CHART OF THE DAY: GOLDMAN SEES HOUSE PRICES FALLING ANOTHER 14%
5 October 2009 by Cullen Roche
6 Comments
Goldman Sachs says home prices are going to fall another 14% to their 2002 lows and could be flat to down for years to come:
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Comments
When the big banks/brokers like Goldman make projections, do they come out of multiple internal groups with potentially different opinions, or is it supposed to be a single unified (consistent) set of forecasts? i.e., I wonder whether they consider this perfectly aligned with their more bullish forecasts.
depends on the bank. The big ones have different groups in different parts of the world. For instane, MS Europe might not be on the same exact page as MS U.S., but they generally have a unified theme.
How does it reconcile with their upgrade of the banks? If house prices go down 15% it means huge write offs for the banks.
I guess their whole argument is that the worst of the losses are behind us therefore its time to buy….
Among groups their published opinions can vary dramatically. Their unpublished opinions can vary more. Even better, their prop desks will have positions on that look nothing like any of the opinions their researchers publish (in fact many times it is just the opposite.) This looks like it is from the GS Credit Group, which most likely has a different opinion than equity research. It is much easier to give a true opinion about housing prices because there is no banking work associated with it(given that the securitization market is done and dusted). Unfortunately, the positive comments on the large banks most likely does not reflect the analyst’s opinion, but more likely the fact that there will be additional investment banking work to be done for those companies over the next couple of quarters. I learned a long time ago to use sell side analyst for their data gather/number crunching capabilities, but their opinions (especially those of the big banking houses..boutiques are a different story) are about as useful as an umbrella in a hurricane.
Everything Goldman says is a lie. Those reports are meant to manipulate markets, not inform clients.