For Goldman, a Swift Return to Lofty Profits

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http://www.nytimes.com/2009/07/13/business/13goldman.html?hp


Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.

Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday.

Analysts predict the bank earned a profit of more than $2 billion in the March-June period, because of its trading prowess across world markets. If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so drastically only months after the nation’s financial industry was shaken to its foundations.

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Startling, too, is how much of its revenue Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 an employee. Top producers stand to earn millions.

-snip-

For all its success, Goldman is not impregnable. In addition to the federal money it took last fall, it benefited from the government’s bailout of the American International Group, being paid 100 cents on the dollar for its $13 billion counterparty exposure to the insurer, and it has $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation.

-snip-

“They are a trading firm,” said an executive at rival firm, barely able to hide his jealousy. “It’s what they do.”
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1. Dubious History Of Goldman Sachs Market Manipulation Repeats Itself As Speculators Spike Gas Prices

Dubious History Of Goldman Sachs Market Manipulation Repeats Itself As Speculators Spike Gas Prices


July 01, 2009In another case of history repeating itself, the rapidly rising cost of gasoline, misleadingly attributed by some to supply and demand issues, is actually more of the same from last summer when speculators -- led by Goldman Sachs who has an 80-year history of manipulation and speculation -- fraudulently ran up gas prices to more than $4 a gallon, and Goldman Sachs' long-term greed is once again rearing it's ugly head while America's economy lies in ruins due to their previous fraudulent actions.

Speculators make big profits at consumer expense by fraudulently manipulating oil futures. Oil futures are contracts between buyers and sellers where, according to How Stuff Works, the buyer agrees to purchase a certain amount of a commodity -- in this case oil -- at a fixed price. Futures offer a way for the purchaser to bet on whether or not a commodity will increase in price down the road. When locked into a contract, futures buyers receive a barrel of oil for the price outlined in the future contract, regardless of whether the market price was higher when the barrel was delivered.

Wall Street loves to bet, regardless of the legality involved. When Wall Street heard the word "bet," it flocked to the futures. Wall Street betting is what led to the worldwide economic implosion. Despite the fact that U.S. petroleum reserves are far from being depleted, the price of oil continues rising, showing that the laws of supply and demand have nothing to do with the cost of gasoline. To the contrary, there is quite an artificial market for gasoline that appears to be being manipulated by speculators again.

Rising oil prices -- which are threatening an already fragile economic recovery -- has reportedly led to a growing number of experts blaming Wall Street speculation as the main reason gas is going up, and most on Capitol Hill are remaining silent. Not Maine Republican Senator Susan Collins though. Sen. Collins is one of the few on Capitol Hill who are blaming Wall Street investors. She's trying to limit speculative investments in oil and other commodities...cont'd

http://www.americanchronicle.com/articles/view/108382




Investment Banks

JPMorgan Chase and Co., Goldman Sachs Group Inc., Barclays Plc and Morgan Stanley control 70 percent of the commodities swaps positions, and swaps dealers are the largest holders of Nymex crude oil futures contracts, Masters said.

Representatives for all four banks declined to comment. Banks enter into swaps with airlines and hedge funds to profit from moves in crude prices and then offset some of that risk in futures markets such as the Nymex.

``These large financial players have become the primary source of the recent dramatic and damaging price volatility,'' Masters said in the report.

The commission has put out special requests for information from traders and imposed limits on the number of U.S. oil futures contracts a trader can hold on Intercontinental Exchange Inc.'s London-based ICE Futures Europe market...cont'd


http://www.bloomberg.com/apps/news?pid=20601087&sid=agQ7prrjwiuU&refer=home

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2. Forbes - Did Goldman 'Goose' Oil?

Did Goldman Goose Oil?

April 13, 2009

How Goldman Sachs was at the center of the oil trading fiasco that bankrupted pipeline giant Semgroup.

When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Okla. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation's crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.

But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup's collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup's accounts.

"What transpired at Semgroup was no less than a $500 billion fraud on the people of the world," says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.

What's the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup's trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. "Nothing's been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze," says John Tucker, who is representing Kivisto.

..cont'd

http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html

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3. Imagine that! The Treasury Secretary for the last 3 admins...

are either Goldman alums or proteges of Goldman alums and Goldman profits from the crisis. What a coincidence!

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4. Kick

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