January 6, 2012 | By Tekoa Da Silva
Tipped off 40 minutes ago by our friend and guest of the Bull Market Thinking radio program, Reggie Middleton, it was discovered this morning that Goldman Sachs has just filed an 8k form with Sullivan & Cromwell LLP, initializing what looks to be a gold-linked issuance of interest bearing notes (more commonly called bonds).
The raw filing as published by Yahoo is the following:
Form 8-K for GOLDMAN SACHS GROUP INC
Item 9.01 Financial Statements and Exhibits.
Exhibits are filed herewith in connection with the issuance of the following debt securities by the Company on January 5, 2012, pursuant to the Company’s automatic shelf registration statement on Form S-3 (File No. 333-176914) (the “Registration Statement”):
$15,000,000 Commodity-Linked Notes due 2013 (Linked to the Price of Gold).
The following exhibits are incorporated by reference into the Registration Statement as exhibits thereto and are filed as part of this Current Report:
5.1 Opinion of Sullivan & Cromwell LLP. (end of excerpt).
The main item of interest in the filing is the following:
-The form indicates “$15,000,000 Commodity-Linked Notes due 2013 (Linked to the Price of Gold)“. Although this may make some investors warm and toasty inside, the word “linked” isn’t settling. More than likely it means the bonds will only track the price of gold similar to many ETF’s, rather than having the backing of gold which is of the ultimate value. You can bet this bond, if only “linked” to the price of gold, will be chock full of electronic derivative products designed to “enhance” stability, but in essence—will be reducing the strength and reliability of the contract to that of it’s weakest counter-party. In today’s environment, accepting a western financial firm as a counter party with the hope of solvency, is tantamount to laying in a den of mosquitoes and hoping to not get bitten.
The next question is–where will this filing ultimately lead the market? Will it herald in high trading volumes of gold-linked bonds to be embraced by hedge funds and financial institutions?
Additionally–Will the sucking sound of this first filing be one of many to vacuum away market capital which would otherwise have been allocated to mine financing?
It appears likely. But the major elephant in the room remains MF Global. The ramifications of their bankruptcy event have yet to be fully seen in the marketplace, and in this writer’s opinion, MF Global will be the first of many high-profile broker-dealer bankruptcies coming in the years ahead. Although short term pain, setbacks, and competing products continue to mount pressure on gold and silver mining share investors, when the final bankruptcy extinction-level event ripples through the global financial system, physical metal holders and mine owners will the be the kings and queens of tomorrow’s financial elite.
What are your thoughts on this filing? Please share them below!
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Tekoa Da Silva
Bull Marketing Thinking