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Goldman Sachs Strongly Suggests Clients Sell Them Their Treasury Bonds
The last time Goldman Sachs urged clients to "sell", it was gold - and in the next quarter, they were the largest acquirer of the precious metal via ETFs. So when the muppet-murdering bank suggests this morning that, while "we have been caught in choppy action" there is a slow awakening of Treasury bears and recommends shifting from a neutral to short-duration position in bonds... one can't help but wonder just what the bank will do with all the bonds clients sell to them...
Via Goldman Sachs,
On balance, we expect stronger economic data, evidence that core inflation is stabilizing (albeit at low levels), and neutral policies by the main central banks. We are entering this period with a positive stance on stocks, an underperformance of intermediate maturity bonds in core markets, an increase in inflation break-evens, and a constructive view on credit and sovereign spreads.
A Slow Awakening for the Bond Bears
Our call to be ‘bearish’ on the direction of rates during the second quarter (see Springtime, Bond Bears Awaken, 31 March), from neutral previously, have been caught in a choppy price action.
Since the end of March, total returns on US, German and UK 5-to-7-year bonds have been marginally positive. This has reflected a combination of factors:
- Short-dates US$ rates have been on a roller-coaster ride. Weather distortions have made it difficult to judge the underlying pace of growth. Meanwhile, investors’ interpretation of the Fed’s ‘reaction function’ have shifted between Chairwoman Yellen’s press conference on 19 March and the release of the FOMC minutes on 09 April.
- Expectations of further ECB easing have been kept alive by a string of low inflation prints. The short-end of the EONIA curve has been volatile and, on average, re-priced higher reflecting a progressive decline in excess liquidity and, arguably, the impact of more stringent regulatory pressures. But the intermediate to long end yields have fallen, de-coupling from their US counterparts.
- The BoJ’s ongoing bond purchase program is contributing to keep long-dated nominal JPY yields very stable, amidst rising inflation expectations. Ten-year JGBs now trade at the same level of last November (around 60bp), with 10-yr breakeven inflation 40bp higher.
- International tensions surrounding developments in the Ukraine have increased capital inflows into the Euro area (with the EUR playing the role of the ‘new Yen’) and led to a further decline in rates in core countries.
But the Warmer Weather Should Boost Their Strength
We acknowledge the difficulty of holding short rate positions in the current environment of low policy yields and the several cross-currents listed above. Nonetheless, we strategically stick to the view that the market is too complacent in discounting negative real cash yields out to 2017-18 in the major economies, and low rate volatility over this entire time horizon. The different macro models we run converge in saying that the very front-end of the US, and the long-ends of Germany and Japan have departed from their fundamental underpinnings, and are vulnerable to an increase in the term premium. We are currently recommending short positions in 10-yr German Bunds and long positions in 10-year Japanese inflation. As we commented on Friday, we would see peripheral EMU spreads remaining resilient to an upward adjustment in core rates, if predicated on an improvement in the macro outlook.
In support of our thesis, we note the following:
- Stronger macro data ahead: While the debate on the amount of residual slack in the labor market in the US remains a heated one, leading indicators of economic activity point to a rebound from the soft patch in the first quarter. Meanwhile, core inflation appears to be forming a bottom, reflecting price pressures in services and rents. With the Fed no longer locked into macro threshold guidance, there should be more room for policy rate forwards to reflect the evolution of incoming macro data. Admittedly, the debate on whether the Fed will start lifting overnight rates through the Reverse Repo Facility already in mid-2015 (as the FOMC ‘dots’ suggest), or wait until a later date and then remove the accommodation more rapidly (which has been a long standing view of our US Economics team) remains open. In either case, but especially under the second scenario, yields at the 3-to-5-year maturity should continue to increase (and the yield curve become more ‘hump-shaped’) as and when the pace of the expansion accelerates.
- Accommodative overall financial conditions: Recent gyrations in stock markets do not contain enough macro information to challenge this assessment. Rather, they appear to relate mostly to a sequence of risk unwinds in areas where valuations had rapidly changed (examples, tech stocks, UK domestic plays, Euro area peripherals). Supporting this idea, for sectors that have gone down in price, others that have outperformed (those exposed to emerging markets, and the energy complex provide two examples) without a clear mapping to macro risk factors (as Aleks Timcenko wrote in a Daily dated 24 April).
- Less segmentation in the Euro area: There is evidence that the fragmentation across the Euro area is slowly declining. Falling TARGET 2 imbalances reflect this, as peripheral banks continue deleveraging and repaying the LTROs, and investors outside the Euro area purchase peripheral assets (see Dirk Schumacher’s note on the topic). On our measures, peripheral spreads now trade tighter than what can be justified by macro fundamentals and credit ratings alone. Finally, the ECB appears inclined to compensate for the contraction in bank balance sheets through direct support of the securitization market (see our note from February on the topic). Steps towards credit easing would be supportive for growth, and lead to an increase in inflation expectations from presently low levels.
So sell Goldman Sachs your bonds! now!
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too much thinking for a muppet ... just SELL ... get it over with.
One has to wonder what is going on with that barbaric relic ... everyone from armstrong and the rest of the crew is calling for another bottom, yet, just doesnt seem to be going down ... one has to wonder what are they expecting to happen ... will see i guess
"But the Warmer Weather Should Boost Their Strength"
Now I Understand.. bonds are thermodynamic.
& muppetz dont spontaniously combust....(they get blown up...)
Muppet Translator - Stocks down, US paper up
Quitters never win. Right Mo?
Winners never quit...
The mere existence of a FED gurantees there can be no bond bear. Ever..
We're going to learn that the hard way. Gotta love it!
that's why Hell keeps freezing over
Mr. Valentine has set the price!
The American sewer system backs right up into this shit hole!
I thought that was the Fed's gold vault that backed right up to their shit hole?
I'd be curious whether the same strong advice has headed also for China. Goldman could make a great deal by exchanging the pile of 'useless' gold for the treasuries.
Goldman should indeed take the chance.
At this point, I don't even think these guys want money...only power!
Nope...it is the money. They can use that to buy the power they do not currently enjoy.
Can't rationalize the irrational. It is quite possible they do it for the hookers and blow. Even possible they don't know why they do it and they do it because they can.
The dog licking his balls theory. Works for me.
Is the will to power inherently masturbatory then? I think it is.
We should co author some bullshit thesis and toss it on Amazon and retire.
Licking your balls to the top.
We'll have Robert Mishkin write the intro and sell it to college students as "Economic Theory".
Crazier things have been done.
http://ecx.images-amazon.com/images/I/51447wWo-YL._SX258_BO1,204,203,200...
Hookers and blow can infact be expensive...but most likely a tax write off somewhere, somehow.
How in the fuck can they say they expect stronger economic activity when they just downgraded economic growth to 1.1% from 3% last week? Stupid muppets deserve what they get when they can't put two and two together.
They can say whatever they want because this goverment will never prosecute them for misleading the public, they are bed partners!
They are the government.
These are the same folks that cost the taxpayer 185 billion dolores...and got paid dollar for dollar I might add.
Hey, assholes...where is our 20% economic growth you promised with that?
"It all comes in the form of more real estate"?
That land is an income producing asset you phuckers. Now you're sticking a liability on there (some phi king Stripper Mall) and trying to call that growth positive?
We're still down 30 MILLION jobs.
On the good side "we're still better off than Europe." How the invasion going anyways?
Doc I think for whatever the reason it looks like the fed has decided enough is enough with QE and is actually trying to pawn this shit sandwich off on us as a recovery. They seem to be in a pretty big fuckin hurry to stick their "mission accomplished" sign in the dirt and move on. GS is playing along hoping to grab a few more bawnds knowing full well what is coming
That seem to be fair assessment. The momos can not get any traction before rolling over again. The free money stream is coming to an end.
They can't even prosecute a war right.
It's called a ten MILLION man Army you morons.
And that's just for starters. "We'll throw the guns in for free." Ammo does cost extra though.
Their growth estimate cut was for Q1. Naturally, as always, they are looking for stronger macro in Q's to come -- and of course this is supposed to happen with $100+ oil.
And in quarters to come they will be reducing their inflated numbers again. We will not see above a 1.5% (and that's with the new intangible calculation) growth in GDC (gross domestic consumption since we produce nothing but excrement and financial weapons of mass destruction).
Don't go overboard. The US is the #1 exporter of wheat and soybeans (Brazil closing in on soybeans).
Major corn exporter but the total is down from the 1970s. China refuses any more US corn (Gen Mod concerns).
As long as there is a Midwest, the US will always produce something.
But in general, yeah, there's no engine on the horizon that is going to goose growth later this year.
Buy the fucking dip, Muppets!
Are their clients who listen to Goldman? I mean, how many times do you get raped before you learn? All these pension fund managers and other financial mangers for business and private funds, how does it work to go to Goldman for advice and investment vehicles? How many bodies liter the roads and still they come.
Just the sign I was looking for. Time to buy some treasury bonds...
Liabilites still need to be funded. Goldman knows this and so do I, but what I don't know about is the timing.
Another few rounds of "taper", gotta keep rates low...
<Salivation starts>
UK launches criminal probe against fraud bankers.
UK prosecutor charges US-based ex-Barclays staff in Libor probeBY KIRSTIN RIDLEY
LONDON Mon Apr 28, 2014 10:25pm IST
Will we see first bankers in the UK go to jail?
The investigation is of someone US based. This is just London trying to grab more banking business from NYC.
Nothing fundamental happening.
QE V is in the air...
The Fed is up shit creek, eh?
no the fed will be fine. It's pretty much everyone else.
$hits toaster. CHeers
The Dow is even! Hooray for the President's Working Group on Finacial Markets, POMO, Tuesdays, and Blankfien doing G-d's work!
These are just pumps to allow whoever is exiting to exit. They keep getting followed by bigger dumps. This market stinks to shit. I may miss the momo recovery of the century but I am holing up in mega cap div payers and bawnds and am calling it a year.
I've been there for a while, and it's been a good start on the year. Now I'm raising some cash. For myself, Im buying the fear and just trading the ranges.
I have been there to but I keep sticking my toe in the water only to get it bit off. I'm gone. F this guy Yellen.
I've been telling both of you I was long equity your whole tenure at Fight Club. I went short for the first time a couple weeks ago.
The last conversation we had you called me a doodie head for saying gold would drop from $1,385 and that it was about to go parabolic. But since you mentioned you are short. What are you shorting?
They fight their last battle... something epic will be pulled off in front of our all eyes. Watch history unfold on level not seen in many decades.
Paper gold down 6% - what a joke
Hopefully Goldman is levered 1000 percent and triple long that too.
Even the devil can learn some tricks from these scumbags
These aren't momo monkey's...these are pomo monkey's.
The defaults are well underway now.
I have sold the General Electric and I would recommend others looking for principle appreciation do the same thing. Lot of room to move that dividend higher of course....but that clown CEO couldn't run a lemonade stand...unless of course the lemonade stand was for sale.
"No it does not come with the property where it is situated. Only the stand, a large water cooler and some lemons. And that will be ten million dollars." It does come with a permit for "lemonading."
Rehypothecation bitchez...
I can't fathom why the gods over at Goldman would want treasury notes. Don't they know that they are just a virtual construct, a bookkeeping entry; a shoe box of empty promises and worthless paper??? Or is that just for the purpose of middle class assets?
Keeping track of all the bullshit can be difficult.
Goldman is the FED.
The FED is Goldman.
WHY DO YOU DIFFERENTIATE?
You know the story about the sinking ship and the rats, right? These entities disgust me.
QE by Goldman or QE by the FED?
It's still QE.
Let's see how well the Gold thing worked out: On Aug 13, 2013 you reported the GS gold move and its Sell recommendation. On 8/23 gold topped at 1434/oz. Since, its been as low as 1141, got back to 1392 and has gone lower again. Must've been a hedgng trick for them to make money there. If this bond trick goes the same way we mght have a great contary indicator to add to the list. As for the GS muppets, they deserve what they get for doing biz with them.
Cue the dead muppet by the side of the road pic.
I have the dead muppet on my desktop but do not have permission to post him, or he would be here!
Was there not an earlier article today stating the BforIS new rules require more liquid debt? Such as Treasuries?
Relax, GS just getting ready for the stock market crash, everyone will sell their momentum stocks and then sit in "cash". of course the banks will put that "cash" in treasuries.
This is what happens when you get the entire globe hooked on cheap crack and the primary dealers start feeling the squeeze while Pablo is on vacation.
Sell in may and go away