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Goldman Sachs: Short Today, Long Tomorrow, Winning Either Way


On March 21st of this year analysts at Goldman Sachs (GS) announced that it was the best moment to get long stocks in at least a generation. In a report Goldman's Chief Global Equity strategist Peter Oppenheimer made the case that stocks were historically cheap relative to bonds and the anticipated growth rate. The work is largely forgotten now but created a lot of buzz with the S&P over 1,400 at the time.

As first reported by BusinessInsider.com yesterday morning, Goldman Sachs clients received an email advising clients to short the S&P 500. Authored by Noah Weisberger, the Head of Goldman's Macro Equity team, the report cited evidence of economic weakness as the catalyst for an expected drop of 5%. The email was sent at 10:52am et at which time the S&P was trading at 1,351 and on its way to a 2% drop for the day.

There's nothing legally wrong or even particularly sleazy with being bullish all Spring then flipping the script the first full day of summer. Most people are happy to give Goldman a pass on the "generational buy" call being made 4% higher than the insta-short suggestion. Trading isn't a sure thing, even for the sharpies at Goldman.

Oppenheimer's "The Long Good Buy" report played like a giant market smiley face, released for all to see and discuss over breakfast. Weisberger's email was sent only to GS clients and had the moodless tone Wall Street deploys for internal use only. Is there something a little oily about screaming "Buy!" in public and "Short" in your client emails?

Playing the role of House of Squid apologist, Nesto says the two reports are all but entirely unrelated. "They got a lot going on," Nesto says of Goldman. The firm can't be expected to micro manage what he labels as "a supermarket of superstars." It wasn't Goldman taking the other side of its own monumental "buy" call, it was Weisberger unwittingly fading Oppenheimer.

Of course both of those calls came with Goldman's imprinteur. One guy was Goldman's Chief Equity Strategist and the other is the firm's Head of the Macro Equity Team. Presumably Goldman has a Majordomo of Stock Planning who can also slap whatever opinion he wants onto a piece of firm stationary and dish out on the basis of account size.

The research only mattered because it came from Goldman Sachs; the firm, not the people. Selective distribution and saying one thing in public and another behind the scenes isn't unusual on Wall Street. It's business as usual which is exactly why it stinks.

If you don't like the smell of the markets, Nesto suggests you simply not get "stanked upon." As evidenced by the flood of investors leaving the market it looks like plenty of folks are taking that advice.

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