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Goldman Turns Bearish: Squid Releases Top Trades For 2012... And It's Not Pretty

Tyler Durden's picture




 

The much anticipated Goldman Sachs list of "Top Trades Recommendations for 2012" is out... And the squid is bearish. Which is bad news, as if there is one thing one does not want is to be aligned with Goldman's salesforce. Let's dig in.

In a nutshell:

And in detail:

Our First 2012 Top Trades Focus on European Cyclical Risk, Policy Asymmetries and Commodity Constraints

Given the acute economic and financial market uncertainties as we launch our 2012 Top Trade recommendations, we have focused on areas where our near-term confidence is high and where there are important asymmetries or possibilities of being rewarded in multiple states of the world. By the same token, we are likely to re-evaluate them more frequently than in previous years as the balance between market pressure and policy reaction changes.

The first theme is further near-term economic and financial deterioration in the Euro area. Market pressure is likely to be the key mechanism through which the crisis itself intensifies and a policy response is forced. So it makes sense to position for downside here. The risk is that, outside of disorderly ‘tail scenarios’ where it is easy to envisage significantly more market damage, markets are already priced for quite bad outcomes in most places. So in choosing our trades, we have tried to avoid areas that are more direct reflections of the overall Euro area risk premium (such as the currency and peripheral spreads), and instead have focused relatively more on cyclical exposures, given the economic damage that has already been set in train. The recommendation to be short an index of European high yield credits (Xover index) should benefit from the fact that tightening credit conditions and a contracting economy are likely to hurt high yield borrowers disproportionately hard.

The second theme is the possibility of more radical policy responses. We expect QE3 in the US, additional Gilt purchases in the UK and a reasonable chance of further Swiss intervention. The recommendation to be long EUR/CHF benefits from the asymmetry caused by the peg, with both a much better European scenario and a much worse one (that includes a slowing Swiss economy) likely to push the cross higher through a re-peg. The short German Bund trade also has some of this flavour, with the trade potentially benefiting both from a move towards ‘debt mutualisation’ in the Euro area or a less orderly outcome that forces the German government to support its financial sector.

The third theme relates to the relative resilience of parts of the EM world and the commodity constraints that are a continued focus. The long Brent recommendation is a direct expression of that supply-constrained situation in the oil market, but long Canadian equities versus Japanese equities is also an oil exporter versus cyclical importer expression in equities.

The long CNY and MYR versus GBP and USD combines aspects of the last two themes, being long countries with current account surpluses and relatively resilient economics, versus current account deficit countries that are increasingly likely to use aggressive QE policies in order to exert downward pressure on their respective currencies.

Overall these trades strike a balance between our cautious view on Euro-area developments, on the one hand, while remaining more open-minded on the possibility of transmission more broadly.

1. Short European High Yield credit (Buying protection on the iTraxx Crossover index), for a target of 950bp (opened at 770bp) and a potential return of 4.5%, stop at 680bp

We recommend going short the high yield corporate bond market in Europe by selling protection on the iTraxx Xover index. We expect this trade to benefit from the following considerations.

  • The credit quality of European non-financial firms has not recovered to its pre-crisis level (see “European credit fundamentals: not so good,” The Credit Line, November 7, 2011). The credit quality of US firms, by contrast, is at its highest level in 25 years. Thus a recession in Europe—our forecast—could put considerable pressure on European high yield firms in 2012. We see mostly downside risk to this growth forecast, with very little upside.
  • Tightening credit conditions in Europe—with meaningful risk of a very sharp tightening—are likely to fall disproportionately harder on high-yield borrowers. European companies in general rely much more on bank loans than bond debt in their capital structures (by a ratio of roughly 4-to-1, according to our estimates). Thus, we think companies in Europe are more exposed to a contraction in bank balance sheets in 2012 than US companies were in 2008. We suspect that such pressures on bank balance sheets have already caused a meaningful credit tightening, and we think this pressure is likely to escalate as growth slows and the sovereign crisis persists.
  • Owing to the enormous pressures on fiscal budgets, financially distressed companies in the private sector are much less likely to receive sovereign assistance today than they were in the past. The benefits from such implicit sovereign support are difficult to quantify empirically, but we have long thought that bondholders in European companies have taken a degree of comfort from the knowledge that European governments have historically appeared willing to assist companies in distress, especially ‘national champions’ and economically important employers. However, in light of the current sovereign crisis, we think future credit spreads will have to reflect this loss of implicit sovereign support.

These reasons leave us feeling cautious about the potential for additional re-pricing of credit risk in European non-financials. We expect credit spreads to remain wide globally, but Europe seems especially vulnerable until a more robust response to the sovereign crisis emerges. Even in the best case scenario, Europe is likely to be in a recession, and the risks to that view are mostly to the downside.

In short, we think the direction in European high yield spreads is still wider, not tighter. We recommend buying protection on iTraxx Xover S16 for a spread target of 950bp. Assuming an average DV01of around 3.6 and a holding period of 3 months, the trade has a (fully funded) potential return of 4.5%.

2. Short 10-yr German Bunds for a target of 2.8% (open at 2.3%) and a potential return of +4.5%, stop 2.0%

On our long-held central view, funding pressures and the deterioration of the economic outlook will act as a ‘forcing mechanism’, leading to an agreement on a deeper fiscal integration of the Euro area, possibly in stages, involving budgetary rules supported by effective sanctions. Such an agreement on the regulation of fiscal flows should in turn pave the way to a partial ‘mutualisation’ of the existing debt stocks. Many options are on the table on how to achieve this, either explicitly (and ideas range from a co-investment fund seeded by EMU members on a pro-rata basis to a joint and several ‘redemption fund’) or indirectly via the ECB’s balance sheet. In both cases, this would result in a one-off transfer of credit risk to the ‘core’ countries, and a relaxation of systemic tensions which have led to a very pronounced flight-to-quality. Once a deal on fiscal flows is reached, we would also expect the ECB to adopt a more forceful response aimed at reducing funding costs and support the deleveraging of public and financial sector balance sheets. Against this backdrop, we recommend being outright short 10-yr German bund yields, but the position can also be expressed against corresponding maturity EONIA. We also like the ‘asymmetry’ of the trade: in a Euro-area ‘break-up’ tail scenario, the financial sector in the creditor ‘core’ countries will be confronted with severe impairments in their foreign holdings, which would worsen the state’s fiscal position. And in the middle ground between these two outcomes, where we find ourselves now, the ECB will be intermediating growing intra-Euro system imbalances. Through this monetary channel at the heart of EMU, the ‘shadow’ credit risk of the core countries is already rising, and at an increasingly rapid pace.

3. Go long EUR/CHF for a target of 1.35 (opened at roughly 1.2260) and a potential return of 11% including carry, stop at 1.20

With risky asset correlations strongly affecting FX markets, it is difficult to find exchange rate crosses that offer asymmetric expected returns. One strategy that we have been advocating to mitigate this problem is to look for those currencies that are strongly affected by policymakers. The Swiss National Bank is currently committed to keeping the EUR/CHF exchange rate above 1.20. This policy of quantitative easing is consistent with the rapid slowing of the Swiss economy and deflationary pressures. We see two scenarios in which this recommendation could work. First, continued weakening of Swiss activity, possibly linked to a deepening in the Euro-area crisis, could force the SNB to ease even more aggressively via a raised intervention level, which we now project at 1.30. Second, the (partial) resolution of sovereign tensions could trigger the reversal of some safe-haven flows into the CHF. Overall, it appears there are several scenarios, which could lead to a notable move higher in EUR/CHF, while the downside risks appear limited.

4. Long Canadian equities (S&P TSX) vs Japanese equities (Nikkei), FX unhedged for a target of 120 (opened at 100) and a potential return of 20%, stop at 90

In equities, we recommend a long position in Canadian equities via the S&P TSX relative to Japanese equities via the Nikkei, FX unhedged. This relative value trade, with an embedded long CAD/JPY leg as well, can be tracked on Bloomberg with the custom ticker .TSXNKY. Indexed at 100 on the Canadian close of November 30, 2011, we have a +20% target and a -10% stop loss on this top trade.
We like this pair trade for four reasons:

  • With a bullish view on the commodity complex, and energy prices in particular, the Canadian equity market ought to be a clear beneficiary given its significant energy and materials weights (both a bit less than 25%). However, as our Commodity team has pointed out, energy upside is as much about supply-side constraints and lean inventories owing to concerns about the sustainability of global growth, as it is about resilience in some of the emerging markets. But given the unresolved risks in Europe, and our expectations for a recession there, we do not want to be outright long equities. And we are using the Japanese market, which is historically cyclical but with much smaller weights in commodity producing sectors (around 7.5% in materials and <1% in energy), to hedge out both cyclical exposure and broad ‘equity risk’, while leaving commodity exposure intact.
  • The resulting equity pair has, over the last several years, tracked energy prices quite closely. More recently, over the last month or so, the equity pair has lagged the crude oil rally, providing an attractive entry point. Given our 6-month and 12-month WTI forecast of $113.5./bbl and $120/bbl respectively, and combined with the recent underperformance on the equity side, we think that a 20% move higher in Canada vs. Japan is about commensurate with the six-month oil target. Compared with a ‘long-only’ implementation, our chosen pair trade has a more moderate (annualised) volatility of about 20%, resulting in an attractive risk/reward profile for this trade, over the next six months.
  • Apart from reflecting an upbeat near-term commodity view, this pair trade also reflects our forecast views on divergent currency paths. Our FX forecasts call for significant CAD appreciation relative to the USD, while our expected Yen profile is fairly flat. By implementing the trade in an FX unhedged way—which can be done via ETFs—we implicitly recommend going long CAD/JPY too.
  • While we recognise that the Euro-area situation remains a source of elevated volatility in risky assets, the structure we are recommending is less levered to these risks. The reasons are twofold. First, the relative-trade nature of this trade ‘hedges away’ common dependence on events in Europe. And, second, over the last year the correlation of Canadian and Japanese equity markets with European financials was among the lowest in developed markets. It is also worth noting that Canadian financials fared reasonably well during the financials crisis of 2008.

5. Long a Global Rebalancing Basket (CNY, MYR versus GBP, USD) for a target of 107 (opened at 100) and a potential return of 7%, stop at 98

Large current account surpluses, and related signs of excessive FX reserve accumulation, are an important feature of persisting global imbalances. In particular in Asia, a number of countries record large surpluses in combination with heavily managed exchange rates and persistent inflation pressures. The currencies of these countries remain strong candidates for additional nominal appreciation. The CNY and MYR are typical examples, with the latter adding commodity exposure to the appreciation pressures.

Another feature of global imbalances is that a number of developed countries struggle to support domestic demand since the global credit crisis. In response, some of these countries have shifted towards extremely accommodative monetary policies and substantial QE, which exerts downside pressure on the respective currencies. The Fed and the Bank of England have been particularly proactive and hence the USD and GBP could remain under downside pressure. Both countries also continue to record current account deficits.

Combining the two angles suggests that a basket of long CNY, MYR versus GBP, USD would likely benefit from underlying equilibrium pressures towards global rebalancing, while displaying relatively little correlation to swings in broader risk aversion. We would implement the CNY and MYR legs via 1-year NDFs (expiring on 3 December 2012, trading at about 6.42 and 3.19 respectively.

6. Long July 2012 ICE Brent Crude Oil futures for a target of $120/bbl (opened at $107/bbl) and a potential return of 12%, stop at $100/bbl

As the downside risk from the European debt crisis has intensified, so has the oil market’s incentive to draw down inventories ahead of the threatened global economic recession. In particular, in its attempt to price in the potential that the European debt crisis may trigger a new global economic recession, the oil market continues to set crude oil prices too low to clear the tight physical markets, leading oil inventories to reach exceptionally low levels for the time of year. In the first three quarters of 2011 (latest available data), OECD total petroleum inventories drew by 225,000 b/d more than normal. This implies that despite Brent crude oil prices, which averaged $111.50/bbl over the same time period, current demand still exceeded the available supply. We estimate that Bent crude oil prices would have needed to average $130/bbl to restrain demand in line with supply. Further, in the absence of the IEA coordinated release of 35.5 million barrels of government inventories this summer, Brent crude oil prices would likely have needed to average $140/bbl to keep demand in line with supply.

Of course, the market had ample inventory cover from 2011Q1-2011Q3, and so the market could balance by drawing inventories rather than restraining demand. However, with inventories now exceptionally tight outside of the US, and US inventories drawing rapidly, we believe that this draw on oil inventories cannot be sustained and oil demand must be restrained either through the feared sharp decline in world economic growth, or higher crude oil prices.

Consequently, while the downside risk from the European debt crisis has increased, the upside risk to oil prices has also increased as the low level of inventories and currently tight supply-demand balance is leaving the oil market exceptionally vulnerable to supply disappointments or better-than-expected demand. Interestingly, while the oil market has spent much of 2011H2 drawing parallels to 2008H2, the more relevant parallel may prove to be between 2011H2 and 2007H2, when extremely tight physical markets set the stage for crude oil prices to rise by almost 50% in 2008H1 to a record high over $145/bbl even though the US economy had fallen into recession, much as we think the European economy is doing now

 


And the reasoning for this bearishness:

 

Another Two Years of Sub-Par Growth in Advanced Economies

The overall story is one in which the features of a post-bust recovery remain critical for understanding the medium-term global outlook. The US and several major developed economies are still facing the headwinds of private-sector deleveraging and budgetary consolidation in the public sector. That combination is likely to mean another two years of sub-par growth in major advanced economies, continued high unemployment and spare capacity, and a fresh round of policy responses, including further moves towards unconventional options.

EM Operating Relatively Close to Capacity

Free from some of the headwinds in the developed world, many EMs are operating relatively close to capacity, with inflation only just beginning to cool from elevated levels. Policy is gradually shifting towards preventing slower growth, and we think it will move further in that direction, helping to preserve their relative resilience. At the same time, supply-constrained commodity markets—particularly in oil—mean that even moderate global growth is enough to put upward pressure on commodity prices, despite significant slack in many other sectors.

Continued Intensification of the Euro-area Crisis

For the world as a whole, our forecast for real GDP growth in 2012 is 3.2% (down from 3.4%) and 4.1% for 2013. But the near-term uncertainties around our central forecasts are particularly large given the continued intensification of the Euro-area crisis. How the global economy actually evolves will depend on how that process plays out and the extent to which problems here transmit to the rest of the world.

Deeper Recession in Euro-area, Slowdown in US, Below Trend Growth in China

We now expect a deeper recession in the Euro area. Our baseline is for real GDP to fall at a rate of about 0.5% (or 2% annualised) in the present quarter and early 2012, which corresponds to the deepest part of the 1992-1993 recession in the Euro area. For 2012 as a whole, we expect a decline real GDP in the Euro area of 0.8%. Our baseline is for activity to stabilise towards the end of 2012, and expand by a modest 0.7% in 2013, but this is conditional on some major economic policy changes in the Euro area.

The deterioration in the Euro area has led us to downgrade our forecasts for countries that are heavily exposed to the region via foreign trade and/or the financial system. Specifically, we now expect mild recessions in the UK, Scandinavia and parts of Central and Eastern Europe. We continue to expect a growth slowdown in the US, as well as below-trend (but still decent) growth in China.

A Cautious Investment Picture, Highly Conditional on Policy Further Out

The Euro-area economic and financial risks are likely to remain centre-stage for now, and the battle between market pressure and the potential policy reaction is likely to intensify in the near term. So our strongest market views are based around the notion that this pressure will dominate early on. We envisage further near-term downside for European cyclical assets, increased banking system stress and continued pressure in European sovereign bond markets, extending to the core economies.

In Europe itself, we are forecasting notable downside in equity markets over the next three months (around -16%), and our near-term equity views in all of the major regions are relatively downbeat and have a defensive flavour, emphasising areas with strong balance sheets, low exposure to Europe and relatively low cyclicality. This applies even in areas (like Asia) where our economic forecasts for the year as a whole are still quite benign.

Beyond that, much depends on how policymakers then respond to that pressure. We currently expect improved performance in markets (higher equities, higher bond yields and a stronger Euro) beyond three months. And we can envisage taking a clear, constructive view across the markets at some point in the next few months, particularly if things deteriorate rapidly first. This general profile of near-term market turbulence followed by eventual recovery is consistent with the central profile in our economic forecasts. But it is important to understand that, more than usual, this is a conditional forecast and one that may require significant policy action for us to stick with it. And somewhat similar to a market version of Newton’s first law, we think in this environment the most sensible position is to stay structurally cautious unless a sufficient policy response is forthcoming.

Largest Upside Potential in NJA Equities 12 months out

The extent of performance in the second half of the year—even with some resolution of European issues—also varies by market. In equities, we envisage the largest upside potential ultimately in Non-Japan Asia (NJA), given the combinations of undemanding valuations and a still-benign central economic forecast for China. In the US and Europe, we think the upside through the year is likely to be more limited as sluggish economies, fiscal restraint and deleveraging pressures dominate. But even here there may be pockets of the market that could surprise positively once things stabilise: equities exposed to housing and automobile sales in the US, where activity levels are especially depressed, and consumer equities in the UK following the reversal of the intense squeeze on disposable incomes that has occurred.

Gradual Rise in Bond Yields

In government bond markets, working with the assumption that activity picks up in the second half of the year, but policy remains easy—with no run-off in central bank asset portfolios and only moderate inflation—bond yields should rise gradually. At current levels, they are below what a macro model based on inflation, growth and short-term rates would imply for almost all G10 countries. We maintain our conviction in the view that we have held since June that 10-year US Treasuries will not fall below 2% other than temporarily. We expect yields in the US to end 2012 at 2.5% and reach 3.3% by the end of 2013 as activity recovers and a fiscal risk premium is built in. For some of the more cyclical economies (UK, Canada, Australia), we expect yields to stay stable in the first half of 2012, with a relatively steeper sell-off in the second half as growth recovers and yields move back towards their macro equilibrium.

We expect German Bund yields to surpass what a macro model (such as our Sudoku) would imply, reflecting the assumption of a partial ‘mutualisation’ of Euro-area sovereign debt. This suggests that German 10-yr yields would be at 2.75% by end-2012 and at 3.25% by end-2013 (roughly 25bp above forwards and the model), with the risk that the move to 2.75% happens even faster.

FX: Euro-area Crisis vs Dollar Downtrend

In currencies, very high cross-asset correlations suggest that the trajectory of most crosses will reflect to a large extent the gyration of the Euro-area crisis. In that respect, it is possible that cyclically-correlated currencies will continue to see more weakness in the near term, maybe even substantially. However, if our central assumption of a subsequent policy response materialises, the unwinding of already very stretched long USD positions would likely become the dominating market dynamic. This would be visible in broad USD weakness, which remains the main theme of our revised forecasts (see table). Moreover, the latest trends in cross-border capital flows suggest that the USD continues to face underlying current account funding pressures, which have been temporarily masked by the deterioration in risk sentiment. By contrast, the portfolio flow situation in the Euro area actually improved on increased repatriation from Euro-area investors.

Within the scenario of a successful European policy response, EMEA currencies would likely rally relatively less, given their particularly strong trade and financial linkages with the Euro area. Some LATAM currencies could also continue to underperform due to financial sector connections to the Euro area. Among the outperformers, resilient Asian growth and barely contained inflation pressures will likely maintain substantial appreciation pressure for Asian surplus currencies. ‘Wall of Money’ flows could become a challenge again for many central banks in the region. Among major currencies, we expect FX markets to remain strongly influenced by policy action, such as the intervention in EUR/CHF and $/JPY, or continued QE by the Fed and the BoE.

We Continue to Forecast Higher Oil Prices

Partial resilience in global growth and the tightness of energy markets in particular means that we also continue to forecast higher oil prices. Of course, significant additional downside to the global growth picture would eventually change that story. But given the physical nature of those markets, this is one place where current reality, not future risks, could determine pricing even in the shorter term.

 

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Wed, 11/30/2011 - 13:16 | 1930977 lolmao500
lolmao500's picture

Bullish for Canadian stocks... Goldman is nuts. Once Europe or the US goes belly up, Canadian banks will go belly up too.

Oil going up... yep, war it's gonna be.

Short German bunds... yep.

Wed, 11/30/2011 - 13:20 | 1931003 Triggernometry
Triggernometry's picture

Not pretty? That's downright FUGLY!!

Wed, 11/30/2011 - 13:26 | 1931025 BaBaBouy
BaBaBouy's picture

Oil Could Go Ballistic !

 

This is a Great must watch for all ...

Chris Martenson Lecture On Why The Next 20 Years Will Be Marked By The Collapse Of The Exponential Function

http://www.zerohedge.com/news/chris-martenson-lecture-why-next-20-years-...

Wed, 11/30/2011 - 13:30 | 1931063 LongBalls
LongBalls's picture

If it is not clear now it never will be. The West has no option but to print, print, print. The only thing supporting this thing from an all out collapse are two words - PETRO and DOLLAR.

War is on the horizon.

The IAEA claims that Iran will have nuclear warhead capability by March 2012. It is winter. Soldiers move better in cool middle eastern temps especially wearing chemical suits. War is no more than 2 months away.

IMHO.

Wed, 11/30/2011 - 13:58 | 1931191 Are you kidding
Are you kidding's picture

Let the troops spend Christmas at home...then...

Wed, 11/30/2011 - 13:58 | 1931192 Dr. Richard Head
Dr. Richard Head's picture

Iran is the least of our worries.  With indefinite detention soon to be signed by President and the US Army openly posting for Internment Camp Specialists - http://www.goarmy.com/careers-and-jobs/browse-career-and-job-categories/legal-and-law-enforcement/internment-resettlement-specialist.html - me thinks the bigger threat will be our own government. 

Wed, 11/30/2011 - 15:29 | 1931757 Richard Chesler
Richard Chesler's picture

Christmas rally bitchez!

 

Wed, 11/30/2011 - 13:20 | 1931004 Sunset chaser
Sunset chaser's picture

Are there any that shouldn't be faded?

Wed, 11/30/2011 - 13:37 | 1931095 Carlyle Groupie
Carlyle Groupie's picture

Ha! Funny that *YOU* should ask this...

Wed, 11/30/2011 - 13:27 | 1931018 BaBaBouy
BaBaBouy's picture

Gold and Oil ...

Wed, 11/30/2011 - 13:25 | 1931034 CPL
CPL's picture

They are bullish Canuck stocks because where do you think they are going to rule from next.

 

It ain't NYC.  Natives will cut them to ribbons.  Although they don't seem to understand that once they are over here, squid is on Canuck turf.  My suggestions to them is don't drive outside of cities.  There's a lot of space to get lost in.

Wed, 11/30/2011 - 13:59 | 1931196 CPL
CPL's picture

Read that, only thing that popped in my head was the popping noise of housing and equities.

 

 

Wed, 11/30/2011 - 13:38 | 1931103 Matt
Matt's picture

If things get much worse, Japanese equities should decline more than Canadian equities, still resulting in a net profit.

What kind of scenario would have lower commodity prices, with a surge in Japanese equities (in USD in the end, so more QE by the Japanese wouldn't be a positive move as the Yen would decline accordingly)?

A major housing crisis in Canada would probably drag down CAD hard, since the government explicitly backs CHMC insurance on 5% down mortgages.

Wed, 11/30/2011 - 13:45 | 1931142 kengland
kengland's picture

Which is it TD? GS the idiots who can't nail the euro cross if their life depended on it or the GS who's brilliant analysis is worth of making the front page of ZH.

You can't have it both ways.

Wed, 11/30/2011 - 13:58 | 1931190 ak67
ak67's picture

yea wtf

Wed, 11/30/2011 - 14:01 | 1931202 fuu
fuu's picture

Or think for yourself?

Wed, 11/30/2011 - 14:19 | 1931331 bankonzhongguo
bankonzhongguo's picture

I sorry folks, but after all these years of; published opinions from the very actors that facilitate these global financial fiascoes, the ridiculous government forecasts sidelined by the never-ending vacancy of law enforcement activity all compounded by the buzz-saw media that so consistently does not report real information and in fact becomes a stovepipe for more compressed and abbreviated "reporting" - How can anyone believe anything, let alone use this "information" to trade in this "market" against co-located HFT engines?

All this swill pushed out to one client class verses another; you cannot know if what you are reading is valuable, actionable or part of a larger disinformation campaign.

We gave up watching the 'nightly (s)newz.'  We stopped supporting the whole CN-BS charade.  The vaulted NYT is no more than a co-intel de jour organ for people and motives that will never exist in your own state or zip-code.

Find 3 sources of clean food and water within a few miles of your home.  Home school your kids.  Make friends with your neighbors. Hone a real skill that has value and stop hoping that passive investing is going to feed your unemployed children.

Nobody is coming to help you.

Wed, 11/30/2011 - 13:17 | 1930982 killallthefiat
killallthefiat's picture

I'm surprised they are not shorting gold

Wed, 11/30/2011 - 13:36 | 1931090 blindfaith
blindfaith's picture

what is unsaid is more important than what is said.

Frankly, I think the text and charts are contradictory...but that is Goldman.  Anyone who thinks 'they' can see into the future of this mess is full crap, and those who follow it must have blindfaith.

Wed, 11/30/2011 - 13:20 | 1930985 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

sooo its time to be long? I mean, thats basically what they're saying right?

 

ohh look at that eurchf reco, I bet thats when they were coming down from the coke/hooker binge.....

Wed, 11/30/2011 - 13:18 | 1930986 vegas
vegas's picture

uh oh, I'm long eurchf. This is bad news,

 

http://vegasxau.blogspot.com

Wed, 11/30/2011 - 13:26 | 1931039 CPL
CPL's picture

Pound the sell button

Wed, 11/30/2011 - 13:18 | 1930987 GeneMarchbanks
GeneMarchbanks's picture

'We expect QE3 in the US, additional Gilt purchases in the UK and a reasonable chance of further Swiss intervention.'

What? No Merkel? If they could just convince the Germans this whole 'Top Trades' list gets thrown in the garbage.

Come on Germans listen to your little Mephistopheles...

Wed, 11/30/2011 - 13:19 | 1930989 BlackVoid
BlackVoid's picture

Gold is not included, good sign. Top trade: long gold.

Wed, 11/30/2011 - 13:32 | 1931066 Bam_Man
Bam_Man's picture

Why bother even mentioning it?

It is just a "barbarous relic" that some people covet because of "tradition".

You are much safer trusting a fiduciary like MF Global Goldman Sachs to look out for your financial well-being.

Wed, 11/30/2011 - 13:19 | 1930991 killallthefiat
killallthefiat's picture

Canadian equities, bitchez

Wed, 11/30/2011 - 13:27 | 1931048 CPL
CPL's picture

BreX, Nortel, Blackberry, Tyco...and other great Canadian equities can be yours for the low low price of...

Wed, 11/30/2011 - 13:19 | 1930993 fonzanoon
fonzanoon's picture

GS is pushing QE3 and yet is bearish. Makes sense

Wed, 11/30/2011 - 13:34 | 1931083 CPL
CPL's picture

Because they know the outcome, we all do.

Wed, 11/30/2011 - 13:19 | 1930996 august west
august west's picture

loyd called he said, "damn it, you weren't supposed to release this list until we were fully positioned to take the other side of this flow."

Wed, 11/30/2011 - 13:19 | 1930997 Vincent Vega
Vincent Vega's picture

"Goldman's top trades for 2012" a.k.a "do as we say not as we do".

Wed, 11/30/2011 - 13:20 | 1930999 WonderDawg
WonderDawg's picture

Great, now I have to reassess my entire short strategy. This must mean DOW 20,000 in 2012. Fuck.

Wed, 11/30/2011 - 13:40 | 1931113 dracos_ghost
dracos_ghost's picture

Yeah, I heard they are changing their name to Goldman Stops since their clients are going to be stopped into the poor house.

Wed, 11/30/2011 - 13:20 | 1931001 Cleanclog
Cleanclog's picture

Doesn't GS believe in China?  Where is Asia in their strategy?  Their fingers, oops tentacles, are firmly intertwined in the European governments and monetary authorities . . .  China and the little tigers - not so much I guess.

Wed, 11/30/2011 - 13:22 | 1931017 xcehn
xcehn's picture

GS does not believe in China.

Wed, 11/30/2011 - 14:04 | 1931218 Carlyle Groupie
Carlyle Groupie's picture

Ha! You show zero knowledge in your statement.

Wed, 11/30/2011 - 13:20 | 1931002 kito
kito's picture

can zh start a inverse squid etf? why just tilson? im quite sure that we would do much better investing inverse of the squid

Wed, 11/30/2011 - 13:21 | 1931006 xcehn
xcehn's picture

The squid knows global economic collapse is coming.

http://online.wsj.com/article/SB1000142405311190389590457654270358778454...

Wed, 11/30/2011 - 13:49 | 1931163 kito
kito's picture

sorry xcehn, i have better places to put my money than subscriptions to wsj. 

Wed, 11/30/2011 - 13:21 | 1931009 Mattress Money
Mattress Money's picture

All i have 15K what should I do????

Wed, 11/30/2011 - 13:44 | 1931027 hedgeless_horseman
hedgeless_horseman's picture

 

 

...we think in this environment the most sensible position is to stay structurally cautious unless a sufficient policy response is forthcoming.

Get a second job and stay out of the markets.

Wed, 11/30/2011 - 13:26 | 1931042 TeamDepends
TeamDepends's picture

Profit with Cramer

Wed, 11/30/2011 - 13:27 | 1931049 blindfaith
blindfaith's picture

sit tight and don't let it burn a hole in your pocket.

Wed, 11/30/2011 - 13:28 | 1931051 CPL
CPL's picture

Nothing but buy gold.

 

The only currency left on the planet worth a fiddlers fuck.

Wed, 11/30/2011 - 13:28 | 1931052 GeneMarchbanks
GeneMarchbanks's picture

farm

Wed, 11/30/2011 - 13:35 | 1931068 hedgeless_horseman
hedgeless_horseman's picture

 

 

Farm with $15k?  Garden.

Speaking of that, our lettuce and root crops are having a bumper fall.   

Wed, 11/30/2011 - 13:35 | 1931087 CPL
CPL's picture

You can get 100 acres in the Ottawa Valley for 20k, just need 180k to clear it so it's useful.  It'll be good black earth though.

Wed, 11/30/2011 - 13:41 | 1931117 hedgeless_horseman
hedgeless_horseman's picture

 

 

For less than $500 you can be in the chicken and egg business.  With the chicken shit, you can start making your own good black earth wherever you are now.

http://www.ideal-poultry.com/pricelist/Ideal-Retail%20Price-List.pdf

Wed, 11/30/2011 - 15:10 | 1931638 CPL
CPL's picture

Price isnt' bad even with exchange rates over the border.

 

Proven laying hens are $4 a piece, baby chicks you can pick up for 6 of them for $2.  out of the six you might get lucky and have 2 out of the six make it to becoming an egg layer. 

Once you establish who has the best baby factory, you eat the ones that don't do so well, and make sure the rooster knows where your girls are.  After six months, swap roosters with someone else so you don't inbreed the stock while keeping an eye out for more roosters to trade other people with.

In the winter you keep the door open for wild Turkey's to come an roost with the chickens and the turkey's will kick the shit out of any animal other than humans that comes near the hutch.  Don't think of them as mouths to feed, think of them as vicious bastards that will keep coyotes, wolves, fishers, racoons and other carnivores at a distance.

Plus they are funny looking and make crazy noises.  The big thing for hutch meat here is rabbit.  Grow fast, protein is high in the meat, breed fast and cheap to feed...It's $10 for a mid sized coney at the store for roasting.  If buying rabbits to breed, don't bother, people give them away at the speed they breed.

Wed, 11/30/2011 - 13:38 | 1931102 tomfool
tomfool's picture

Send it to me I have a fool proof zero risk option strategy.

Address Below:

Bernard Madoff

c/o

Federal Bureau of Prisons

320 First St., NW,
Washington, DC  20534

Wed, 11/30/2011 - 13:22 | 1931014 slaughterer
slaughterer's picture

Hatzius says he predicts QE3 today.  And GS goes bearish?????  Too many conflicting opinions at GS.  Lloyd should simplify the firm into one unified strategy.  

Wed, 11/30/2011 - 13:25 | 1931030 JSD
JSD's picture

They have 'one unfified strategy' - rip as many people off as possible without getting caught (acutally, getting caught doesn't seem to matter).

Wed, 11/30/2011 - 13:26 | 1931043 slaughterer
slaughterer's picture

Green arrow for you.  

Wed, 11/30/2011 - 13:23 | 1931020 hermes trismegistos
hermes trismegistos's picture

hey why don't you post an article about stopping credit credit card for 6 months.

Globally.....what would then happen?

 

Wed, 11/30/2011 - 13:23 | 1931022 razorthin
razorthin's picture

Meh.  Looks like a stagflationary prognostication.  Far from the bearish outlook the situation warrants.

Wed, 11/30/2011 - 13:25 | 1931032 urbanelf
urbanelf's picture

gold equals one through six

Wed, 11/30/2011 - 13:25 | 1931035 firstdivision
firstdivision's picture

My top 2012 trades will be:

1.       Sell CDS on iTraxx Euro Xover Index

2.       Long 10 year Bunds

3.       Short EUR/CHF

4.       Short TSX and long Nikkei

5.       Stay out of Global FX Baskets

6.       Short July 2012 ICE futures with ever last penny

Wed, 11/30/2011 - 13:28 | 1931053 tmosley
tmosley's picture

My top 2012 trades are likely to be:

1.  Buy physical silver.

2.  Sell physical silver for physical gold.

3. Buy everything when the streets are a river of blood.

Wed, 11/30/2011 - 13:40 | 1931111 firstdivision
firstdivision's picture

7. Buy a soild gold toilet with the gobs of worthless lollers

Wed, 11/30/2011 - 13:45 | 1931143 knukles
knukles's picture

Awsome!
A solid gold shitter for the best part of the day whilst reading Goldman reports.
Dude...

Kudos

Wed, 11/30/2011 - 13:26 | 1931044 ChiefJohnRutledge
ChiefJohnRutledge's picture

I will take the other side of the EUR.CHF from them.    I think they are right on oil, though.  

Wed, 11/30/2011 - 13:27 | 1931050 slaughterer
slaughterer's picture

With a EuroZone recession, the oil call is kind of risky.  

Wed, 11/30/2011 - 13:30 | 1931059 vote_libertaria...
vote_libertarian_party's picture

hahahahahaaa...same old GS

 

Economies will shrink/slowdown everywhere but stocks will rise everywhere.

Wed, 11/30/2011 - 13:32 | 1931069 TradingJoe
TradingJoe's picture

always do the opposite the squid does and you'll be fine!

Wed, 11/30/2011 - 13:45 | 1931106 midgetrannyporn
midgetrannyporn's picture

The squid does not care which way you bet. If you play in their kitty box they win. Public pronouncements such as these usually mean that they are just trying to balance out positions.

Wed, 11/30/2011 - 13:32 | 1931071 user2011
user2011's picture

Goldman fucked it's customer by recommending EUR/USD a week ago.  Then they go bearish on the EUR/USD.   And their customer got fucked again today.  

 

I don't know who else would believe in Goldman..   I think Goldman is the one that will go bearish next year.   BTW, no bail out for them, ever.

Wed, 11/30/2011 - 13:33 | 1931074 Bam_Man
Bam_Man's picture

Can anyone tell us how well Goldman's "top trades of 2011" are doing?

Wed, 11/30/2011 - 13:33 | 1931078 orca
orca's picture

Why are they going long EUR/CHF with a 1.35 target, if their 12-m forecast says 1.30?

Wed, 11/30/2011 - 14:04 | 1931212 knukles
knukles's picture

Commissions.

Wed, 11/30/2011 - 13:34 | 1931079 Piranhanoia
Piranhanoia's picture

The system is unsustainable and you are likely to lose all your money if you bet in our casino.

Thank you for giving GS a chance to rape you so many times.  

Wed, 11/30/2011 - 13:48 | 1931159 Matt
Matt's picture

Well, I already have a stack of casino chips, and if I don't play them, the casino is going to just create more at an ever-declining value anyways, so might as well let'em ride.

Thu, 12/01/2011 - 11:50 | 1934979 DrunkenMonkey
DrunkenMonkey's picture

It's sustainable until the developing nations' citizens are as over-extended debtwise as the developed nations currently are, no ?

Wed, 11/30/2011 - 13:38 | 1931085 wee-weed up
wee-weed up's picture

!!

Wed, 11/30/2011 - 13:37 | 1931097 fonzanoon
fonzanoon's picture

I read an a report from GS during the summer where it declared PCX their top recommendation. It was 22 bucks and they had it going to 27. I bought it at 22 with a tight stop. They are funny those GS people

Wed, 11/30/2011 - 13:40 | 1931116 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

unbelievable......goldman just said to go long eurchf with 3500 target

Wed, 11/30/2011 - 14:11 | 1931266 Hober Mallow
Hober Mallow's picture

Can someone please explain me why Goldman would want to go long EUR/CHF?

What are they assuming?

Wed, 11/30/2011 - 13:41 | 1931119 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

See you on the other side....of the trade.

-Lloyd Blankfein

Wed, 11/30/2011 - 13:46 | 1931120 Dick Darlington
Dick Darlington's picture

The whole reasoning behind the short Bund recommendation is suicidal circle jerk. When the periphery risk transfers to core, the core is TOTALLY fucked. And no, it doesn't mean that periphery will be better off. It means that even the borderline solvent countries will be dragged down, already high anti-euro sentiment among the PEOPLES will grow exponentially and will be the final push for large scale social unrest and break up (which is actually the best outcome). They just don't get it. All this mentally ill mantra abt eurobonds and fiscal union making shit turn into gold is complete and utter bs. It's a POLITICAL dream of the small elite (including the insolvent megabanks), and it will fail. If only the eurocommies had enough brains to break up the economic prison in "orderly" fashion...

Wed, 11/30/2011 - 14:07 | 1931234 GeneMarchbanks
GeneMarchbanks's picture

'If only the eurocommies had enough brains to break up the economic prison in "orderly" fashion...'

This hasn't anything to do with brains, Dick. All it would take is willpower and moral sense. Those things waved bye-bye a long time ago. The same goes for the US. 


Wed, 11/30/2011 - 14:20 | 1931335 Dick Darlington
Dick Darlington's picture

You're right Gene, absolutely.

Wed, 11/30/2011 - 13:43 | 1931132 dtwn
dtwn's picture

Investing/self protection strategy for 2012 or when SHTF:

1)PMs

2)Oil, energy sources

3)Guns and ammunition

4)Food and water

5)Alchohol and cigarettes (other peoples addictions = automatic barter currency)

6)Condoms (people like to fuck, and when the SHTF they don't want another mouth to feed = barter currency)

Source:  Maslow's hierarchy of needs http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs

Food, water, and sex are at the foundation in the physiological category.  Addiction to nicotine and alchol could also be added in my opinion.  After those needs are met, security is next.  The other needs aren't going to matter when the SHTF.  Think about it.

Wed, 11/30/2011 - 13:48 | 1931157 death_to_fed_tyranny
death_to_fed_tyranny's picture

You Sir must be a terrorist. The helicopter will come in the night. Waterboarding is back in at GITMO.

Wed, 11/30/2011 - 13:46 | 1931148 rubearish10
rubearish10's picture

Fuck Goldman and off topic to "what now"? We wait for Beige Book and next headline "head fake'! Dude, where's my car? WTF, not easy to make moves when it just moves and sits, moves and sits. Really?

Wed, 11/30/2011 - 13:46 | 1931150 slewie the pi-rat
slewie the pi-rat's picture

MEDIC!!!

Wed, 11/30/2011 - 13:53 | 1931172 JW n FL
JW n FL's picture

 

 

 

http://www.emptywheel.net/page/3/

With Latif Decision, Section 1031 Authorizes Indefinitely Detaining Americans Based on Gossip By:  Saturday November 19, 2011 4:11 pm

 

As I noted yesterday, both Dianne Feinstein and Carl Levin understand Section 1031 of the Defense Authorization to authorize the indefinite detention of American citizens. Levin says we don’t have to worry about that, though, because Americans would still have access to habeas corpus review.

Section 1031 makes no reference to habeas corpus, and places no limitation on habeas corpus review.  Nor could it.  Under the Constitution, habeas corpus review is available to any American citizen who is held in military custody, and to any non-citizen who is held in military custody inside the United States.

Even ignoring the case of Jose Padilla, which demonstrates how easily the government can make habeas unavailable to American citizens, there’s another problem with Levin’s assurances.

Habeas was gutted on October 14, when Janice Rogers Brown wrote a Circuit Court opinion holding that in habeas suits, judges must grant official government records the
presumption of regularity.

The habeas case of Adnan Farhan Abdul Latif largely focused on one report purporting to show that Latif fought with the Taliban. I suspect the report is an early 2002 CIA report, written during the period when the US was trying to sort through hundreds of detainees turned over (sometimes in exchange for a bounty) by the Pakistanis. The report I suspect is at issue summarizes the stories of at least 9 detainees, four of whom have already been transferred out of US custody. David Tatel’s dissent makes it clear that there were clear inaccuracies in the report, and he describes Judge Henry Kennedy’s judgment that this conditions under which this report was made–in the fog of war, the majority opinion agrees–increased the likelihood that the report was inaccurate. Of note, Latif’s Factual Return reveals the government believed him to be Bangladeshi until March 6, 2002 (see paragraph 4); they blame this misunderstanding on him lying, but seeing as how the language of an interrogation–whether Arabic or Bangladeshi–would either seem to make his Arab identity clear or beset the entire interrogation with language difficulties, it seems likely the misunderstanding came from the problem surrounding his early interrogations.

Beyond that report, the government relied on two things to claim that Latif had been appropriately detained: The claim that his travel facilitator, Ibrahim Alawi, is the same guy as an al Qaeda recruiter, Ibrahim Balawi (usually referred to as Abu Khulud), in spite of the fact that none of the 7 detainees recruited by Balawi have identified Latif. And the observation that Latif’s travel to Afghanistan from Yemen and then out of Afghanistan to Pakistan traveled the same path as that of al Qaeda fighters (here, too, none of the fighters who traveled that same path identified Latif as part of their group).

In other words, the government used one intelligence report of dubious reliability and uncorroborated pattern analysis to argue that Latif had fought with the Taliban and therefore is legally being held at Gitmo.

And in spite of the problem with the report (and therefore the government’s case), Judge Janice Rogers Brown held that unless Judge Kennedy finds Latif so credible as to rebut the government’s argument, he is properly held. More troubling, Rogers Brown held that judges must presume that government evidence gathering–intelligence reports–are accurate as a default.

When the detainee’s challenge is to the evidence-gathering process itself, should a presumption of regularity apply to the official government document that results ? We think the answer is yes.

Rogers Brown is arguing for a presumption of regularity, of course, for the same intelligence community that got us into Iraq on claims of WMD; the report in question almost certainly dates to around the same period that CIA went 6 months without noticing an obvious forgery.

Continue reading ?

Wed, 11/30/2011 - 13:54 | 1931180 JW n FL
JW n FL's picture

 

 

 

 

Is the Government Hiding Chase’s Cooperation in the Scary Iran Plot? By:  Wednesday November 23, 2011 2:18 pm

 

As I noted in this post, earlier this month, the government unsealed the redacted first complaint in the Scary Iran Plot. I will do a post summarizing the differences between the original and amended complaint later (short version: in a number of ways seeing both complaints weakens their case slightly against Quds Force).

But in this post, I want to suggest–and this is speculation–that the secrecy about the complaint may serve, in part, to protect JP Morgan Chase.

Continue reading ?

Wed, 11/30/2011 - 13:58 | 1931189 oddjob
oddjob's picture

NG, it really cant fall anymore.

Wed, 11/30/2011 - 14:00 | 1931197 kralizec
kralizec's picture

Oil looks yummy to me!

Wed, 11/30/2011 - 14:28 | 1931399 dcb
dcb's picture

Ok, they got stopped out of theuir euro trade because they can't read a chart, and now it would have returned money. man these guys are joke

Wed, 11/30/2011 - 14:39 | 1931476 MarcusLCrassus
MarcusLCrassus's picture

"Long a Global Rebalancing Basket". 

 

This sounds a little ominous.  Is this when they bring in SDRs and revalue the dollar at 40-50% of its current value?  Overnight gas goes to $6-7 a gallon?

Wed, 11/30/2011 - 15:17 | 1931688 Stagflationary
Stagflationary's picture

Remind me - what was their S&P target for 2011? what was their USDJPY target? what was their gold target? what was their oil target?

Wed, 11/30/2011 - 15:40 | 1931804 The trend is yo...
The trend is your friend's picture

how did their 2011 top trade ideas do? anyone know

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