Courtesy of Pam Martens
Goldman Sachs’ Share Price Versus SPDR Barclays High Yield Bond ETF (Goldman Is the Green Line; the ETF Is Orange)
By Pam Martens and Russ Martens: February 3, 2016
Most folks don’t realize that on Monday, September 23, 2013, Goldman Sachs began trading as one of the 30 stocks in the Dow Jones Industrial Average Index (Dow). Because the Dow is stock-price weighted and Goldman sports a very high price, it has an outsized impact on point gains and losses in the index. As of yesterday’s close, Goldman Sachs is the priciest stock in the Dow, despite its plunging price of late.
Yesterday, the Dow lost 295.64 points and Goldman Sachs was a major contributor to the decline, losing 4.98 percent of its share price to close at $151.70. If this keeps up, it might not be too long before you see Goldman yanked from the Dow.
The percentage loss in Goldman yesterday was notable on multiple fronts. First, its percentage decline was 3.18 percent more than the loss in the Dow, which gave up just 1.80 percent. Goldman’s percentage decline was also higher than two other components of the Dow which saw negative ratings action yesterday from Standard and Poor’s. Chevron had its debt rating cut one notch from AA to AA- while Exxon was put on a negative ratings watch, which could mean its much-ballyhooed AAA-rating could get nicked. (As a barometer of just how bad things are in the land of collapsing oil prices, Exxon made it through the Great Depression without a credit downgrade from S&P.)
But the biggest oddity in Goldman Sach’s price action yesterday was how it performed versus the SPDR Barclay’s High Yield Bond Exchange Traded Fund, a portfolio of junk bonds whose stock symbol is JNK. The ETF closed down just 0.82 percent versus Goldman’s big percentage decline of 4.98 percent. Clearly, something is seriously wrong in how today’s markets are pricing risk or transparency at the mega banks is as clear as mud. (See related articles below for more insight into this matter.)
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