Bloomberg is out with another headline tape feed today as they report on the commodities division trading struggles at bank giant Goldman Sachs. It appears the trading division is not sure what to do after they have cut down to the bone, and they are at the point of losing money on commodities trading. The Chief Financial Officer names three culprits:
Chief Financial Officer Marty Chavez said last month that the poor performance in commodities resulted from the “market backdrop” and lower client activity. He acknowledged that the firm “didn’t navigate the market as well as we aspired to or as well as we have in the past.” Chavez, along with Chief Executive Officer Lloyd Blankfein and co-president Harvey Schwartz, rose from the commodities unit to lead the company.
So let’s see here, the “market backdrop” was not ideal for Goldman. Maybe the heavy hand of manipulation is not taking its to on everything so that distortions are seen throughout the system. If there is lower client activity, how can that be? With a record stock market, base and precious metals on a tear, and a new “investor” jumping into the waters, how can that be? And they didn’t navigate the market well enough? Is that another way of saying their in a little bit of financial trouble?
Here’s more of the highlights from Goldman’s renewed focus to get back onto a solid commodity footing:
The commodities strategy comes out of a review led by Isabelle Ealet, one of the banks’ co-heads of trading. The unit was a topic of discussion at a late-June board meeting in London. The review examined the unit’s size and client mandates, as well as how traders managed risk amid concern that they weren’t properly hedging positions that may be illiquid and therefore last months.
“Goldman admits that it may have cut too deep into FICC over the years post the financial crisis,” Schorr wrote in a report earlier this month. “Our gut says that Goldman has done what it can on expenses, headcount and assets and will now shift their focus on growth to better support, and be more engaged with, their clients.”
At the same time, a senior executive privately admits that if markets decline or the trading environment worsens, the bank may be forced to consider downsizing again.
So there you have it. Goldman Sachs is sending somebody a message via Bloomberg, which runs Bloomberg Terminal, which feeds the algos that parse the data coming across the ticker to smash everybody through their stop losses and scoop up what they sold short.
But now, they are signaling. We just don’t know what they are trying to say. I’m sure that information is privy to just a few select people, and most likely that type of information is not even held withing the actual commodities trading division.
Upon looking at the chart, it does appear there is trouble in bank land:
The dreaded “Death Cross” happened in late July, where the 50-day moving average bearishly crossed below the 200-day moving average. Yes indeed, Goldman is wounded, and I don’t think there’s much more the Fed and other bullion banks can do to stop the bleeding. There is only so much physical gold and physical silver.
Keep a close watch on this one. Could be one of those signs we have been looking for.