Here Is What Even Goldman's Clients Missed

Tyler Durden's picture


Ask 10 people in New York who won the Greek election, and chances are 8 will respond correctly. Yet among all the manic-depressive euphoria surrounding Europe, most will likely have missed the following. Not that there's nothing wrong with that: as Goldman's David Kostin explains, even Goldman clients were caught unaware.

While investors focus on the European sovereign debt and bank problems and Fed policy, our client discussions reveal that portfolio managers are not aware of the wave of negative preannouncements across the market. The reduction between the midpoint of new guidance and consensus estimates prior to the pre-announcement ranged from 2% to 20%. The median 2Q reduction equaled 4%. Firms lowering quarterly earnings guidance include: Pall (PLL), Nucor (NUE), Ryder Systems (R), Proctor & Gamble (PG), Cardinal Health (CAH), Texas Instruments (TXN), Starbucks (SBUX), Autodesk (ADSK), FedEx (FDX), Jabil Circuit (JBL), Bed, Bath & Beyond (BBBY), and Adobe Systems (ADBE).


Explanations for the lower guidance ranged widely. Europe ranked at the top of the list but weak US demand was also identified as a cause of lower revenue guidance. Many firms expect slower demand to continue through 2012. For Bed, Bath & Beyond promotional pressures are squeezing margins. Texas Instruments’ customers are still hesitant to rebuild inventory and industrial orders are moderating due to uncertainty. Proctor & Gamble cited operational errors when lowering its sales and EPS guidance and cut its spending on developing market expansion. FedEx noted margin headwinds from higher pension expenses.

Don't worry though: CTRL-P can fix aaaaaaall of the above. Just sprinkle some magic toner dust.

And if that fails, who needs earnings anyway?

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Sat, 06/23/2012 - 20:20 | 2554826 old naughty
old naughty's picture

So, this is the shape of an economic recovery.


Sat, 06/23/2012 - 20:31 | 2554843 knukles
knukles's picture

Betcha a Natural Born Greek won the Greek Election.
No Diversions.
Back to Work.

Sat, 06/23/2012 - 20:43 | 2554857 knukles
knukles's picture

Come to think of it...


No wonder none of Goldman's clients knew of this.
That's an oxymoron.

Goldman has no clients.

They're all counter-parties.

Sat, 06/23/2012 - 21:00 | 2554890 Fluffybunny
Fluffybunny's picture

They just don't know it until their account is empty? :D

Sat, 06/23/2012 - 23:19 | 2555092 flacon
flacon's picture

South Park vs. Cafe Del Mar - And It's Gone

Sun, 06/24/2012 - 00:54 | 2555175 Michael
Michael's picture

Something truthful for a change from CNBC?


Sun, 06/24/2012 - 03:48 | 2555257 The Alarmist
The Alarmist's picture

There's a [possibly apocryphal] story from the dot-com days that when asked when Amazon would ever show a profit, CEO Jeff Bezos responded that profits were for pussies.

Sun, 06/24/2012 - 08:19 | 2555371 blindfaith
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So what else is new.  Listed companies don't make money by selling stock.  They make their money by printing stock, just like Ben.

Sun, 06/24/2012 - 10:53 | 2555612 Temporalist
Temporalist's picture

"They just don't know it until their account is empty?"

To riff off your theme:

They just don't know it until their account is empty and the party is over.

Sat, 06/23/2012 - 21:18 | 2554923 PhilB
PhilB's picture

Thats ture. Which makes me think this is another piece of crap information from the street. GS is saying that from the client meeting PORTFOLIO MANAGERS didnt know about negative preannoucnements. WTF?! Guys, their clinets in this case are not retail, its Hedge fundas and other Portfolio Managers. Now, you gonna tell me they missed something as so basic to their livelihood as knowing whats coming up for next seasons earnings? Please! This is another plant of WTF information. Its not believable, its uselsss info, and makes me wonder what the purpos of writing it was for. Any ideas? To further their reasoning to go short Thursday? If so we need and there are a hell of a lot better shit than this!

Sat, 06/23/2012 - 21:33 | 2554944 LetThemEatRand
LetThemEatRand's picture

Why would Goldman and others in the industry want to push down the market?  After all, if the market crashed and burned over the next few months it would help investment banker O'Romney win the big game.  Just a coincidence that we have no QE, bank downgrades, GS negative predictions, etc, I'm sure.  

Sat, 06/23/2012 - 21:47 | 2554968 nmewn
nmewn's picture

"Why would Goldman and others in the industry want to push down the market?"

They're massively short?

Sat, 06/23/2012 - 22:00 | 2554991 LetThemEatRand
LetThemEatRand's picture

Nothing like front running your own negative press.  

Sat, 06/23/2012 - 22:19 | 2555016 nmewn
nmewn's picture

They're snakes...always have been...always will be.

IB's are protected by government, its really all anyone needs to know about the set up. They are not capitalist, they are fascist.

A real capitalist will short them into the dust when the time comes ;-)


Sat, 06/23/2012 - 23:11 | 2555083 Caviar Emptor
Caviar Emptor's picture

Nahh..since when do capitalists create de-stabilizing crises to serve their own purposes? It goes against every Darwinian principle, including the theory about giraffes and long necks. Simply ludicrous

Sat, 06/23/2012 - 23:33 | 2555107 WonderDawg
WonderDawg's picture

I guess that makes me a real capitalist, because that's exactly what I plan on doing.

Sun, 06/24/2012 - 00:04 | 2555140 Hulk
Hulk's picture

Beware the Bernanke put...

Sun, 06/24/2012 - 10:56 | 2555622 Temporalist
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I know exactly where to put him and the only assholes big enough to fit him are Krugman and Summers.

Sat, 06/23/2012 - 22:11 | 2554996 CClarity
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About that new Prime Minister in Greece.  Yes, selected and seated Wednesday June 20th.  Went to a "routine" eye exam yesterday, June 22nd.  Really? Two days into ruling during a crisis and he has a "routine" eye exam?  Anyway, he has a detached retina that is being medically attended to today, June 23rd.  

As someone who had a detached retina less than two months ago, I sure hope his is a minor tear and not actually detached.  Or at least easier than mine.  I had general anaethesia for 4 hour operation, and a long acting gas injected into eye, and had to keep my head (and usually body) in a 24/7 face down position for weeks.  Not painful, but very distracting, uncomfortable, challenging for reading etc etc etc.  If he has had the gas injected he cannot fly or climb Mt Olympus do to pressure changes - which means he is not a Greek God that is able to fix this stuff.

Not an ideal situation for a new leader of a country in crisis.  Oh yeah  . . . and the Greek finance minister physically collapsed on Friday too.

I don't think it will evoke more than a Merkel sympathy card.  Certainly won't solicit an austerity punt or Eurobonds for Hellas.

Sun, 06/24/2012 - 00:22 | 2555155 flacon
flacon's picture

It could be "central serous retinopathy" a condition where a bubble forms under the retina, caused by extreme levels of stress. 

Sun, 06/24/2012 - 04:25 | 2555273 PhilB
PhilB's picture

I must be suffering from financial Armageddon fatigue. For a second I thought you said "serious central bank sociopathy" where debt bubbles form causing extreme levels of economic stress.

Sun, 06/24/2012 - 08:00 | 2555358 RoadKill
RoadKill's picture

Romney was never an Ibanker moron. He was a management consultant before he founded Bain Capital. Not that facts matter to peopke like you.

Sat, 06/23/2012 - 22:16 | 2555013 They Tried to S...
They Tried to Steal My Gold's picture

Is Kenya one of the Greek Isles?

Sun, 06/24/2012 - 09:06 | 2555402 knukles
knukles's picture

Kenya is the capital of DC

Sun, 06/24/2012 - 07:45 | 2555355 bank guy in Brussels
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How the Greek regime may have rigged the 17 June election ...

In order to 'game' the result, they allocated parliamentary seats and votes, not based on the completed Greek census of 2011, as required, but on an older census of 11 years ago, in 2001, before their were major population shifts ... Which might have changed the outcome in favour of the pro-EU parties ...

The Athens Bar Association has apparently declared the 17 June Greek election null and void due to this electoral fraud ...

From John Ward's 'The Slog', interesting tidbits there ... his EU-related articles should be on the ZeroHedge contributor's page:

Sat, 06/23/2012 - 20:34 | 2554846 Oracle of Kypseli
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There will never be a recovery unless all private and government debt is forgiven, all .gov pensions are adjusted, % of government employees goes down significantly +++ and there is a great reset.

Absent the above, the world will be muddling through in perpetuity.  

Sat, 06/23/2012 - 21:51 | 2554977 Buck Johnson
Buck Johnson's picture

Your exactly right, exactly right just Look at Japan.  They have been in a recession/slow depression for over 20 years since the late 80's fiasco of them buying American realestate and other things.  We told them and the world that they need to get the bad debt off their books and essentially forgive it, but they didn't.  And look at the US and the EU along with the UK, they aren't even taking their own advice to Japan.  The big banks know that they won't exists and other things won't exists if this is done so as you said they will keep muddling along until a black swan (one of many) come out of left field that they never thought would be a black swan. 

Sat, 06/23/2012 - 23:44 | 2555119 Fred Hayek
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And Japan entered that time period with a lot of tremendously positive characteristics to their economy. They had a strong export sector and they had a tremendous savings rate. We, in the U.S. have neither of those things.

Sun, 06/24/2012 - 03:04 | 2555247 Nage42
Nage42's picture

Problem with the theory.

In Japan, the gov debt is not held by a foreign soveriegn that you can just thumb your nose at and say: "sorry, I can't pay."

In Japan, like >80% of the gov debt is held by _its people_, so when you say: "Japanese have a high personal savings rate," do you see how it's a bit of a house of cards?


So in Japan, they burned their citizen's pensions to attempt to inflate their way out of deflation = fail

In USA, they burned the Chinese/European's soverign holdings (by transfer, their citizen's pensions) to build a lot of weapons to hold off the loansharks when they come back to ask for their money = moral fail, but game-win.


Either way... next generation is going to have some very angry people trying to get back at the old cronies that have already died.


Sun, 06/24/2012 - 03:54 | 2555258 The Alarmist
The Alarmist's picture

USA is paying China enough in interest to fund the build up of its military. That plus several hundred million under-occupied young men of military age makes any technological advantage fleeting, so your hypothesis would suggest we are actually on the losing side of the game.

Sun, 06/24/2012 - 13:11 | 2555936 11b40
11b40's picture

You might want to reflect on how miltary tactics have adjusted to take advantage of the HUGE technological weapons sytems advances the U.S. has made....both in quantity and quality.

Regardless if they have 1 million soldiers or 50 million soldiers, unless we are going to invade and conduct a ground war in China, which we would never do, they are worthless if we decide to act against them offensively.  Take out transport systems, stageing areas, and Command & Control, and what China would be left with is a huge number of soldiers roaming around the countryside wondering what happened.

They could, however, cause a lot of trouble in their neighborhood and other sensitive areas of the world if we let it happen.  Based on how we let bankers and multinational corporations sell out our industrial advantage, I am not optimistic about keeping our military advantage over the very long term.  The game is still ours to lose.

Sun, 06/24/2012 - 15:16 | 2556213 The Alarmist
The Alarmist's picture

We think we have a problem with a few thousand al Quaeda? Wait til we piss off a few million Chinese.

Sun, 06/24/2012 - 22:27 | 2556846 11b40
11b40's picture

The Chinese are much too intelligent and practical for suicide to become a fad, let alone a way of life.  It's not like they are married to the Communist Manifesto.  Like average people of all cultures, the Chinese you will meet on the street would like nothing better than to have friendly relationship with other nations and other business partners.  America is still the international beacon of light for all but the most backward..... and the most advanced.

They have over 3 times our population.  Our GDP is about 14 times bigger than theirs.

Think about it.


Mon, 06/25/2012 - 05:41 | 2557143 tonyw
tonyw's picture

In the 1950s GDP per head was over 20 times, now it is around 5 and the trend has accelerated.

During the last few years people in the US have seen their wealth fall, in China it has risen.

Sat, 06/23/2012 - 21:52 | 2554978 nmewn
nmewn's picture

Exactly...debt jubilee.

A year ago people were scoffed off the pages of ZH for suggesting such a radical, not so much.

I guess size (of debt) does matter ;-)

Sat, 06/23/2012 - 22:37 | 2555033 robertocarlos
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No way I'm going to accept that some guy got a free house and a free BMW, and I only got a free 32" TV.

Sun, 06/24/2012 - 01:11 | 2555190 Oracle of Kypseli
Oracle of Kypseli's picture

That only applies to unsecured debt. Please return that TV immediately and we will not report you.

Sat, 06/23/2012 - 22:37 | 2555034 RockyRacoon
RockyRacoon's picture
Odious debt

In international law, odious debt is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime. The reason why these odious debts cannot attach to the territory of the state is that they do not fulfill one of the conditions determining the lawfulness of State debts, namely that State debts must be incurred, and the proceeds used, for the needs and in the interests of the State.   Odious debts, contracted and utilized for purposes which, to the lenders' knowledge, are contrary to the needs and the interests of the nation, are not binding on the nation – when it succeeds in overthrowing the government that contracted them – unless the debt is within the limits of real advantages that these debts might have afforded. The lenders have committed a hostile act against the people, they cannot expect a nation which has freed itself of a despotic regime to assume these odious debts, which are the personal debts of the ruler.

Sun, 06/24/2012 - 01:17 | 2555193 Oracle of Kypseli
Oracle of Kypseli's picture

<<analogous to the invalidity of contracts signed under coercion.>>

Or under durress!

Example: Sign here or we would expose you that you received bribes for ordering those submarines from Siemens, even though your country is landlocked.

Sun, 06/24/2012 - 07:23 | 2555344 nmewn
nmewn's picture

Good post Rocky.

Which is why I am always careful to call it government debt...not yours or mine. You will never find me saying we (the citizens) owe X for the actions of (in a just rational world) the power mad, criminally insane. We don't, the government does.

What else can one call a regime that terrorizes its own citizens with armed tax collectors, military "training exercises" in metro areas, fondeling babies & invalids in airports, gestapo-like "traffic safety" road blocks, tracking devices in cell phones etc. ad nauseum but...despotic.

And finally, I never knowingly signed any contract, with any government official, at any time, to place my children and their unborn children (and theirs) into involuntary servitude to government or their proxies. For one thing I could never bring myself to do it morally or ethically. For another, what party, acting in good faith, would even ask such a thing be in a contract and have it enforced by "the law of the land"?

I know...I answered my own question ;-)

Sun, 06/24/2012 - 11:48 | 2555767 RockyRacoon
RockyRacoon's picture

Paying us back for that war should deplete the Bush family fortune quite a bit.   Has he been sent the invoice yet?

Sun, 06/24/2012 - 23:49 | 2556934 merizobeach
merizobeach's picture

"I never knowingly signed any contract..."  What about a tax filing?  That's a legal contract that you (may) voluntarily sign that proclaims your legal obligation to pay the taxes that you are declaring that you owe.  If you feel otherwise and would like to elaborate, please do.  I generally read your posts with interest and agreement.

Mon, 06/25/2012 - 00:44 | 2556980 TrulyBelieving
TrulyBelieving's picture

    Good observation merizobeach. I beg to differ that it is voluntarily signed. Just consider what would happen to a citizen that would agree to pay only on what the Fed. govt. Constitutionally spent.

Sun, 06/24/2012 - 09:10 | 2555412 falak pema
falak pema's picture

your are restating Jefferson's declaration of independence expressed differently...I salute you. I salute the Parthenon under siege...

Sat, 06/23/2012 - 23:18 | 2555090 Caviar Emptor
Caviar Emptor's picture

I agree with you, except we differ on one absolutely key point: we won't muddle through, we'll get swallowed up in quicksand. Why? Biflation. Simply put, the cost-structure of the economy will exceed growth in real final sales at an accelerating pace. So there will be contraction, not "low growth" especially when looked at in real terms (inflation stripped out). On a social level this will mean the continued extinction of the middle class, less social mobility, fewer employment and advancement opportunities and of course political polarization

Sun, 06/24/2012 - 01:22 | 2555194 Oracle of Kypseli
Oracle of Kypseli's picture

In practice however, an underground market will spring outside of the financial/banking sector which will balance things out. Nonetheless, I agree that there will be some serious pain all arround and high crime rates.

Sun, 06/24/2012 - 09:58 | 2555455 centerline
centerline's picture

I am afraid you might be underestimating the number of people of who are dependant the system and incapable of functioning in any system that requires them to be productive in some manner.  This will be the source of profound pain.

The underlying subject at hand is explosive cheap-oil fueled industrial age population growth that was the real energy used to fuel one hell of a fiat ride this cycle.  Social complexity and resource constraints are already pushing back.




Sun, 06/24/2012 - 00:00 | 2555135 icanhasbailout
icanhasbailout's picture

nah, that is too reasonable - let's have an inconceivably destructive war instead

Sun, 06/24/2012 - 00:35 | 2555168 bnbdnb
bnbdnb's picture

GS only lies when they claim they are bullish.

Sun, 06/24/2012 - 04:22 | 2555272 geoffb
geoffb's picture

GS only lies when they open their mouth.



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