Is the damage already done in bonds?

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Can changes to the bond market now save those that have gotten hammered by this inversion phenom or is the damage already done? Also, is this just a wild rumor that Goldman Sachs (sp) are hitting the skids because of this; aren't they one of the largest outfits in the world?

MrsPeal

-- MrsPeal (.....@...com), February 04, 2000

Answers

I don't know about GS this time, but a senior VP at GS (and close friend) told me during the LTCM (bond market) disaster that Goldman wrote the $350 million dollar check to bail them out because they would have lost "much more" if LTCM had collapsed.

-- Dave (aaa@aaa.com), February 04, 2000.

There would appear to be a significant rift between policymakers at the Fed and the US Treasury Department. The Fed raised rates a cumulative (a quarter on the discount and a quarter on the fed funds rate) 50 basis points on Wednesday and, on Thursday, the Treasury comes in and causes rates to decline sharply. The steepening of the yield curve, over about the past ten days, has hammered hedge funds and bond dealers and, no, I doubt that yesterday's Treasury action can save them. Nor do I think today's break can save them. The bond:stock ratio has, in recent years, hovered pretty steadily in the vicinity of 23:1. That means for every one dollar spent on stocks, there are $23.00 spent on bonds. The capitalization of the US 39-year bond market is huge, therefore, the potential for disaster as a result of the change in the yield curve is similarly huge. It's my guess that the damage is done and, at least in part, I think that's what the gold market is confirming today. Goldman Sachs is not only hurting from the action in the bonds, but they're getting killed on short gold positions. Their efforts to get out of shorts are evidenced in today's gold market activity. What's happened, and continues to happen, in all of the markets has been so significant (especially since the start of the new year) that we may not know, for years, the extent of the damage suffered. The current environment is troublesome enough, but this troublesome environment will bring about consequences of its own. IMHO, we're just seeing the tip of the iceberg in what is a major and long-lasting change in economic cycles. I am in the camp that says we have entered an inflationary period. And the effects of inflation are only just beginning to be felt.

-- (cashtradr@aol.com), February 04, 2000.

Thanks Cashtrader for some insight into the gold jump. But it seems to me that gold is far more scared than just a brokerage firm hitting hard times. (understandably not a small firm) but even the gulf war didn't do this much to gold. There must be some real fears about Japan or Europe or Russia or the US meltdown or what?? Justthinkin wild

-- justthinkin com (justthinkin@gold.com), February 04, 2000.

cashtrader, thanks for the input.

We are so woefully short of information and insight on yesterdays event. I compare it to an earthquake that happened at the bottom of the ocean somewhere. It started a tidal wave but when and where it will wash up is an unknown quantity.

I am starving for news on this. The only thing I know is that something big happened and of course our media lets us down and is probably still chasing that Cuban boy all over the western hemisphere; pathetic journalism.

-- Guy Daley (guydaley@bwn.net), February 04, 2000.


Got Gold?

Or are you one of the savvy investors holding shares from last years IPO of Goldman Sachs???????

>"<

-- Squirrel Hunter (nuts@upina.cellrelaytower), February 04, 2000.



Justhinkin'---Surely you don't think Goldman-Sachs is the ONLY medium-to-huge (gold price) manipulator out there who's getting caught by the "shorts"?

-- Ben Corson (bcorson@dmi.net), February 04, 2000.

Don't forget the Japanese part of this equation--whatever it is. With Japan Inc. in economic trouble, has a big (negative) effect on Treasuries (as to what, I'm clueless).

-- Mara (MaraWayne@aol.com), February 04, 2000.

Just thinkin- - - Go back and re read what you just said, and remember that Goldman Sachs is only ONE of the larger houses that do bonds, and consider that the relationship between bonds and the economy is even MORE critical than the relationship with stocks and the economy, particularly when the corporations can't get any debt financing, or can't roll over debt at a reasonable price.

G-S going down or even being in DANGER of going down WILL be as much a panic situation as the Penn Central Bankruptcy Debt Rollover weekend in which the Country ran out of money. No, it didn't go away from anyone's pocket but LOTS of companies and banks would have closed their doors if Pensy had defaulted, rather than rolling over that debt. And it took 15 years for the truth to get out.

If G-S goes down there will be defaults ALL OVER the Street and from there to Main Street is a VERY SHORT jump when you are talking debt management.

Joss

-- Joss Metadi (warhammer@Pride.of.Mandeyne), February 05, 2000.


What I seem to be hearing here and on other TB2K threads is that Goldman-Sachs/Bank America et al represent another case of "too big to (let) fail," along the lines of the LTCM fiasco. So who organizes the bail-out and what's it gonna cost? If G-S's attempt to cover some of its gold shorts has already pushed gold over $300, seems to be we're talking bucks so big LTCM will look like a petty cash account.

-- Cash (cash@andcarry.com), February 05, 2000.

I seem to remember(but NOT sure)::

Did Goldman Sachs go public shortly before the 1929 crash; and then bought back all the shares and went back "private" during the depression when the shares were at the bottom?

-- jeanne (jeanne@hurry.now), February 05, 2000.



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