Goldman may be running its own “Storage Wars”

How close are we to seeing Goldman Sachs CEO Lloyd Blankfein standing in front of storage unit telling perspective bidders, “You can just look in, don’t touch, don’t go in.”

That the mental image I have from a story moving Thursday morning of Goldman repossessing a 217-ft luxury yacht from a former (i assume) client down in Palm Beach, Fla., according to a WSJ.com story.

Goldman, Morgan Stanley and UBS wealth management units have been active in lending cash to their clients against some esoteric belongings, such as wine collections, art collections and equity portfolios.

These banks are pushing these loans for two very specific reasons. They have an existing relationship with the client and knows his asset holdings. The banks also keep more of the profits from these loans, since there are little broker fees or other charges against the loan.

Goldman’s private bank has quadrupled its overall lending balances since 2012 to $29 billion. Morgan Stanley wealth-loan balances are up 420% since 2012 to $74 billion, according to the article.

To get back to the yacht, the luxury boat is listed for $39.9 million, according to broker​. The outstanding balance of the loan owed to Goldman is roughly $28 million. So there is some wiggle room to haggle with Lloyd.

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Climate on Wall St. over Trump nixing Paris Agreement

The US participation in the Paris Agreement, which is the United Nations-backed pact on reducing greenhouse gas emissions to combat global warming, was nixed last week, by the Trump Administration as it is written now.

First, let me say I do not agree that climate change is “settled science” since I am old enough to remember when climatologists said in the 1970’s that we were headed into an ice age due to human development .

Secondly, climates don’t change in decades, climate takes 10’s of centuries to work through its progressions. The climate science we are looking at now is similar to looking at one photograph of a marathon runner.

You have no context of how long the race is, or how the runner did in the race. It’s one step in a 26-mile race. And yet some scientist look at this photo and not only know who won the race, but also the time it took the runner to finish.

Thirdly, the climate cycles we have experienced over the last 50 years have all been attributed to man-made emissions whether it was drought or flooding, cold temperatures or warm temperatures, strong hurricanes or weaker storms.

It’s my belief that the sun and the reduction of sun spot activity over the last decade has more influence over our atmosphere than anything we are doing on Earth. However you don’t see that mentioned too much in this debate and I’ll get to why in a second.

So that’s my take on climate change and this is why I agree with the White House on not signing on to the pact as written.

One thing the Paris Agreement does do well is create one of the greatest wealth transfer in history. Through what’s called carbon credit trading the pact sets up an exchanged — run by Wall Street banks — to take cash from US firms and so they can by third-world carbon credits to offset the companies emissions.

It’s a tax on productivity, with Goldman Sachs, Morgan Stanley and other firms taking its piece. Why do you think Goldman’s chief Lloyd Blankfein broke onto Twitter for the first time to denounce Trump’s decision?

Not for fear of warming, but because Goldman is working with former Vice President Al Gore and David Blood, who is the former chief of Goldman Sachs Asset Management, to jump-start this trading platform through their firm Generation Investment Management. And if the largest buyer of your credits is not in the market, how do you make money?

Why would Tesla boss Elon Musk quit the White House advisory role? His whole company is created and funded by no emission vehicles. And if there’s no subsidies or future carbon credits for you and I for his cars than why buy them.

You see the Paris accord is not only aimed at US companies, it will get down to you and I and how we “manage our own carbon footprint”, through additional government fees and taxes.

So why is science not looking at the solar cycle as a cause? How can you tax the sun?

While the Paris Agreement is a feel good issue — who wants to destroy the planet — its mechanisms and funding structures are too one-sided against the US. China has very little restrictions on growth and emissions, despite being the No. 1 consumer of coal in the world.

So for the White House to say no we want a better deal than ex-President Obama agreed to is not out of the question. Besides if this is a treaty, Congress would have to approve it, before Trump could sign off on it.

Heads up for the Goldman guys grudge match

With Steve Mnuchin’s Senate confirmation Monday night, a White House battle is staged.

Mnuchin will be in the Treasury building on the Great Mall and National Economic Council director, Gary Cohn will be at the head of the mall at the White House.

While both men come from Goldman Sachs, Mnuchin is second generation banker as his father was with the white shoe investment shop for many years. Cohn was the second in charge of the bank but was never able to take the reins as chief Lloyd Blankfein hung tough during the Great Recession.

The position of National Economic Council director is the back up Treasury spot since it was developed in the Clinton administration for ex-Goldman honcho Bob Rubin.

Who will play what role is speculation right now, but if I had a guess, look for Cohn to have a greater purpose to provide Wall Street banks with greater flexibility in capital formation by gutting Dodd/Frank. Bringing back proprietary trading is probably his main objective, since it provided Goldman and others with a healthy revenue stream for the banks allowing for greater bonuses.

Mnuchin’s positions probably includes freeing up the housing market to unlock billions in value in the mortgage market. So look for him to be a backer of Fannie Mae and Freddie Mac in backing the home loan market. Since Mnuchin came out of the mortgage mess, he may have a strong belief that mortgages, like student loan obligations should be an unforgivable debt.

Needless to say neither have a greater purpose to directly benefit Main Street or the general economy in my view.

I spoke with a Washington DC legislative analyst Monday and what he told me was quite an eye opener. The proposed Trump tax cut will probably not come through this year due to constraints in the legislative calendar.   Yes the White House will speak in generalities on the new policy, but cannot get the Senate of House to act on it this year due to budgetary constraints in Congress’ scheduling.

 

Fill it up, Joe, cause I can't retire.

There are a few reasons why crude oil having a $20 handle is not beneficial to equity market and US investors. So while saving $2.00 on a fill up to pay for a cup of coffee seems Ok, the $2,000 you lost in your 401(k) is not.

Look at why gas is so cheap. The price of oil is being used as a weapon and the war has many fronts.

  • Saudi Arabia is keeping the price low to cripple US fracking operators.
  • The world’s global economy is in a recession, so usage falls as does the price.
  • The strong dollar is beating up the price of crude.

In the US, this price war is having a disastrous effect on drillers, frackers and the whole infrastructure in the Midwest and Texas. The industry has lived off of junk bond funding, with large banks such as Wells Fargo along with smaller regional banks being on the hook for these now non-performing loans.

The chase for yield has many other big players in the oil patch purchasing this dubious paper. Reports say that the Dallas Fed is trying to stem this contagion by asking note holders not to force bankruptcies, but to look to consolidate the industry.

So what happens, when hedge funds, private equity funds and others see loses and the need to provide more collateral to their loans due to losses? They short equities through futures as a hedge. When that becomes to crowded a trade they sell what they can, not what they want.

The Dallas Fed has also reportedly suspended mark-to-market on the toxic paper in order to window dress the troubled firms balance sheets and help the troubled banks not have to take write downs or hold further capital against the bad paper.

This is a big part of the 11% cratering in the Nasdaq over the last two weeks as the FANGs — Facebook, Amazon, Netflix and Google — have been put on auction by the same players who ran them up.

So sip your free coffee and newspaper and look at the sports pages to see who won yesterday, but remember that free java is causing agita to your retirement fund.


 

If you are Lloyd Blankfein, what does it say about your firm, Goldman Sachs, that the Democratic candidates vilified — especially Bernie Sanders — you and the company directly more times than Republican presidential candidate Donald Trump?

The last thing any Goldman banker expected to hear when tuning in to the debate was the firm being put on the grill.

Also let’s clear up some history that Sanders mentioned. Bill Clinton had Robert Rubin as Treasury Secretary who was Co-Chairman and Co-Senior Partner before leaving for Washington. Rubin was instrumental in repealing in 1999 the  Glass–Steagall Act and the regulations on derivatives through the CFTC.

Both these acts have a direct line to the cause of the bank crisis of 2007-2008. Upon leaving Washington, Rubin would take a leadership position with Citigroup, which benefited greatly from the repeal of Glass–Steagall.

George H.W. Bush had Hank Paulson as his Treasury Secretary. Paulson was Chairmen and CEO of Goldman prior to leaving for Washington. Paulson’s legacy is still being formed, but his three-page budget requesting $800B+ scratched out on legal pad, should be noted by financial historians.

 

Crude Reality

By MICHAEL GRAY

Wall Street and Washington are playing a crude joke on the US economic recovery.

Higher gasoline prices have drained over $25 billion from the US economy since September, as skyrocketing oil costs have eaten into consumer’s wallets.

But the issue isn’t supply — it’s Ben Bernanke and hedge funds.

The Federal Reserve chief has kept the dollar weak with his “quantitative easing” stimulus plan. Wall Street sees commodities like oil as a security, a hedge on the watered-down greenback. They can run up oil prices on nothing more than speculation that China may suddenly need more oil.

Oil prices have hovered near $100 a barrel recently (though a disappointing jobs report brought it back down to $88 a barrel on Friday). OPEC is of course pleased with the high prices, and refuses to increase production — but privately, even they’re puzzled by the increase in prices. There hasn’t been a spike in the demand for oil recently; in fact, the recession has decreased use.

Yet New Yorkers pay more than $3.45 at the pump, and economists are forecasting $4 or even $5 a gallon gas by spring.

“That’s over a $145 billion annualized ‘hidden tax’ on the consumer,” says Peter Buetel, president of Cameron Hanover, who covers the oil industry.

“Gasoline prices at the pump have increased over 27 percent since Bernanke began telegraphing his move in September,” Buetel added.

Stephen Schork, an energy analyst who runs the Schork Report, wrote in a November posting that Bernanke’s easing started the run-up in crude oil through a weakened dollar. Then the fast money on the Street took the ball and ran with it.

But it isn’t as if the oil market suddenly had a switch turned on in September. Energy prices never really retreated during the recession, and some analysts believe the price of gasoline should now be more than a dollar lower than its current $3-plus average across the country.

While most of the equity cheerleaders have celebrated stocks’ year-end moves and said that gold and silver may be bubbles, crude oil prices have soared more than all other investments.

Precious metals were up 8 percent for the final quarter of 2010. The Standard & Poor’s 500 index gained 13 percent during the same period while crude, facing stiff headwinds of a stronger dollar as the euro weakened on Irish and Greek debt woes, gushed over 16 percent.

Cameron Hanover’s Buetel estimates that 40 percent of the run-up in crude prices by year’s end can be laid at the feet of Wall Street.

The crude reality for consumers is that this is the same Wall Street crowd chasing profits, which took crude prices to $147 a barrel in July of 2008, only to crater to $33 a barrel by December of that year as the fast money moved elsewhere.

It’s a big part — oil at $147 a barrel — of what exacerbated the recession in 2008.

“In a fragile economic recovery, $25 billion that does not buy movie tickets, pay restaurant bills or make a retail purchase could mean a longer time for economic recovery,” said Buetel.

Disappointing holiday retail sales bear this out.

Just this week Discover Card officials said that 47 percent of consumers spent less on gifts this holiday season because of higher gasoline prices and the sales figures from retailers showed declines across the board.

So where were the sales? Investors will likely get the answer when the oil companies report their earnings later this month.

Schork said that $90 a barrel translates into $3.15 a gallon and $95 a barrel to $3.30 gallon.

“At $95, we begin to see demand destruction,” said Schork, which means consumers cut back on gas purchases.

That has little effect on Wall Street banks and hedge funds that are bidding up the price to get a better return for their investors.

At the end of last year, Wall Street money mangers controlled 200 million barrels of oil in futures contracts. That level is five times the amount of oil Nymex controls in its Cushing, Okla., crude oil storage facility.

The Commodities Futures Trading Commission, under the FinReg rules passed last year. is charged with reining in Wall Street speculators by this month. But the panel will not have any subtenant rules until late spring at best.

mgray@nypost.com