Is Goldman Sachs Window Dressing?

Today’s news from Goldman Sachs ($GS) is interesting in more ways than just the negatives they predict for the economy.  I can’t help but wonder about the timing of their statements.

We just had a pretty good run from near Dow 10,000 to near 10,900.  Year to date Goldman Sachs had probably outperformed most of their peers and has had plenty of trading opportunity.  Not knowing what their current portfolios look like in their eyes, it does seem odd that in the midst of all the news and portfolio managers who have said “No double-dip recession”, that here comes Goldman with a big negative.  Who does this serve?

If we follow the money a little bit maybe it serves Goldman more than investors.  Many investors have only recently added exposure to their portfolios.  If Goldman made enough in trading so that their portfolio return is somewhat irrelevant, then maybe helping the markets prepare for a harsh economy also helps Goldman window dress some accounts and funds prior to year end, and also can help them move to better positions for the coming year, and an eventual positive market.  How should we take this?

As business owners we must take it with a grain of salt, maybe a whole pound of salt!  I don’t think investing in private accounts is necessarily effected by this, but should we view it as a short term negative and in reality a buy signal?  To me it almost seems like they are saying the poker players at the table all hold bad hands except Goldman, and now they are waiting for everyone to fold.  They may have a full house or they may be bluffing but if everyone else is holding a bad hand it doesn’t matter.  So how do we follow this lead?  Don’t be the last one out and don’t be the first one out!  This hand may be played over the next 2-3 quarters but it is going to end way before the night is over.

In other words, keep playing, don’t bet to high for now, but realize the next hand may deal you some good cards, as long as you still have something left to bet.  Is business investing a poker game?  Only some of the time.  In the short term it really can look like gambling more than investing.

So when should we be willing to deploy new ventures, take risks in marketing, and put hedge money back to work?  If you have long term goals you must continue to work forward toward them, at the same time you may want to adjust your timing for anything that increases overhead.  To me it seems like the best time may be after the first of the year.

Today’s article on Goldman Sachs from Bloomberg: http://bit.ly/c0XgJx