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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.
MAIN POINTS:   

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?

NO CHANCE.

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 

Last IMPORT PRICE INDEX NUMBER DOWN

 

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.

http://www.factset.com/websitefiles/PDFs/cashinvestment/cashinvestment_6.27.12 

 

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 it...you 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.

http://www.youtube.com/watch?v=ZkH5Ak4wAnY

 

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?

http://finviz.com/futures_charts.ashx?t=GC&p=m5

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

<yawn>

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?

INO.com Markets - Chart for U.S $ INDEX (NYBOT:DX)

whack-0-BiCheZ!

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?!?

WTF!

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 rocks...is that you?

Dr. G.G. Gono knows: http://www.rbz.co.zw/pdfs/2008%20MPS/AprilMPS2008.pdf

 

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

@adr

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]

Fri, 09/07/2012 - 09:12 | 2771274 Cursive
Cursive's picture

@buzzsaw99

Yep.  The "transmission mechanism" stops at bank balance sheets and exchange-traded asset prices.  QE just creates inflation, not real economic activity.

Fri, 09/07/2012 - 09:03 | 2771224 Crispy
Crispy's picture

BS, no reason for an official QE announcement with twist in effect in perpetuity.  

Fri, 09/07/2012 - 09:25 | 2771351 LawsofPhysics
LawsofPhysics's picture

Correct, I mean with ZIRP there is no cost for capital creation, right? Can't wait for negative interest rates. Any chance the bank will pay me to take out a loan?

Fri, 09/07/2012 - 09:06 | 2771233 Winston Churchill
Winston Churchill's picture

WORSTIER than expectations..

Fri, 09/07/2012 - 09:07 | 2771238 Meesohaawnee
Meesohaawnee's picture

tyler really. we need to stop the "what goldman thinks" posts..fuck them. I dont give attention to idiots and criminals.. lets have a mandate. No qe talk. no what the squid thinks talk.. were just giving them the attention they want.  Playing right into their game.

Fri, 09/07/2012 - 09:11 | 2771268 Itch
Itch's picture

Yeah, lets ignore them, thats a great idea. Because if we dont look at them, they will obviously stop what they're doing.

Fri, 09/07/2012 - 09:06 | 2771239 jjsilver
jjsilver's picture

From the Democratic convention, brainwashed vaccine damaged, fluoride drinking aspartame zombies

https://www.youtube.com/watch?v=07fTsF5BiSM

Fri, 09/07/2012 - 09:08 | 2771244 Dr. Engali
Dr. Engali's picture

Gold's new boner says Ben is going to print.

Fri, 09/07/2012 - 09:10 | 2771263 fonzannoon
fonzannoon's picture

Doc I would start thinking a lot about what type of side salad you want.

Fri, 09/07/2012 - 09:19 | 2771316 Dr. Engali
Dr. Engali's picture

It's getting close. Time is running short.

Fri, 09/07/2012 - 09:25 | 2771350 GetZeeGold
GetZeeGold's picture

 

 

Seems a tad optimistic to me.....but if it works for you, I'd say go with it.

 

Fri, 09/07/2012 - 09:08 | 2771247 fonzannoon
fonzannoon's picture

If goldman wants QE so bad why do they keep mushing it with their predictions?

Fri, 09/07/2012 - 09:17 | 2771302 Cursive
Cursive's picture

@fonzannoon

How is 50/50 a serious prediction?  I'd laugh at Mel Kiper if he said the Redskins had a 50/50 chance of winning this Sunday.  And so I'm laughing at this crap of a "prediction" from GS.

Fri, 09/07/2012 - 09:30 | 2771371 fonzannoon
fonzannoon's picture

It's not serious. It's a joke. The point is as Goldman themselves raise their forecast of QE they mush it. Because they fuckin suck.

Fri, 09/07/2012 - 11:34 | 2771863 Haager
Haager's picture

Why worry? Even an 80% chance didn't hit the target weeks ago, so no nodding here.

Fri, 09/07/2012 - 09:08 | 2771248 Meesohaawnee
Meesohaawnee's picture

yea that was pathetic.. Did biden think he was talking to 2 year olds. I cant believe what i heard from him. that was sad..

Fri, 09/07/2012 - 09:13 | 2771285 LongSoupLine
LongSoupLine's picture

The BEST Biden speech EVER!:

http://www.youtube.com/watch?v=mcjet2MwUR0

Fri, 09/07/2012 - 09:44 | 2771416 slewie the pi-rat
slewie the pi-rat's picture

are you lost?  on the wrong string or site?

pretending to answer someone about joBlo?

we're soooo sorry ya don't feel more perky after a night's rest, too

ain't it just awful?  a crying SHAME?

did ya know how mittens stayed outa 'nam?  after leaving stanford after 1 year he went back to michigan where daddy had was being re-elected goobernator

and he was appointed "minister" for the WHOLE STATE by the LDS

so, he got to stay home and play w/ the dog while being a mormon;  later he became a "bishop"

did he ever write anything or give any speeches?  they would be fun to read!

those would be romney's speeches from the LDS pulpit in 1966 or later

can you put some up for us?

Fri, 09/07/2012 - 09:18 | 2771264 ptoemmes
ptoemmes's picture

Wow...next week in no particualr order:

Fed meeting with QE3 on the table

German Constitutional Court on ESM

AAPL and mini iPad and iPhone5 maybe

Plus, as an added bonus from http://www.theultimateholidaysite.com/holidays/2012-9/

Sep 09 National Teddy Bear Day, Weinerschnitzel Day, Grandparents Day

Sep 10 National Swap Ideas Day, Sewing Machine Day, TV Dinner Day

Sep 11 "I Want to Start My Own Business" Day, Make Your Bed Day, National No News Is Good News Day

Sep 12 National Chocolate Milkshake Day

Sep 13 Fortune Cookie Day, National Defy Superstition Day, National Peanut Day, Positive Thinking Day, Snack a Pickle Time, Uncle Sam Day

Sep 14 National Cream-filled Donut Day

Sep 15 Make a Hat Day, National Felt Hat Day

Fri, 09/07/2012 - 09:14 | 2771291 No Euros please...
No Euros please we&#039;re British's picture

Mmm, GS bullish on gold reaching $2000/oz by year end. GS predicting QE3 which pushes up gold over $25/oz. They must be planning a bear raid on gold.

Fri, 09/07/2012 - 09:18 | 2771307 caimen garou
caimen garou's picture

I'm still trying to figure out when did qe stop

Fri, 09/07/2012 - 09:21 | 2771322 Meesohaawnee
Meesohaawnee's picture

it never did. Twist is just QE in another name.

Fri, 09/07/2012 - 09:26 | 2771352 caimen garou
caimen garou's picture

right, thats why i'm long on toilet paper, they are going to use a lot of it to clean thoes fans

Fri, 09/07/2012 - 09:23 | 2771332 dwdollar
dwdollar's picture

You didn't get the memo? ZIRP and trillion dollar deficits are the new normal.

Fri, 09/07/2012 - 09:30 | 2771368 AynRandFan
AynRandFan's picture

EUR/USD at the top of a rising channel that began July 25.

Fri, 09/07/2012 - 11:33 | 2771858 Haager
Haager's picture

Sure that this is the top? I expect asians to dump dollars asap, so  expect a rise on sunday night.

Fri, 09/07/2012 - 09:30 | 2771369 AynRandFan
AynRandFan's picture

.

Fri, 09/07/2012 - 09:37 | 2771399 Canadian Dirtlump
Canadian Dirtlump's picture

nice to see silver go from second bellybutton shrinky dink to raging boner in an hour lmao.

Fri, 09/07/2012 - 09:40 | 2771410 AcidRastaHead
AcidRastaHead's picture

Hi, I'm a financial superstar and I predict a 51% probability.

Fri, 09/07/2012 - 09:54 | 2771440 drivenZ
drivenZ's picture

There's no way they do unsterilized treasury QE because of one so-so NFP print...not going to happen. I would put the chances of MBS QE at maybe 20% and a rate language extension or an "Evans proposal" at 50-60%. Stocks have been on a tear, hell, bernanke has said himself that equity appreciation was a sign that QE was working. If the market really wants QE they'll need to let the S&P drop 150pts. 

 

But this very QE bullish tone could easily be Jan just feeding the "Buy gold ahead of QE" trade since as someone noted above Goldman's bullish on Gold. Wouldn't be surprised if they're dumping Gold prior to the meeting next week. 

Fri, 09/07/2012 - 10:04 | 2771495 muppet_master
muppet_master's picture

i don't give a hatzius

what hatzsius thinks....two days ago i loaded up on some short squeeze hedges = sell covered PUTS and buy deep out of the money calls when spx @ 1405 BUT STILL KEPT ALL OF MY SHORTS.

today @ spx 1436 = i unloaded all of my short squeeze hedges !!

and added to EUR shorts @ 1.27+

Fri, 09/07/2012 - 10:20 | 2771554 dcb
dcb's picture

well we just hit my target top point

Fri, 09/07/2012 - 10:47 | 2771670 yogibear
yogibear's picture

The Fed would be reckless and stupid if the did QE now. Look what's coming at the end of the year. Far larger than making any Wall Street flunky their bonus.

 

Fri, 09/07/2012 - 11:20 | 2771798 Nobody For President
Nobody For President's picture

Well, nobody else has said it yet this morning:

The markets are broken, BitChez!

Fri, 09/07/2012 - 13:05 | 2772209 dbTX
dbTX's picture

Something to watch for in the near future: COUNTERFITTING

Sat, 09/08/2012 - 03:19 | 2774090 Colonel Klink
Colonel Klink's picture

Fuck Golum Sack and the 4 horses they rode in on!

Sat, 09/08/2012 - 16:04 | 2775062 IMA5U
IMA5U's picture

The Golden Scrote s the worst

 

S&P 1250 predition

QE prediction

 

That's basically prediciting heads I win tails you lose

Why does anyone even listen to them?  They are there to screw you

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