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Goldman Flow Now Selling EUR Outright, Advises Leveraged Accounts Are Caught Wrong Way In EUR Collapse

Tyler Durden's picture





 

Some very disturbing commentary for the EUR bulls out of Goldman sales desk (these guys are the real deal, not the institutional sell side idiots who can't hit an elephant from 3 feet with a bazooka), which is now outright bearish on the EUR: "We’ve been better EUR sellers to the tune of half a yard, mostly technical accounts. Leveraged accounts are not participating in this move for the most part, and if anything, they have been caught the wrong way around." Which means that should the collapse continue, the margin calls will come in, and the EUR longs will go the other way, putting increasing pressure on the EUR pairs, and likely forcing the SNB to do the inevitable. Look for more EUR pain overnight.

More from Goldman's David Clark:

Yet another reason to have sold EURs today. EURUSD has dropped nearly 2 big figures in the last 24 hours and is closing at the lows. EURCHF makes new all-time lows. EURAUD revisits levels not seen since 1989 – particularly interesting on a day when equities are down 1%. We’ve been better EUR sellers to the tune of half a yard, mostly technical accounts. Leveraged accounts are not participating in this move for the most part, and if anything, they have been caught the wrong way around.

And some observations on deteriorating geopolitics from Goldman's Natacha Valla:

Strike in France, sounds familiar? Estimates vary between 1.1 (interior ministry) and 2.5 to 3 (unions) million for the number of people in the streets today for the first general strike to protest against the proposed pensions reform. In short: (i) Either way, this is a lot and can be considered a success for unions. (ii) Given today’s sizeable turn-up, the government is likely to propose to soften the edges of the reform and get away with it (eg on specific regimes for physically-tough jobs) while keeping the core intact. The President and the PM have already made statements in this direction today. Overall, be braced for more of this in September.
 
Prospects for French sovereign debt? France currently enjoys a honeymoon with markets – its spread to Germany is minimal (see chart below). Yet, the country’s track record in managing public finances and the shape of long-term government liabilities (see chart below) do not look great. Overall, at the time we speak, we can still give the benefit of the doubt to the current government, as it has said very loud its commitment to turn the situation around. Whether or not this will happen will depend on its ability to keep a firm hand (and/or make wise concessions) through what promises to be a shaky September. A disciplined budget won’t suffice, structural reforms (starting with pensions) will be key.
 
Recall that our Global Markets team has initiated a couple of trades involving France in the sovereign space (10-yr Italy against France, and Spain vs. France). See Francesco Garzarelli’s latest mails and his Bonds Snapshot of September 6th for more details).
 
Watch out for developments in France – things might move fast.
 
A couple of charts:

All in all, the pleasant myth about Europe is unravelling. As Tim Backshall pointed oh so wisely, the choice is simply: default now or default later.

 

 


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Tue, 09/07/2010 - 20:54 | Link to Comment bugs_
bugs_'s picture

Could Goldman be right this time?

Tue, 09/07/2010 - 21:55 | Link to Comment Getagrip
Getagrip's picture

Look what happened in 08. Everything melted down except USD and treasuries. The Fed has a lot of treasuries that need to be bought. Dollar/treasury melt up coming to a theater near you...soon.. 

Wed, 09/08/2010 - 00:05 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Ding ding ding, we have a winner! R.I.P. Euro, R.I.P. socialism

Wed, 09/08/2010 - 00:06 | Link to Comment moneymutt
moneymutt's picture

I thought we were socialist now, if were socialist, Europe, far to our left, must be the former USSR or soemthing further to the left.

Wed, 09/08/2010 - 01:13 | Link to Comment barkingbill
barkingbill's picture

you guys are talking out of your armpits. 

Wed, 09/08/2010 - 01:16 | Link to Comment barkingbill
barkingbill's picture

what the protests actually show is that people in france have enough balls to stand up to their government and the corporations robbing and plundering while they downsize and streamline, and get so lovely efficient and can rob some more. 

Wed, 09/08/2010 - 04:17 | Link to Comment Goldenballs
Goldenballs's picture

+1,000,000.Forget the Socialist crap,this is about living standards and having a decent quality of life,in fact if the elites have their way its about having any quality of live.As in working into your 70,s,having any security or rights in the country you were born in,working to pay taxes to pay the debts of others and carrying on the fiat ponzi scheme.Seeing anything in political terms defeats the object at the moment,unless a united front is shown the politico,s and banksters will do what they want and further down the line it will be a lot uglier.The elites want a divided population so there is no opposition to the "crime of the century"

 

Wed, 09/08/2010 - 00:24 | Link to Comment Eternal Student
Eternal Student's picture

Exactly. So much for the claims that the dollar was going to crash this month, and we were going to see hyperinflation.

Last September, the Inflationistas struck out with their claims of massive inflation. This September looks like it's going to be a bust for them again.

Wed, 09/08/2010 - 11:23 | Link to Comment Voodoo-economist
Voodoo-economist's picture

a strong dollar isnt really spaeking for treasuries? Its easier to sell them at a lower price, no?

Wed, 09/08/2010 - 00:08 | Link to Comment rocker
rocker's picture

Thanks Tyler  for another great scoop.

Me thinks Goldman is "Done Doing God's Work."   U.S. Markets follow the Euro.  

Tue, 09/07/2010 - 21:03 | Link to Comment americanspirit
americanspirit's picture

A broken clock is right twice a day

Tue, 09/07/2010 - 21:04 | Link to Comment liberal sodomy
liberal sodomy's picture

euro going the way of the dodo bird.

Tue, 09/07/2010 - 21:06 | Link to Comment Hephasteus
Hephasteus's picture

Gold price in euro's. Gonna get ugly.

Tue, 09/07/2010 - 21:10 | Link to Comment TooBearish
TooBearish's picture

Dammit another buy signal.

Tue, 09/07/2010 - 22:16 | Link to Comment CPL
CPL's picture

I was just thinking the same thing after reading the article.

 

Going to keep a eye on FAS tommorrow for a first 15 minute open drop and then the rocketship pop chart.

Tue, 09/07/2010 - 21:19 | Link to Comment papaswamp
papaswamp's picture

Is it me or is there a muted panic going on? Gold and Silver shot up, the FX market is going nuts, BHO has proposed about $600 Billion in new stimulus (add them all together...don't forget the R,R,R is a $350 Billion project (50 bil is just the initial))...European default and debt issues are looking even worse. Several satellite countries need money (Moldovia $115 Mil/Belarus $2.2 Bil)....the tension just seems to be escalating.

Tue, 09/07/2010 - 21:51 | Link to Comment TooBearish
TooBearish's picture

Plenty to panic about ...no one wants to be short it seems.

Tue, 09/07/2010 - 21:59 | Link to Comment Getagrip
Getagrip's picture

As Kramer said- Ohhhh..I'm tense

Wed, 09/08/2010 - 00:10 | Link to Comment moneymutt
moneymutt's picture

maybe, but there is also a lot of QE money leaking out into speculation (not unfortunately to regular economy) so this money sloshed to and from currencies, oil, gold, stocks etc...so its hard to tell if its panic away from things or a rush towards the next bubble.

Wed, 09/08/2010 - 06:18 | Link to Comment tom
tom's picture

When don't Moldova and Belarus "need money"? Is there anyone left in Moldova? I thought they all left for the greener grass of ... Romania.

Tue, 09/07/2010 - 21:25 | Link to Comment Nihilarian
Nihilarian's picture

New Normal for the French: "Oui" is now "Iou", bitches.

Wed, 09/08/2010 - 00:34 | Link to Comment skohiu
skohiu's picture

+1

Tue, 09/07/2010 - 21:32 | Link to Comment Number 156
Number 156's picture

Keep an eye on CNBC - Watch them panic. The producers will be trying to hold a narrative in the face of the obvious. Watch as they kick more and more guests off the show. Or they will restrict the guestlist to Krugman clones.

Tue, 09/07/2010 - 21:39 | Link to Comment bugs_
bugs_'s picture

A new half hour show - I could fix them up "Fast Panic"

Tue, 09/07/2010 - 22:05 | Link to Comment Hephasteus
Hephasteus's picture

Attack the panic. Always be thinking panic attack, panic attack.

Tue, 09/07/2010 - 21:39 | Link to Comment DavidC
DavidC's picture

"euro going the way of the dodo bird."

What, and the dollar isn't? it's a race to the bottom. If the dollar doesn't fall, the Fed is done for.

DavidC

Tue, 09/07/2010 - 21:52 | Link to Comment liberal sodomy
liberal sodomy's picture

Want to help me bury a silo of wheat?

Tue, 09/07/2010 - 22:21 | Link to Comment CPL
CPL's picture

Trust me, buy a Mall in Northern New York and fill it to roof.  Nobody will ever know it's there.

 

//google abandoned malls US North East, facinating how awesome the 80's were in terms of making giant malls and how fast they collapsed.

Tue, 09/07/2010 - 22:08 | Link to Comment Battleaxe
Battleaxe's picture

What will Goldman say next??????!

Tue, 09/07/2010 - 22:33 | Link to Comment firstdivision
firstdivision's picture

[OT] Epic battle in the ES at 1090 tonight.  Me thinks if 1090 gets taken out, we will have a ~2% fall tomorrow.[/OT]

Getting on topic, I have to say it is clearly evident that the Euro will be the new, colorful, toiletpaper that we will be using in the near future.  If France does run into some issues with this strike, it will easily cause the Euro to fall off a cliff very quickly.  Let us see how the MSM sweeps this under the rug...another round of "new and improved" stress tests?

Tue, 09/07/2010 - 23:04 | Link to Comment MrSteve
MrSteve's picture

It is disrespectful to mention toiletpaper and the Euro as you have done. TP has significant value. Everywhere, governments are the only ones who put ink on paper and cause it to lose value.

Tue, 09/07/2010 - 22:41 | Link to Comment bobert
bobert's picture

What's going to keep the fed from increasing it's portfolio to $3T, then $4T etc., into infinity?

What will cause them to want to sell. Ostensibly (altruistically) to keep inflation in check? Will they be selling their portfolio at a loss at this point? How do you have a loss on something that cost you nothing?

 

Tue, 09/07/2010 - 22:48 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

How do you have a loss on something that cost you nothing?

Now that is something to ponder.

Wed, 09/08/2010 - 06:51 | Link to Comment nmewn
nmewn's picture

The same way a tax cut to the people can be phrased as how is the government going to pay for this.

Wed, 09/08/2010 - 00:13 | Link to Comment moneymutt
moneymutt's picture

if they went to $4 trillion and spend it all on public works and subisdizes states, it might actual swamp the deflation in debt/credit, but instead they will give it to banks for 0 percent interet so they can buy Treasuries and collect our tax dollars in form of interest

Wed, 09/08/2010 - 06:50 | Link to Comment tom
tom's picture

Inflation and the government's and financial system's extremely poor positioning for it.

Of the $1.2 trillion of monetary base expansion during "QE1" (Sept. 08 - April 10), banks and other financials used about $1.1 trillion to build up their cash, motivated in part by their ability to earn 25 bips on cash by holding it as excess reserves at the Fed.

But if QE2 were another $1T, or $2T, how much more cash would financials want, and how much more would they feel safe holding? The Fed can't legally force them to hold it. The Fed could try to keep them in cash by raising the rate it pays on excess reserves, but that would raise rates throughout the economy, including on Treasuries, and thus add new incentive for financials to get out of their cash. We don't know where it is until we get there, but there definitely is a point at which the excess reserves cup is full, and any more monetary base expansion spills out into inflation.

Inflation would raise rates on private debt, crushing financials because of the long durations of their bond portfolios.

If Fed kept Treasuries rates down by continuing to monetize in the face of inflation, that would send real rates on Treasuries into negative territory and induce holders to sell.

But my guess is Obama, Congress or both will call it a game and default before it gets that far. The fact that endless monetization is possible doesn't make it preferable, even to elites.

http://keynesianfailure.wordpress.com/2010/08/13/qe2-the-overblown-herohorror-stories-and-the-mediocre-reality/

 

Tue, 09/07/2010 - 22:41 | Link to Comment bobert
bobert's picture

What's going to keep the fed from increasing it's portfolio to $3T, then $4T etc., into infinity?

What will cause them to want to sell. Ostensibly (altruistically) to keep inflation in check? Will they be selling their portfolio at a loss at this point? How do you have a loss on something that cost you nothing?

 

Wed, 09/08/2010 - 08:14 | Link to Comment Almost Solvent
Almost Solvent's picture

China does the same thing.
They can keep this going for awhile

Tue, 09/07/2010 - 22:43 | Link to Comment bobert
bobert's picture

I stuttered.....

Tue, 09/07/2010 - 22:46 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

http://www.bloomberg.com/news/2010-09-07/greek-debt-deals-hidden-from-eu-probed-as-400-yield-gap-shows-bond-doubts.html

Four months after the 110 billion- euro ($140 billion) bailout for Greece, the nation still hasn’t disclosed the full details of secret financial transactions it used to conceal debt.

Opacity, bitches!!!!!!!!!!  Black IS the new black.

Tue, 09/07/2010 - 22:49 | Link to Comment web bot
web bot's picture

Just a couple of years ago, looking at several hundred billion in an annual deficit was not considered great... Today we talk trillions... and it is as if, so what... there's more where that came from (for now, that is)

Tue, 09/07/2010 - 23:15 | Link to Comment zeta
zeta's picture

Have anyone noticed that there is no single female contributor other than Maria of ZH? Why is that?

Tue, 09/07/2010 - 23:25 | Link to Comment citationneeded
citationneeded's picture

Maybe it's the sexist comments, the graphic images, the constant mentions of slut and bitch.

Or, women iconoclasts are hard to find.

Tue, 09/07/2010 - 23:29 | Link to Comment Orly
Orly's picture

Yeah.  What he said...

Tue, 09/07/2010 - 23:32 | Link to Comment citationneeded
citationneeded's picture

Hey! I could be a 'she'! :)

Tue, 09/07/2010 - 23:42 | Link to Comment fuu
fuu's picture

Because Tyler is a shared byline?

Wed, 09/08/2010 - 00:00 | Link to Comment Deflationburger...
Deflationburger with Fleas's picture

um....because none have signed up for accounts and posted?  This site is an equal opportunity bear cave.  Most women I know have much, much thicker skin than to be offended by the RoboTraders of the world, or whomever others were referring too.  Its almost more insulting to women to intimate that.

Wed, 09/08/2010 - 02:10 | Link to Comment SheHunter
SheHunter's picture

Maybe because of the asinine (-) math questions?  We have less patience for red-tape BS.  I do voraciously read....but seldom post.

Wed, 09/08/2010 - 06:55 | Link to Comment aheady
aheady's picture

Ditto.

Bitches bitchez? I'm also a she.

Wed, 09/08/2010 - 07:16 | Link to Comment Takingbets
Takingbets's picture

Another one here too.

Wed, 09/08/2010 - 07:36 | Link to Comment New_Meat
New_Meat's picture

k a t h y

Velo

MsC

Dr. Sandi, ex-weatherbabe

-- Ned

Wed, 09/08/2010 - 07:42 | Link to Comment aheady
aheady's picture

Don't forget Michelle!

Tue, 09/07/2010 - 23:46 | Link to Comment Occams Parsimony
Occams Parsimony's picture

MY H4 tells me the Euro is not a buy, it looks more like a nothing. It may be a buy at 1.221 if all hell doesn't break loose.

I have a debt relief idea that Goldman and Morgan may like. Short the Euro to .85 this should be enough relative to available leverage to take a nice hunk out of the US deficit. Hey Blankfeld and Obama get on that and don't forget to tell Richard to take long at the bottom.

No Euro position

Long usdjpy 83.5

Long usdchf 1.00

Short audusd 92.2287

Short xauusd 20.05

 

Tue, 09/07/2010 - 23:36 | Link to Comment doolittlegeorge
doolittlegeorge's picture

from countries to Continents.  remember that when you speak of "them" so flippantly.  in short "remember they have armies, navies, air forces and marines."  more to the point and as is the case with Europe, some have had empires as well that have lasted "hundreds of years" and of which "the United States used to be a part of."  to my knowledge no one claims the US has one nor do i think is anyone pining for one right now.  you could argue we should have one, however....

Wed, 09/08/2010 - 00:05 | Link to Comment radish juice
radish juice's picture

Well the comment "default now or default later" seamlessly extends to S&P500 "go down now or go down later". If a lot of retail moves out of the equity markets, leaves even less reason to prop them and could be sacrificed to support the govt debt need that has no end in sight.

Wed, 09/08/2010 - 00:14 | Link to Comment runlevel
runlevel's picture

*my first post*

 

so i guess ill say.. silver bitchez?

Wed, 09/08/2010 - 00:19 | Link to Comment tom a taxpayer
tom a taxpayer's picture

Hi Yo Silver!

Welcome aboard.

Wed, 09/08/2010 - 00:14 | Link to Comment moneymutt
moneymutt's picture

I thought housing was peaking in 2004, I was wrong.

Wed, 09/08/2010 - 01:12 | Link to Comment Hephasteus
Hephasteus's picture

When house flipping shows showed up on discovery channel. You just knew.

Wed, 09/08/2010 - 00:17 | Link to Comment Itsalie
Itsalie's picture

France, the next sickman of europe; when the chinese stop buying LV and chanel bags and the chinese/japanese tour groups start deserting paris on hearing sarko and le pen's racist chants, France will go down greece's road. Then the euro will fulfill its full potential, move down to parity with USD and sharing the USD's status as toilet paper du jour.

 

Wed, 09/08/2010 - 01:15 | Link to Comment Young
Young's picture

EURAUD revisits levels not seen since 1989

Did not know the euro was that old...

Wed, 09/08/2010 - 04:49 | Link to Comment French Frog
French Frog's picture

for pre-1999 currency comments, the deutsche-mark (dm) is used as an excellent proxy to the euro; so when you hear that "eur/aud is at levels not seen since 1989", it really means the equivalent dm/aud rate

Wed, 09/08/2010 - 03:19 | Link to Comment daneskold
daneskold's picture

And since this article was posted.....

 

The EUR/USD is up.

 

Europe opens up while U.S. futures surge.

 

Fade Goldman...

 

 

Wed, 09/08/2010 - 03:57 | Link to Comment Nigaz
Nigaz's picture

EuroSwissy having fun sub 1.28

(while AUDJPY gets ramped per the 'day=new' algo)

Wed, 09/08/2010 - 04:00 | Link to Comment Highrev
Highrev's picture

Do you still really think Goldman's "recommendations" are worth repeating?

Wed, 09/08/2010 - 04:37 | Link to Comment MrTrader
MrTrader's picture

Ha, ha, ha. Goldman is making fun of you. It is a well known "secret" that retail accounts are short EUR for months ! And in this very moment they are still SHORT. Every singel human being out there "hopes" to make a dime shorting EUR !

Conclusion : STRONG BUY.

And not to forget : if uncle Jan Hatztius is right about QE II coming...;=)

Wed, 09/08/2010 - 05:01 | Link to Comment Nigaz
Nigaz's picture

Something funny in JPY right now...

Wed, 09/08/2010 - 05:27 | Link to Comment jbc77
jbc77's picture

eur/chf continues to get beaten down. At this point is SNB intervention not imminent? We know the end result, which makes the exercise futile but doesn't Hillenbrand almost have to act??

Wed, 09/08/2010 - 06:52 | Link to Comment jbc77
jbc77's picture

Did we have central bank intervention this morning? Euro markets were getting spanked, so were u.s futures.....I went to take a crap and everything turned green.

Wed, 09/08/2010 - 07:27 | Link to Comment bruce wayne
bruce wayne's picture

Yeah, the ECB bought Portuguese debt.  Those auctions have to go off without a hitch.  Of course yields were disastrous but who cares.  Another nice note for today, check out Greek bonds and Greek banks.  Oh well, rally on...

Wed, 09/08/2010 - 07:36 | Link to Comment tom
tom's picture

Didn't you hear the good news? New bank capital standards won't be enforced till 2013!

Wed, 09/08/2010 - 07:37 | Link to Comment Eally Ucked
Eally Ucked's picture

They announced that new regulation for capitalization of banks (Basel) will be implemented in 2013. So they have 2 years to play yet.

Wed, 09/08/2010 - 08:11 | Link to Comment Budd Fox
Budd Fox's picture

Forget the panic...everyone now is euphoric as Portugal sold some worthless toilet paper at a lower spread than usual....

Ramp the junk up again!!!!!!!!!

Wed, 09/08/2010 - 08:17 | Link to Comment MrTrader
MrTrader's picture

Matter of conscience: would you rather use Portugese, Greek, Irish, Spanish or US toilet paper ?

At least uncle BEN has full control of toilet paper production in the US, or ? ;=)

Wed, 09/08/2010 - 08:22 | Link to Comment Budd Fox
Budd Fox's picture

BEN is buying the entire curve....that is gonna end in tears! Anybody who is not taking CNBC Kool Aid knows that if you model properly the equations of flows of funds in the U.S. Economy, and accept that aggregate demand is GDP Nominal, PLUS or MINUS the growth of total debt MINUS inflation....demand is still falling off a cliff, since BEN cannot print faster than the private sector is deleveraging. But this entails knowing non linear third degree differential equations. Economists stop at linear first degree.....and are all on the payrolls of Goebbel's Proaganda Ministry of da Banksters..

Wed, 09/08/2010 - 08:24 | Link to Comment tom
tom's picture

Hey, MrTrader, you're almost on to something, in an ass backwards way. Let's give control of US monetary policy to the Bundesbank. Might be our only hope.

Wed, 09/08/2010 - 08:38 | Link to Comment MrTrader
MrTrader's picture

I am recalling the good, old days when the GERMAN D MARK was a "HAMMER" of a currency. The 1000 DM note was a beautiful note :)

Wed, 09/08/2010 - 08:21 | Link to Comment tom
tom's picture

Actually, standards will be strengthened gradually over 10 years beginning in 2013. So they have ... well, at most less than 2 years to play, at most until the Greek bailout runs out, but why wallow in gloom?

Wed, 09/08/2010 - 13:25 | Link to Comment Youri Carma
Youri Carma's picture

Of cause it's nice for Goldman and the U.S. to point the finger somewhere else and scream bloody murder about the "Nuclear Option" while in fact the U.S. was already using the "Nuclear Option" for 18 months!?

However this doesn't make these observations less truth.

Tue, 09/28/2010 - 04:01 | Link to Comment Herry12
Do NOT follow this link or you will be banned from the site!