Love it or hate it, there's no denying Goldman is a force to be reckoned with. When these guys predicted that oil would surge to $100 and beyond back in 2006, many Fools laughed. The laughing stopped when oil proceeded to do just that. And when Goldman followed up its $100 prediction with a call for $200 oil just two years later, no one laughed. Investors actually bid up oil futures, nearly helping Goldman fulfill its own prophecy.
For good reasons or ill, this banker's opinions remove markets. Even if you don't agree with Goldman, it's worth keeping an eye on.
All commodities, all the time
Because gasoline prices are so central to our lives, Goldman's petro prognostications grab an inordinate share of newspaper headlines. But in truth, Goldman spends considerable time tracking the trends of many commodities, including wood, fertilizer, grains, and non-precious metals. This week, we're going to highlight for you three trends the banker sees in three such less-sexy commodities.
Wood-a, could-a, should-a
If and when this comes to pass, Goldman suspects we'll see a raft of downgrades from its brother analysts. Beating the rush, Goldman shaved a penny off its 2009 earnings estimate for Kimberly-Clark, then lopped a dime off of each of its profit predictions for 2010 and 2011.
Could Procter & Gamble
I didn't seed that coming!
In other agricultural news, Goldman also took Monsanto
The big question here, I suspect, is whether Monsanto's troubles are company-specific, or something a bit more contagious. If we're not seeing an aversion to Monsanto's seed products in particular, but perhaps a more general pullback in planting, that could mean bad things for fertilizer producers like PotashCorp
Hong Kong phooey!
Last but not least, in a little-noticed comment last week, Goldman let slip that it's not quite as confident about the prospects for a global economic recovery as it previously let on.
Calling emerging markets in particular "not ... yet on solid footing," Goldman warned that last year's surge in copper prices in particular (up more than 100% on the London Metal Exchange, or LME) may have gotten a bit ahead of itself. Stockpiles are also up more than 100% since just last July, which has Goldman worrying about what a drop in demand from China might mean for the metal. (It might also spell trouble for big miners like Southern Copper
So is it time to panic? Not quite. In fact, at the same time that it expressed worries over the future for copper prices, Goldman predicted that the price on a LME three-month copper contract will rise close to 15% over the next six months. Even 12 months from now, it should sell for 10% more than it does today.
For the time being, the trend in rising commodities costs seems to remain on an incline -- for lumber, for copper, and until we hear differently, for fertilizer. Here's hoping the economy proves stronger than Goldman fears, and pricing as strong as it predicts.