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Comment by rich_sasha | Hacker News Reader

Might. Or might not. The last authority on that IMO is an investment bank with no skin in the game.

If they really thought it’s true, they would trade on it themselves (they can now, really) or at least keep quiet about it and tell their top-paying clients privately.

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I have to say that my immediate interpretation of the title is: "Goldman Sachs: We've bought some oil futures".

Except that, post Volcker, banks are prohibited from proprietary trading; and also except that there exist strong mandatory separations ("Chinese walls") between investment research and the investment banking and trading parts of banks.

Assuming they bought futures, "Goldman Sachs Futures Pte Ltd" is officially located in Singapore and Volcker Rule doesn't affect companies that are doing trades outside of US or makes trade decisions outside US.

Volcker Rule does affect banks that are controlled by US banks, but if Goldman did paperwork correctly (of course they did), beside the name similarity, you won't be able to link it with US Goldman.

GS is an investment bank, not a commercial bank.

GS is actually a bank holding company; I'm not sure what your comment is actually trying to say though - does it intend to contradict some part of what I wrote?

The point is that they have an investment banking arm that is absolutely doing prop trading.

This stopped being true during the 2008 financial crisis. See https://www.marcus.com/us/en .

Ok, fine. They’re a bank holding company that includes an investment banking arm. That arm definitely does prop trading though, so my point stands.

or short sold so many futures that they need people buying enough so there is liquidity for them to get out of the contracts.

quoting wikipedia

> and "by 2008, eight investment banks accounted for 32% of the total oil futures market".

don't know the current state of affairs, but you can be sure goldman bought oil. in june. last year.

Rules changes and investment banks cannot do prop trading now. Though I hear they changed again, quietly, and now they sort of can.

The point is, this is some analyst writing it. I’m sure it doesn’t go against the business and trading positions of GS, but it is some minor part of a big picture.

Overall, public analyst recommendation are pretty much uncorrelated with future returns.

I'm not advocating for or against GS here, but wouldn't an investment bank with no skin in the game be a bit more trustworthy? If there's no money on the line, there's no incentive/pressure to conform their analyses to their lines of business.

A few things. It's a big assumption to guess they have no skin in the game. They could and likely do have a net position one way or another in the oil market. There are a few ways that could work. They could both believe this is true, and also have a position in that direction. So publicizing this view might help their position realize gains sooner than expected. This is somewhat of an opposite to how short sellers work, where they will take a position then publish an expose.

But suppose they have no skin in the game. Is that necessarily better? It implies they don't know enough about the market to actually take a position, which calls into question the value of their research.

Of course both of these are huge simplifications. They ignore that GS is a huge organization, not a single person. As schizophrenic we people can be, corporations are that much more so. The left hand literally might not know what the right is doing. Who published this paper may not have authority to trade, or the ears of those who do. Or many other possible explanations.

Anyway, the general point is that disinterest and neutrality do not universally make opinions more reliable.

As big in both organizational size and managed volume as Goldman Sachs is (and as substantial and fundamental a portion of the global market as oil is), it's almost inconceivable that they wouldn't have any exposure in the oil market.

In fact, I'll bet that across the organization GS is currently holding multiple different (potentially mutually contradictory) positions in the oil market.

Someone with a Bloomberg terminal could backtest whether trading with (or against) Goldman's public advice works (or not) over time

Doesn’t :)

Fun fact: it was consistently wrong that’d be just as useful.

This is not necessarily the case, due to market spread. It's very easy to build a strategy that's consistently wrong, but by flipping the signs you will still be consistently wrong because of market spread.

GS definitely buys and sells oil futures.

https://markets.businessinsider.com/news/stocks/goldman-sach...

I feel like it would be pretty hard for any investment bank to have no skin in the game. Many if not most of the companies in the stock market are affected by rising oil/energy prices.

Banks make money off fees for trading and loans (and complicated products that end up being a mix of the two). The recommendation business is mostly a marketing effort to drum up business. Their clients will be split roughly 50:50 on views on oil going or down. They don’t care. For every client losing money, another makes money too and has more money to spend on trading fees.

Banks used to be allowed to trade on their own accounts, but that was a massive invitation for abuse. This got at least massively scaled down, if not outright banned.

Sometimes investment banks do find themselves with an exposure they have to actively hedge; maybe they sold some complex product and it backfired on them, etc. But that’s rarer and a lot harder to game.

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