Goldman's Jim O'Neill: "Let's Worry About Everything"

Tyler Durden's picture

Presenting some deeply philosophical observations from the man who has been wrong about pretty much everything, and to whom the jarring return of reality and its relentless destruction of the ivory towers he has carefully erected his entire career, can only be described as "surreal." No Jim - it's not surreal. It is all too real. The only surreal thing will be the response when GSAM's LP get their year end performance statement.

Let's Worry About Everything

From Goldman Sachs Asset Management Chairman, Jim O'Neill

On Friday in Paternoster Square outside our London offices, there was an Abba tribute band entertaining lunchtime workers in this gorgeous Summer sunshine we are enjoying. I ate my sandwich watching them. It was a beautiful distraction from the prevailing mood of the markets and the economic world. Of course, at the true Abba’s pomp in the late 1970’s, the world wasn’t in a particularly great shape either, so maybe there was something symbolic about it all.

Much of the latter end of the last week has felt rather surreal to me, as much of the economic data and comments from companies have been rather benign. And yet, markets continued to explore the grimmer angles. This was highlighted by the release of the much-better-than-expected Chicago ISM at 60.4, yet the US markets spent the afternoon weakening as the gloomy mood prevailed.

It wasn’t just the Chicago ISM that was better than expected. Despite the widespread view of the inevitability of a European and US recession, German data continues to be rather benign with another better-than-expected employment report, this time for September. Unemployment fell 26k, with the rate dropping to 6.9 pct. China has published a better- than-expected PMI for September, coming in at 51.2, Korean exports are holding up well, but in this mood, the markets will no doubt find some holes in these too. Perhaps Korea has started exporting to Jupiter?

It should have been a better week. Following the annual IMF meetings, there is some serious discussion of a “big bang” solution to the European problems. And, the German parliament passed the EFSF, somewhat easier than many had feared.

Judging by the price action, market participants seem to be increasingly convinced of imminent recessions in Europe and the US as well as a prolonged period of “Japanisation,” in which positive GDP growth struggles to keep ahead of a weaker underlying growth trend.

If this prospect weren’t grim enough, the notion of a “hard landing” in China is back on people’s minds with a number of participants promoting the idea, and many newspapers honing in on challenges in the property markets and financial sector.

What is the matter with everyone? Take a look at what happened in the 1980’s – after Abba played their last live concert in late 1982 – the world did rather better than expected.


It all seems a bit surreal. Here is a story that highlights the weird state of everyone’s mind. “Foreigners flock to JGBs as Europe continues to flounder” ran the headline on page 6 of this week’s English version of the weekly Japanese Nikkei newspaper. According to the story, foreign holdings of JGBs have risen to 7.4 pct by the end of June 2011, up from 6 pct a year ago. More recent data suggests the trend will continue. Why are foreign investors doing this when all anyone talks about is the sovereign debt problem? On exactly comparable data, Japan’s debt-to-GDP ratio is two and half times worse than the Euro Area at around 220 pct of GDP.

I often appreciate the argument that JGBs won’t weaken because of the internal demand amongst high savers and due to the support from the BOJ. But, for foreign investors to add to their holdings strikes me as most peculiar. Neither the yield nor level of the Yen can be a sensible explanation, so it must simply boil down to some odd combination that a number of central bank reserve holders have too much spare cash, and they know that Japan is not part of EMU.


Sticking with the surreal, since the start of September, the Dollar has strengthened against many currencies. Indeed, it has managed to break above its 200 day moving average against virtually all cross rates that matter to the US, except for the RMB and – bizarrely – the Yen. I spent quite a bit of time over the past couple of days talking about why the Dollar is doing this with a number of analysts. Virtually all of them seem to think it is not that big a deal, and is purely attributable to “risk off” behavior and perhaps a repeat of the 2008-like scramble for Dollar liquidity.

I can’t see the case for sustained US$ strength against many “Growth Market” currencies. In fact, on the contrary, the $ should resume weakening against most of them through time. That said, I can see the case for a partial further $ recovery against the Europeans, perhaps the BRL, and some other liquid developed currencies. The Dollar has been significantly undervalued, the US external balance is slowly improving, the US is not as cyclically challenged as a number of others, especially Europe, and the forthcoming marginal policy developments in terms of monetary and fiscal policy, are perhaps not going to be US$ negative compared to others. On top of all of this are the major Swiss policy developments. And, as I wrote back at the time, “Swiss never lies”. It looks as though it isn’t lying this time either.
So, the Dollar needn’t be higher purely because of the “risk off” forces. Obviously, if this is the prime reason, it is not good, and hopefully won’t last for too long.

While many associate the Dollar move as another “bad” sign for the equity markets and confirmation of other darkening signals, there is no reliability about the consequences of the Dollar breaking above its 200 day moving averages, either as a precursor to sustained Dollar strength, or its consequences. More often than not as Neeti Bhalla from our ISG group pointed out to me, the S+P has been higher at specific 3-, 6- and 12-month internals following such breaks of the Dollar in the era of floating exchange rates. 2008 was a notable exception but there are many instances when the Dollar has appreciated for good , not bad reasons.

As for the future performance of the Dollar itself, time will tell, but if the US economy manages to keep on “ creeping” through despite all, perhaps this bounce has more to it than many suspect, at least for a while.

If sanity were to prevail, you might expect $/Yen to join the picture, but that is still far from clear despite the better close for the week.


To complete the political party season, the Conservative party starts its meeting this weekend in Manchester. I spent a breakfast with some of their faithful yesterday, and while they interpret the opposition’s stance on business and finance as good news for them, they all seem as worried about everything as many others. The big question in my mind is whether the Chancellor will give any hints of, if not a Plan B, a slight adjustment to Plan A? The case for such a move is pretty overwhelming, and sticking with the 1970’s theme, perhaps some regionally-geared infrastructure financing might not go amiss. There appears to be rising talk of the case for a Government Bank also, which is more like the 1950’s. I have to say that I find the argument quite compelling, and have for some time, having published a couple of pieces suggesting the idea back in 2008. After all, if you own the majority of some financial institutions and require more lending in the country’s national interest, then why not take all 100 pct and go for it?


I could have devoted the Viewpoint to this topic and I shall return to it in coming weeks. If it hadn’t been so conceivable, this development could easily sit in the surreal bucket also. I expect an increase in the intensity of emails I receive suggesting the removal of the R from BRIC. I know many close to Medvedev are most disappointed, and this for me is disappointing, but as one wag wrote, while they thought they were working for the other side, the other side was working for the other side...quite remarkable. For those of us who do not live in Russia, I do think we all need to remember that Russia likes its strong leaders, and if this transition is peaceful and things remain stable, that will be more than a decade of stability, which for Russia, is quite an achievement.


As I said at the start, this should have been a “better” week with the noises emanating from DC and Germany passing the expanded EFSF package. I guess one can only conclude that things have moved on so much, that the market’s reaction this week is that the “big bang” ideas are necessary because we are heading for the worst in Greece. This week, we will publish our Monthly Insights and it will be devoted to the issues of EMU and reflect back on much of the discussions we have had about the problems, including a special section from Jonathon Bayliss, who heads up the European Government investing team and has been so on top of all the issues.

The bottom line for me is this: the November G20 is likely to be a major point of inflection, which will either resurrect life or leave us in deep hibernation through the Winter. We need to have by then a credible path for Greece, elements of the big bang in terms of bank recapitalization, and collective buy-in from all of Europe’s key players. Not much to ask for...


Monday’s FT carried the following headline on the front of its second section, “China the real thing for business rather than the US, says Coke chief”. Expanding on the fact that China now accounts for 7 pct of Coke’s global business and the first half of 2011 saw them double their sales from 5 years ago, the CEO elaborated about how welcoming many regions of China were to them, and contrasted it with the deteriorating picture in the US.

I picked up this same theme at an Economists’ conference on Growth Markets that I had the pleasure of being the closing speaker at on Friday. But back in the surreal world of markets, my inbox was full of really gloomy stuff about hard landings, property collapses, major NPLs and so on. As I said earlier, “what is the matter with everyone?”

It is pretty obvious that you will have some failed property lenders, where a country’s policymakers deliberately choose to stop a strong rise in property prices before it gets out of hand like the US and Europe, as the Chinese have done in the past 2 years. I can’t understand why it therefore translates into a “hard landing”. The Chinese property market has some issues because of deliberate policy. In fact, it is remarkably impressive, and a huge contrast to virtually any evidence I can see from my days in the markets, that a policymaker would choose to prick a property bubble before it gets to the stage that we all know only too well.

China, as I have written about now for nearly a year, has entered a new phase of development where the quality of growth matters more than the pure quantity, and with it, the sustainability of growth. This would suggest that the next 5 years would see an outcome closer to the 7.5 pct average, which the 5 year plan assumes. As a critical part of it, the Chinese consumer is going to be more important, which is why, for me, the Coke CEO’s comments are more pertinent than all the nonsense flying around the fast money crowd this week. In the coming weeks, the key in all this will be Chinese inflation, and judging from the chart of agriculture prices that GS’s Yu Song sent me Friday, it is coming down. Once that happens, talk of a hard landing will dissipate.

Enjoy the sunshine if you are lucky enough to have what we have in the UK this weekend.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
knukles's picture

What the Fuck is Wrong With You?

Spastica Rex's picture

I heard that some of the ZH readership are planning on disrupting the NYC protests using camels and riding crops.

Bicycle Repairman's picture

I didn't like ABBA in the 70s and I sure as hell do not like them now.

Fukushima Sam's picture

Jim, WTF?

Not only does ABBA suck, but you forgot about Fukushima in your little "analysis" of "the Japanese situation".

Read this, first person point of view from an American living in Japan for many years:

"We in Otsu-City, Shiga Prefecture, 311 miles (500 km) from Fukushima, are seeing readings around 0.15 microsieverts on average, which is around five times what the Japanese government is reporting. My wife and children will leave Japan as early as possible because I perceive a growing exodus will come and it might become hard to place kids in schools."

Popo's picture

An extremely large part of Japan (including Tokyo), has for all intents and purpsoses -- been destroyed.  That is not an overstatement when one considers that the irradiated areas will remain radioactive for the next several centuries -- and the irradiated areas extend hundreds (if not thousands) of kilometers in all directions.   Just because the television isn't showing us scenes of mass exodus with the population fleeing overnight -- does not make the destruction of the capitol any less real.

The damage has already been done to the nation -- and with every day that passes -- it is being done far more brutally and insidiously, to the Japanese citizenry.  As this catastrophic human damage begins to manifest itself -- and it is profoundly sad to say that it will and must -- the existential truth about Japan's very survival will become clear.

That is most assuredly, not "priced in" to markets.  

Jim lives in an ivory tower, dining on government-sanctioned data and bank-massaged balance sheets.   And no doubt,  he's paying close attention to those "official" Japanese government radiation reports which tell us that everything in Nippon is "normal".  

Poor Jim.  He failed to predict any of the recent collapses -- and continues to ask cluelessly, where all the "gloom" is coming from as he eats his sandwich in the park.   That Category 6 shit-storm heading towards you is going to be such an awful surprise for you, Jim.   You'll probably wonder where on Earth it came from -- if you even notice it with Abba playing, and all...




knukles's picture

Absolute Clarity.
I salute you.

zorba THE GREEK's picture

I believe that people can withstand much higher radiation levels than is now believed.

Where are the reports of people getting radiation sickness in Japan. Even in Gernoble (misspelled)

there have been far fewer deaths from radiation than expected. A lot of the radiation fears are

overblown. I wouldn't be surprised if Fossil Fuel Backers have something to do with spreading fears

in order to turn people against nuclear reactors. I'm not saying that prolonged exposure to high

radiation doesn't do any harm. It is clear that it causes birth defects and weakens the immune

system, but what I am saying is that people can withstand brief exposure to high radiation and

prolonged exposure to mild radiation without being harmed. If this were not so, those men who

have been working around the power plant in Japan would be dropping like flies now and that is

not the case. Twentysome years ago, there was a guy who for decades went around and publicly

drank highly radioactive water from nuclear power plants and exposed himself to extremely high

amounts of radiation with no visible signs of harm. I am not saying that any level of radiation is

safe or that prolonged exposure to moderate amounts won't cause cancer in 20 years or so.

What I am saying is that there is much evidence that people may have a much higher threshold

to radiation exposure than is commonly believed. 

Vlad Tepid's picture

Thanks for the post. I'm going to follow your posts posts in the future as Otsu is the cradle of my personal civilization.

Forgive me though if I mistake his concern for a bias, as he also apparently believes that the Prius car is going to give drivers cancer.

I have been deeply disturbed by the fact that Fukushima and "affected area" produce has been showing up gleefully on the shelves as potentially tainted beef is stripped off the shelves with a lot of pomp.  The quoted source is much mistaken if he believes that Japanese people are not discussing this (they are), and he also appears to misinterpret the cultural phenomenon of "gaman" and "shikatta ga nai" for a collective avoidance syndrome.

I did not have any device for measuring radiation this summer but I will be using one to check the very area discussed above at the end of the year and in June.

rocker's picture

Remember the Goldman manta, "Someone has to take the opposite side of the trade. 

knukles's picture

Ya know, this thing could very very easily get way the hell out of control.  Too many people of too many different backgrounds all there protesting for something which they all very seriously believe in but probably cannot elucidate amongst themselves well but understand amongst themselves quite intimately...
And only takes one bad ass screw up or agent provocateur (hint hint) to ignite the tender ...and BANG!...  it'll be off and running.

This is another demonstration (no pun intended) identical to all of the others surfacing about the globe regardless of the powers or ideologies inspiring such....
Simple Disenfranchisement.
And it's growing. 
In an electronic age, spreading at the speed of light so to speak.
The frequency of these displays of restlessness, irritability and discontentment are increasing as are the magnitude and amplitude if you will.  They're becoming bigger and bigger, each within the context of it's very own cultural, social, economic and political habitat.

And is it all truly circumstantial that in most cases there is an accompaniment such as in this one by the Mayor warning of popular troubles just days prior?  I am not suggesting in any way shape or form that there is even any conspiracy theory warranted.  It is just odd...  Like military drills coinciding with accidents....

I'm getting a funny feeling that something's happening. I can't put my finger on it.  I cannot describe it.  I cannot find the appropriate terms, so disenfranchisement will simply have to do for the moment.  And it will spread... that I got a funny, strange feeling about.

Spastica Rex's picture

The con isn't holding everybody's attention like it always has. The grifters might have to change their tactics to engender fear, if the marks don't play the game like they're supposed to.

Comay Mierda's picture

There will be plenty of agent provocateurs causing violence on the streets, the real protesters are peaceful and know that violence plays into the police state agenda

kaiserhoff's picture

Zeitgeist - It's untranslatable, but you did pretty well.

Piranhanoia's picture

I remember a story about a group of men and boys that said goodbye to their families one morning to protect a route that they thought the British might take to harm their neighbors and themselves.  They stopped at the bridge.  The boys dressed in red fired upon those guys at Concord bridge.  Another chapter is about to be written.

Dick Fitz's picture


That is the best name EVER!

I agree- there is an inchoate, undefined, and ineffable...feeling. Fear. Paranoia. Uncertainties with myriad names.

I was at a large wedding tonight, and talked to a variety of people, and whenever "the state of the world" came up (and I made sure to bring it up!) their responses were VERY different from a year ago. Everyone had some sense that things were "wrong", but no words to describe it.

This was a diverse group of 20-50 somethings, and when I brought up Ron Paul more than half knew who he was, and at least a quarter were ready to hear me talk about his plans. That's a BIG change from 4 years ago.

The US is ready for a radical, even if he's old, "crazy" and "unelectable" in the eyes of the MSM.

data_monkey's picture

Many sheeple will lose their minds in their own households before they even make it to the streets.

scatterbrains's picture

If these kids want to see shit get real there going to have to provoke an escalation of the "use of force" they have in their numbers the ability to fight batons with batons, mace with Greek style cocktails and when the 1st protestor gets gunned down shit goes national!... just saying.. I'm sure no one wants to see shit escalate but the cops don't have the upper hand here..the commish is shitting his pants hoping it don't escalate.

These "kids" dont forget, have been raised on Ultimate fighting and Call of Duty etc.  so yea, I'd say it's a tinder box out there.

Are you kidding's picture's too early.  People aren't ready yet...not desperate enough. 

Comay Mierda's picture

How does goldman rule the world when they are full of retards?

mahalopamala's picture

Oh no he didn't. Yes, he went full retard. (movie with jack black, ben stiller, and robert downey jr) hee hee- Comay thanks for the laugh in this grim time.



daily bread's picture

They bought Con-gress and the Adminstration.  Is it that hard to see?

Also, I wonder how many on the Supreme Court got law school scholarships funded by the squid.

citrine's picture

daily bread,

you reminded me of the article by Michael Lewis "Bashing Goldman Sachs is simply game for fools", and in particular the following part:

Rumor No. 1: “Goldman Sachs controls the U.S. government.”Every time we hear the phrase “the United States of Goldman Sachs” we shake our heads in wonder. Every ninth-grader knows that the U.S. government consists of three branches. Goldman owns just one of these outright; the second we simply rent, and the third we have no interest in at all. (Note there isn’t a single former Goldman employee on the Supreme Court.). What small interest we maintain in the U.S. government is, we feel, in the public interest. Our current financial crisis has its roots in a single easily identifiable source: the envy others felt toward Goldman Sachs.

combatsnoopy's picture

The NYPD are Wall Street's mercenaries.  Dimon bought them off for $4.6 million. Little did the NYPD think that Dimon only got that money from the taxpayers.  And that the taxpayers were robbed to salvage their pensions when Wall Street LOST it by selling uncollateralized "collateralized" debt obligations.

Thugs are thugs because they're not the sharpest tools in the shed.  It's unfortunate that "democracy" gives that much power to dummies.  But then again, look at what our lobbyists did to this country.  


DeadFred's picture

Wow! Talk about rose colored glasses, I gotta score me some of those for when things look really down.

mfoste1's picture

im pretty sure he was drunk/high when he wrote this

Taint Boil's picture

Let it go ... everyone has a say here.

Freedom ..... great country and a great blog. Water always finds it's own level.

Rum and Coke kicking in on this end probably the same on that end .....

Dick Fitz's picture

1- I hope they lock you up in Guantanamo for that name. EVIL! Boils hurt, and I can't imagine one...there.

2- free country? Well, unless they disagree with you, then they kill you, no trial, no jury, just BOOM to the head.

3- Rum? Vodka is much better!

gangland's picture

fubar i hate posting links so here's mine excerpts from suskind's  new book till i get sued

Taint Boil's picture

Ok here is mine too. Real estate links, Rent vs Buy, etc, A good guy and NO ads ..100% legit

Arius's picture

w/ all due respect to GS not sure this guy has his priorities quite right ... russia before china in his list of priorities ???  thats the old rule ... perhaps he could try to project whats coming not talking about what already happened .... china is the new world like it or not ...

knukles's picture

Not only the hierarchical ranking, but expressing anything other than a recognition of business as normal with the Return of RasPutin is just so fucking naive.

Absalon's picture

Dear Mr. O'Neill:  You don't understand why people are negative?  I'm negative about the markets because I think the financial statements of all the major banks in the United States, Europe and China are works of fiction.

DeadFred's picture

Why weren't we elated with the Chicago numbers? because we didn't believe them. You only get to lie so many times and then your cred is gone.

mendigo's picture

He ate lunch while listening to ABBA!
Speaks volumes.

knukles's picture

Wow.... time dilation

Piranhanoia's picture

Well, he said it was an Abba cover band, so maybe he saw two guys and two girls.  Knowing that he thought this was lunchtime, and the guy is chemically challenged based on what he writes on happy talk...  He might have been seeing double and watching a Sonny and Cher cover band?  What the hell would he know?   It was probably the Salvation Army lady and her trombone player and he was working his 4th vodka and glass. 

max2205's picture

He must be gay and btw we only go up on real bad news. Sorry Jim.

Oh and go fuck yourself GS!!

Pretorian's picture

It is astonishing how fast this man forgot save haven position on CHF trade.  Now since CHF is draining  slowly, unfed from the Goldman UBS blood ... now it can provide some energy to heavenly damaged sovereign countries at least until Jim comes back with more poetry. Fuck off bitch go to your bankrupt nation which funeral have been arranged by you and you partners at Goldman so you can sleep well at night.

tom a taxpayer's picture


O'Neill is lost in Deep Thoughts.

Hey, O'Neill, why don't you and your sandwich take a lunchtime stroll up to Tottenham, North London and cogitate on the "surreal" riots and arson of August. Maybe do a little pro bono work for the less fortunate lads and lower class criminals.

buzzsaw99's picture

the only thing surreal for jim is why his bonus is in gs stock and not cash.

CrashisOptimistic's picture

He doesn't understand oil geology and as long as that remains true, he'll be delusional.

tom a taxpayer's picture


Yep, and it's O'Neill's fault. Everything he says is a lode of schist. He should have paid attention to his Auntie Klein. He's a dip with no core values.


tawdzilla's picture

time to play...let's follow the logic:

ABBA played music in the 70's, when the stock market was down

The stock market recovered in the 80's after ABBA stopped playing.

The ABBA tribute band is playing music in the 10's when the stock market is down,

Therefore...the market will recover after the ABBA tribute band stops playing?????

DormRoom's picture

First, unemployment is not a leading indicator, if an economy is heading into recession.  So why  put so much emphasis.


Second, 1982 was the start of the debt bubble, culminating in the S&L crisis, which created the moral hazard, that generated our 30 year debt bubble.

Thirdly, JGB buying is likely from yen carry trade unwind.  //sign hedgefunds are deleveraging.

Fourth, USD surge likely due to USD carry trade unwind.  //sign hedgefunds are deleveraging.

Fifth, Putin would like to see the end of the EU; NATO for that matter. No help from Russia.

Sixth, Germany passed the EFSF, but it can go no further.   probability of Germany leaving EZ.  Why else would all the high ranking Germans leave the ECB.  They may help plan the German exit.  Thus no conflict of interest.

Lastly, EZ goes down, China goes down harder, since most of Chinese exports go to the EU.  Chinese cannot offest lost exports with domestic demand in time.  Huge cultural friction to domestic consumption. poor social services, which incentivizes people to save.  Asymmetry at play.  Export demand collapse faster than Domestic consumption gains.  Its economy is already overheated.  More stimulus risk pushing it into runaway inflation, and more bad loans. Hard landing vs. hyperinflation.

Cursive's picture

there was an Abba tribute band entertaining lunchtime workers in this gorgeous Summer sunshine we are enjoying.

Markets being rational reacting to sovereigns on the very of default?  Not surreal.  Abba tribute band? Very surreal.  Jim O'Neil lives in the La La Land of textbook economics.  Jim, get your head out of Paul Krugman's ass.  You might realize that Fall has begun and Summer is in the rear view mirror.