Goldman's Gary Cohn Disagrees With Mark Cuban, Oil To Go Lower And Janet Yellen Has 'Got To Be Patient'

Gary Cohn, president and COO of Goldman Sachs Group Inc GS, was on Bloomberg recently to discuss why he thinks oil prices can go substantially lower and why he disagrees with Mark Cuban's view that we are in another bubble. Cohn also discussed why Janet Yellen is compelled to remain dovish and patient.

Oil Will Go 'Substantially Lower'

"Right now, we're still in the mid- to high-$40s. We've been ticking around $45 to $50. And what I said recently is I think the front end of oil can go down," Cohn said. "And I think we're getting to that point."

He continued, "If you look at the storage capacity in the mid-continent of the United States, we're basically close to capacity. So, if much more oil comes into the system in the United States, we're going to fill up capacity. We're going to fill up storage. We're going to have to price in more contango to attract in more storage.

"So, what I think we're going to see happen is the front end of oil come down, the back end is going to stay unchanged and the contango's going to widen. That still means we're going to wake up to one day where we see a headline where the spot price of oil is substantially lower than it is. And I still believe that's going to happen."

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Disagree With Cuban

Cohn was asked what he thinks of Mark Cuban's view that we're in a bubble. He replied, "I never like disagreeing with Mark, but I'm going to disagree with Mark.

"When you look at the Nasdaq at 5,000 now versus where it was last time we were at 5,000, it's substantially different. The composition of the index is different. The companies that make up the index are different. The multiples are substantially different. The earnings power is different."

He explained, "The fact that you and I are using companies in the Nasdaq as part of our standard, daily living – and I'm not sure we could live without those companies today. They have become part of our everyday life, and they're making our life different. They're making our life better and we depend upon those companies," Cohn stated.

Dovishness And Patience

On Janet Yellen's compulsion to remain dovish and patient, Cohen said, "I still think she's going to be dovish. I've been saying that for a long time. I still think that she's got to be patient. I understand that Janet Yellen wants to, and I understand the need that she really wants to raise interest rates.

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"If you were Janet Yellen, you would want to raise interest rates; you'd want to have the ability to lower interest rates if something went wrong. There's nothing scarier than being head of the central bank and not having the ability to stimulate the economic cycle. That's a bad position to be in."

Cohn went on, "So, I understand her position. On the flip side, she's got a dual mandate. She's got an employment growth mandate, and she has an inflation mandate. There's no inflation in the system; there's no signs of inflation in the system.

"I think Q1 GDP is going to be lower than people think. I think Q1 earnings are going to be lower than people think. And I think she's going to continuously be in this tough position of intellectually wanting to raise interest rates, but fundamentally not being able to," Cohn concluded.

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