WHAT IS GOLDMAN SACHS TRADING?
There’s little doubt that Goldman Sachs has the best trading desks on Wall Street. Whether you’re skeptical of their legitimacy, envious or sincerely impressed it’s a firm you’d be foolish to ignore. Goldman moves markets like few firms do. I’ve attached some macro and micro ideas out of Wall Street’s best trading firm. After all, if you can’t beat em, might as well join em:
1) Goldman sees a large divergence between the commercial real estate price estimates in equity REIT’s and CMBS market.
How to play it? Short REITs, buy AAA CMBS or sell protection on AAA CMBX.
2) Goldman sees continuing problems in developed nations that have financed their bailouts (ahem) through increased public debt.
How to play it? Short debt-laden developed economies, long select emerging economies. You can also buy USD, JPY, or EUR puts vs calls on the currencies of commodity exporting nations (AUD, BRL, CAD, NOK).
3) Goldman sees continued weakness in the Japanese economy.
How to play it? Sell the Yen or buy JPY puts. An equity short doubles as a short position for debt-laden countries above.
4) Goldman continues to believe oil prices are heading higher.
How to play it? Buy long dated oil futures. Short the crack spread.
As I often stress, Goldman also likes a number of market neutral strategies, but that’s for another post for another day.
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Commodity Trades:
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Source: GS
TPC,
If you have to take a position, what’s your view of the market in the short term?
Thanks!
I would never listen to Goldman Sachs because they aren’t honest. They say things and then do the opposite.
MS,
As you likely know, I have no direct equity long/short strategy exposure at present. If you put a gun to my head I would be a buyer until the retailers finished reporting earnings. I absolutely would not short this market…..
How it come they “leaked” this info?
Probably they want you to believe thats going to be their strategy LOL
TPC
Would you have the time to take each of those strategies and explain them in detail – in diff posts with your analysis and viewpoints? That would be hell of a post!
Say for example:
Goldman sees a large divergence between the commercial real estate price estimates in equity REIT’s and CMBS market.
Lets assume that we believe this to be true: How does a retail investor play this? What are the risks? What alternatives exist?
I hope I am not asking for too much.
TPC, when is the last retailers to report their earnings?
Regards, Jimmy
Can you put a link up to the entire report, Would be great to read.
thanks
Here’s the link
http://www.scribd.com/doc/18300149/GS-August
The retailers trickle out over the following two weeks. I believe Target is the last major retailer on the 18th. That is of course unless you still consider Sears to be a major player….they report the 20th.
I’m still in cash. This market feel’s very very complacent to me. Investors are just chasing performance at this point.
onlooker,
have often do they come out with a strategy report? is it monthly? also how can we get access to the report in the future?
Thanks
Glad you got your hands on that report. I sent it to my broker yesterday, and it started making its way around the net.
that was a
… fyi… It’s a great report…
do you trust them?
Do you trust the kid that beats you up and steals your lunch every day? No, but I respect his every move….
That doc is 2 weeks old. Is there a way to follow Warren Buffet’s move? Did he reduce his equity position recently?
TPC – that is funny the way you describe GS. When i was with a hfund our traders used to feel the same way!
There is no correlation between the trading desks action and the view from the analysts
100/10 (your stop loss percentage) = 120
10 x $500 (your R) = $5
$5,000/$20 (share price) = 260 shares
Tighter stop loss, same amount of risk, same R of $500.
Now let’s say you’d like to trade Intel options. You’re bullish, so you’re going to buy Intel calls. The options you want to buy are $2. Yahoo lists options prices by price per share, but option contracts are for 100 shares… So one of your option contracts will cost $200.
A straight call option position is much more volatile than a straight stock position. So you could set a wide stop loss of 50% on your call position. A wider stop will mean a smaller position size. Take a look:
100/50 (your stop loss percentage) = 2
2 x $500 (your R) = $1,000
$1,000/$200 (price per call option) = 5 option contracts
Different stop loss, different position size, different kind of asset, same R of $500.
You can use the concept of R to “normalize” risk for any kind of position… from crude oil futures to currencies to microcaps to Microsoft. If you’re trading a riskier, more volatile asset, increase your stop-loss percentage, decrease your position size, and keep your R steady. That way, you’re risking exactly as much money on each of your ideas.
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