes that are now falling. Tightening of lending standards was previously discussed in Lending Guidelines / Credit Squeeze and The Blame Game.

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Category: Blog Spotlight, Corporate Management, Economy, Real Estate, Retail, Weblogs

Blog Spotlight: The Mess That Greenspan Made

Today we start a new series:  Blog Spotlight.

We put together a short list of excellent but somewhat overlooked blog that deserves a greater audience. Expect to see a post from a different featured blogger here every Tuesday and Thursday evening, around 7pm.

First up in our Blogger Spotlight:  Tim Iacono and The Mess That Greenspan Made. Tim is a software engineer in his mid-forties, living in Southern California. He calls his blog is a "vain attempt to stave off a mid-life crisis, and here’s hoping that it’s going to work."

Tmtgm

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Today’s focus commentary is called Friends in High Places? and it address the controversey we discussed last week.

 

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Friends in High Places?

Life is always much more fun when there’s a good
conspiracy theory to kick around. When the New York Times starts kicking it
around too, then it can really be
enjoyable.

Such is the case with the recent plunge
in the price paid for gasoline by formerly dour consumers leading up to an
election where the party in power is clearly having difficulty wooing the
electorate. It just so happens that the newly appointed Treasury Secretary used
to run the investment bank that controls the world’s most important commodity
index, which seven weeks ago cut the weighting of unleaded gasoline by nearly 75
percent, causing all commodity investments based on this index to sell their
unleaded gasoline futures.

For the same number of buyers, a glut of
sellers means lower prices, and voila! Prices at the pump drop precipitously,
consumer confidence rebounds, and the electorate develops a new spring in their
step.

Or at least, that’s what some would have you believe. . .

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Category: Blog Spotlight, Commodities, Corporate Management, Federal Reserve, Finance, Politics