So around the time of Labor Day, i was looking at a reversal trade in the Aussie dollar, & lo and behold, on my newsfeed there was a notification on how Goldman did "not like the AUD", right around its lows, https://www.forexlive.com/news/!/go...g-trade-war-to-weigh-on-the-currency-20180907 Well, we all know how that story turned out - within a day or two, ie. just enough time for a note to be emailed/disseminated to supposed "muppets", AUD then staged a nice rally off the 0.71 level. The timing just seems really fantastic, not to mention it happened way too many times in the past (eg. most memorably with crude oil, i think they were calling for shorts in the $20s area, literally within days of CL's trough) If we're to be paranoid, would it be that the "public" trade recommendations are designed to get "muppets" in, so that the real, "private" instructions should be to trade opposite to whatever the "public" note says? Kind of like a secret code for the inner circle, I wouldn't be surprised with all the scandals that broke with LIBOR rigging, currency rigging, precious metals manipulation, the 'cartel' etc etc If someone has a compilation of all the "public" macro trade recommendations sent out by Goldman, we could check the timestamps & where the market actually traded afterwards. It'd be funny if there's real alpha to be found there - eg. if on 80%+ of their "public" calls, the trade would work with a solid risk:reward profile if the exact opposite was done. My guess is that whenever they put out a "public" recommendation, the trade may work for 1-2 days, with just enough momentum to pull the "muppets" in, & then there would be a STRONG reversal in the opposite direction, possibly signaling the start of an extended move. Perhaps next up would be to compare Gartman vs. Goldman's 'reverse indicator' % accuracy. Something tells me that it takes just as much skillz to be so consistently "wrong-footed," as it does to be always profitable, esp. if said trade recommendations would generate a better entry point when "muppets" willingly enter the opposite side of the trade, eg. in this case, those who sold AUD in large quantities at the 0.71 level after reading the bearish note on Sept 7. There is some method in the madness, i say.
think of it as an extra edge beyond the other lines of statistics, with insight on how the invisible hand tentacle will actually drive a particular market (among all the different macro plays out there) in 1 direction short term - ie. you know, when the "smart" money is luring the "muppets" in at the end of a trend, then it provides quality info on: - the timing of the reversal: within 1-2 days, going by historical cases - trade direction: opposite direction of the public "recommendation" - price entry point: wait for final momentum push in the next 12-24 hours, when all the "muppets" are lured in by seemingly unstoppable momentum in the direction of the public recommendation, such that price would be absolutely rock bottom for an entry to the long side, and ceiling for an entry to the short side, maybe not always long term, but good enough for swing trade with good risk:reward profile, with stops placed at the support/resistance reached at some major level set in the next 12-24 hours (eg. for AUD, it was the 0.71 level, which was good support - obv don't set stops exactly at 0.7100, that would be good pickin' for the algos, do some random figure below it, far enough to be insulated from algos in the bid-offer stack, but close enough to limit the actual risk) - exit point: 2-3% pop immediately in short term for good swing trade setup, set trailing stops & hold for larger gains; using 5x leverage on futures, would generate 10-15%, not too shabby for a few days' work with low downside - trade's risk/reward profile: Very favorable - reasons for why this setup works: 1) zero sum market, esp. for macro trades placed in the futures markets, means that the source of "smart" money's outsize gains must come from "muppets" somehow 2) the "muppets" must be made to act in coordinated ways, so that they're mostly on 1 side of the lopsided boat. A good way to herd them would be to send out some publicly disseminated note, to lure them in by telling them it's a good trade idea. Very often, the note itself serves as the catalyst/timing mechanism for the real "inner circle" 3) the "public" recommendations get disseminated for free/ seemingly low direct compensation for the authors by ppl email forwarding each other, tweets, sales guys (sometimes not even from goldman) trying to look as though they 'value add' for their low-priority clients, the word even gets sent out to the public press, spun as a "leak" that provides valuable insight. The value of the 'free' info is all in providing a good entry point to the real "inner circle," & definitely be assured that the "inner circle" exists - just look at the rigging scandals in every major market, from LIBOR to currencies to paper commodities, where there was literal, documentary evidence from electronic trails on chat messages; there're probably other "inner circles" which are unbeknownst to public yet, plus there's good plausible deniability where you can say you did your best to provide "good" trade recommendations on public research notes, but somehow the money is always made by betting the opposite direction. ultimately, "free" info is never free. 4) with the consistency that the "public" recommendations are always within 1-2 days of a reversal, either they have the most 'inaccurate' analysts on the face of the universe, which is highly unlikely given how profitable their thinly-veiled prop trading desks / investment mgmt arms are, or - they're actually very accurate, but just choose to push the opposite trade out to the public. there's got to be motive and intent for the latter, refer to 1-3 above. it wouldn't be surprising if there are 2 sets of recommendations - 1 in the "public" recommendations, and 1 that gets sent around to the "inner circle," which calls for the exact opposite for trades with very low downside. my weekend project would be to systematically compile & analyze all the macro calls put out by them; maybe i'll even run a table of their trades/realized results across time horizons through my ML code, that'd be fun to identify just how much 'edge' they regularly provide for their inner circle, and to pick out the kinds of markets that they are most influential in.
Alright, just out from Livesquawk on Goldman: "Goldman Says Revising Its 12 Month Gold Price Forecasts To $1,325/TOZ From $1,450/TOZ Goldman Says Dollar Unlikely To Derail Its Bullish View On Commodities" Also from Bloomberg earlier: https://www.bloomberg.com/news/arti...dities-as-investors-shrug-off-trade-war-shots So if their "public" recommendation is to short dollar / long commodities, the real trade would be to long dollar / short commodities. Perhaps wait 1-2 trading sessions/scale in orders over couple days to get a more favorable entry point with the last dregs of momentum designed to lure in the "muppets" Personally i'd just be taking the long dollar leg of this trade, higher leverage with FX anyway, and tougher to engineer any kind of robust squeeze. In the meantime, am expecting gold to sink below $1200, esp. if Goldman is 'publicly' calling for price target in the $1300s again.
if anything they sure are consistent...the gift that keeps on giving, US dollar up / gold down, exact opposite to goldman's 'public' recommendation that was conveniently reiterated yesterday Gold drops by most in a month amid dollar strength https://www.ft.com/content/5bc6dfc0-bda4-11e8-8274-55b72926558f Gold takes it on the chin after rally fails. Can the price momentum break out of the range? https://www.forexlive.com/technical-analysis/!/gold-getting-hit-today-20180921
at some point, it would seem maybe they just dispensed with 'research,' and started writing 'advertising' that touts the pros of why someone should willingly take the opposite side of their own trading desks like a wolf that 'advertises' why a sheep should venture at night into the woodlands...after all, it's backed by their 'research' that nighttime ventures into the scary woods are full of exciting promises for the sheep didn't that 'Fabulous Fab' VP get into trouble precisely bc he sold derivatives that were 's****y deals' to goldman's clients (collectively referred to as "muppets"), which goldman then reportedly bet against. same game, new spin; it's not like they're going to resolve the 'conflict of interest' in the public's favor, as evidenced by their extremely consistent trading profits every quarter, like clockwork
looks like the guys over at Forexlive also did a weekend project in compiling and checking goldman's publicly recommended trades. Goldman Sachs' top trades for 2018 have been an unmitigated disaster https://www.forexlive.com/news/!/go...18-have-been-an-unmitigated-disaster-20180922 lol, perhaps for their internal teams it was an 'unmitigated $$$ opportunity' let's join the inner circle, i say
Trouble is,the tentacle feeds out morsels of ground bait from time to time to sucker in the muppets. Got to bite on ground bait and not the hook.