Goldman's Prepared NFP Kneejerk Reponse: "QE Probability Now Above 50%"

Tyler Durden's picture


The NFP number was released at 8:30 am. At 8:40 am Goldman Sachs' Jan Hatzius hit "send" on a 356-word email to clients which was checked, vetted, and given the sign off by compliance, in which the Goldman head economist read through the NFP data, and concluded that "Probability of QE3 Next Week Now Above 50%." Curious why the risk assets first dropped then soared as if stung? Because today, once again, good is great, but worse is greater. Let the global liquidity tsunami continue!

From Goldman:

BOTTOM LINE: With today’s August employment report showing a nonfarm payroll gain of 96,000 and an unemployment rate of 8.1% because of a drop in the participation rate, we expect a return to unsterilized and probably open-ended asset purchases at the September 12-13 FOMC meeting.

1. We now anticipate that the FOMC will announce a return to unsterilized asset purchases (QE3), mainly agency mortgage-backed securities but potentially including Treasury securities, at its September 12-13 FOMC meeting. We previously forecasted QE3 in December or early 2013. We continue to expect a lengthening of the FOMC’s forward guidance for the first hike in the funds rate from “late 2014” to mid-2015 or beyond.

2. While there is significant uncertainty around the details of any new program, our base case is that QE3 will be formulated as an open-ended asset purchase program of around $50 billion per month, with an end date that is not given in advance but made dependent on progress in the economic recovery. We expect the criteria set for ending the program to be formulated in qualitative terms in the FOMC statement but explained in more detail in Chairman Bernanke’s press conference and in a statement from the New York Fed. We expect Operation Twist 2 to be continued until its scheduled completion at the end of 2012.

3. The return to asset purchases at this time is not a given. It is also possible that Fed officials will limit themselves to a lengthening of the forward guidance. In that case, we believe that they would try hard to find a way to not only lengthen the guidance but make this guidance more powerful by coupling it with a statement to the effect that “…a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed.” It is even possible that the committee would adopt Chicago Fed President Evans’ proposal to signal no rate hikes until the unemployment rate has fallen to a specific level (in Evans’ version 7%) unless underlying inflation rises above a specific threshold (in Evans’ version 3%). But that is not our base case.

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Fri, 09/07/2012 - 08:52 | 2771161 firstdivision
firstdivision's picture

Probability of QE with food inflation about to hit overdrive at the store and oil/fuel at these levels, 0.000000001%

Fri, 09/07/2012 - 08:56 | 2771183 GetZeeGold
GetZeeGold's picture



On a long enough timeline given the current conditions the inevitability of printing......goes to 100%.

Fri, 09/07/2012 - 09:00 | 2771205 bdc63
bdc63's picture

Bring it on!  QE to infinity! ... 'cause the last couple rounds of it have had such a POWERFUL impact on creating jobs ...

But on a brighter note - gold is up 22 bucks on the bad NFP number


Fri, 09/07/2012 - 09:01 | 2771213 qussl3
qussl3's picture

QE3 was oil and food spiking?

AND with UE rate dropping?


Repubs will have a field day if Ben blinks.

Fri, 09/07/2012 - 09:06 | 2771235 bdc63
bdc63's picture

Haven't you heard? ... "inflation expectations remain well anchored"

Fri, 09/07/2012 - 09:19 | 2771310 qussl3
qussl3's picture

Thats for the algos and momotards.

Gas and food prices havent moved yes?


Fri, 09/07/2012 - 09:23 | 2771330 bdc63
bdc63's picture

Core inflation vs. Headline inflation = apples and oranges ... come on -- get with the program!

"if it don't read through, then it ain't true!"

(do I really need a /SARC for this one?)

Fri, 09/07/2012 - 10:10 | 2771521 Spider
Spider's picture

C'mon now its Goldman.  They are probably shorting commodities, stocks, etc because QE wont happen next week.  Always do opposite what GOldman says...

Fri, 09/07/2012 - 09:19 | 2771313 Cognitive Dissonance
Cognitive Dissonance's picture

Yeah................maybe to some helium balloons.

Fri, 09/07/2012 - 09:23 | 2771331 adr
adr's picture

There is a four day waiting period if you want to buy more than 1 helium balloon for a party. Helium is in short supply.

Fri, 09/07/2012 - 09:25 | 2771347 withnmeans
Fri, 09/07/2012 - 09:19 | 2771314 LawsofPhysics
LawsofPhysics's picture

Yes, 2008/2009 redux. Will the banks and financial houses get a bailout this time? Place your bets...

Fri, 09/07/2012 - 12:21 | 2772057 amadeusb4
amadeusb4's picture

Gold is up on the euro short squeeze. At least that's what this website I found, called Zerohedge, said.

Fri, 09/07/2012 - 09:25 | 2771349 Vincent Vega
Vincent Vega's picture

Agree with you GZGold.

Fri, 09/07/2012 - 09:04 | 2771230 Sauk Leader
Sauk Leader's picture

"The Federal Reserve's actions are not intended to benefit everyone." - Ben Bernanke

Fri, 09/07/2012 - 09:21 | 2771324 reading
reading's picture

The fed dual mandate is unemployment, right?  So really, if they can just get the partcipation rate to continue to drop like a rock things will be looking sweet...


To be real, tough to push the pedal to floor with $100 oil and a dropping unemploment rate (regardless of the reason) but doesn't mean they won't do it.  But wow, watching the crack heads on tv is stunning...these folks are down to their last few bucks to buy the next hit and are terrified they'll not get the next one.



Fri, 09/07/2012 - 09:24 | 2771337 Eireann go Brach
Eireann go Brach's picture

On a long enough timeline Jan Whorehouse will get hit with a bat or a truck!

Fri, 09/07/2012 - 08:53 | 2771168 Boilermaker
Boilermaker's picture

Sad...really pathetic and sad.

Oh, and corrupt.  I almost forgot.

Fri, 09/07/2012 - 08:55 | 2771175 Jason T
Jason T's picture

I just paid $3.96 a gallon of gas and Ben is going to do QE right before the election... riiigght.  



Fri, 09/07/2012 - 08:58 | 2771204 trebuchet
trebuchet's picture

Productivity UP 



unemployment/spending shrinking/saving


That is called anchored inflation expectations. Real wage growth is possible with increased productivity - in fact HIGHLY DESIRABLE (share the gains) but if unemplomyent goes up then that is bad news pre election.

Romney in = Ben out. 


Obama in = ???



Fri, 09/07/2012 - 09:01 | 2771215 Jason T
Jason T's picture

productivity is going to tank becaues we're not investing jack squat in machinery.  


Fri, 09/07/2012 - 09:07 | 2771237 trebuchet
trebuchet's picture

yeah thats the scariest thing and when that feeds through .......     

Fri, 09/07/2012 - 09:08 | 2771246 HelluvaEngineer
HelluvaEngineer's picture

You don't need machinery if you're not building anything.  Oh, my bad, I guess we'll need some more drone factories.

Fri, 09/07/2012 - 09:09 | 2771251 Sauk Leader
Sauk Leader's picture

Record Cash. S&P sitting this administration out. 


Fri, 09/07/2012 - 09:01 | 2771216 Cursive
Cursive's picture

@Jason T

My thinking as well.  The real laugher here is that GS put the odds as 50/50.  That's the ultimate hedge.

Fri, 09/07/2012 - 09:23 | 2771335 reading
reading's picture

If Goldman just told you the fed is for sure going to do better run like the f*ing wind cause they are getting ready to hand everyone else the bag.  History clearly shows when it comes to being honest Goldman rates a zero.


Fri, 09/07/2012 - 08:55 | 2771176 docj
docj's picture

Gold and Silver went straight up like a rocket. I'm sure Fraud Street will open with a nice long green candle. President ChoomPrompter gets to take credit for a "reduced" FunEmployment rate.

So. Much. WIN.

Fri, 09/07/2012 - 08:56 | 2771192 Zgangsta
Zgangsta's picture

The erection on the gold chart is giving me one of my own.

Fri, 09/07/2012 - 09:31 | 2771377 eclectic syncretist
eclectic syncretist's picture

Both gold and silver have each broken out from the year-long consolidations they have been in, and are likely to go much higher over the next year or so. 

Fri, 09/07/2012 - 08:55 | 2771179 trebuchet
trebuchet's picture

Fed firing up the helicopters now

Fri, 09/07/2012 - 09:09 | 2771231 GetZeeGold
GetZeeGold's picture




Romeo Foxtrot.......let's dance.


Fri, 09/07/2012 - 08:56 | 2771185 LongSoupLine
LongSoupLine's picture

ahhh yes, the Goldman "public release".


time to buy puts.

Fri, 09/07/2012 - 08:57 | 2771197 dwayne elizando
dwayne elizando's picture

Well it looks like Goldman gave up on feeding the contrarions.

Fri, 09/07/2012 - 08:57 | 2771198 Dapper Dan
Dapper Dan's picture

Did gold just shoot up $25 in seconds?

Fri, 09/07/2012 - 09:00 | 2771210 fuu
fuu's picture

Yes, yes it did.

Fri, 09/07/2012 - 09:23 | 2771336 GetZeeGold
GetZeeGold's picture



Congratulations chief......looks like you pissed off someone.


Fri, 09/07/2012 - 09:26 | 2771355 fuu
fuu's picture


Fri, 09/07/2012 - 09:37 | 2771397 GetZeeGold
GetZeeGold's picture



Oh you better just watch yourself lil mister!

Fri, 09/07/2012 - 09:29 | 2771365 slewie the pi-rat
slewie the pi-rat's picture

Curious why the risk assets first dropped then soared as if stung? Markets - Chart for U.S $ INDEX (NYBOT:DX)


Fri, 09/07/2012 - 09:41 | 2771401 fuu
fuu's picture

Are you telling me that when a currency goes down that things priced in that currency go up?!?


I am curious how that works exactly. How many pips must DX fall to generate $1 of lift in dollar denominated assets?  I imagine there is some "friction" involved.

Fri, 09/07/2012 - 10:04 | 2771494 slewie the pi-rat
slewie the pi-rat's picture

well, it's hard to tell;  maybe we could ask tyler and he could quote a squid report  L0L!!!

sometimes the dollar and gold go the same way;  i seen it wif me own eye!

but here, the dollar whacking is getting me slewie sense to tingle a bit, especially of you look at a coupla weeks, it's a pretty good "takedown" to this pi-rat, fuu

but it IS supporting the euro!  and there is that "correlation to markets" there

also interesting this morning is the first time i checked the long bond, it was -.88 and on another screen, same time?  +.99! 

price discovery with a time-lag?

now this screen has gone even higher DOWFUTURES

here's something we know will make sense Mogambo Nontraditional Policies (MNP)
By: Richard Daughty

where's my bong?

Fri, 09/07/2012 - 10:21 | 2771551 fuu
fuu's picture

SGXNifty has been flakey for me the last few days, just not as flakey as me.

That article that you?

Dr. G.G. Gono knows:


Fri, 09/07/2012 - 08:58 | 2771201 Debtonation
Debtonation's picture

Why doesn't the Fed just set a ceiling on the 10 year?  Wouldn't that be the same thing as open ended QE?

Fri, 09/07/2012 - 09:10 | 2771262 HelluvaEngineer
HelluvaEngineer's picture

Because it's more fun to set a target on something that you have no intention of achieving, like employment.  Then you can finally print as much as you want and hand it to your buddies.

Fri, 09/07/2012 - 08:58 | 2771203 Cursive
Cursive's picture

If so (and 50/50 odds is a good hedge, GS), then mogas is going over $5/gal.  Just look at the prices paid subcomponents of ISM.

Fri, 09/07/2012 - 09:11 | 2771267 HelluvaEngineer
HelluvaEngineer's picture

I wish it would go to $10/gallon.  Blue/Red America deserves it at this point.

Fri, 09/07/2012 - 09:14 | 2771286 Cursive
Cursive's picture

Agreed.  We get the government and economy we deserve.  I feel like one of the roaches in a wood pile, trundling through the feces and decay.

Fri, 09/07/2012 - 09:28 | 2771364 adr
adr's picture

Good people shouldn't have to pay for the stupidity of others. I shouldn't get fucked in the ass because some women cried during Chairman Bama's speech.

America didn't vote for this administration. The handlers voted this administration in for us. Or do you realy believe Harry Reid won the Nevada election with real votes cast by actual people.

Fri, 09/07/2012 - 09:56 | 2771469 Cursive
Cursive's picture


Look, I'm not happy about the world we inhabit, either.  The fact is, as Jon Dunne once said, no man is an island.  Why is that so hard for so many people to understand?  Unfortuantely, we have to live with others and the mistakes of others.  This is why you have to fight - every day - against corruption and attacks on liberty.  Look at our education system.  What about the state of families?  Instead of family matters handled in private, now everything is a matter of state control, comrade.  Yes, it looks as though we are doomed because our forefathers became lazy and subservient.

Fri, 09/07/2012 - 09:01 | 2771214 buzzsaw99
buzzsaw99's picture

unsterilized and open ended asset purchases help the unemployed how exactly? hopefully hatzius will end up in the bread line too. JOIN US [/evil dead 2]

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