Goldman Sachs CEO Lloyd Blankfein On China, Volatility In The Stock Market And The Future ...

Goldman Sachs and Fidelity Attracted by Digital Currencies

At least two major financial firms,Goldman Sachs and Fidelity,are actively searching out the realm of Bitcoin and Ethereum as investor demand for exposure to digital currencies swells.A Goldman spokeswoman told The Wall Street Journal that:
In response to client interest in digital currencies,we are exploring how best to serve them in this space.*
Indeed,Goldman has been following the currencies for some time now.One of its vice presidents issued a report on Bitcoin price action earlier this year,when it sharply increased to more than 5,000 dollars.The price has since declined all the way to below 1,000,before recovering  to over 4,000.*
About 75 funds related to digital currencies have sprung up so far.*
Privately held Fidelity Investments,Inc. have also been probing this prospect,with CEO Abigail Johnson revealing they have made several venture investments in Bitcoin-related businesses and are looking at the blockchain technologies that underlie the currencies with a number of top universities.
Fidelity has gone even farther than Goldman,setting up a digital currency mining operation for educational purposes that uses hardware from 21 Inc.Ms.Johnson said:
We set up a small Bitcoin and Ethereum mining operation...that miraculously now is making a lot of money.*
The Ark Innovation exchange-traded fund provides exposure to digital currencies and other advanced concepts.*
Among the skeptics,JP Morgan Chase CEO Jamie Dimon has dismissed digital currencies as being a fraud.*
At time of publication,the currency prices were:
Bitcoin (BTC) 4360.00 +1.20%
Ethereum (ETH) 294.97 -2.13%
Bitcoin Futures 4318.00 + 1.38%*
Goldman Sachs (GS),Ark Innovation ETF (ARKK)

Alcoa Launches Q4 Earnings Season - not dependent on China

In accordance with tradition,Alcoa has reported its Q4 2015 earnings first.Earnings per share were 0.04 versus the estimate of 0.02,a slight beat;while revenue came in at 5.25 billion dollars versus the 5.29 billion estimate,a bit of a miss.The company says it exceeded productivity goals,however.It expects continued strong demand for aluminum and strong global aerospace sales.Indeed,it is planning to spin off the aerospace business in 2016,so will implement the overhead reduction program this year.*
It's been really a solid quarter,said Alcoa CEO Klaus Feldman.We've seen a string of large contracts.We've doubled our auto shipments over the past year.Look at the cash;look at productivity-all this we've got under control.We have five different businesses.We're building up our bauxite business.We have an energy business.Today we're in a trough,and we're still doing well.We have 1.9 billion in cash and we believe global demand will rise by 6.9%.Aluminum is a hot metal.*
How is the China downturn affecting Alcoa? We are not dependent on China.China has opportunities,rather than threats for us,Mr.Feldman explained.*
Some part of this 15% drop in China is domestic;but part is fundamental,added Timothy Moe,chief Asia equity strategist at Goldman Sachs.The fundamentals are:
a.concerns about growth;and
b.concerns about the depreciation of the currency,the renminbi.
Any concern that growth is slowing is a real fundamental read-across,Mr.Moe observed.*
Alcoa Inc (AA),Goldman Sachs (GS)

Monday Newsline:China,Japan,Syria

China's exports dropped 18.5% in February-the most since 2009.A 7.5% increase had been anticipated.The Asian New Year may have been partly to blame.Still,the MSCI Asia Pacific index fell 0.96% on that news,plus the fact that Japanese growth was only up 0.7%,which was less than expected.Japan will raise the sales tax next month as well.*
New York copper prices dropped for the second day on concern that China demand will fall with the decline in exports.Goldman Sachs nonetheless sees Chinese stocks as desirable,since they could rise 24% from their decades low valuation.*
In the next six months,most emerging markets will be involved in political or economic problems,said Victor Shvets,a managing director at Macquarie Securities.You never have revolutions when people are happy.You start with marginal areas like Ukraine or Argentina.There is a lack of reformm and liquidity.The only way out is to enact reform.
Below a certain level of GDP growth,social problems emerge.Reform can keep the wolves at bay,Mr.Shvets told Bloomberg TV.*
Thirteen Greek Orthodox nuns from Ma'aloula,Syria have been released by the Syrian government in a deal arranged by a Lebanese general,in which about 150 women and children prisoners were freed by the Syrian authorities.The nuns had spent more than two months in captivity after being abducted from their convent.

Market Views:Microsoft's Roadmap and Tesla's Prospects

On the the recent slide in the stock market,I don't think it's gonna turn into much,said Andrew Burkly,managing director at Oppenheimer&Co.We're expecting kind of a 5-10% dip.Earnings season's been OK.People are looking to rotate into more of a global capex story.Overall we think the earnings season is turning out pretty well.*
We're not strong on the fundamentals of Microsoft,but on the opportunity for change,according to Rick Sherlund,US Technology Research Team head at Nomura Securities.If you were to take an internal candidate for CEO and pair it with CFO Amy Hood,you could come up with a pretty good conclusion.
I think you need radical changes in the business itself,more services in the cloud.Enhance shareholder value with dividend increases and share buybacks.That gives you the freedom to change more businesses to business light with lowered margins.*
In the long run,you have to bet on emerging markets growth,said Goldman Sachs CEO Lloyd Blankfein.Basically the flattening of the world is getting great opportunity in these countries.*
December's Index of Leading Economic Indicators rose 0.1%,the smallest increase since 2012.December existing home sales rose 1.0%.The national median home price was 198,000 dollars,up 9.9% from December 2012.*
Tesla Motors is selling its Model S electric sedans starting at 121,000 dollars in China.They are being shipped now for March or April delivery.Hong Kong alone took 300 orders in August.China is the number one market for luxury auto sales and has a pollution problem,making it a promising territory for Tesla.*
Asian markets were down in Tuesday trading on worries about Chinese economic data and the Fed meeting later today.US stock futures rose,however,after three straight days of decline.*
Tesla Motors(TSLA)

Thriving on Main Street:Goldman Sachs Grows in Salt Lake City

Wall Street powerhouse Goldman Sachs continues to recruit staff for its Salt Lake City office at 222 Main Street.It occupies seven floors in the new building,having moved from an industrial park in the outskirts of town.A large component of the office is Utah-raised people.
Goldman expects significant growth at this Rocky Mountains location over the next 2-4 years.It has surged from 300 to more than 1400 so far.It is their second largest office in the Americas.The regional office gives more responsibility early on,Goldman says,offering more exposure to all the firm's businesses.Positions at the office include Investment Management;Operations;Services and Technology;and Investment Research.
Goldman praised the excellent talent and resources it has been able to tap into through the Utah education system and general labour market.Utah lends tremendous value to its global businesses.Many employees continue their careers in other offices in the Americas,Europe and Asia.In a recent survey,employees rated their experience at this office 3.7 out of 5 stars.
Goldman has been moving people out of New York to such non-traditional hubs largely to cut costs.It is following a trend by financial services companies to open offices in high quality of life/low cost areas such as Salt Lake City and North Carolina.
Goldman's Salt Lake office has been recognised for the diversity of its staff.Some of them never expected to work for the financial services titan.
In addition,the Goldman program 10,000 Small Businesses is recruiting students for its academy at Salt Lake Community College.Participants have expressed high regard for the program that brings Goldman's expertise to bear on small business issues.They are attributing double digit revenue and jobs growth based on the knowledge and networking offered through the program.
Goldman Sachs(GS)

Asia This Day:Markets Rally On Cyprus Deal;World Trade Challenges

A tentative resolution of the Cyprus problem has been agreed,and the prospect of a bailout for the tiny yet significant nation has sent Asian shares higher in early Monday trading.India's Nifty Fifty index was up 0.86%,and the Sensex index rose 0.82%.US stock index futures were also higher,along with oil futures,while gold futures fell,as did Treasury bond  futures.
At a China development conference this weekend,World Trade Organisation Director General Pascal Lamy said the full globalisation of China's trade won't be without challenges.The new Chinese leadership under President Xi Jinping seems to be headed in the right direction on improving market access to China.I heard them saying we want to keep China opening its market,we want to keep internationalising the Chinese economy.
This will be challenging,however,as it faces resistance from domestic players who will not always welcome foreign competition.We want to grow our exports,but we also know we have to grow our imports.This obligates the domestic players to increase their quality and productivity.
Overall,this opening up has worked for China,but that doesn't mean it will happen in a painless way.What is painless is often inefficient,but what is efficient is sometimes painful.
The WTO's influence waned when the Doha Round of trade talks that began in 2001 floundered over the next 10 years.They failed to resolve a rift between developed and developing countries,but new WTO talks have begun.This time,instead of negotiating a big bundle of 20 topics,it is being done slice by slice,bit by bit.
The stumbling blocks in the old talks were US-China differences.No WTO Director General can push the US and China to agree on something if they don't agree,and this is what happened.
A very important negotiation is going on regarding customs standardisation,which would reduce the cost of cross-border trade.We have a problem moving the rule book forward so another layer of trade liberalisation happens,Mr.Lamy observed.
In other regional developments:
The HSBC flash China Purchasing Managers Index for March came in at 51.7,indicating a rebound in Chinese manufacturing.
Luxury retailer Tiffany saw a 13% increase in jewelry sales in the Asia Pacific region ex-Japan.
Goldman Sachs has raised its growth forecasts for the US and Japan.
Tiffany(TIF)

Asia This Day:Billabong Struggles With Tough Conditions

Australian clothing retailer Billabong has suffered its first fiscal year loss since going public in 2001.The group reported the net loss of 275.6 million dollars,and a revenue decline of 7.6%,on Monday.At the same time,it claimed a net profit ex-items of 33.5 million on global sales of 1.55 billion.
The group had hired Goldman Sachs to analyse its situation.Among its problems were poor sales in Europe and Australia;online competition for its brick and mortar stores;and rising raw materials costs.At its height,it operated about 700 stores worldwide.
CEO Laura Inman said that,at an underlying trading level,the Group remains profitable.As previously flagged to the market,the Group's results have been adversely impacted by various significant and exceptional items.In response,the Group has endeavoured to adopt a conservative position,implementing initiatives that will target both cost savings and revenue growth.
Billabong has sold part of its Nixon accessories brand;closed 58 underperforming stores;and reduced costs.It has also identified a further 82 non-performing stores for closure in FY 13.Cost savings of about 30 million are expected to be realised in 2013 from initiatives implemented in 2012.
The Group intends to simplify its business;leverage its Billabong brand;realise the strategic potential of retail;continue to expand Billabong's global e-commerce platform;and globalise and integrate the supply chain.The current challenging trading conditions are expected to continue in FY 13.
There will be no final dividend for FY 12,and none are expected to be paid for the first half of FY 13.Billabong had sold a 48.5% stake of its Nixon brand to Trilantic Partners,plus a further 3% to management,in order to stabilise its balance sheet and fend off an unsolicited bid by TPG Partners.
Billabong produces and markets sportswear and casual clothing,including surfwear,outerwear and accessories.
Billabong International Ltd(ASX:BBG),Goldman Sachs(GS)

Conditions At Goldman Sachs-plus its current strategy

Considered by many to be the profit and influence king among investment banks in modern times,Goldman Sachs was nonetheless subject to the same economic forces as everyone else in Q4 2011.The firm beat earnings estimates,but missed on revenue,or sales.Goldman's clientele is being cautious about investing and mergers and acquisitions in this difficult climate.
Trading and investment banking is down.It's not a good time to be an investment banker or trader,according to William D. Cohan,author of the well-regarded book "Money and Power:How Goldman Sachs Came to Rule the World."With the new rules,it's gonna be very tough to do business on Wall Street.
You're gonna get 5-8 years in the limelight at Goldman Sachs;then you're gonna be moved out for younger people.That's a good thing.
I think Goldman Sachs wants to be below the radar screen,not the whackamole.They want to get beyond being the poster child for bad behavior on Wall Street,Mr.Cohan observed.
With regard to the company's current perspective on equities,Dave Costin,Chief Equity Strategist at Goldman,says U.S. companies with the most exposure to the U.S. ought to outperform.It's one of our fundamental strategies for 2012.Consumer staples are what we prefer.Labor slack means little wage growth,hence poor discretionary spending.
Long term,two-thirds of corporate cash is reinvested in growth.In this environment,we're looking at 11% growth of dividends,Mr.Costin noted.
In other words,companies are plowing a lot of cash into dividends today to attract the skittish investors of these volatile times.It's why so many investment advisors are recommending the good dividend payers such as Procter&Gamble and PepsiCo to their clients.
Goldman Sachs(GS),Procter&Gamble(PG),PepsiCo(PEP)

What To Expect From 2012:A Goldman Sachs Economic Perspective-plus some stock tips

A tone of caution pervades the thoughts of a leading analyst when he views the 2012 prospects for the market and the rest of the economy.Jan Hatzius,Chief Economist at Goldman Sachs,feels that 2012 will see sluggish growth,with continuing repair of built-up imbalances.Recovery of the labor market will be very slow and halting.We suspect the first half of 2012 is gonna be a little slower.We suspect that the truth is decent growth,but a little softer.
We're still in a very macro-driven environment,with high correlation.We do think Europe is in a significant recession,and the impact will be greater on the U.S. than it has been so far-a full percentage point greater.
I think there will be a slight increase in housing market normalcy.Small businesses have done worse than large because they are more linked to construction,and more dependent on banks for financing,rather than capital markets.
We have a depressed economy.We think real GDP will be 1.5-2%.It's unlikely that you'll get major initiatives from Washington before 2013,in a presidential election year.Unemployment is not directly under the control of policymakers,although it's politically unacceptable,Dr.Hatzius observed.
Update:Goldman Sachs believes Vodafone may appreciate more than 50% over the next two years.It has downgraded MasterCard to neutral from buy,and Accenture to neutral from outperform.MetLife has been upgraded from neutral to buy.
Goldman Sachs(GS),MetLife(MET),MasterCard(MA),Vodafone(VOD),Accenture(ACN)

BHP Shares Rise On Gillard Policy Win

Shares of natural resource firm BHP Billiton rose Monday morning on news that the Australian Labour Party is lifting its ban on the export of uranium to India.Prime Minister Julia Gillard said the move will help the Australian economy by tapping into India's demand for energy.Her critics pointed out that India hasn't yet signed the nuclear non-proliferation treaty.
Japanese shares also rose on optimism that the Euro debt crisis is being seriously addressed.Jesper Koll,Head of Japanese Equity Research at JP Morgan Japan,described Japan as the forgotten angel.It is showing good job creation,wage growth and policy decisions.Goldman Sachs agreed,saying Japanese profits could rise significantly in 2012.
Mr.Koll is a longtime resident of Japan and has many years of experience analysing its economy.
BHP Billiton Ltd.(BHP),iShares MSCI Japan Index Fund(EWJ),JP Morgan Chase(JPM),Goldman Sachs(GS)

Advantage View:Where the Opportunity Is

Earnings have been very healthy on the back of cost-cutting,according to Steve Barry,co-chief investment officer at Goldman Sachs Asset Management.We see a market with stocks reacting individually.There's only so much you can do on the cost side.You've got to get some revenue growth.
I think you have to look beyond our borders.The U.S. is maybe half to a little more of our company's global results.The middle class of the emerging markets can help drive growth globally.
We see an improvement on the credit side of financials.We're in a world where investors want confirmation,rather than what may happen.Financials look to us to be very opportunistic here.That anticipatory dynamic is core to what we do.Financials are enterprises that behave and adapt,Mr.Barry believes.
Bob Albertson,a principal and chief strategist at Sandler O'Neill Partners,L.P., also likes the financials.He would go into banking.You're seeing accelerating signs of loan growth to businesses.It's a magnetic attraction to see that.The financial sector hasn't participated in the rally.
At the end of the day,credit demand is picking up.The excess capital is overflowing,and the banks don't know what to do with it,Mr.Albertson points out.
Goldman Sachs(GS),iShares Dow Jones U.S. Financial Sector Index Fund(IYF),iShares S&P Global Financials Sector Index Fund(IXG)

Goldman Misses,Yet Improves

The profit miss recently reported by Goldman Sachs is quite instructive.It shows how conservative Goldman has become in the wake of the financial crisis.Not only is Goldman averse to monetary losses;it also doesn't want any more egg on its face.The company took quite a drubbing in Congress and in the media for its business practices leading up to the crisis.
As well,the decrease in compensation for its employees reflects this new conservatism on the part of the iconic Wall Street firm.The luster may be off this storied company to a certain extent,but it can only gain in the long run with these new practices leading to a more secure and stable future.
Goldman Sachs(GS)

Focus On Tech,Part 2:What Facebook Is Really Worth

Given a recent surge of investor interest in Facebook,Wall Street is discussing just how much this company is really worth.The more thoughtful retail investors are watching to see if Facebook would be a good prospect for them,should it ever go public.Nick Beim of venture capital firm Matrix Partners thinks the 50 billion dollar price tag that Goldman Sachs put on Facebook is an extraordinary valuation for a 7-year old company with 2 billion in revenue.
At the same time,Facebook does have extraordinary growth.It is increasingly a large source of traffic to Google and many other web sites.
Goldman Sachs' 450 million dollar investment in Facebook is an attempt by them to play the private finance market in many ways.The Securities and Exchange Commission may get involved in overseeing this market,but they have a lot more important things on their plate at the moment,Mr.Beim points out.
Ryan Jacob of Jacob Asset Management,who participated in the original Internet boom time,says it's very difficult to know what the margin structure of private companies such as Facebook is.It's a murkier picture.A lot of the information about these firms is hearsay and very speculative.
A valuation is just a snapshot,Mr.Jacob feels,so it's really hard to say what Facebook is actually worth at any given moment.Valuations can change from day to day.The 50 billion valuation that Goldman Sachs put on Facebook was probably valid at that point in time,but may not be accurate now.
A fund that Goldman Sachs set up for private investors to get in on Facebook with has been filled up in short order.Many believe that Facebook will have its initial public offering as early as this year,when retail investors would get a chance to add Facebook to their holdings.That will be a huge event,if it indeed occurs,based on Facebook's vast reputation alone.
Goldman Sachs(GS)

What Goldman Sachs Does

Goldman Sachs has been dominating the business news,but many may not understand what the company actually does.Professor Samuel Hayes of the Harvard Business School says Goldman Sachs affects all of our lives.It serves as brokerage and researcher for pension funds;raises money for cities and towns;facilitates new issues of stock for companies we work for or invest in;and engages in trading for its own profit.
Goldman Sachs has a lot of influence through its alumni in government.Two of them went on to become U.S Treasury Secretary,but the alumni are active all over the world.Professor Hayes is sure there are elements of both resentment and actual misconduct fueling the current furor over the company.Goldman Sachs should know that the perception of this behavior is damaging.They will have to live with it for a long time,in the professor's opinion.
Goldman Sachs is 140 years old.It employs 35,000 people worldwide.In recent years,its proprietary trading has grown in importance,which has been criticized by some as being less than socially useful.

A Private Equity View

Scott Sperling of THL Partners says they've always found Goldman Sachs to be of the highest integrity.Goldman is still one of the leading firms that help advise and finance private equity.This fraud charge probably does not have long legs as far as the market itself is concerned.
A year ago,there was enormous uncertainty about the global economy.Today,the economy has stabilized.THL is seeing reasonably good growth throughout most of their portfolio companies.Today they're back to a much more normal level of financing.Today you're looking at deal structures of 35-40% equity.
Historically,THL has done best when the debt level is normalized or below normal.They try to remain highly disciplined,Scott Sperling explained.
THL Partners is not a publicly traded company.

Early Edition:Leading Analyst Buys Goldman

Dick Bove,a leading banking analyst at Rochdale Securities,says he would buy Goldman Sachs stock despite the firm's being charged with civil fraud by the Securities and Exchange Commission.The charges will have a short term negative impact,Mr.Bove said,but Goldman will still be Goldman.I don't want to defend them;if they have done anything inappropriate,they should be penalized,the analyst stated.
Dick Bove described Friday's plunge in Goldman's share price as a massive overreaction.Goldman's capabilities in trading and good systems suggest no one can take its place.The reputation of people within the division is strong enough that the business is gonna continue to thrive.Still,Mr.Bove observed,the shadow the charges cast is pretty sizable.He asked whether the SEC action is the first of multiple attacks on Wall Street firms.
The most likely outcome of the matter is an out of court settlement,in which Goldman will pay a few billion dollars to the government.It has already repaid the government loans received at the height of the financial crisis.Goldman reportedly has some 65 billion dollars in equity with which to pay the fine.Questions have been raised,however,about the tenure of CEO Lloyd Blankfein.There is also the possibility that the Justice Department will file criminal charges in the case.

Geithner Exercises His Authority

Treasury Secretary Timothy Geithner invoked his statutory authority last week in a letter to the U.S. Congress.Mr.Geithner notified Capitol Hill that he has extended the Troubled Asset Relief Program,or TARP,until October 3,2010.He does not expect to deploy more than 550 of the 700 billion dollar war chest,and is looking for up to 175 billion in repayments by the end of 2010.Reduced commitments will allow significant resources to pay down the national debt.
Mr.Geithner said the extension will allow continued implementation of housing and small business support programs.He anticipates recovering all but 42 billion of the 364 billion in TARP funds deployed this year.Several banks,such as Bank of America and Goldman Sachs,have already repaid their TARP allotments.Citigroup is planning the repayment of its 20 billion dollar loan from TARP.At 9%,Citi's Tier One capital ratio is the highest in the industry,indicating its ability to repay the debt,in the company's opinion.Citi will sell 17 billion in common shares,plus 3.5 billion in tangible equity units.By 2010,Citi will emerge from the pay restriction regime.

Focus on Ford:Garnering Praise

Goldman Sachs has placed Ford Motor Company on its conviction buy list.It says Ford is doing well enough to get through at least 2010;the chances of their needing aid are very low.Goldman has put a six-month price target of 6.00 on Ford shares.Ford reported Q1 earnings of -0.75 a share,versus an estimate of -1.23.Its Q1 revenue was 24.8 billion dollars,versus an estimate of 22.01.It had 21.3 billion in cash at the end of Q1.Many consumers are giving Ford credit for shoring up its finances before the financial crisis took hold,so that it could survive on its own now.

The Best Financials

Gerard Cassidy of RBC Capital Markets feels the financial recovery is gonna take awhile.There's gonna be a lot of fits and starts.The securitization market is still frozen.That's a critical part to getting consumers spending again.If you have to invest in financials,invest in a capital markets bank such as Goldman Sachs or Morgan Stanley,Mr.Cassidy advises.Such banks are less exposed to the consumer.Goldman Sachs reported earnings that were far better than expected yesterday,and is raising capital through a stock offering ,so it can pay back the money it received from the Troubled Asset Recovery Program.