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Published: December 14, 2009
When references are made to the world's
"oldest profession," I sometimes wonder if we're not exactly
referring to market manipulation. In this country alone, market
operators have been employing all sorts of market manipulations
for more than 100 years.
What may surprise you is that most of it isn't illegal or even
improper; in institutional circles, it's actually viewed as
shrewd business.
One such manipulation was put on display this week -- a news
development that had me howling in disbelief and left me in awe
of the evil genius of Goldman Sachs Group Inc. (NYSE: GS).
But if we step back, there's a lesson here -- a lesson that
points to real potential profits if we stop to understand what's
about to happen before our very eyes. It's a lesson that I
preach to investors -- that the institutions that operate the
market and maintain its very framework, also "influence" that
market's movements. In fact, this real-market "case study"
confirms the profit strategy that I've set out in this special
report.
These machinations are completely legal. But they do happen and
those who understand that also have the opportunity to profit
from that knowledge. And you don't even have to be part of the
institutional elite to do so if you know what to look for.
Let me explain...
Surely you have heard by now that the Goldman partners have
decided to pay their top brass in stock instead of cash bonuses
this year. So do you think it is any coincidence that Goldman
shares have mysteriously declined recently? After one of the
most profitable years of all time due to the company's
involvement in dozens of sovereign and corporate debt and equity
deals, and its successful prop-desk trading of the recent
volatility?
If you had the ability to drive down the shares of stock that
you were about to receive, wouldn't you do it? Goldman doesn't
actually have to sell its stock to drive its value down; all its
treasury department needs to do is stop supporting it during the
day with buybacks.
As noted, it's not improper, it's just smart business. You can
see how much Goldman's stock has fallen -- compared to an
industrial company like 3M Co. (NYSE: MMM) in the chart above.
Since mid-October, Goldman shares are down -12% while 3M is up +9%. I seriously doubt that the pounding of Goldman's stock
relative to the shares of 3M is occurring on the basis of
fundamentals; it's most likely all structural.
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You can be sure that some of Goldman's financial-industry
cronies will be announcing the same sort of stock-based
compensation too, and it will turn out to be no coincidence that
their shares have fallen dramatically while most other sectors
of the market have been buoyant.
Once those bonuses have been paid and the prices recorded,
expect the prices of these shares to levitate, as if by magic.
My guess is that this will happen at the start of the New Year,
if not late in December.
Be ready to swoop in and take advantage.
-- Jon D. Markman
Contributing Writer
Money Morning |
