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Goldman's "Top Trade Recommendations For 2015"
Psst, want to lose some money fast? Then you, like Goldman's Global Opportunities Hedge Fund, should have invested in Goldman's own top trading ideas for 2014, a hedge fund which as we reported is down 2.6% YTD.
But in case you missed out on this sterling opportunity to blow money in nominal and real terms, you are in luck, because seconds ago Goldman's "smartest men, and women, in the room" released their first Top 8 trades for 2015. Which, as a reminder, are a great moneymaking strategy for Goldman's flow desk which is on the other side of these trades, and assures a loss for all those, Goldman's internal hedge funds included, who are on the receiving end of Goldman's wisdom. And yes, all those who wish to keep shorting those 10 Years - a trade Goldman can't stop recommending year after year - can just mail a blank check to Goldman right now.
So without further ado, here they are:
- Top Trade #1: EUR/$ downside via a one-year EUR/$ put spread.
- Top Trade #2: 10-year US Treasuries above 3% but not below 2% in mid-2015, through cap and floor spreads at zero cost.
- Top Trade #3: Long a Dec-2015 Eurostoxx 50 ‘bull’ call spread.
- Top Trade #4: Long US High Yield credit risk via 5-year CDX HY junior mezzanine tranches.
- Top Trade #5: Long an equity basket of EM crude oil importers (Taiwan, Turkey and India).
- Top Trade #6: Short CHF/SEK.
- Top Trade #7: Bearish Copper relative to Nickel, on supply divergence.
- Top Trade #8: Long US Dollar against a basket of ZAR and HUF.
Some more detail:
Top Trade #1: EUR/$ downside via a one-year EUR/$ put spread
Position for EUR/$ downside via a one-year 1.20/1.15 put spread for around a 4.5 to 1 potential maximum payout.
We forecast that EUR/$ will fall to 1.15 over the next 12 months, in equal parts a reflection of our Dollar bullish view and Euro bearish outlook. In particular, given that HICP inflation is unlikely to rebound in coming months, there is a chance that additional ECB easing, including possibly sovereign QE, comes sooner rather than later, setting the stage for EUR/$ to move meaningfully lower in the short term.
Top Trade #2: 10-year US Treasuries above 3% but not below 2% in mid-2015, through cap and floor spreads at zero cost
Buy a constant maturity 10-year US Treasury 3.00-3.50% ‘cap spread’ at zero cost by selling a corresponding 2.24-1.75% ‘floor spread’, both expiring on June 30, 2015.
We expect 10-year US Treasuries (TY10), currently yielding around 2.3%, to trade at or above 3.0% next June – one quarter ahead of the market-implied lift-off date for the Federal Funds rate. Our Sudoku model indicates that TY10 are already trading ‘expensive’ relative to our Economics team’s global macro outlook, and puts yields in a 3.10-3.50% range in the second half of next year. TY10 outcomes higher than 3.5%, implying a 5-year 5-year forward rate of over 4.0%, are unlikely over this horizon, especially considering that German Bund and JGB yields are still capped by the respective central banks.
Top Trade #3: Long a Dec-2015 Eurostoxx 50 ‘bull’ call spread
Go long Dec-2015 Eurostoxx 50 3150/3450 ‘bull’ call spread (buying the Dec-2015 3150 strike call and selling the Dec-2015 3450 strike call), currently at 101.5 (Bloomberg: SX5E 12/15 C3100 Index vs. SX5E 12/15 C3400 Index).
The (nearly) at-the-money 3150 call costs 170.6, while selling the 3450 call costs 69.10 (both priced as of the close on November 19), giving this position a maximum potential 2-to-1 payout. There are two routes by which European equities could move higher. In our central case, we see scope for a pick-up in Euro area growth in 2015, which we think is not reflected in market prices. At the same time, our European economists see a significant risk of a downside case in which activity and inflation disappoint. And, in that case, the ECB would move to more forceful QE, so initial asset market pressure would subsequently be reversed.
Top Trade #4: Long US High Yield credit risk via 5-year CDX HY junior mezzanine tranches
Go long risk (sell credit protection) on the 5-year CDX HY Series 23 junior mezzanine tranche (the 15-25% portion of the loss distribution), at a running spread of roughly 495bp per year for a target of 440bp (implying a potential return of over 700bp) and a stop at 580bp.
We think the recent underperformance of the US High Yield (HY) market should prove transitory. Our current best understanding for this underperformance is that a portion of the HY investor base remains burdened by recent losses on a number of crowded trades. Our choice of the junior mezzanine tranche, which provides a reasonable level of subordination for default losses, is partly informed by our long-standing ‘up-in-quality’ view on the HY market.
Top Trade #5: Long an equity basket of EM crude oil importers (Taiwan, Turkey and India)
Buy an equally-weighted basket of Taiwan (TWSE), Turkey (XU030) and India (NIFTY) stock market indices, priced at 100, with an initial target of 115 and a stop at 93.
The decline in crude oil prices has the potential to boost activity growth, particularly for oilimporting countries in Emerging Markets (EM). We propose an equally-weighted basket of several of the biggest EM petroleum importers. Each of the basket’s constituent countries adds elements that, in our view, fit with our global baseline macro outlook. Taiwan is an exporting economy that is exposed to a growing US, and has lagged the recent move higher in US equities along with the broader EM complex.
Top Trade #6: Short CHF/SEK
Go short CHF/SEK at the current spot of around 7.70 with a target of 7.00 and a stop at 8.10.
Euro weakness has been reflected in EUR/$ and EUR/GBP this year, to name just two Euro crosses, but EUR/SEK is a notable exception. In large part, this reflects the fact that inflation in Sweden is almost as low as in the Euro area, with recent dovish surprises from the Riksbank reinforcing the view that Sweden and the Euro area are suffering from the same ‘lowflation’ problem. We do not agree with this. After all, low inflation in the Euro area has a heavy structural component, as the internal rebalancing in the monetary union involves lower prices/wages in the periphery and the opposite dynamics in the core markets. In contrast, we see low inflation in Sweden as temporary and think it will move higher in coming months, in line with the Riksbank's October forecast.
Top Trade #7: Bearish Copper relative to Nickel, on supply divergence
Position for Copper underperformance relative to Nickel via Dec-15 LME futures, using equal notional amounts, for a potential 20% upside.
The short Copper/long Nickel trade highlights some important features of our set of market views for 2015 in the commodities space, particularly the theme of ‘supply differentiation’. Copper has entered a once-in-20-year supply cycle, resulting in above-trend supply growth, while Nickel supply continues to be constrained by the Indonesian export ban. This should result in rising (falling) visible inventories of Copper (Nickel) in 2015.
Top Trade #8: Long US Dollar against a basket of ZAR and HUF
Go long USD against a basket of HUF and ZAR at 100, with a spot target of 113 and a stop at 94. The ‘cost-of-carry’ for the basket is around 3.75% per annum, which we will account for in terms of our stop-loss throughout the year.
Our global outlook is consistent with USD strength against EM currencies. The strengthening US recovery should see US yields pushing higher from current levels, while EM rates stay suppressed due to the broader commodity-driven disinflation trends in the first half of the year. The compression in interest rate differentials should ultimately result in USD/EM strength. Two buckets of EM currencies are most exposed. The first bucket includes countries facing persistent imbalances. South Africa stands out: its external imbalance has remained large despite a weaker currency, higher yields and softer activity performance.
* * *
To summarize: short bonds (this time will be different), go long a decoupling America, short Europe because Draghi will do "whatever it takes" to crush Europe's political capital, er, artificial currency, and then go long risk on both inflation and deflation because as showed yesterday, in the current idiotic period which historians will laugh at one day, both inflation and deflation are bullish.
The only thing that prevents us from issuing a "do just the opposite" recommendation is that unlike previous years, Tom Stolper is not part of the recommending crew, thus there is some risk Goldman may actually get some of these right...
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Goldman eats dog shit.
Thieving bastards!
Rotten dog shit!
This is a map for the muppets or what ?
Come on muppets! Take the other side of our massively convex bet in CDX HY junior mezzanine debt.
Barbarous relics don't get any consideration? ;-)
Pleased to meet you.....hope you've guessed my name.....but what's troubling you is the nature of my game.
Paging Beeks!
I was on a conference yesterday with AJC and a few others of Goldman Asset Management. Their big trades is tactical managament, since they see the beta chase coiming to an abrupt end, unconstrained bond management since treasury rates can only go up, and long dollar short gold. AJC thinks the economy is awesome here in the US, but horrible in the rest of the world.
My ultimate take away: They don't know shit.
BOYCOTT ALL MEXICAN RESTAURANTS - PUT A BEANER OUT OF WORK!
calling my broker right now to load up on the CDX JM stuff. Woo Hoo!
He'll telephone it into a page on the floor & get your order just ahead of the frontrunning algos I'm sure.
Stopped reading after #2.
10-Year @ 3.5% by June? Seriously? LOL!
Muppets indeed...
Mybe Government Sachs they got these ideas from the employee who was just caught (and fired) for stealing confidential/sensitive data from the NY Fed. Who just happened to be his former employer.
http://www.cnbc.com/id/102202149?trknav=homestack:topnews:2
Round and round goes the revolving door.
I'm stuck long DXY but hedge with Phy Gold in MY location!
Damn, I was really hoping euro would crash next year. Now I need to go long. Sucks!
CNNer's bizarre Cosby penis chomp interview seems to make Rush blush:
http://tinyurl.com/mgecrm9
Long DXY with a hedge of Phy gold is mo' better!
It's a setup, Goldman will get just enough right here to suck back the muppets.
Death to Goldman!!!!
#8 with the USD might work out for all the wrong reasons. The rest are a give me.
Take the points with the Washington Generals.
Oh yes Death to Goldman!
They are rippoff artists. Gangsters is suit and ties......
The hiring process at Goldman is grueling and the stuff of legends.
Q. Would you kill your grandma?
A. Why the hell not?
Congratulations......you're in!
It's the same process MSNBC / CNBC has......I'd opt for GS.....it pays better.
Gambling
Lure the muppets. that is why the economy won't ever recover, bunch of gamblers after a pot of gold.
You can bet Goldman will be on the other end of all these trade "recommendations"!
yep! but you will never hear Fast Money or the government CNBC come out with the anti Goldman trade....
Call 1-800-PROP-DESK and we will be happy to fill your order.....
I continue to be massively long Bull Shit in 2015.
All I see is "muppet blood" looking at this list; seriously, short CHF/SEK? Who the fuck trades this piece of shit cross and who is on the other side [short answer: the Squid]? I don't know how these asshats stay in business.
www.traderzoo.mobi
It's not so much staying in business...as it is staying alive these days.
Nailguns....steep cliffs......tall buildings.....sharp objects in showers.....it's not as easy as it looks.
Even if you get clear of the FBI.....you still have to face the Bureau.....and those guys don't really have to follow any laws. It's pretty much just whatever they think.
If U don't know how the Wall Street Jewish Mafia, especially Lord Blankfein, stays in business after what Paulson, Greenspan, Timmay, JYell, Lew, bernanke, and men behind the curtain did in 2008, creating a quadrillion in new FRNs handed over, no questions asked, to them, then you need to review some of the earlier posts from 5 years ago.
In our world, reality, if we had performed as GS did in the years from 2000 to 2007 we would be skeletons by now, soaked in alclohol, putrefying under cardboards boxes.
I'm well aware of how the "world" works; I meant how do they keep muppets?
www.traderzoo.mobi
Does GS structure me a product against these top trades, providing market making by the top HFT peers?
They stay in business in the same way Cramer does - because unlike Hedge Funds they have zero accountability for performance.
Muppets get the financial advice they deserve.
Goldman Sachs.....dickin' da muppets!
They stay in business by buying politicians, putting ex employees at the head of most central banks, frontrunning with HFT, lying and taking the opposite of their "recommendations" and being first at the trough of QE.
None of these are 'investments' - where the money goes to a company that will hire people or build factories or buy equipment. They are all just plays on one thing rising in value while another falls in value. And THIS is why all the Fed's QE money has had ZERO positives for the real economy!
I don't know what to think of these recommendations. They aren't put out by Thomas Stopler; so are not obvious contrarian trades. I can see the Long dollar/Long dollar Index, but the rising treasury rates? Nawww, can't let that happen.
Top Trade #4: Long US High Yield credit risk via 5-year CDX HY junior mezzanine tranches.
And this one would be difficult to get into ^.
It's not like you can take on this position in your Interactive Broker's account.
It would almost seem like you'd have to have an account with GS- you know the one where the call gets routed to the floor, whose office is next to their "Chinese Wall".
Color me suspect.
So basically do the opposite and we can earn some cash? Cool, thanks for the tips goldman.