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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 | 568515 bugs_
bugs_'s picture

Could Goldman be right this time?

Tue, 09/07/2010 - 21:55 | 568641 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 | 568807 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 | 568812 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 | 568881 barkingbill
barkingbill's picture

you guys are talking out of your armpits. 

Wed, 09/08/2010 - 01:16 | 568883 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 | 568984 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 | 568840 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 | 569507 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 | 568815 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 | 568530 americanspirit
americanspirit's picture

A broken clock is right twice a day

Tue, 09/07/2010 - 21:04 | 568534 liberal sodomy
liberal sodomy's picture

euro going the way of the dodo bird.

Tue, 09/07/2010 - 21:06 | 568543 Hephasteus
Hephasteus's picture

Gold price in euro's. Gonna get ugly.

Tue, 09/07/2010 - 21:10 | 568553 TooBearish
TooBearish's picture

Dammit another buy signal.

Tue, 09/07/2010 - 22:16 | 568666 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 | 568562 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 | 568635 TooBearish
TooBearish's picture

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

Tue, 09/07/2010 - 21:59 | 568646 Getagrip
Getagrip's picture

As Kramer said- Ohhhh..I'm tense

Wed, 09/08/2010 - 00:10 | 568822 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 | 569026 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 | 568571 Nihilarian
Nihilarian's picture

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

Wed, 09/08/2010 - 00:34 | 568851 skohiu
skohiu's picture

+1

Tue, 09/07/2010 - 21:32 | 568581 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 | 568605 bugs_
bugs_'s picture

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

Tue, 09/07/2010 - 22:05 | 568652 Hephasteus
Hephasteus's picture

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

Tue, 09/07/2010 - 21:39 | 568610 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 | 568636 liberal sodomy
liberal sodomy's picture

Want to help me bury a silo of wheat?

Tue, 09/07/2010 - 22:21 | 568676 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 | 568660 Battleaxe
Battleaxe's picture

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

Tue, 09/07/2010 - 22:33 | 568688 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 | 568726 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 | 568703 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 | 568711 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 | 569038 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 | 568826 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 | 569037 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 | 568705 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 | 569089 Almost Solvent
Almost Solvent's picture

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

Tue, 09/07/2010 - 22:43 | 568708 bobert
bobert's picture

I stuttered.....

Tue, 09/07/2010 - 22:46 | 568710 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 | 568712 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 | 568744 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 | 568763 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 | 568769 Orly
Orly's picture

Yeah.  What he said...

Tue, 09/07/2010 - 23:32 | 568771 citationneeded
citationneeded's picture

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

Tue, 09/07/2010 - 23:42 | 568782 fuu
fuu's picture

Because Tyler is a shared byline?

Wed, 09/08/2010 - 00:00 | 568803 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 | 568922 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 | 569034 aheady
aheady's picture

Ditto.

Bitches bitchez? I'm also a she.

Wed, 09/08/2010 - 07:16 | 569050 Takingbets
Takingbets's picture

Another one here too.

Wed, 09/08/2010 - 07:36 | 569056 New_Meat
New_Meat's picture

k a t h y

Velo

MsC

Dr. Sandi, ex-weatherbabe

-- Ned

Wed, 09/08/2010 - 07:42 | 569060 aheady
aheady's picture

Don't forget Michelle!

Tue, 09/07/2010 - 23:46 | 568750 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 | 568776 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 | 568808 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 | 568828 runlevel
runlevel's picture

*my first post*

 

so i guess ill say.. silver bitchez?

Wed, 09/08/2010 - 00:19 | 568835 tom a taxpayer
tom a taxpayer's picture

Hi Yo Silver!

Welcome aboard.

Wed, 09/08/2010 - 00:14 | 568829 moneymutt
moneymutt's picture

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

Wed, 09/08/2010 - 01:12 | 568879 Hephasteus
Hephasteus's picture

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

Wed, 09/08/2010 - 00:17 | 568832 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 | 568882 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 | 568995 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 | 568951 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 | 568980 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 | 568983 Highrev
Highrev's picture

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

Wed, 09/08/2010 - 04:37 | 568991 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 | 568999 Nigaz
Nigaz's picture

Something funny in JPY right now...

Wed, 09/08/2010 - 05:27 | 569008 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 | 569039 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 | 569054 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 | 569058 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 | 569059 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 | 569086 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 | 569091 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 | 569102 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 | 569104 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 | 569122 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 | 569097 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 | 569815 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 | 609396 Herry12
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