Goldman Sachs expects fiscal mess
To the real cynics out there, a bearish report on equities from Goldman Sachs signals a massive short position held by the bank.
Whether you believe that or not, it's fair to say that at least David Kostin, Goldman Sachs Chief U.S. Equity Strategist, believes that the firm's clients need to get flat in equities or get burned badly. If Goldman Sachs itself has taken a massive short proprietary position, which will not be legal for much longer, it's all the more reason to ponder whether we're in for a fiscal-cliff inspired 12 percent meltdown in stocks, as Kostin believes.
Some might be more inspired to get on the bear bandwagon if the scenario weren't so tightly linked to one issue: The budgetary "sequestration" that is scheduled to occur if Congress cannot pass a budget this year.
My sense is that the threat will remain a potent political tool between now and the elections. After the elections, I fully expect Congress to come to its senses and pass some sort of compromises that steers the country clear of the fiscal cliff, albeit without really solving any of the real debt issues.
Still, for people who think Congress and the federal government in general have lapsed into extreme dysfunction, there's an easy way to put their money on the line. The likelihood of sequestration perhaps hasn't yet been baked into market valuations, which are high right now.
- here's the article