Goldman Sachs has reported that it has dramatically reduced the risks it is taking, at least as measured by average daily Value at Risk, or VAR. Yet its in-house super bull is touting stocks.
Currently the bank says its average daily VaR is just $86 million, a twenty-four percent reduction from the previous year. As Reuters says, this is the lowest VaR for Goldman in seven years. (VaR is a term for what the firm thinks it can lose in any average day.)
Goldman watches VaR very closely. So it's safe to assume that when VaR falls to record lows this isn't because markets have simply become less risky. Goldman knows how to increase VaR if declining market volatility starts pushing it down. If VaR declines this means Goldman has gone risk-off.
Perhaps a bit awkwardly, Friday morning Goldman dispatched uber-bull Abby Joseph Cohen to reassure investors that the January-February stock market rally is real and based on fundamentals.
This was AJC doing her usual bullish thing, of course. And Goldman as a firm is under no obligation to follow AJC's advice. But it does align awkwardly with Goldman's own risk-off move. If the market crashed, it would be easy to say that Goldman's talking heads were telling investors to go in one direction while the firm went in another. Goldman did not respond to requests for comment.
At the heart of the accusation that Goldman is a blood-sucking tentacled beast is the idea that Goldman encourages bubbles so that it can profit when they burst. So its fair to wonder if Goldman is at least risking giving these accusations a new lease on life.
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