The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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The Enigma of Goldman

Rolling Stone magazine once referred to legendary investment banking firm Goldman Sachs as the “great vampire squid wrapped around the face of humanity.”  I don’t find any reason to disagree with that.  Yet, I have great professional respect for their cold, hard, unblinking analytical capabilities.

In their latest analysis, they estimate that our GDP growth is being reduced by a whopping full percentage point at the current price level of oil.  Still, they expect the S&P to end the year at 1,500 or up about 12%, which would be a major bull move in only eight months.  And, they expect gold to end the year about $1,690 per ounce, also a 12% bull move from where we are. 

The traditional relationship of the stock market being slightly ahead of the economy and moving opposite from the price of gold seems to have broken down.  My suspicion is that the understandable flooding of dollars into the stumbling economy by the Fed is creating asset inflation in both stocks and gold.  Goldman does not regard inflation as worrisome.   We’ll see . . .