Jim O'Neill

Jim O'Neill must be in hog, er PIIG, er BRIC heaven: it appears his employer, Goldman Sachs, is about to become the proud owner of O'Neill's all time favorite Manchester United. At least that way the reason for an AIG brand still advertised on the front of all ManU players' shirts will finally make sense: call it bailout advertising, in which AIG (indirectly) paid about $160 billion in taxpayer money to Goldman and a few others so its name would grace the uniforms of Goldman's latest acquisition. According to Sky News, a consortium of investors, which includes Goldman Sachs and law firm Freshfields, affectionately called the Red Knights, is preparing to acquire the soccer team from the much hated Glazer family, which in the span of several years has gotten ManU's debt/GDP ratio (or some other BS metric) to be almost as bad as that of the United States. Alternatively, it is oddly ironic that the bank that does God's work will soon be the owner of the Red Devils. The question: will Lloyd soon be sitting in satan's box at Old Trafford?

Read the following from Goldman's Jim O'Neill, take two tablets of hopium, and first thing tomorrow use REDI to buy 10 times your net worth in BRIC stocks - buy indiscriminately - they are all going up, up, up. Also don't forget to buy some Man U leaps. After all with a hundred years of momentum behind you (and billions of dollars spent in lobbying to preserve the status quo) it is not as if something new can ever come out of left field (both literally and metaphorically). At least Goldman's permabullish analyst has had the chance to read the Goldman Monthly FX Analyst report, which substantially dropped its $/BRL 3/6/9 month targets from R$1.60, R$1.65 and R$1.75 to R$1.75, R$1.85 and R$1.90. O'Neill notes: "it does appear [theReal is] overvalued" Needless to say, we were looking forward to this happening for quite some time. And as much as Goldman touts the BRICs, we are confident that our own creation, the STUPIDs, will be getting much more airtime over the next decade.

Just in case you were mystified what "excess capacity" cheerleader #1 Jim O'Neill thinks of the world, be mystified no more. Spoiler alert: Jim uses the words "remarkable analytical mind" and "Alan Greenspan" in the same sentence. And with that out of the way, read on, and while you are at it, buy buy buy.

Janet Yellen, who in mid-November completed a "fact-finding" trip to Hong King and China, provides some insightful observations into the closely tied monetary fates of China, Hong Kong and the US, as well as China's Catch 22 paradox of overcapacity. As Yellen points out, US monetary policy is a critical factor for both Hong Kong and the mainland "both Hong Kong and the mainland are currently pegging to the dollar, they are both to some extent stuck with the policy the Federal Reserve has chosen to promote recovery." In essence, and in confirmation with Zero Hedge's "vassal theory" of the Sino-US relationship, China has a "considerable interest" in the Fed's exit strategy. Yellen demonstrates that while China is forced to look to growing its own internal economy now that the export-led, current account surplus model is over, the transition will require yet more stimulus, thereby further inflaming the asset bubble, spurred by the massive overcapacity already in place in the country, and further pushing the country into a monetary-fiscal zone of disequilibrium. This would be exacerbated by any move to strengthen the Yuan, which is what has to happen for the US to keep inflating its troubles, yet won't happen so long as China continues being in denial about its bubble conditions, thanks to a phenomenal precedent set by none other than the Federal Reserve itself. Yellen won't go so far as admitting it, but all the ingredients for a massive Chinese (and thus, U.S.) crash are now in place.

"On the other side of my book, I have discovered something which is close to the Paulson trade in CDOs in US mortgages in 2005 and 2006. Can you believe that a trade with that kind of dynamic exists today. Can you believe if nothing happens and I am just wrong than again I will lose 1.5% but if I am right I will make 75%." Hugh Hendry

With every Tom, Dick and Harry convinced they can take on Goldman's Jim O'Neill and come up with a wittier, edgier, Gen Y/Z BRIC equivalent, Zero Hedge has decided to join the fray. We present the STUPIDs: Spain, Turkey, UK, Portgual, Italy and Dubai. We admit that while the BRICs and some the other more ridiculous sounding acronyms we have seen out there recently are a gauge into various countries' pent up "growth" potential, the STUPID index is merely a countdown to the inevitable sovereign debt implsion that so far has been postponed due to cash printers working on overdrive 24/7. And to make it simple for the armchair acronym specialists, since the index is in CDS, the chart will go up... but not on the pervasive permabullish sentiment.

"Equities tend to do well when real rates are rising, but there are risks that it could be different this time if higher yields are driven by an inflation scare and/or heightened fiscal concerns. 'Start of tightening' remains our dominant theme of the year, and we continue to expect a consolidation in equities associated with the start of tightening. Market volatility around the start of Asian tightening and announcement of more onerous financial regulations confirms our long held view that the start of tightening could be many things other than the first Fed hike. With the general willingness of authorities to move away from crisis mode in recent weeks, we believe the tightening phase has now started and will intensify, and we expect positive payrolls will lead to a change in Fed language and the start of excess liquidity withdrawal in the next few months. We see 6% downside to MSCI Europe in the next 12 months and recommend selling into strength." - Teun Draaisma, Morgan Stanley

Goldman's "go to" bull, Jim O'Neill, starting to get decidedly bearish. Also, as if economic commentary interspersed with soccer from Janjuah wasn't enough, O'Neill is here to offer the Red Devil perspective.

• Samuelson: China's $2.4 trillion global grip (RCM)
• Game over Tishman Speyer: look for CRE CMBS numbers to plunge next month (Bloomberg, WSJ)
• More Bernanke-fail threats for the peasantry: fire and brimstone, Geithner edition (Politico)
• Obama's bank plan could level high-frequency field (Reuters)
• UBS tax ruling by Swiss court may prompt new U.S. legal battle (Bloomberg)
• Goldman to cap London partners' compensation at 1 million pounds (Bloomberg)

Right. Accurate economic reporting is literally guaranteed to come out of China! Goldman says so!

Now that the market lives and breathes with every Fed decision and transaction, reading tea leaves and juggling cow feces has about the same predictive impact on security outcomes as analyzing fundamentals or technicals. Yet from the perspective of correlations, nothing is as important as the dollar: equities have a -100% correlation to the value of the dollar, which in turn impacts commodities and even interest rates. The dollar is the primary market leading indicator. Which is why we present the key points from the Goldman Sachs "Themes and Ideas for Q1 2010 and Beyond: FX Sales Strats" in which Goldman shares a few thoughts on why in its chartist opinion, and contrary to that voiced by Jim O'Neill and other Goldman strategists, the dollar is headed higher. And possibly much higher.

"We expect real GDP to grow 3% (annualized) in the fourth quarter, slow to a 1½% pace in late 2010, and then gradually reaccelerate in 2011." - Goldman Sachs Team Jan, not Team Jim

Goldman's latest bull market propaganda makes CNBC looks like champions, and provides data that contradicts that presented by none other than Goldman Sachs itself: GDP growth for 2010 is somehow going to be both 4.4% and 2.1%, claims Goldman. And idiots keep on buying stocks based on Goldman's "hedged" recommendations.

Update: it appears Mr. O'Neill is in fact referencing world GDP, whereby the divergence in GDPs of course makes sense. Nonetheless, we would still like a swig of his Kool Aid, and we still would expect him to present a counterpoint to the numerous bearish points highlighted by Mr. Hatzius previously. We believe it is only fair if one is presenting top picks in an overly optimistic environment, while Goldman's head economist has recently been refuting just these ebullient observations.