[msandford]

Goldman will probably pump-and-dump the warehousing business onto someone unsuspecting.

1. Buy up metal warehouses

2. Stockpile metal, thus reducing market supply

3. Watch as market price increases and rental income holds steady

4. When market prices have risen enough (say 30-50%) and you have a giant stockpile of metal, put the whole business up for sale

5. A giant inventory coupled with high prices and increasing cashflow for the last several years makes the business very attractive to someone with money but not a lot of sophistication

6. Goldman makes a boatload and doesn't have to figure out how to unwind the mess

7. Unsuspecting buyer goes bankrupt within two years

[MikeCapone]

Maybe. Or maybe it'll backfire and they'll lose a lot of money.

If it was that easy, it's all that everybody would do. But it's harder than that (just ask the Hunt brothers), I believe.

[msandford]

The difference is that the people at GS have relationships with many (most, all?) of the wealthy people in the world. That makes finding a buyer who has enough cash but not enough brains easier.

I'm not suggesting that it's a slam dunk and everyone could be doing it. But being one of the premier investment banks in the world does have some perks.

[MikeCapone]

Agreed. There's definitely a very high chance of information asymmetry when you are dealing with GS. All I'm saying is that there's enough reflexivity (Soros' term) and unknowns in the market that even very smart people like them can lose money.

I think we're probably saying the same thing, just coming from different ends of it.

Cheers.