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A Crushed Goldman FX Strategist Speaks: "We Badly Misread This Meeting"
Of all the mea culpas by the sellside penguin crew, the one post ECB mortem we were expecting above all, was that of Goldman FX strategist Robin Brooks who infamous, perhaps legendarily, opined just yesterday that "it remains the case that downside skew in EUR/$ is modest compared to the run-up to the Jan. 22 meeting. In short, we think risk-reward to short EUR/$ into tomorrow’s meeting remains compelling and we anticipate a 2-3 big figure drop on the day."
Well, Goldman was right about the 2-3 figure move... only it wasn't a drop. Actually make that 4-5 figure move in the wrong direction, in fact the biggest surge in the EUR since the announcement of the Fed's QE1!
So after waiting for a few hours, we were delighted to see that Robin is still ok, and sharing more muppet-crushing wisdom. Here is GOldman's just released note on the ECB's "shocker" titled "Dry powder, lost credibility." It is unclear just who lost credibility however.
From Goldman's Robin Brooks:
We badly misread this meeting.
Given the mixed messages from the ECB over QE, starting with the Bund sell-off in May, we had thought there were bigger stakes at play than the usual considerations around growth and inflation. Indeed, we expected President Draghi to deliver a forceful message, in part to fix some of the damage wrought over the summer. But today badly wrong-footed us and, in our view, further damaged the credibility of ECB QE.
As Exhibit 1 shows, the smaller-than-priced deposit cut was relatively minor in the scheme of things, moving EUR/$ higher by about one big figure (from 1.0550 to 1.0650), in line with our view that a 10 bps surprise maps into two big figures. The bigger disappointment came in the press conference, when a smaller-than-expected extension of QE, upward revisions to growth, and a stand-offish message on further deposit cuts took EUR/$ near 1.09.
Our impression from the press conference was that this message was deliberate, so that the Governing Council seems far less willing to ease aggressively than we had expected. At current levels, meaning around 1.09, EUR/$ prices only the 10 bps deposit cut, given that a good part of the decline from 1.13 prior to the Oct. 22 meeting was driven by the hawkish FOMC (Oct. 28) and strong payrolls (Nov. 6). That might be a reason to remain optimistic about further declines in EUR/$, especially with Fed lift-off around the corner. But the stakes for EUR/$ and the ECB are higher.
The big question today raises is whether the ECB is serious about QE. That question also arose over the summer, when the volatility in Bund yields raised questions over whether the ECB is willing to stabilize yields in Europe’s safe haven asset to encourage portfolio shifts into risk assets. Today’s sell-off in Bund yields (Exhibit 2) and the bounce in EUR/$ rivals those seen in April and May and again puts the question of ECB commitment to QE firmly on the table.
From an FX perspective, this matters a great deal, as today’s price action shows. The Euro rallied, driven by declining inflation break-evens and rising nominal yields, i.e., rising real yields. This price action has all the hallmarks of the Yen under Governor Shirakawa, as opposed to Governor Kuroda, raising for us the unpleasant possibility that the idiosyncratic Euro weaker story has been compromised. Even in the unlikely event that today’s disappointment was a mistake, we think it has cost enough credibility that the Euro down story we had envisaged is now less likely to play out. We are placing our forecasts under review.
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For those who skiped through all that here is the now traditional one picture summary:
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Stolpered...
They misread some folks.
However, they placed their bet on the opposite of what they said publicly, so their bonuses are OK.
The ECB was a lot more loose than it is getting credit for. It's not like they could have increased the monthly purchases. They needed more debt and are now getting more debt. Does this mean that debt is so distressed that this money will not filter into the Eurozone, via loans, mortgages, equities? Are banks that bad? Potentially it is all because of Basel 3 and the tigher capital requirements on banks. Countries are trying to reduce spending as much as possible.
Eur to continue the slide from here. Brent crude to bottom out, it cant get much worse, Oil pain to be reflected in Canada resulting in looser monetary policy and a weaker CAD. Gold to continue the decline, still very highly priced, wait till get gets below 1000 but silver will start to bottom out. Bonds to weaken a little more, happy days, more long term returns. US Stocks? Who knows? but if it goes up much it a great place to short a little, Dax could go up. GBP strength till new year at least, then see how the economy is getting on. JPY continues to slide deeper down.
Don't be distracted: http://www.ft.com/intl/cms/s/2/b0d8f614-997c-11e5-9228-87e603d47bdc.html...
I can hear the Golden Balsack's prop desk traders laughing. 2 Extra bottles'n'models tonite!
These evil shitbags trade on inside information but no on gave them a heads up on this one. Soros is another one who has moles in the central banks.
Hopefully, some muppet fuckers got fucked.
For a change.
One can hope that GS bet heavily on the short side and I expect to hear about a nailgun accident...soon.......
Twas a day for the long gamma crowd, for sure.
Brooks took consolation when reminded Goldman had the other side with the partners' fund.
The Yellen quote i have been hearing on the radio all day is that the economy is good, as evidenced by the fall in the unemployment rate from 10% to 5%.
Did ya read the ha ha ha ha ha ha
Muppet Massacre Madness!
Har Har silly clients, Draghi is ex-Goldmanite shit. He just made them a whole bunch of money on the other side of this trade. The side Goldman took against it's clients.
Not even courteous enough to give Kermit a reach around either. Shame shame.
Jesus Tits...did someone get the license plate of the Mack Truck that just smashed the shit out of my short?
FUCK me.
Full fuckin retard....
Jewish bank is lying again, there is no such things as "data misread" because we know FED is leaking data in advance and you bet this is at least one of the banks that is surely receiving them. They made big profit today from you.
Why do people pay for this dog shit? All one had to do was look at the data from the last couple of rate cuts to see what would happen. FYI, the FT early leak of the wrong ECB policy move was a GS engineered play to flush all stops both directions. Sergey had the code with the playbook.
The reaction in the euro troday was the result of overwhelmingly bearish sentiment and positioning. Expect the same with gold and silver with a few days (or hours) lag. At least they don't offer negative yields.
Goldman don’t have a seat on the European Central Bank Advisory Committee like they do with the FED, makes all the “reading” difference.
Kermit, our favorite crisis actor...
am I the only one starting to wonder if goldman had swaps on blue star's bonds? 1911 may have been an especially lucrative year for a towboat owner or two out of new york...
sure they did
Prepare for the whipsaw.
I have a hard time believing that the Goldman Sachs is out of the loop. They have historically been one of the primary implementers of global technocratic banking empire policy and procedure.
Are they now claiming that THEY are an outsider? Ohhh, Pllleeeeaaaaaasseee!!
nothin like a good bic fight between grandma's ah.. sorry goldman- wrong..........i thought these guys knew the inside scoop.
nothin changed five yrs been gone, same mrkt crap.. grandma yellen disagrees with citi 65 delta on recession, grandma is what 50-50. dumbass!
good stuff here zh, donate!
Appears (uncertainty is the new paradigm) that distrust by everyone of everyone is the new norm. Let there be darkness!
We squeezed a few folks.
Here's the before image of Goldman's clients:
http://3.bp.blogspot.com/_Wf0wIhjvJmg/S_3qw1SMKcI/AAAAAAAAApc/DXo3vjrGO6...
Tyler provided the after.
Jump, jump, jump!
Draghi decided no more Q€ is needed on the back of stellar results by the razor wire industry, np. :P
https://thinkpatriot.wordpress.com/2015/10/02/warning-ideas-are-dangerous/
I think that Taleb's advice to only trust advisors who have skin in the game themselves probably doesn't extend to those advisors playing against you in the same deal.
Oil pain to be reflected in Canada resulting in looser monetary policy and a weaker CAD.
Will believe it when I see it. All 5 charter banks posted record (RBC and BMO), or near record earnings results. Doesn't seem like there is any pain going on here, unless of course, you are one of 100,000 that just got laid off (with more layoffs to come).
Average house price in Edmonton last month sold for more than $432K.
Yeah
Aint seeing - AT ALL.
God's work from Goldman from Wall Street infamous for pushing Muppets under the bus on Sesame Street.
In order to believe a liar, you must first believe they stopped lying.
I love that quote. I read it somewhere on ZH but I don't remember the author's name.
Michael.....Barry's wife.
How the F could you miss the coming USD whack? It was so obviously coming. The Fed had pushed the USD so high it was killing the economy. They have to push it down to the 80 level again, at a minimum. What they did taking it up to 100 was insane. Oh wait...? You think? You think there is a free market in FX? You thought some market forces were involved? You thought you could read them? NO. All USD rates are rigged. How could anyone not know that?
You know you are living in a lunatic asylum when..............
A fat little mental patient is heading the FED.
QE and ZIRP clearly are not working - not in Japan (three lost decades), not in the USA (just about hitting the end of its first lost decade) and not in Europe (a little behind the US in losing a decade).
As the BIS explained several years ago (and many private strategists explained before that), QE and ZIRP have a price. And at some point (several years ago according to the BIS), those costs outweigh the benefits even for vampire squid banks.
Draghi is a Keynesian creep who no doubt wanted to fire his BS bazooka and ease policy even further... but the ECB members (especially the ones paying attention) know that isn't realistic. Not even if Goldman throws a world class temper tantrum.
Draghi backed off because he has to, not because he wanted to. He is an idiot, and so is anyone who believed in his empty promises.
Goldman's CNBC strategists might have expected a unicorn to fly out of Draghi's butt, that doesn't mean their trading desk was positioned for it.