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Jim O'Neill's Latest Spin: "The Quicker China Slows, The Better"
It was only a month ago that Jim O'Neill was openly taunting those who refused to suckle on Goldman's Kool Aid teat: "dear grizzlies…….bet your worried about today’s rally? See u later." (sorry, we won't let this go for a long time). Then again, those who did believe Goldman's and David Kostin's advice that the market would be 30% higher now, are down to 70% of AUM (the very same David Kostin who on September 12, 2008, the weekend before Lehman blew up, predicted a 12% rally by the end of 2008 on the road to "S&P 1,400"). So, yes Jim, the grizzlies are far less worried at this point. Wish we could say the same for the bulls. Which incidentally may explain why Jim O'Neill has been completely gone from the scene for the past month. Luckily, he has now reappeared, and is once again dispensing bullishness to all who care to listen. The quote du jour this time: "While I can understand why some of the China bears will be full of the
joys of Spring right now, this is a “desired slowing” and unlike some
of the many issues in the West, the quicker they slow, the better." And we thought Bob Pisani had trademark to the "a nuclear holocaust is a victory for the bulls" phrase. Needless to say, we disagree with everything Jim has to say, except for his world cup pick. That said, we certainly enjoy his spin for the comedic content.
Both the World Economy, and the World Cup have entered highly interesting phases . I am off down to Capetown Sunday to share in some of the “beautiful” game for a few days, as well as a client event. I have managed to experience some of the flavour of each World Cup since the US held one in 1994, and they are fabulous occasions. Gideon Rachman had a lovely piece in the FT earlier this week, summarizing their flavour, and suggested that they lift the world into a more wonderful place, even if only for a brief period. He is right… Perhaps we should have extended the World Cup for the whole “ Sell in May and Come Back on St Legers Day” this year………? That would be fun. Anyhow if the phrase works this year, as it sure has been doing since the start of May, only another 2 months and the market might start to find a floor……..and then the bulls return..
Anyhow, the Netherlands has just beaten Brazil, so there is a major shock again, and it means we can only get 2 of our 4 predicted semi finalists correct. (Argentina and Spain). Away from this, to the world economy. Of note;
1. China, and so on. We revised down our China GDP forecast for 2010 today , from an above consensus 11.4pct to “in line” at 10.1pct. This is the first revision lower we have made for China since the immediate aftermath of 2008, and of course, since March 2009 have been much more optimistic than the consensus. As explained in the note from Yu Song and Helen Qiao this am, and discussed by Mike Buchanan earlier in the week, we expect that the next couple of quarters could see growth slip –temporarily-quite a bit.
All of this needs to be put in some kind of appropriate perspective. First of all, we remain more bullish about both a/the trend rate-we think 10pct, and b/ 2011 where at 10.0pct, we are back above consensus; and b/ we expect inflation to actually fall significantly now. The latter especially means that, the key issue is “when do policymakers stop tightening financial conditions?” as when we reach that stage, all guns start blazing again.
While I can understand why some of the China bears will be full of the joys of Spring right now, this is a “ desired slowing” and unlike some of the many issues in the West, the quicker they slow, the better. As I have said on many occasions recently, using our own proprietary GSCA as a rough tool, that moving back within an 8-12pct range, is the sign we should be looking for.
Lots of other interesting things also about China this week, especially as it relates to the CNY. It strengthened quite a bit more this week, currently 6.7710, yet I didn’t see hardly any email chatter about it. This is a sign that China has done a great job on the currency issue, introducing more flexibility as well as appreciation.
In addition, there were some quite interesting comments from the IMF’s Strauss Kahn this week, specifically suggesting that, as Mike B and I wrote about in a recent Global Paper, the SDR will soon need to be adjusted to include the CNY. He did suggest the soon might not be tomorrow, or next week, or even any time really soon, but it is coming..
One last thing, back to Chinese GDP. They actually revised , yet again, previous year’s GDP growth higher, from 8.7 to 9.1pct, suggesting to me that they must be extremely close to that magical point of becoming bigger than Japan.
2. Global Papers abound. Talking of global papers, 2 very important new ones this week.
Global Paper no 199 from Dominic Wilson, Anna Stupnystka and Alex Kelston, on our revamped GLI, our global leading indicator. A must read for anyone interested in a/leading indicators, and /b our views. As explained, it is now truly more global than before, and it suggests the GLI might have peaked the month before last.
Global Paper no 200 comes from Jan Hatzius and all the US team, and is also a must read. The paper focus on both fiscal and monetary stimulus, and why we believe US authorities are right to have resisted the popular mood from many others for an early tightening. It is an excellent detailed piece for anyone interested in the US and economic policy.
3. G20 and “ squabbles”. Talking of which, while the likes of the UK are eager to pursue this notion that their new “tough” stance on fiscal policy is the only game in town, you can bet our new PM and Chancellor will get their ears bashed when they visit DC in coming weeks. The run of disappointing US economic data continues apace this week, with almost something daily. Of which, the hints of a new rising trend in weekly job claims, the drop off in new orders in the ISM survey , and the weakness in housing indicators all vie for “most concerning”. I rather suspect our 2 new British super heroes are rather hoping that not too many others tighten fiscal policy sharply, especially the US, as their will be no export markets ( beyond the BRICs for anyone to sell to). While it is possibly cool for those tough enough to tighten their own fiscal belts a lot, for all G20 members to do it simultaneously would –obviously-be rather nuts.
4. EMU-land and the Euro. Surprise surprise, the Euro suddenly finds it not so difficult to rally. As I have argued with my few week old “ new balance” about this particular currency pair, it is indeed a currency pair. Now whether the FX market knew whether the Netherlands would come up with today’s surprise or not, or whether it is the market simply derating the US once more, who knows, but the more balanced shift was rather predictable. Now just stop to think about, what happens IF the Spanish stress tests are credible, and – did you see that pig flying past your window- there is a credible stress test of all of Europe’s challenged banks, then this thing could easily get above 1.30……..on the other hand…..
There is an excellent new paper from BRUEGEL which discusses much of the topical EMU stuff, especially the complex German politics. “Why Germany fell out of love with Europe”, authored by Wolfgang Proissl, a Brussels based commentator for FT Deutschland, and a temporary scholar at Bruegel. it is well worth reading. He argues that Germany has lost some of its love affair with Europe, while at the same time, EMU is indeed, increasingly German driven. And one part I especially sympathize with , “ too many rules” are obsessively created , only to be easily broken. Get on with supply side reform and allow the notion of a true common currency area to flourish- my view- otherwise you are stuck with a glorified European Monetary System reincarnated.
5. Sweden showed , that not all developed countries are in the same troubled waters, raising rates this week. That follows the earlier crowd led by Australia, who have of course, been having lots of their own fun and games with politics and corporate blame games…
Anyhow, come on Argentina………..
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Good is bad. Bad is good. Whatever suits our purpose.
"Stupid is as stupid does." -- Forrest Gump
the sooner everyone on this planet understands and really internalizes that GS intends to "harvest" all the wealth, and "manage it" for the less intelligent, the better off we will all be.
Jim O'Neill - " Just so you know, I am a tool, but a very well paid tool."
I can hardly wait for "why the world is better than you think" V. 2.0.
Syme: Beautiful thing, the destruction of words.
"The sooner China slows, the better--" Wow, they really should be careful what they wish for.
"I have managed to experience some of the flavour of each World Cup since the US held one in 1994, and they are fabulous occasions. Gideon Rachman had a lovely piece in the FT earlier this week, summarizing their flavour, and suggested that they lift the world into a more wonderful place, even if only for a brief period."
My clients have made me a ton of money (I wonder if I have done the same for them) and the view from my Ivory Tower is magnificent. Have you tasted the tea and crumpets? Fabulous.
"As I have said on many occasions recently, using our own proprietary GSCA as a rough tool, that moving back within an 8-12pct range, is the sign we should be looking for."
I will remind you of every time I say something even remotely correct - and GS has some double-secret analysis that really just boils down to me licking my finger into the wind.
"While it is possibly cool for those tough enough to tighten their own fiscal belts a lot, for all G20 members to do it simultaneously would –obviously-be rather nuts."
My economic theories make no sense, and I really don't know what I am talking about, and sometimes that realization comes to me, but I shunt it aside as quickly as possible. I am not aware of the concept of competitive devaluations, and that it's preposterous that all countries can simultaneously increase their exports.
"Get on with supply side reform and allow the notion of a true common currency area to flourish- my view- otherwise you are stuck with a glorified European Monetary System reincarnated."
I like to talk out of both sides (just like my pal Jim Cramer) so that something I say might actually be right and I will remind you of that part later.
My thoughts exactly. What a moron this guy is.
If Goldman Sachs is cheering Argentina to win is that an indicator they will lose?
Fucking spooky. Never underestimate the power of the squid.
Looks like Poland is also slowing...Bloomberg... Poland tapes IMF for twenty billion as a "precaution". Just another Friday after the close "new normal" byline.
"we expect inflation to actually fall significantly now."
Where does Jim Buy his milk from?
Must keep the ponzi going
Must keep the ponzi going
Must keep the ponzi going
Can't let China get ahead
Can't let China get ahead
Can't let China get ahead
Can't let China get ahead
China is in a phase that few American Anal-yst can comprehend. But the truth is there will come a time when they are in a expansion phase while we are in a depression. Like it or not just get use to it.
Oh, and the israeli's that go to China to co-opt the system get eaten alive by their system, unlike the American Dream where 3% of the population currently owns the entire country....
My god why do all these guys write like fruit tarts: "I'm off to sample a flavour..." "A brilliant piece..." "It was simply fabulous..." "Anyhow, Muffy and I..." "Well to my shock that did not have the 1969 Lefitte which was the purpose of our visit..."
You ever meet these types of blowhards at parties? They're the dipshits with the ascotts talking like they have lockjaw. "I believe he is a Harvard man, is he not?" "Where are you summering this year?"
Biff: "Well, I am a corporate executive."
Muffy: "He keeps important things from happening!"
See, now that's funny.
Hee hee. I guess you have met Jim and his wife, Marie Antionette.
If you're going to attempt to dress up your class envy in satire, you should at least learn to spell the the names of the luxury items you are lampooning.
To wit, it's "Chateau Lafite."
Also, it's an "ascot."
I'm not sure which is worse, the kind of people you describe in your feeble effort above, or ignoramuses like you. If humanity is to rebuild anything worth the effort after the impending apocalpyse, then both types will have to be erased from the planet.
Dr. Strangelove: Mein Führer! I can walk!
Hey shitbrains, I'm not lampooning luxury items or the enjoyment thereof, I'm lampooning poseurs who think that loudly stating their knowledge of such items gives them stature. My guess is the shoe fits...? I'm surprised you didn't inform the board that the 1950s Lafite Rothschilds are far superior to the one I referenced. Calling out spelling errors...what a fucking ass.
They're not just spelling errors. They're spelling errors that fundamentally undermine your pitiful attempt at satire.
The only people who feel threatened by someone commenting on the qualities of a bottle of Lafite are people who, like you, can't even spell the label correctly.
Now fuck off, you little lumpenprole twat.
It actually is a desired slowdown, though it is likely to slow down more than China wants and they certainly aren't looking for a recession, which they will also get.
Agreed. The local government politicians have been making out like bandits, giving themselves loans out of the SIVs and buying up assets. The central authorities need to wrest control back, and the easiest way they can do this is by starving these entities of capital. Once they can no longer pay the foreign loans, the central banks can seize these SIVS and break the power of the local politicians.
Currently, it is the inability of the central powers to reign in the local governments, which are incredibly corrupt, which is the greatest threat to stability. The workers see these people becoming filthy rich and they are getting angry...
This guy Jim O'Neill understands as much about football as about the present economy: nothing, nada.
Well, anyway we're sad for Brazil, but at least a little glad for Uruguay, our "small neighbor". In the past, Uruguay was a part of Brazil for a time, named Cisplatina, our "rebel province" wich conquered its independence.
It's good to see their football back to what has already been in the past. Many brazilians will be supporting Uruguay for now. They are our "little brother". And they are not arrogant like the Argentinians.
P.S.: go JUNK your mother.
Sorry to see Brazil and Ghana out of the cup race.
Ghana played their hearts out, penalty kicks are so cruel.
I am picking Spain and Argentina in the final but it could as easily be Germany versus the Dutchmen.
Could Goldman be right this time?
"2. Global Papers abound. Talking of global papers, 2 very important new ones this week."
Dude really needs to stop talking to the Tidy Bowl man, and calling the paper the lil' dude finds floating around his wee boat research papers. Are these things like ink blot tests that Jimmy interprets for us?
JO'N writes about his jaunt to Cape Town like an average joe about to slip off to the local mall with the wife and kiddies. That's okay, JO'N writes for and gets around in circles of the very wealthy. Good for them. What I don't understand is why in the name of hell would these supposedly "smart" people (or did they all inherit their wealth, as sounds is true for JO'N as well as the distinct probability that he has never worked an honest day in his life), spend five seconds listening to the horse manure spewing forth from JO'N and GS. Are the super rich super stupid? Or should I be more precise, "are the super rich clients of GS all super stupid?
And yes Chinese inflation will fall significantly. It's called deflation, which goes along with global depression. Saddle that up on your polo pony.
For the life of me, I really don't know how you earn the money the Squid is pissing away on you Jimbo. It is beyond me how you waste half the real estate in a report on your mindless experiences and opinions. Here's a hint: Whoever is reading the crap you fools put out on a regular basis isn't doing so to get your take on football, Capetown, the English countryside or any other f-ing thing you happen to wake up one morning and think is important. In fact, if I was a client of the Squid, I would demand that you lose your position post haste just to make up for the losses your point of view has generated in the last month alone. (might want to get the resume ready...)
Realize this is beyond you.... beyond your team... beyond The Squid. You are going down, just like the global economy. P.S.- You suck!
Looking for trends in a soiled square of my shit paper would pay handsomly over advice/outlook from Jim O'neill....or Jim Cramer.
The only difference between Goldman Sachs and Bernie Madoff is that Bernie Madoff didn't get a tax payer bailout.
Hope everyone enjoys their 3 day weekend.
"Looking for trends in a soiled square of my shit paper would pay handsomly over advice/outlook from Jim O'neill"
Yes, but you see, it's all in the eye of the interpreter isn't it. Jimmy could find bullish sentiment in a pile of Bear poop.
What he said...
OT
http://www.bloomberg.com/news/2010-07-02/yale-gallery-makes-thrilling-di...
(the painting was located right next to the filing cabinet with the 60 million shares of Bear Stearns they had forgotten about along with their sizeable investment with Amaranth and a major position with Fairfield Greenwich)
The world economy, bad or good, will always be more interesting than the World Cup.
"Beautiful" game?? Holy shit........God Himself could not have created a game more boring than soccer.
The only thing "beautiful" about the World Cup is that Paraguayan model chick with the phone tucked between her huge boobs. Now there's some red, white and blue I can get excited about.
Y'all have a nice weekend.
Yes, the beautiful game, a true art, admired by all those who seek not only the instant gratification of seeing the teams scoring all the time, but the beauty of the ball changing of feet, from player to player, the dribble, and the enthusiastic celebration of the fans when finally comes the so expected GOAL.
Oh great, another squidman to hate.
If Jim O doesn't smoke dick I would be surprised. "Not that there is anything wrong with that."
Metro-sexuals like Jimmy give many working people douche chills. Creepy and stupid is a BAD combination...
What a dick.
"dear grizzlies…….bet your worried about today’s rally? See u later."
does he mean "you're" as in "you are?" Only morons get that wrong.
Soon time for the guillotines with the mono-molecular edges.
sorry TD, I agree with most of your stuff, but I think Germany will crush Argentina today..teams that dot defend are doomed to lose..and Argentina does not have a defensive midfield..
GS is "going south"
As you all know by now GS World Cup prediction was WRONG!
Germany 4 - Argentina-0
Looks like the Dutchman and the Germans in the final even though I hope Spain makes it.
Beginning to sound like a financial advisor: - market is going up unless it goes down but it will probably remain flat - there all my bases covered.
if you give a talented team like Argentina to an addict like Maradona that does not want Messi to eclipse him any way, this is the expected result..Did Maradona play with 4 forwards at his time ha???Where was Cambiasso when they needed him, back in Argentina, Italy..GS is dead wrong as always..
..in other China news...the Chinese have basically told the US to piss off as far as the South China Sea is concerned.
"WASHINGTON, July 3 (AP) - (Kyodo)—The Chinese government officially conveyed a new state policy to the United States in March, telling U.S. officials that it considers the South China Sea part of its "core interests" that concern China's sovereignty and territorial integrity, sources close to the matter said Sunday."
http://www.breitbart.com/article.php?id=D9GNI5600&show_article=1
Updated DOW chart:
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
Look, its very simple. GS research says buy, you sell. Sell, you buy. China up means China down. Argentina means Germany. OK? They weren't wrong. Never wrong.
If you put your money where their mouth is, all you get is a mouthful of squid ink all over you cash.
On the subject of which, wonderfully, on wikipedia we find
"Recent studies have shown that cephalopod ink is toxic to some cells".
http://en.wikipedia.org/wiki/Cephalopod_ink#Use_by_humans
No shit. Come on, I couldn't make that up.
Certainly a lot of details like that to take into consideration. Thanks windows vps | cheap vps | cheap hosting | forex vps