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Goldman: "QE 3 Optimism Is Excessive"
As has been repeated on Zero Hedge many times, with the stock market just 15% off its post-Jackson Hole surge highs, the market continues to be irrationally exuberant that QE3 will come come hell or high water. No. That will not happen until all the mutual funds who have been holding for 2+ years realize that in order to get another heroin hit, some will have to be wiped out (thank near-record margin debt and record low cash holdings) before QE3 does arrive. The latest to confirm this is Goldman Sachs, which via a note just released by Dominic Wilson confirms our speculation that "QE3 optimism is excessive." Ironically, the only thing that will guarantee QE3 is a fresh round of significant pains which retraces the entire QE2 move higher. Nobody in the long-only community wants to hear it. Alas, it is the truth. As usual: he who sells first, will have a job tomorrow...
From Goldman:
Part of the reason for speculating that QE3 optimism is excessive is that many investors believe that equity markets have been strangely resilient. We have ourselves pointed out that US equity indices have been vulnerable to the growth downgrade that their own rotations out of cyclical sectors imply, and some of that “gap” has recently closed. But it is also true that the current pattern of asset markets is broadly consistent with the way mid-cycle slowdowns are often priced. Cyclical assets underperform broad equity indices, bonds rally as the market adjusts its views of policy and that dynamic in turn partially cushions the hit to risk assets overall. As Themos Fiotakis described in a recent Daily, a weakening dollar is not uncommon in an environment where the global cycle is showing positive but declining growth. So the critical question again comes back to how persistent and how significant the underlying growth slowdown turns out to be. Amid all this is a reminder that the simplest US slowdown trade – mid-cycle or otherwise – is generally to be long US fixed income.
And some more observations:
While the market has been quick to price easier policy in the US in response to the growth slowdown, it has been slower to relax about EM tightening risk. At one level, that makes sense given tighter capacity and more intense inflation pressures in many of the large EM markets. But we think a US slowdown – up to a point at least – is probably more helpful to EM than to DM markets. This is simply the reverse of our argument in late 2010 that an accelerating US recovery would add to EM policy dilemmas by pushing commodity prices higher and providing a tailwind to local demand. While persistently slower US growth would be more troubling for the large developed economies that are still trying to make inroads into spare capacity, it would also create more “room” for EM economies to grow without hitting global constraints so hard. That was the rationale for our long EM Top Trade recommendation in April. The timing of our shift has clearly been premature. But we are less puzzled that EM equities have been outperforming again recently in this environment than we were by their underperformance in the first half of May. Our latest tactical FX trade recommendation to be short MXN/CLP, based on Robin Brooks’ and Alberto Ramos’s recent work on cyclical momentum in Latam, has a similar flavour.
One potential lesson of the last few months is that the global economy finds itself in uncomfortable places when US growth accelerates alongside robust growth in other parts of the world. Our latest round of forecast revisions in May were to a large extent about acknowledging that the energy constraint is more binding than we expected going into the year. The silver lining of a US slowdown could thus be that it takes the sharpest edge off some of the commodity-related inflation worries. Our own new forecasts look for higher commodity prices over the coming 18 months, but not for the kind of rapid acceleration that we started to see in the first quarter of this year in energy markets. Those forecast revisions do reinforce our preference for commodity exposures – having taken a break in April and early May – and Jeff Currie and team added fresh long recommendations in oil, copper and zinc two weeks ago. With that shift and an expectation of more USD weakness, we added a short $/NOK Top Trade recommendation (our eighth) at the same time, which is off to a good start.
Translation: prepare for much more selling (including precious metals which will likely see at least one or two rounds of margin call satisfying liquidation), before the time to front run the Fed comes again.
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Disapointing.. I hate the delay of the inevitable.
To make matters worse, now ZH is getting hit with Obama 2012 sidebar ads. I'm not sure if that's better or worse than Cramer.
Can anyone speculate what will happen to the mining stocks - or metals price?
Tell me about Southern Copper yielding 6%.
SCCO has been getting crushed on the elections in peru, it's hard to tell what the impact is, for me anyway
It is still hard for my Peruvian in-laws to get info on what Ollanta Humala will do.
Will he be as bad as Chavez? His team sez no.
He becomes President on July 28, so we will see before too long.
I was about to post something obscene. Just buy puts on your miners and sell me your physical. I've got incredibly undervalued euros for you. You game?
So GS says QE talk is excessive and Sinclair calls for "the Blackhole of Calcutta" for equites if it's stopped...
http://goldandsilverlinings.com/?p=1151
Meridith Whitney has some new research, http://finance.fortune.cnn.com/2011/06/06/meredith-whitney-state-finances-are-worse-than-estimated/ Things are getting worse.
see last lines above:
Translation: prepare for much more selling (including precious metals which will likely see at least one or two rounds of margin call satisfying liquidation), before the time to front run the Fed comes again.
Its a very dollar centric view - many of us are poor short term speculators and hold Euros that are in a very precarious postion....
If the dollar goes ballistic from here the euro might crash and euro distress is the real driver of Gold in my opinion.
Its still Dollars Bitches Vs Gold Bitches
down they go into end of July
Silver more than Gold
the ads are tailored to your interests....oops.....
I don't know about that, i get ukrainegirls.com, something about guns, force.com and University of Liverpool MBA programs.
I am a canadian hetro women, who has no interest in nor ever used a gun, with a couple of degrees already.
they call it "hacking." at least to the authorities. "true crime" actually--with a bad sense of humor to boot. apparently someone thinks it sells because ZH isn't ginning up the t-shirt sales wagon anymore.
I don't get ads. I use Firefox (not everyone's favorite browser) which has a number of neat add-ins, one of which is Adblock Plus. Eliminates ads altogether. Another is Flashkiller, which eliminates banner ads. I make up for it here by periodically sending a contribution.
Best regards,
RF
lol. i'm getting ads for roadkill.com for t-shirts, Citi credit cards, hunting gear from Cabelas. Cableas makes sense. The others, go figure.
Yeah, I get Russian mail order brides and Trade with Cramer ads...
Like I would trade with Cramer the Clown...
Who wants to be a ranting, bug eyed, sweaty bald guy?
Yeah, WTF?? I get FilipinoCupid.com as an ad. My wife's a Filipino but how do "they" know that.
cookies mang.
all my banners say Night Train and MD 20/20?
Weird, all I see is Cisco and Wild Irish Rose.
That would explain why I only get advertising for renfaire supplies and personal lubricant.
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I'll take Cramer the Clown ads over CREEP (Committee to RE-Elect the President) ads any day...
Unlike Barry Soetoro... Deep down, Clown knows he is a douche...
1550+
QE3, in whatever form, by whatever name, and in whatever amount, may or may not come.
The important thing, and really, the only important thing to bear in mind is - it can't and thus won't be an effective medicine or procedure to cure or effectively treat the disease that ails.
Even its 'transitory' analgesic effects, should it arrive in bucket loads, must be questioned at this point.
Heroin addicts overdose and die with regularity.
Nobody here (at least as far as i understand it) think QE solves/cures anything.
The only thing QE does, is force traders/investors/gamblers into risk assets. Period.
We also know the only thing that Bernanke can target is "wealth effect" his 3rd mandate.
So the issue becomes, at what level in the S&P does Bernanke start to look at another round of QE. I think around 950, definitely 900. The 2nd thing worth thinking about is what form QE3 takes. What does Bernanke buy this time around?
I agree with everything you said, but emphasize that what you described (i.e. forcing/encouraging the risk asset trade) is what QE did.
As the wreckage of the carnage that QE wrought becomes more visible and harder to hide, it's at least worthwhile, and I'd argue essential for survival, to ask: What will further QE do?
Put oil at $150
Printing money is the last vestige of a dying economic system....the World is now printing money.....the world economic system is dying....what more is there to speculate about? Are we really trying to profit before the collapse? Profit no longer matters.....I know.....because I'm the Profit Prophet..
T.E.I.N. everyone!
Profit you are right about the world economy dying. The big boys need to stay on top though. Too many of ehhh, those unwashed masses, making ehhhh money in their markets. Flush small hedge funds and the new rich first followed with a strong rebound like last time. The rich continue to get richer.
QE 3 will be in late Sept or Oct.
Further QE makes the dollar go critical and melt thru its containment vessel, PM's go up 25% from here.
"QE 3 Optimism Is Excessive"
I agree with everything except the first three letters
WHO CARES? I live in the United States of America!
"WE'VE GOT THESE ECONOMIC PROBLEMS... BUT WE ARE NOT COMING APART AT THE SEAMS. WE'RE THE UNITED STATES!"
http://www.youtube.com/watch?v=ggkhFLyAgBc
Portray an image of power and security
Foundations crumble at the base
Inner turmoil reflection read externally
Veil of lies attempts to hide our face
Descend
Molten masses in their image we are a formed
Art of deception mastered skillfully
Decay of value stifled cry of the unborn
With open eyes we still refuse to see
Respond arise nation divided
Selfish syringe draining lifeblood from our veins
Pallid skin displays condition true
Struggling on oblivious to our own pain
Contented smile as we continue to descend
Yen, a little selfish dont you think?
Have fun with the passive aggressive on your Friends.
Whoever this "Tyler" is, I like "him" the best: he is astute, compact, and cynical as all hell. He reads between the lines with a keen eye, and know what is to come. He ven knows how to parse the intralineal in a highly technical Goldman Sachs trade rec. We love this "Tyler." Keep him on, and pay him more!
If you like him, and make money, donate.
Yes, there is "Sarcastic" Tyler, "Cynical" Tyler, and "Monologue" Tyler, among others...
BTW: "Monologue" Tyler can be recognized by his 3 column inch, paragraph long rambling, multi-clause sentences...
"As usual: he who sells first, will have a job tomorrow..."
That's the quote, the meat, the heart of the post. Since we do not know how this will down, best be diversified.
If you do not own physical gold, then you better get started.
Aye lad, fine words.
i haven't bought physical for about 4 months now.
And i suspect the best buying opportunity for a long time is coming right up.
while the market digests the 'end' of QE i'll be BTFD.
The lad of 55 laughs!
There are no filling stations that will take gold in return for oil.
And that is all that matters.
None that take stocks or bonds either. All that matters is how many FRNs you can get.
By predicting 2nd half strength, Bernanke has telegraphed no QEIII rest of this year.
I think the market went from about 80% believing we would get QE3 in some form, to about 60% after his speach. Still a long way to go!
QE3 or no bid.
Its not about value its about any bid at all.
Yes they will get their bid via Qe3,4...n or nothing will get a bid. Ever, ever, ever again.
All this jawboning nonsense is just talking book.
The market will wait untill July 10 no money by then and no bid for the market.
What happens on July 10?
These guys at the desk are major ass___ fill in the blank. They will not buy for themselves or others without orders to do so. No Qe no order.
These guys just dont care. If you want a bid on a stock your going to have to pay them to place that bid.
The Fed is playing a dangerous game. July is after the 4th weekend everyone is just turning on there computers and if they see no action by the Fed by Sunday July 10 there will not be any action by monday July 11.
A market without a bid is easy as pie. HFT or no, computers dont act without movement.
Watch by 9-10 you'll see some jawboneing but if nothing solid first asia then europe by NY open something will have been said supporting the US market.
Some just need to poke the bear.
Ah thank u, i am learning...
I'll go Turkey weiners on that call!
Are those weiners bbq and spice or are you making them?
Thanks for the reply. I'll cook for you any day.
Yen Crossover, I bet you would. Didn't we just have the same discussion the other day. Your blah, blah is overrated and overstated. Zip it up and you might learn a thing or two. Plus your Sunday open garbage that you were spewing was a bunch of nonsense. If you followed your own advice (which I am sure was not the case), then you were slammed and are picking up the pieces.
By all means, enlightenen me. I'm not GAY. I am a very happy person. My Sunday open thoughts? Regarding, trading the opening Gaps? You should have done very well, based on my trade ideas. Yen is below usd/jpy (DXY, 74) and CHF is a sell tops scenario.
What was your trade, and more importantly. What was your MARGIN? YEN
why are futures in rally mode?
Answer: To put a good face on BB for the Asians. They hold alot of USD.
uhh because interest rates are still being driven lower until june 30th when QEII ends....lower i rates means increase in private investment and vice versa as im sure you know....
ACB's rinse washing. LIQUIDITY!
Today was dominated by program buying, I expect things to go higher in the interim. But no QE3 looming is making things tricky here. The June games have begun.
'Futures in rally mode' wow up 18 on the DOW? Im not writing home about it.
Errrhhmm.. given that QE3 is all about devaluing the dollar, this is a good thing tbh. Altho not immediately for my gold shares ...
yeah except usd not a million miles away from going bid when every idiot buying the "about to default" euro realise what on earth they are doing....
You are completely over looking the secret lending / purchase facilities that the FED can create / summon from the depths of hell to create some liquidity in the markets.
Obama will not be ousted while Bernake sits on his hands and Bernake / Obama dont want to hear about ZeroHedge articles.. so in secret is the best way to keep the people happy and dumbed down.. all at once.
Withdraw symptoms so soon?
But if GS is forecasting USD weakness, how can the interpretation be a selling of PMs? Curious minds need to know, and I think this "Tyler" might be up to answering this curious contradiction.
haha not so easy to unwind a Bernake put... pu put put pu... yes good Tyler is unbeatable!
What do you think about Southern Copper? 6% dividend.
When's Lloyd Blankfein going to jail? Will he get prostate cancer, too?
Relax and see how the ASIA (fixing) moves the trade. yen
remember "soft-patch" a year from now
LMFAO
So we believe Goldman now? This is so confusing - sometimes we disbelieve them and think they're criminals, but when they agree with us, we credit their research?
Depends...even a broken clock is right twice a day and even the biggest falldown drunk has his moments of clarity.
Uncle Ben is damned either way. QE too quickly, and he is just catering to a greedy market. QE too late, and it might just not be enough to reverse the mother of all collapses. The real question is just how frail are current conditions, and is Ben really that good at getting such a call right?
Remember, Sub-prime is contained, I can remove inflation in 15 minutes, I am 100% confident etc etc etc. Watching this doofus try his academic only hand at global brinksmanship is turning me grey.
the squid sez "bondz bitchez!"
okay, now i'm scared. it's too easy.
Buzz you are smart beyond your years! I look forward to some comments later.
Best Wishes.
The squid talks out both sides of their mouth always. Shaza points to this piece from the wsj:
By Min Zeng
Goldman Sachs says in a note today that 10-year Treasury yields, trading recently at 3.022%, have stabilized around 3% on both sides of the Atlantic and below the bank’s measures of “fair value”. “Barring a meaningful downgrade to the 2012-13 growth outlook, we think that the bond rally is close to an end,” Goldman’s bond strategists write. Goldman sticks with its year-end call of a 3.75% yield on the 10-year, even as some other major banks have cut their yield calls...
Consumed I owe ya 1. Yen
Bag holder says what.
I find this delay with the QE 3 leaves me rudely interrrupted. I always saw him as Copter Ben....what a disapointment HE turned out to be!
Goldman is just a schill for the Fed. Bernake's playing his hand to get gold and silver to drop. Give the impression that no easing around the corner. Wait until the bottom falls out of the economy in the next 2 quarters and see how fast he eases. Of course it will take some time......and remember, they have some ammo left over from QE2. You don't think they used it all up do you. Stocks will attempt to hold but ultimately the addicts will demand their shot in the arm so support will break.
So it's coming and I think sooner than later, but Bernake has to talk his game.
Yes. but then we get into the inflation/deflation debate regarding PM. I'm game!
Goldmen and the Bernake are just dreaming if they don't understand that speculators are the dumbest people on the planet.
First speculators, once they get an idea into their heads they go with it untill they run out of money.
Second god-for-bid, that idea makes them money or works. Then its just full bore untill they fall off a cliff and die.
If Goldman or any CB think they can stop a working idea. They are in for a real culture shock, to crash a working idea would require that idea to be proved wrong. That can only happen if that idea stops working from the start ie: gold at 100$oz. Good luck.
Anything less then nothing are those in at a profit, and the idea still has legs to will run.
There in nothing i like more than listening to Goldman douche-bags who won't have jobs this time next year repeat what their Masters tell then to. ZZzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.
Reese Bobby or Bobby Jimmy, whatever your name is, what were you trying to say? Stop the gibberish.
Futures trading up at the moment. Market not too terribly riled it seems.
Yea wait till Mr Market realizes his $7 billion a day crack habit is shut off. Wont be pretty.
how funny! how the rhetoric changes! after months incessant chanting that there will be QE3, QE4, QE5 without any doubt, from almost all involved with ZH, suddenly its everyone else who has been holding the faith.
No one wishes pain on someone else. Yet, I somehow want Wall Street to feel the pain that Main Street feels right now. If for no other reason that I think we all need to be in this together. There should not be those left out of the Monitary Expansion (Main Street) for the benifit of Wall Street.
If Wall Street felt the pain then maybe things would change for Main Street.
At least Wall Street can Sell their Stocks and Book a Profit. Main Street on the other hand has no Profits to Book.
I'd like to see Wall Street reduced to a role whereby it doesn't and can't buy off our elected leaders in order to feed its rapacious greed via writing the laws to specifically allow it to steal the largest volume of taxpayer dollars and future taxpayer dollars in recorded American History, designing useless, and in many cases, highly destructive products in the context of the capitalistic structure, completely cutting the throats of the working and middle class of America, small businesses, mid-tier businesses, the consumer, and in general, Main Street America, and then I'd like to see those on Wall Street who broke the laws be prosecuted and imprisoned where warranted, the so called too-big-to-fail institutions be pulled from life support, and allow an organic and much more free economic structure come to pass, whereby economic actors succeed based on the true value of the goods and services they provide to other economic actors, which is a derivative (no pun intended) of what they know and know how to do, and not who they know (or own).
Mr Market has a $7 billion per day crack habit...if free mountains of crack are cut off things dont continue as normal, Mr Market flies into a homicidal rage.
Biggest probem is when you stick a pin in a ballon there is nothing left.
If you look at the Great Depression that Bernanke studied the Market rallied and then went even lower. History always repeats itself.
and often on a bigger scale
Keeping all my physical, add on dips and have cash for miners when and if they move a bunch lower. This will work out, just keep that hand on the tiller.
Is there any way we can arrange GS being the sacrificial lamb?
Seeing Jamie Dimon yapping at Bernanke was just surreal. Talk about "chutzpah". And no, I'm not an anti Semite, I just hate Dimon for the criminal and sociopath he is. What is the purpose of having that clownish staged exchange between those two?
as if they don't conspire together on a daily basis. :roll:
Of course they do, but why the public exchange?
Trial balloon for what?
No. That will not happen until all the mutual funds who have been holding for 2+ years realize that in order to get another heroin hit, some will have to be wiped out (thank near-record margin debt and record low cash holdings) before QE3 does arrive.
Ah yes, the ole pump & dump again.
Of course.
One must not forget that Goldman, JP Morgan have 100% success on all trading days. Losses have to be borne by some "lucky" funds
As has been repeated on Zero Hedge many times, with the stock market just 15% off its post-Jackson Hole surge highs, the market continues to be irrationally exuberant that QE3 will come come hell or high water. No. That will not happen until all the mutual funds who have been holding for 2+ years realize that in order to get another heroin hit, some will have to be wiped out (thank near-record margin debt and record low cash holdings) before QE3 does arrive.
Bullshit, as I recall, ZH has been saying that QE3 will arrive directly on the heels of QE2, in some form or fashion. While it's true that a few posters (<5%) predicted there would be some lag time between hits of easing, I don't recall ZH being one of them.
Perhaps someone will be kind enough to prove me wrong, and provide links to posts where ZH made this claim.
Dallas Fed Chief: We're Done Helping You, Time For The Economy To Go On Its Own
NO QE3?
http://owe-bama.blogspot.com/
"Close on the heels of QE2"
FOMC Meeting
Two-day meeting, June 21 - 22
Hey QE junkies!
will have to go cold turkey until election campaign 2012
my prediction:
Obama claims the economy isn't recovering as fast as "he"(Obama the king of the world) would like...so soon he will take on a republican persona swear to personally see to tax cuts for everyone to try to cinch his reelection...
in the meantime, this will be the news(Obama becomes a right wing conservative) that takes the market another leg higher.