Warning: Don't Trust Goldman Sachs (Especially About Oil)

March 26, 2018 Warning: Don't Trust Goldman Sachs (Especially About Oil) Dear Reader, Over the past week, I've sent you six different special reports. Each one showed in detail how you can transform your life and your finances... And can make your dreams come true. But as a new Oil & Energy Investor member, I must warn you. Doing this one thing could undo all that profit potential. Let me explain... In energy as in all other forms of investment, an open public market requires an even playing field. Some participants may have bigger computers, or a millisecond head start on data, but at least all investors theoretically have access to the same information and analysis. Unless, that is, some players are allowed to put a thumb on one side of the scales for their own advantage... One player in particular has a tendency to do that: Goldman Sachs. Now, I normally ignore what Goldman is saying, and so should you. The reasons are simple: (1) their estimates are hardly objective; and (2) they usually miss the boat. In the case of oil, that's more true than ever... Reason #1: Goldman Sachs Makes Money from Their Own Predictions Goldman Sachs is the "investment sage" that you might recall boldly proclaiming in 2015 that $20 a barrel oil was coming. That never happened, of course, but Goldman won the race to deception anyway. That's because the investment bank has been one of the largest runners of oil shorts. You see, if Goldman can get even a segment of investors to believe what its saying and bail on oil, the investment bank promptly makes a profit. This is not detached analysis - it's self-serving spin. This has been a pet peeve of mine for some time. Talking heads on TV are usually obliged to disclose any personal conflicts. Often appearing on the screen below the bellowing pundit is a box. That box states whether the pundit owns any of the stocks or commodities being discussed, any relationship in which the analyst (or his/her firm) makes a market for or advises the company, and the like. Unfortunately, unless the moderator or reporter asks about "short" positions specifically (something that almost never happens), they go undetected - despite these positions comprising one of the primary challenges to objectivity in analysis. A short occurs when a trader believes a share (or commodity) will decline in value. Shares (or derivatives on contracts) are borrowed from a broker and then immediately sold in the market. Later, the short runner buys what was shorted at market and returns it to the lender. If the shares have fallen in value in the meantime, the shorter profits. For example, a stock trading for $10 is borrowed, immediately sold (gaining $10), later repurchased for say $7, and returned to the broker. The result is a $3 profit. But all of these moves are shielded from the audience when the short artist appears on TV. Instead, the pundit (or as I like to call them, Chicken Little from "The Sky is Falling" brokerage) merely looks worried about the stock or commodity on the air - and promptly whistles all the way to the bank as scared viewers sell and drive the price down. This is Goldman personified. But that's not all... Reason #2: Goldman Sachs is Only Right on Oil When They're (Really) Late to the Party Reason number two for not trusting Goldman Sachs is simpler still: the investment bank has consistently misread the underlying dynamics in oil, or ignored them altogether. When crude prices were taking a nose dive in 2015, it was easy enough for Goldman to keep the fall going longer by repeating what the market had already accepted: there's a massive global buildups in excess volume; no cuts coming from OPEC or Russia; the culprit is the new guys on the block (U.S. shale and tight oil producers). Even so, they overshot. In September 2015, when U.S. oil was trading at about $45, Goldman suggested oil might drop all the way to $20. Instead, oil bounced off the high $20s and has been higher ever since. And if you look further back, the investment bank's track record gets even worse. Take their May 2008 prediction of $200 oil. At the time, U.S. oil was trading at about $116. After the investment bank's forecast, oil rose to about $145, and then began plummeting. It's been far below $145 - not to mention $200 - ever since. Put simply, Goldman's "analysis" has just not been very good. And on the few occasions that it has been, it's largely because they hopped on the bandwagon late in the process and repeated what everyone else was saying. In short, be wary of any "advice" coming from Goldman Sachs. And keep an eye on your inbox, as helping you, normal investors, cut through the market noise is precisely why I started Oil & Energy Investor. Sincerely, Dr. Kent Moors