Goldman's Jim O'Neill "Go On President Obama And Congress; Give Us A Nice Pleasant Summer Surprise!"

Tyler Durden's picture

While there are some undertones of caution in the latest letter from the head of Goldman's worst performing group ("I suspect the reason why the bond market has rallied and the Dollar and equities have fallen, is because there is going to be a budget deal, which the markets worry will weaken the cyclical GDP growth outlook further"), his bottom line (literally) is precisely what everyone on Wall Street, and everyone else who writes rants against responsible fiscal management (wait, wasn't Congress responsible 1 year ago? or two years ago? No of course not. It became an emergency a week ago) thinks. And it is as follows: "Go on President Obama and Congress; give us a nice pleasant Summer surprise!" Indeed, when you cut out all the hollow rhetoric of all those whose livelihood depends on the status quoTM and on "borrowing" from the future (cold fusion will certainly help with our energy problems one day... so will the tooth fairy), this is what it is all about.

From Goldman's Jim O'Neill


Did you manage to distract yourself from the US budget fiasco this past week? Or did you spend the whole week wondering about what might happen if the US doesn’t pass its debt ceiling on August 2nd? I had a visit from a really smart hedge fund from Outer Space, and the CIO said that he expected US Treasuries to fall significantly as a result of Congress’ inability to reach a deal and the US being downgraded. I told him that while it seemed very sound reasoning, here on Planet Earth, things don’t necessarily pan out that way. In fact, Treasuries would be the major beneficiary as investors adopted a “risk off” mentality and sold higher risk assets instead. Not to confuse my interesting visitor from Outer Space, I did tell him this didn’t apply to the Dollar, which would fall because investors would be far happier owning the Euro despite all its apparent problems. While the US might have a large budget deficit and the global benchmark was on the verge of losing its AAA credit rating, US Treasuries were a better alternative than anything else. Not surprisingly, my new CIO friend decided that he should rapidly disappear. He got in his spaceship and flew away.

I shall return to this remarkable budget fiasco below. First, however, I shall focus on two other topics that consumed more of my interesting week than the Summer Washington theatre.


Last weekend, there was a tragic accident on one of China’s new high speed train tracks. This has the possibility of becoming quite a big issue. The opening of such vast high speed trains was supposed to be another symbol of China’s dramatic growth and transformation to a leading hi-tech infrastructure economy. To us China bulls, this was another symbol of the nation’s emergence. Some, now with hindsight and perhaps considerable wisdom, question whether, in fact, the opposite has occurred. Has high speed rail become now more of a symbol of how China is trying to move too quickly? Is China now heading for considerable difficulties? That is certainly how the rather noisy bear camp will see this development.

Clearly, this is an issue. As a number of international newspapers wrote, this is the 2nd such accident in the past few years. In comparison, Japan has apparently had, to date, no fatal accidents. There are lots of articles appearing on the internet debating the specifics of the crash and what it might mean.

One consequence is probably commercially positive for many overseas hi-tech infrastructure firms who have perhaps been worrying that they will soon face more and more Chinese competition, not just from inside of China, but in other third world markets and possibly their own domestic markets. I suspect this is now somewhat less likely.

The other, more important issue is what does this mean about future investment spending and the speed of China’s economic growth? To my mind, already convinced that China is entering a new era of more focus on the “quality” of growth as opposed to the “quantity”, this is simply a vivid sign of why Chinese authorities are going to have to choose this path. For investors, they will have to weigh the pros and cons of a period of softer than recently experienced and currently expected growth, which is usually negative for equity prices, versus a more sustainable, balanced and higher quality led growth, which is usually very positive for equity prices.

By coincidence, some Bank of Japan staff have published an extremely interesting article this month about Japan’s experience and any lessons for China. Written by Tomoyuki Fukumoto and Ichiro Muto, “Rebalancing China’s Economic Growth: Some Lessons from Japan’s Experience”, the paper argues that China should deliberately push for slower investment spending before the pace of GDP growth slows too much. They suggest that if China waits until the economy slows, then the investment bust which many observers fear might occur. I recommend this paper to one and all. The authors of this paper had previously written a very useful – and balanced – article on China’s property market, concluding that there was no nationwide problem.

As always, China is fascinating. I should add that while the above development is a key issue, it is not as important as the ongoing debate about when, and if, CPI inflation might peak. In this regard, news that pork prices showed a decline in the latest week is supportive of those of us who are more optimistic.


I made my first visit to Israel this week, spending about 24 hours in Tel Aviv. I felt embarrassed to tell anyone that I met that I had never visited before, given how global I am supposed to be. Even worse, I was present for such a short space of time, I couldn’t visit Jerusalem. People were very diplomatically kind, but I suspect they thought I was nuts. As it happens, I made up for the last part, because I managed to sneak in a helicopter ride over to Jerusalem before I left.

That was a remarkable experience. What a staggeringly complex and fascinating place. From above, you can see so much of the history and controversy below, all within such a tiny geographic area.

Anyhow, on the more business side of life, there were three takeaways from my meetings with leading business figures, important clients, a major policymaker and the rest of the crowd I had fun with in my intense 24 hours:

1. Israel’s business elite is up to the game when it comes to the BRIC and Growth Market story, surprise surprise. Many of the business people at a 2-hour round table I enjoyed are not only at ease with the concept, but quite a few of them are actively involved. I found myself thinking: are Israeli companies another way of making the Growth Market bet?

2. On Egypt, not surprisingly, most people are worried and not particularly optimistic about the near- and medium-term path. I wouldn’t have really expected anything else, given how the previous Egyptian regime was a source of stability from an Israeli perspective. But, as some acknowledged, if the whole troubled region is ever going to move to a more lasting peaceful future, Egypt moving into a better more successful future is something to be encouraged. Interestingly, one gentleman had a particularly important commercial link. His view was that neither of the more extreme outcomes was likely to emerge. When I asked whether he would invest again today, he answered yes.

3. Street protests. Remarkably and ironically given the above, in the past fortnight, Israel has its own street protest about rising prices for food and, in this case, property. Many seemed understandably troubled by it. Some apply blame to the central bank for having kept interest rates too low for too long, which given that Stan Fischer and his team were the very first “developed” central bank to raise them, is quite interesting. It will be fascinating to see where this issue goes.

Overall, it was a fascinating 24 hours, and I rather suspect, it won’t be my last.


Many people I met on my brief trip had wonderful humour and more than one suggested perhaps we should go to the Wailing Wall to pray for sanity in Washington DC. What a weekend coming up on the budget discussions.

When I was in NY in the Spring for our Growth Market conference, I had the privilege of interviewing President Clinton at a dinner, and amongst all the topics we explored globally, reducing the US budget deficit was his priority number one.

Coincidentally, the following day was the first day that a rating agency threatened to put the US on watch. Since then, it has been clear to me that something was going to have to happen.

There has been so much written about the topic by so many, I am not sure that I have too much insight to add, but I will leave you with three observations;

1. For my hedge fund friend from Outer Space, I suspect the reason why the bond market has rallied and the Dollar and equities have fallen, is because there is going to be a budget deal, which the markets worry will weaken the cyclical GDP growth outlook further.

2. I am assuming that this weekend there will be a deal, but it might not be enough for the US to escape a rating downgrade. I am not sure, especially after all the intense focus, that a downgrade itself will have huge market ramifications, at least in the near term.

3. That being said, as I wrote about two weeks ago, if you were looking for a “perfect” Monetary Union, other than Finland from the current Euro Area, you would not currently select any. Of the rest of the so-called developed world, you certainly wouldn’t select the US. You might select Australia, Sweden and perhaps Canada. But you would select at least 6 of our 8 Growth Market countries, and probably all eight. The slow long path to finding new benchmarks and alternative global investments may be about to get another boost, unless something different happens than we all have now been conditioned to expect this weekend.

Go on President Obama and Congress; give us a nice pleasant Summer surprise!

Jim O’Neill

Chairman, Goldman Sachs Asset Management

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jmc8888's picture

Yep, by banksters, for banksters.

Of course fusion won't happen, we give all our money that comes from banks TO banks.


If that changes....via Glass-Steagall...we have a chance.

Cancel the fraudulent debt.  Don't cut, print, or tax to pay it off (as more in increasing numbers gets added on behalf of same banks)

trav7777's picture

Bill Clitton's #1 priority was a balanced budget??  GTFO here

falak pema's picture

Bill clitoris? Like Spiraled Goat?

Bard's picture

Any panic tomorrow? I wanna buy some stocks with 10% discount then reinvest it in gold.

HelluvaEngineer's picture

Yes, panic buying most likely

Pool Shark's picture



"Go on Jim O'Neill and Goldman Sachs; DIAF!"


CrashisOptimistic's picture

The most likely scenario is trading algorithms will continue to evaluate the eroding GDP as cause to believe corporate earnings will not meet their S&P $95/sh target, and thus with a constant P/E, equities must continue to slide.

The debt ceiling increase has not been the major player this week.  GDP has been.

takeaction's picture

PLease let VXX go past 28 so I can get out.  LOL

knukles's picture

Oh, Go Fuck Yourself.

LetThemEatCake's picture

It seems to me the market had already reacted to a likely deal on Friday with bonds rallying, stocks falling three quarters of a percent and PMs trotting along after all the angst pre-market.

Byte Me's picture

So let me see if I have this straight.

Goldman are financial advisers to off-world entities, probably including Jabba the Hutt and Gharlane of Eddore.

EXHIBIT A -- Jackass O'Neill has finally flipped out on his own crapulence.


Sledge's picture

Offworld and URANUS....Goldman's there!!!

johnconnor's picture

It doesn't matter what they do, is only a matter of time before World War 3 and Skynet taking over the world

Sledge's picture

WW III = Cold War...War on present. Skynet?  Isn't that your smart phone?

Troy Ounce's picture



Bet O'Neill did not tell the Isrealis he's a financial terrorist

Dismal Scientist's picture

Schoolboy writing, in a horrible self congratulatory tone. There are better Jims out there.

Sledge's picture






Cassandra Syndrome's picture


But, but Asia opens soon.... What do we do?! I'm scared, please save us Lord Obama.....


By 1 vote I beleive it was blocked. Lovely.

Sledge's picture

it needed 60 votes to pass. pretty bad.

Jim B's picture

I had to turn the news off, Durbin and McCain were hamming it up for the camera with big smiles acting like duchebags... The real deal will be announced later...  


Theater of the stupid! 

Mike2756's picture

One is borderline senile and the other is from another planet.

Chuck Walla's picture

God, I cannot tell the diff between those two most days. One had some honor once, the other never did and never will.  Progressivism rules.

Iam_Silverman's picture


OK, so who voted "Present"?

Goatboy's picture

AntiSec is no longer interesting to ZH staff?

Bob's picture

Give us a nice pleasant summer surprise?  Would that be waking up as a bankster and finding that Obama already started your blow job while you slept?

It's a bankster's life!

knukles's picture

"I managed to sneak in a helicopter ride over to Jerusalem before I left."

Now that's spiritually balanced. 
Really.  The head of an Investment Management firm jets all over the world and writes diatribes such as this to whom?
Not the folks for whom he's paid to manage money...................

No fucking wonder there are articles about senior management and client's concerns about GSAM's performance and loss of assets under management.
Mayhaps a bit of focus?

whiskeyjim's picture

When I was in my early teens, I used to pour over album liner notes hoping to glean deep and wonderful secrets to the meaning of life and living from the philospher song writers that I revered and cherished. Then I figured out they were just druggie kids that could spin a tune.

When I was in my early twenties, I used to power over investment publication from Wall Street hoping to glean deep and wonderful secrets about macro trends and how the world economies worked. Then I figured out they were just coked up financial managers that mostly never managed a real company or labored in a free market in their whole life.

When I was in my early thirties, I used to read the Fed publications hoping to glean an understanding of the macroeconomic models by the brain trusts that set interest policy for the world. Then I figured out their models sucked, that macroeconomic theory is a lot like a religion, and that they in fact have really no idea WTF they are doing, but they are controlling interest rates and printing money.

I'm not sure why it took me so many decades to figure out that there is no brain trust that people can rely on. But I've been a strong proponent of flatter hierarchies and free markets ever since.

Amish Hacker's picture

Yes, after just a few minutes in Jerusalem's airspace, all the political and religious complexities of the last forty centuries were made clear: 

"From above, you can see so much of the history and controversy below."

Jim O'Neill should compare notes with G.W. Bush, who became an expert on post-Katrina New Orleans with a single flyover in Air Force One. His stunning insight:

 "it's got to be doubly devastating on the ground." 

Ghordius's picture

LOL! And he does not explain why he was "not allowed" to go there... Perhaps he really is like Dubya?

oogs66's picture

That line just struck me as wrong in so many ways

MFL8240's picture

Yes, I agree with the scumbag from Goldman but, I would add this, make our summer great by resigning immediately Mr. President you are a failure.

whiskeyjim's picture

Two observations as I read this post:

  1. There was no market calamity in 1995 when the government shut down twice while they debated budgets. In fact the players were identical. What is different now that inspires so much Chicken Little rhetoric, other than an MSM that has lost all sense of rationality in its support of Progressive thought? One can argue that given the size of the debt, markets now require a more significantly austere budget than a passing nod to our structural bankruptcy, or one can argue (wrongly IMHO) that markets are still looking for more stimulative budgets. But one can not argue both at the same time, which Mr. O'Neill seems to be doing.
  2. The whole piece screams the message that this man is so accustomed to the idea that elites 'manage' and control economies (over the little people) that if you put him in charge of say, a $500million company on Main Street, he would not have a clue what to do. These folks wouldn't know what to do in a free market if it bit him in the face. Even the concept that government would eventually get out of the way in any country, is completely foreign to him, or that they are working on the symptom rather than the disease.

It is all really quite depressing.

whiskeyjim's picture

There is one more message in that piece:

You the reader are cool. I am really, really fucking cool. And we are living really cool lives that make a huge difference. I write these articles with a down home diary feel so that you can vicariously read just how cool I am. And I took a helicopter ride over Jerusalem, and it was so cool!

TSA Thug's picture

Thanks gang for the awesome Goldman piece. Jim is one of my favorites. I'm touched to hear that his visit to Israel was a good one. Anyone who has been there will undoubtedly say the same(unless you're a stinking Arab).

Mazel Tov Jim!

When I went through basic training I was taught some basic greetings and customs from Israel.


--You WILL Obey!

gwar5's picture



Let's hope O'Neill is just being sarcastic. One thing's for sure, he's not really worried about anything.

GCT's picture

The Senate killed the deal again.  Getting out the popcorn and soda.  This is turning out to be a first class comedy!

molecool's picture

Regarding cold fusion: anyone here heard of Rossi's e-cat? It's not really cold fusion - rather it's a low energy nuclear reaction without needing radioactive isotopes. I have been sceptically following this for six months now and believe that it could actually have a chance of being real. Google e-cat and Rossi for more info - unless of course you readily dismiss anything non-fossil or non-nuclear as a hoax.

brew's picture


The circus in Washington over the debt ceiling is beyond laughable - it is dysfunction times 100.  The extreme factions of the left and right have been doing what they do best...create gridlock.  Raise taxes on the wealthy!  We can't cut Social Security and Medicare!  Raise the debt ceiling and spend more!  Truly, the President, the House and the Senate are unfit to govern...period.

The American public has let this go on far too long.  We continually send the same-old, same-old back to Washington to continually do nothing.  Their actions are very transparent to me. Instead of doing something right today that may be unpopular with the people, we'll pass it on to the next administration and congress thereby insuring re-election.  Obama ran on the premise of change in Washington.  How's that been going Barak?

If this latest round of political theater doesn't get people off their fat asses to seek out true public servants to vote for, nothing will.  My votes in 2012 will be to send them all packing.


slewie the pi-rat's picture

very clever of jim to pretend to dissociate and not notice

i wonder whatever could they have meant by that funny about praying at the wailing wall for "sanity" for the US? 

and what would jim like, here? 

sounds like christmas in august, to slewie...

ho, ho Hooo...

PulauHantu29's picture

Make my day! I have so much in oil, GLD and SLV that I am lookin gforward to another Quadrillion Injection of Fed Mega-$$$$ into the system.

Many analysts predict $2,500 gold and $220 I understand why. There is no will to control spending before the next election in 2012.

falak pema's picture

where is the deal? Is it a deal or not a deal...will it be or not be for an ephemereal period of a few months....vanishing mirage...oh, we had such a deal once...

Atomizer's picture

29 July 2011 The Smurfs ring the NYSE Opening Bell

Someone needs to continue the agenda to trick the masses. The bullshit is getting harder to hide by the day.

The Communist Smurfs


chump666's picture

What an idiot.

USD tanks and yeilds go up, this butnuts rally will be a flatline fizzle.  Soon Goldman when the SHTF, we short your running to the goverment, ok?

chinawholesaler's picture

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