The FX recommendations of Goldman's Thomas Stolper have, over the course of this year, been the butt of every joke on Zero Hedge, and we actively recommended readers do precisely the opposite of whatever Goldman advised clients. End result: Zero Hedge readers: 100%; Goldman clients: -100%. We were delighted to read that in his yesterday letter, Stolper admitted that his clients would have done better off siding with our cynical view of events than paying Goldman tens of millions in soft dollars (oops, did we just say soft dollars). To wit: "The performance of our FX top trades this year has been unsatisfactory." Nuf said.
From Goldman's Thomas Stolper:
The performance of our FX top trades this year has been unsatisfactory. We recommended a long PLN/JPY position as a variation of the EM versus G3 theme but implicitly assumed a lot of long EUR/$ risk, which was the primary source of under-performance. US weakness and a substantial rally in US bond markets translated into additional JPY strength as a result of rate correlations. Including carry this trade idea recorded a negative performance of 15.6%. We also recommended long GBP/NZD based on the idea that strong UK activity will ultimately translate into stronger Sterling, compared to weak activity in New Zealand, which also remains exposed to large external imbalances. Unfortunately, persistently dovish UK monetary policy fully offset the impact from growth, while the NZD got a commodity related lift from the AUD. We posted a potential loss of 12.5% on this trade, including carry. Finally, our view that growth differentiation would remain an important generic theme for FX markets turned out to be true, though performance was slightly disappointing as many of the fast growing countries in Asia prevented appreciation through unprecedented intervention, limiting the return to +1.8% on our GS FX Growth Current.
Of course, when a trader admits weakness, it's pretty much game over. We hope Thomas has very thick skin in 2011.