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As Expected, Goldman FX Closes EURCHF At Loss To Clients, Profit To Zero Hedge Readers
On the 19th of October, we told readers that Goldman is pitching a short EURCHF trade; and that, as a result, it is time to go long. Back then we said: "Like every other time Goldman says to do something, the prudent thing to
do is the opposite. Of course, this means more weakness for gold, as
the Swiss Franc is simply the safest equivalent of gold in the monetary
realm. Oh well - if better cost bases are to be had, than so be it." We were pretty much spot on, as usual, vis-a-vis our evaluation of Goldman involvement (and gold has indeed presented a better cost basis). Since then, the EURCHF has ploughed straight up, and gold has plunged. Just relased: Goldman has closed the EURCHF trade, after the 1.36 limit was hit. End result to clients - loss of 1.4%. End result to those who took our slightly jaded view on things: profit of 1.4%. We also suggest readers take profit on our "profit" limit being hit.
From Goldman:
Last week we recommended short EUR/CHF positions based on the idea that risk aversion in the Eurozone could rise again in light of intensifying French strikes and also because long-dated implied EUR/CHF volatility suggests unwinding risks of legacy carry trades persist. However, we chose a relatively tight stop, which has been triggered on Friday and we therefore close this trade idea for potential loss of 1.4%.
And here is how the EURCHF fared since the 19th:
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Taking GS advice can be expensive.
but at the moment gold is strong...up 20.
and how about that palladium? wow.
i think russia will become a BIG player... as big as china.
The other side of the coin is that ZH has it easy as ZH is not calling trades but is generally predicting both directions of currencies: so we've seen "EUR CFH parity this year!" and "EUR USD parity this year!" articles just as much - as we are seeing the periodic gold bug articles.
ZH readers who followed that kind of bad advice are currently down with a massive loss of 20,000+ pips on EUR/USD or down with a 5000+ pips loss on EUR/CHF - or might have bought gold at the DXY top.
(Just like there were bogus ZH articles that suggested that the BP oil well would rupture any time soon (after predicting that hurricanes would destroy the well), that another islandic volaco would erupt, or bogus claims that we are heading into hyperinflation not deflation.)
It would be a fair comparison if ZH called explicit trades, and analyzed them later on. Selectively touting those articles alone where ZH happened to call the right trade, while remaining silent about all the bad avice, is intellectually dishonest.
I was always under the impression ZH doesn't advise nor promote to do anything investment-related (well, besides buying buckets of gold bars).
Its right in the disclaimer.
idk about all that.not worth getting into
Well, you surely got a point there. Though it's not my duty to defend ZH and all the articles that appear here -as I've found some of them utterly ridiculous as well- I must say there are only very few articles written by TD and the core team that explicitly suggest a certain trade. There are guest posts that analyse FX markets, but what Tyler argues with regards to Goldman trading suggestions has been proven to be spot on quite a few times for short-run trading (Goldman being the contrary indicator).
About hyperinflation, I have personally posted several Bernanke speeches and articles written well before the crisis saying that he will do anything and everything to create inflation should the U.S head towards deflation. Of course, whether or not he will succeed is an other issue, as most of the money flows into emerging markets and creates new bubbles and massive appreciations of their currencies, as discussed on ZH and many other places including the G20 meetings. The end result is that the dollar will probably keep on depreciating in the medium-run, and as hyperinflationary episodes in history suggest, once a certain threshold is reached, inflation will spike, and the treasury's will fall masssively with FED remaining as the sole buyer. So with a medium-run perspective, ZH has been right since the announcement of TARP and QE1. Dollar down, deflation prevented, food and oil-price inflation, gold and silver up, stocks up..
As I said, you have point if you consider short-term trading, some readers might have bought gold at 1360, or euros at 1.40 but the more important question is, how much you will have made in a year from these trades. ZH consistently warns readers of staying away from day-to-day trading in such rigged markets, and knowing on what sort of a bombshell the world economy is sitting on at the moment, I would not myself trust any technical analysis, as the shit might really hit the fan any moment (remember flash crash?) So I believe ZH has been pretty consistent, apart from some really stupid guest posts appearing in the last few months.
Tyler(s): Please a bit more care about these guest posts, some of them are utter bullshit really and reducing the credibility of your own excellent analysis..
Goldman faders!
Question : does Goldman´s sales side Forex desk consist of a bunch of rookies ? Answer: Yes, but their are missing their principal strategies group leaving for KKR...
Philosophy night: given that Goldman Sachs is the market, can one become rich by doing exactly the opposite of what Goldman Sachs advises to its clients, each time?
this mean gold is about to spike again?
Yes, gold to spike again as QE2 by the Fed coming very soon plus am sure they are working hard to figure a slimy way out of this whole MERs/MBS debacle.
so is jan like the only macro guy worth a crap at GS? everything else is noise coming outta there and do the opposite?
According to some of our more renowned Goldman-defending readers, everyone at Goldman is always correct, even when they directly contradict each other.
Jan Hatzius seems like the highest of economic geeks to me- almost like he doesn't have an axe to grind but just wants to be right. I trust him the most in his analysis.
Abby Joseph Cohen, not so much. After a while, you begin to find out who is reporting in earnest and who is a shill.
AJC singlehandedly discredits anyone foolish enough to employ her. In every non-retarded parallel universe she was fired 10 years ago or more.
ah screw it all. i'm bedding down for the night. this shall be an interesting week in fx. kabuki style. your observations from weekend posts are intriguing. i'll keep an eye out for your insight. we're all fx traders in some form right?
Best of luck trading!
:D
Now flash-crashes in the comment section! What is the world coming to?!
Everyone being smarter than the other person and able to find a greater fool.
These days it seems trades are multi faceted, you don't just take both sides, you take all sides.
(1.5M uniques is huge!)
-profd
I'm not trading and paying capital gains, I'm riding gold to the graveyard.
So how is Goldman simultaneously rigging the market and losing in the market? I am no fan of them, but don't you have to choose between them being incompetent (as this article suggests) and being evil geniuses manipulating things (as some ZH readers suggest)? Once again, I'm not defending them, just asking for some clarification from someone who has studied GS.
stick with Jan if you read anything squdiee..there are still some credible people out there. but their numbers are quickly dwindling. the rest do "god's work"
double
Goldman is pitching the trade, which means its own traders are on the other side to execute and hold until they wish to offload. q.e.d.
Those bastards.
CHFJPY is stepping on a major 50% Fibonacci retracement level as we speak. Watch for a significant break below the line at 83.16 because after that, it is a...
long
way
down
.
Be careful.
:D
I need to create a db and keep track of their sell desk recommendations, and the P&L of using that as a contrarian.
P.S. Captcha had to be created by a moron. -61 plus -67 =? Oh wait you can only enter 3 char not 4...so why the f' did you ask the question. What a POS.
In other words, our prop desk, who probably took the other side of this trade recommendation, thank you suckers for the 75% annualized rate of return on their investment.
I haven't paid attention to anything in over a week and I just "know" the swissy is in big trouble.
USD 4 trillion QE2 prediction a counter indicator as well?
The French strike's rationale for the EUR/CHF short was truly ridiculous. Again, the trend for EUR/CHF, EUR/USD, Gold, oil etc. is mainly a function of the QE2 Dollar devaluation. Maybe Goldman does not believe in the continuation of this trend any more ("normal" QE2 reflation story is already priced in)? Maybe that's why they are desperatly predicting a QE2 of no less than USD 4 trillion?
For me, that prediction bears striking similarities to Goldman's famous prediction of USD 150 by end of 2008, and USD 250 in the course of 2009, on which prediction Goldman insisted in August 2008, when the oil price was already falling like a rock due to a strengthening Dollar.
I wonder where Mr. Arjun Murti is now enjoying the benefits of his multimillion bonuses. Is he still with Goldman?