FORTUNE — If you bought a can of Coke this weekend, you might have paid $0.002 more because of Goldman Sachs. Worse, the car you drove to wherever it was that you bought that can of Coke cost $12 more than it should have, again because of Goldman (GS), which is like $1.09 more a year over the life of the car.
Of course, the fact that these amounts are small doesn’t matter, as I have argued in the past. The black magic of Wall Street is figuring out how to take pennies from everyone and redistribute that money in the form of multi-million dollar bonuses to a relatively small number of people on the Upper East Side of Manhattan.
But when you want to make the case that Wall Street is taking advantage of us — that is, jamming its blood funnel into anything that smells like money, as one colorful reporter put it — you have to look at how these amounts add up. And in the aluminum market, it’s not clear that the case against Goldman does that.
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The tale of how Goldman is manipulating the market for aluminum and boosting prices to the tune of $5 billion a year for Coke drinkers and others was laid out this weekend in an article in the New York Times. According to the article, back in 2003, regulators passed a rule that allowed Goldman and other Wall Street firms to go outside the normal realm of financial markets and buy up companies that participate in the actual buying and selling of commodities, metals like aluminum. So Goldman did. It bought a group of warehouses in Detroit that store and ship aluminum.
The NYT makes a big deal about the fact that nearly none of the aluminum Goldman holds is ever shipped to customers. Instead, Goldman moves it from one warehouse to another, without any perceived purpose. Sketchy, right?
Maybe not. That’s because Goldman’s clients generally aren’t Coke (KO) or GM (GM), or any other end user. Goldman’s clients, like in the other parts of its business, are investors, who aren’t in the business of making things. They have no actual use for the metal, other than to stockpile it, which is what Goldman does for them. When it is sold, the aluminum might end up being bought by another investor, who would put it in another warehouse, which could also be owned by Goldman.
Much of the movement of the metal, though, happens, it appears, because of a weird regulation, imposed by the London Metal Exchange — the motivation of which, according to the Times article, is dubious because it too benefits from inflated profits in the warehousing business. The rule states that no matter who owns the aluminum, 3,000 tons of it have to be moved out of warehouses every day. So if investors want to hold their metal for long periods of time, they have to move it from one warehouse to another in order to not run afoul of the rules. That drives up the cost of holding onto the metal, and therefore the price that investors want to get paid when they sell it. And that results in a higher price of aluminum, at least in the public markets. So what may really be driving up the price of aluminum, and costing customers $0.002 more for a can of Coke, to the tune of $5 billion a year, is not a dastardly shipping scheme by Goldman, but some poorly written regulation.
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What’s more, Goldman’s warehouses only hold 1.5 million tons of aluminum, a small fraction of the overall stock of the metal. So if anything, by the NYT‘s math, Goldman’s take of its aluminum inflation efforts is $171 million. Much of the rest of the benefit would go to the aluminum industry. Still, a headline that read “Alcoa and other aluminum manufactures make $4.8 billion off poorly devised regulations that drives up the price of a can of soda $0.002” probably wouldn’t have made the front page.
But that’s probably not even the real story. The NYT article says that Coke and other aluminum users have started buying directly from producers of the metal, presumably mining companies, in order to get around rising warehouse costs. So the price of aluminum to Coke and GM, and the cost of a can of soda or a car to an average consumer, probably isn’t going up much, or at all. To prove its point, the NYT states that the price of aluminum spiked from 2008 to 2011 as the stockpiles of aluminum in Goldman’s warehouses rose from 50,000 tons to 850,000.
What the NYT doesn’t mention is that the spike came only after a much bigger plunge in the price of aluminum in late 2007 and early 2008 at the start of the Great Recession. It still hasn’t fully recovered. What’s more, aluminum prices have fallen since mid-2011, even as Goldman’s stockpiles have continued to grow.
Coke may have, as the article states, complained about the rising cost of the aluminum in the so-called spot market, which is the price that gets quoted on exchanges like the LME. But that’s probably because Coke and other manufactures like to hedge against commodity price swings. If the price in the traded market is higher than the actual price of the metal, Coke would have have to pay more for their hedges. But the fact that Coke can hedge its price still likely saves the company money, even at the higher price. Why else would Coke continue to hedge?
But perhaps the biggest problem with the NYT‘s case against Goldman is that it uses its flimsy evidence against the investment bank to justify the argument that basically all commodity markets are being manipulated by Wall Street. The article states plainly, according to a Goldman internal memo no less, that speculators have driven up the price of a barrel of oil by 33%. What the article, again, does not say is that there is a mountain of studies on the other side of that debate that have found that speculators do little to drive up the costs that you and I pay at the pump or elsewhere.
The article also lumps in as evidence the case being made by regulators that JPMorgan Chase (JPM) used power plants it inherited from Bear Stearns to manipulate electricity prices in California. In that instance, it appears that laws were broken. And there Wall Street fraud does seem to be a drag on the economy. But that’s always the case with fraud. There are a number of ways Wall Street firms can jump into the commodities markets. Some of them are illegal, and some of them are not.
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In the end, the debate we should be having is not over whether Goldman is breaking any rules — the NYT article says there is no evidence to suggest it is — but whether speculators should be able to bet on the price of basic materials that affect our lives. And the speculators we are talking about are not just large institutions like Goldman. In the past few years, ETFs that allow average individual investors to bet on the price of oil and other commodities have flourished.
My guess is that liquid markets in which lots of investors get to participate to determine the price of oil or electricity or aluminum or stocks is a good thing despite the costs that go along with it. But maybe there are cases where that assumption is wrong. And the idea that Wall Street is bad for the commodities market is certainly in the air. Congress and the Federal Reserve are apparently looking into this question and thinking of proposing new regulations. Hopefully, they won’t be using the NYT‘s case against Goldman as evidence that change is needed.
