Goldman Has "Aggressively" And Quietly Liquidated A Quarter Of Its Equ

Goldman Has "Aggressively" And Quietly Liquidated A Quarter Of Its Equity Investments 14 hours ago

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Goldman Has "Aggressively" And Quietly Liquidated A Quarter Of Its Equity Investments

While most analysts and traders were digging through Goldman's investment banking and trading results - of which the former came in stellar while trading, especially in FICC, was mediocore...

... when the bank reported its second best quarter on record, there was some more notable slide in the bank's Q2 earnings presentation, and it had to do with what Goldman is doing for its own prop, or "asset management" book.

As shown in the table below, Goldman's Asset Management (F/K/A "prop") also had a stellar quarter, generating a record $5.1BN in net revenue, more than double the year ago quarter.

In explaining the group's stellar performance, Goldman writes that "equity investments produced record net revenues, with the YoY increase primarily driven by significantly higher net gains from investments in private equities, driven by company-specific events, including capital raises and sales, and improved corporate performance versus a challenging 2Q20."

The bank then breaks down the asset mix of its prop traders, which as of Q2 had some $21 billion in equity investments spread across various sectors, vintages and geographies (mostly the US).

Which brings us to the punchline: a chart showing what Goldman had done with its equity investments in 2021. Here the bank pulls no punches, making it clear in the title that it has been busy "harvesting" its balance sheet equity portfolio. Which, of course, is another word for selling.

What is even more remarkable is just how much Goldman has harvested so far in 2021: as shown below, having started with a $20BN equity portfolio which has enjoyed a $5BN increase in market prices, Goldman dumped a whopping $5.5 billion of its equity assets so far (excluding a modest $1.5BN in purchases) or more than a quarter of its entire portfolio as of Dec 31.

Who is Goldman selling to? Anyone who will buy, but here we would wager that retail investors - who have been on tilt buying in 2021 - have been the proud recipients of billions in Goldman sales. This, in the financial literature is called the "distribution phase."

The sales were so extensive that the topic was brought up on Goldman's earnings call earlier today. In response to a question about Goldman's efforts to reduce its equity investment portfolio, the bank said that it it has "made progress on improving its capital efficiency and is moving 'aggressively' to manage equity positions, especially since the environment is supportive."

What does that mean in English? Simple: Goldman is "aggressively" dumping its positions in an environment that is "supportive", i.e., in which the dumb money is providing a constant bid into which whales such as Goldman can sell.

The last time Goldman was "aggressively" selling into a "supportive" market? Well, we have to go back all the way to 2007 and 2008 when Goldman was busy creating the very CDOs which its prop desk would then "aggressively" short. We all remember how prophetic that particular move turned out to be...

Tyler Durden Tue, 07/13/2021 - 13:26

https://whotrades.com/people/474441518/timeline/6064250?showMore=1

Goldman Says Economic Impact From Delta Will Likely Be "Modest" 10 hours ago

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Goldman Says Economic Impact From Delta Will Likely Be "Modest"

Now that the Delta Variant is officially the fastest spreading COVID strain in the US, a team of analysts at Goldman Sachs who have been trying to forecast the impact of Delta on the global economy declared last week that emerging economies with low vaccination rates are the most vulnerable to Delta-induced lockdowns and other economy-crushing containment measures.

However, in heavily vaccinated countries like the US and UK, the analysts pointed out a newfound discrepancy: while Delta is driving new cases higher in places where restrictions on movement and business have recently been lifted, the number of new hospitalizations and deaths have remained subdued, and shown little correlation with any rise in confirmed cases.

This dynamic hasn't changed much in the past week, even as the pace of new cases has accelerated dramatically. Goldman offered an updated chart detailing the spread of the virus in the UK.

In their latest note, the Goldman team assesses the potential economic fallout should the US experience a surge in new cases on par with what the UK has recorded over the past few weeks as PM Boris Johnson prepares to lift the last restrictions in place in England.

Their conclusion? Any economic fallout from Delta would likely be modest. First, high vaccination rates will provide protection against severe infections and deaths.

Second, consumer activity in the UK saw a negligible dip over the past several weeks and survey suggest consumers haven't meaningfully pared back consumption or riskier activities like dining out.

And finally, high-frequency measures of consumer spending and restaurant bookings in the US have responded very little to new virus cases.

While the US media has focused almost obsessively on the small number of states where vaccination numbers have trailed, the fact remains that the US has seen vaccination rates rise rapidly since last winter, making it one of the most heavily vaxxed countries in the world (outside Israel).

As a result, the economic effects of a viral resurgence are likely to be mild, with only the most virus-sensitive sectors, like international travel, likely to be impacted.

What's more, UK surveys of consumer behavior show little change during the month of June.

As it turns out, changes in the rate of spread haven't shown much correlation to consumer spending so far this year.

The Goldman team dug deep on this. Goldman even regressed city-level restaurant bookings (an increasingly popular data set from OpenTable) on the same levels of pandemic severity from June through early July and found no significant relationships.

While it's possible economic data could see a more intense decrease should COVID numbers rise dramatically, from what economists have been able to glean from the data so far, the impact from Delta will likely be modest, if not mild.

Delta is believed to be twice as transmissible as the original strain that caused last spring's first wave. This would suggest that the immunity threshold would be 80% to 85%.

Tyler Durden Tue, 07/13/2021 - 17:05