The obsure Goldman calls and how do they make money???

Abby Cohen, the ex chief-strategist at Goldman and evergreen bull, had called it nonsense that people put the economy and health of the US financial system into question. She said at the end of this year, we are at 1400 or 1500 in an healthy economic environment. Over the last years, her calls were always wrong and she was replaced this year but that guy who was not of big help so far. Now today, they claim 1000 SPX year-end target but not by her - plus they reduced their oil target from 150 repeated 3-4 weeks ago to 125 last week to 70 today. You guys are doing a 'hell' of a job.

I might agree on that call at some point within the next 3 months. We will likely even exceed 1000 SPX but within one year we will drop below the 2003 low heading for 400-600 SPX within 2 -3 years.

I have no idea how they make profits at Goldman but definitely not by trading their own calls. The hype and myth around Goldman is totally overrated it's not the people working there making the money. They have skilled people, no question, but as I stated earlier, you can swap 97% of the stuff with any other investment bank and they end up making the same profits. It's their inside information web which generates profits not that they are any smarter. In a Machiavelistic way, you might call that smarter since business is war ... bla bla bla philosphy.

Excerpt from WSJ

November 16, 2007, 11:26 am

Goldman Economist: $2 Trillion Hit?

Jan Hatzius (right), chief economist at Goldman Sachs, made waves today with a note released last night that put possible credit losses from mortgage defaults at $2 trillion, due to leverage. Hatzius’s analysis have drawn attention before: Back in March 2006, Hatzius said U.S. housing was overvalued by about 20%, based on historical relationships between monthly mortgage payments and median household incomes.

Jan Hatzius (Photo: NABE)

Here are highlights from Thursday’s note:

“Estimates of the likely credit losses on outstanding mortgages have grown sharply in recent months. A back-of-the-envelope calculation using past default experience in different home price environments now suggests losses of around $400 billion. … [O]ne sometimes hears that it is just equivalent to one bad day in the stock market. But this analogy is wrong.”

“[I]f leveraged investors see $200 billion of the $400 billion aggregate credit loss, they might need to scale back their lending by $2 trillion. … This is a large shock. It corresponds to 7% of the total debt owed by US nonfinancial sectors (households, nonfinancial companies, and government).”

“Our conclusion is that the likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized.” – Tim Hanrahan

Goldman has some really good people if Jan Hatzius figured that out what was published under his name. Congrats, he was one of the first official channels to call for it (the meltdown of housing prices and the implosion of mortgage products) although he came to the numbers in steps (slow motion but that may be due to regulations within the bank, since it would not be PC to come up with the real numbers) - not to toot my own horn, but I called for a cost of $2 tril. two years ago and improved the number to $6 tril for now. Actually, I do not want to shock you but the final number will have a higher double digit trillion dollar figure but by that time money might not be worth a lot in 3+ years, since the flooding of the market with money has just started and at some point they will not have real funding anymore so they just print money.

The amazing thing is only that Treasury Secretary Paulson, who is his former boss, must not have read the research properly or did not act accordingly. In any case, Paulson told people until early 2008 that everything was contained and fine and he trusted fully into the strength of the US financial system.