Tag Archives: Goldman Sachs

Top Movers in a Volatile Market

Street Insider.com lists some of the most active ETFs today.

At 2 pm:

iPath S&P 500 VIX Short-Term Futures ETN
(VXX) rose 8.37% to $28.30, on midday volume of 44 million shares, already four times more than its daily average volume. The ETF tracks the CBOE VIX, which is up 28.5% today to a near-term high of $42.15.

United States Natural Gas (UNG) gained 1.2% to $6.89 midafternoon on volume of 20.2 million vs. 26.8 daily average.

Utilities Select Sector SPDR (XLU) up 0.34% to $29.35, volume was already double the daily average at 10.6 million. People are moving to utilities for safety and dividends.

United States Oil (USO) fell 1.89% to $36.26 as crude oil futures posted steep losses for the fourth consecutive day. Mid-morning, the June 10 contracts hit an 11-week low near $74.50 a barrel, but were down $1.46 to $75.43 late afternoon. Volume was up 80% to 18 million.

Financial Select Sector SPDR
(XLF) was actually flat at 2 p.m. at $15.26. Volume had surged to 260 million from a daily average of 103 million. Goldman Sachs (GS) is up 1.7% to $144.65 in the wake of its annual shareholder meeting.

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Pressure on Gold May be Buying Opportunity

The Goldman story is affecting gold according to 24/7 Wall Street. On Friday, the SPDR Gold Shares (GLD) lost 2.1% to $111.24. The guys at 24/7 reason that the Paulson & Co. hedge fund implicated in the scandal is heavily invested in gold. However, if investors pull out, the fund may need to sell gold to cash them out, putting downward pressure on the yellow metal. I think this is argument is a nonstarter. Most hedge funds require 60 to 90 days notice before investors can cash out. So, this sell off won’t happen for a while. This means, that gold may have been beaten down without good reason, and that Monday is a buying opportunity.

Meanwhile, The New York Times said on Saturday that Wall Street firms tent to settle cases like this one, but Goldman’s statement on Friday that it intends to fight may create a big problem. While the refusal to settle was intended to discourage investor lawsuits, this could set Goldman up for a long, messy public battle. The paper added that several European banks that lost money in the deal may try to recoup the money from Goldman.

Then Sunday, the Times added two congressmen want a deeper investigation into taxpayer losses while Britain’s prime minister asked his country’s securities regulator to investigate the Goldman due to losses incurred by the Royal Bank of Scotland. Germany added it may take legal action as well.

It appears Yahoo!Finance had it wrong. They didn’t even mention the volume of the Financial Select Sector SPDR (XLF) which was the third most traded stock on Friday with 380.6 million shares traded, topping the SPDR (SPY) and Direxion Daily Financial Bear 3x (FAZ), which it said had the third highest volume. On Friday, XLF fell 3.7% to $16.36 and the ProShares Ultra Financials (UYG), the one that gives 2x the positive return on the financial sector, lost 6.6% to $71.65.

Big ETF Moves on Goldman News

Exciting day on Wall Street as the Securities and Exchange Commission sends a shot across the bow of Goldman Sachs.

The stock market started out mildly higher, when midmorning, the SEC charged Wall Street’s most influential bank with fraud over its marketing of a subprime mortgage product designed to fail. The SEC says a Goldman vice president was also charged with fraud for his responsibility for creating the questionable mortgage product, known as ABACUS. Surprisingly, criminal charges were not filed.

However, this makes many question whether the bull run of the last year is over.

According to Reuters, the SEC alleged that Goldman structured and marketed ABACUS, a synthetic collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities. However, Goldman allegedly didn’t tell investors “vital information” about ABACUS, including that the hedge fund Paulson & Co helped choose the securities in the portfolio. Run by John Paulson, the hedge fund made billions of dollars betting that the housing market would crash. The SEC also alleged that Paulson took a short position against the CDO in a bet that its value would fall, reported Reuters. “This included an estimated $1 billion from the transaction detailed in the SEC lawsuit, which the agency said cost other investors more than $1 billion,” said Reuters.

Many people on Wall Street have said this is a politically motivated moved as Congress begins debating reform of financial industry regulation.

Goldman denied the charges. Its stock fell $23.57, or 12.8%, to $160.70, and it brought down the entire market with the Dow Jones Industrial Average losing 126 points, or 1.1% to 11018.66. The S&P 500 dropped 19.5 points, or 1.6%, to 1192.13.

Obviously, this means a lot of movement among ETFs.

The Direxion Daily Financial Bear 3x (FAZ) jumped $1.14, or 10.3%, to $12.18, posting the third-largest volume of the market gainers, 209.7 million shares.

ProShares UltraShort S&P 500 (SDS) gained 94 cents, or 3.3%, to $29.72.

ProShares UltraShort Financials (SKF) jumped $1.15, or 6.8%, to $18.11.

The Financials Select Sector SPDR (XLF) fell 62 cents, or 3.7%, to $16.36.

ETFs See Cash Inflows Even as Asset Values Fall

ETFs and ETNs continue to see net cash inflows even as total assets under management fall. The conclusion is this is a function of just falling asset values.

According to the National Stock Exchange (NSX), at the end of November, total U.S. listed ETF and ETN assets fell 16.8% to $487.6 billion from $585.8 billion in November 2007. However, net cash inflows for the month were $26.4 billion, bringing the total net cash flow for the 11 months through Nov. 30 to $136.8 billion. In November, 315 ETFs saw net cash inflows, while 179 saw outflows. ETNs split at 16 each.

Notional trading volume in both ETFs and ETNs fell 33% in November from October to $2.2 trillion. Surprisingly, this represents a record 43% of all U.S. equity trading volume, up from 38% in October. That just shows how much total equity volume must have fallen off. At the end of November 2008, the number of listed products totaled 843, compared with 650 listed products one year ago and 806 in October.
According to the NSX, the only ETF firms that saw assets grow are State Street Global Advisers, ProShares, Van Eck and

Ameristock/Victoria Bay. All those firms saw net cash inflows for the year through Nov. 30 increase compared with the first 11 months of 2007. Vanguard did as well. ProShares’s assets under management rocketed 112% to $20.9 billion. SSGA’s assets grew 8.3% to $142.9 billion. This really shouldn’t be a surprise. ProShares sponsors the inverse and leveraged ETFs that have proved hugely popular in the market turmoil. SSGA sells the largest, most liquid ETF, the SPDR (SPY), which tracks the S&P 500. Many investors making a flight to safety or seeking a place to hold cash on a temporary basis will move to the S&P 500. Even as the S&P 500 sinks, the SPDR’s 2008 net cash inflows have surged 86% year-over-year through Nov. 30 to $18.23 billion.

Meanwhile, BGI’s iShares saw assets tumbled 29% to $229.3 billion.

Firms with net cash outflows in November included PowerShares, $309 million, and Merrill Lynch’s HOLDRs, which saw redemptions of $889 million. Surprisingly, the HOLDRs saw net cash outflows of $3.6 billion in 2007, but are up $1.2 billion so far this year. Other firms that experienced outflows in November were WisdomTree, FirstTrust, and SPA-ETF. Firms with net outflows year-to-date include Bank of New York, Rydex, X-Shares, Ziegler, FocusShares and BearStearns. The last two have gone out of business this year. Rydex is suffering as the strengthening dollar hurts its CurrencyShares.

As for ETNs, Barclay’s iPath family saw assets plunge 36% to $2.6 billion. In November, iPath saw outflows of $39 million. Morgan Stanley/Van Eck ETNs recorded outflows of $16 million in November. Meanwhile, Goldman Sach’s ETNs net cash outflows grew to $97 million year-to-date. Comparisons are not relevant for many of the other ETN firms as they had few funds, if any, last year.

Among the top ten ETFs and ETNs, the SPDR (SPY), iShares MSCI EAFE Index Fund (EFA), SPDR Equity Gold (GLD), iShares S&P 500 Index Fund (IVV), iShares Russell 1000 Growth Index Fund (IWF) and iShares Russell 2000 Index Fund (IWM) all saw net cash inflows in November, according the NSX. Of the 10 largest funds, these saw outflows last month: iShares MSCI Emerging Markets Index Fund (EEM), PowerShares QQQ (QQQQ), iShares Barclays Aggregate Bond Fund (AGG) and the Dow Diamonds (DIA).

The NYSE Group also releases volume data for its exchanges. Average daily matched volume for ETFs, or the total number of shares of ETFs executed on the entire NYSE Group’s exchanges surged 93.5% to 672 million shares from 347 million shares in November 2007. Total matched volume for the month totaled 12,765 million shares, a 75.1% increase. Total volume year-to-date through Nov. 30 jumped 74.7% from the same period last year to 102,583 million shares.

Handled volume, which represents the total number of shares of equity securities and ETFs internally matched on the NYSE Group’s exchanges or routed to and executed at an external market center, totaled 14,813 million shares last month, a 77.6% surge over the year-ago month. Average daily handled volume rocketed 96.3% to 780 million shares from 397 million shares a year ago. Year-to-date total volume climbed 78.1% to 117,629 million shares.

The NYSE also reported total ETF consolidated volume for the month leapt 92.1% to 45,151 million shares, while total average daily volume soared 112.3% to 2,376 million shares. Year-to-date, total consolidated ETF volume surged 119.4% over the first 11 months of 2007 to 355,133 million shares. I think those refer just to the NYSE Group.