DO YOU INVEST WITH GOLDMAN SACHS? WATCH OUT FOR THIS ONE

Last week I posted this article from Money Morning. In a few words it explains why you shouldn't trust what Goldman Sachs (or other large institutional investors) recommend. The reason, in part, is tied to the fact that Goldman Sachs has been known to exploit its customers. They will advise someone to sell a product but then buy the same product, which miraculously goes up in price. 

Conversely, Goldman will advise customers to buy a product - which they conveniently happen to own - which suddenly takes a dive in the market.

This shouldn't come as a surprise to anyone. We need to remember - as I pointed out last year - that after the 2008 market collapse Goldman Sachs' executives sat in front of Congress and brazenly dodged questions as to whether it's their responsibility to "act in the best interest of their clients" (FF to 25:30 in this clip). 

Put another way, Goldman Sachs seems to believe that they are not obligated to disclose their own interests, or conflicts, in any given transaction. In their estimation investment banks aren't required to act in their clients' best interest. 

But wait. Goldman is now upping the ante. 

To help their investing clients feel more comfortable about the products that they will advise them to buy or sell Goldman Sachs has developed a "new framework for forecasting equity returns over the medium term using a consistent approach globally."  They're so excited about their shiny new equities forecasting model that they are extending their "forecast horizon to the end of 2015." 

Hey, I have a model too. Only my model isn't tied to some fancy or obscure formula that takes a Ph.D. in physics to figure out. It's based on common sense, and tied to my understanding that as long as the Federal Reserve and the Treasury Department keep pumping money into the system that markets will continue to "recover." It's insights like this that makes me a market guru.  

Seriously, here's Goldman's less than stunning model-based prediction: "With a 2015 horizon all regions look attractive on an absolute basis." 

What they're actually saying - but won't tell you - is: "Hey, our models are complex beasts based on little more than our hope that the Fed and Treasury will keep pumping cheap money into the system. If our assumptions are right - and you should trust us on this - everything we sell should do well, so buy what we sell you."

And you can trust Goldman Sachs. Their models worked so well that they were able to predict the 2008 market collapse, right?

So, yeah, buy all the equities Goldman Sachs wants sell you over the next two and half years. And right after that give me a call. I have a bridge to sell you. It's in Iraq. Cheap too.

- Mark