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Why The Market Is Up: Goldman Just Dumped On Stocks

Tyler Durden's picture




 

Back on March 21, Goldman's Peter Oppenheimer released the "Long Good Buy, The Case For Equities", which was Goldman's subversive attempt to rally equity into buying all the stocks that Goldman had to offload, as well as buy all TSYs that GS clients had to sell. Needless to say, Goldman top ticked the market and stocks have tumbled ever since, even as the 10 Year soared from 2.5% to the current ~1.75%. So what? Well, this morning the same analyst, precisely two months on the anniversary of his "once in in a lifetime" stock buying opportunity, has released a new report with the paradoxical header: "Near-term risks are to the downside." But, but... Anyway, that's all the market needed to grasp that Goldman's prop desk is now buying every piece of risk not nailed down hand over fist as the June FOMC meeting is now the D-Day. Futures have soared ever since.

Some of the reverse psychology findings in the note:

Equity markets around the world have now mainly reversed the short-lived optimism of the first quarter and the MSCI World index is flat on the year. The brief but powerful rally was triggered by an improvement in sentiment as concerns that troubled investors through 2H 2011 appeared to moderate. A rebound in the global leading indicators and positive data surprises, particularly in the US, eased fears of contagion from the European sovereign crisis into the rest of the world. Meanwhile the LTRO, and some progress in discussions over the fiscal compact in Europe, dampened the perception of systemic risks in the European banking system. Central banks also played a part by introducing a number of measures that both helped to bolster confidence as well as ease financial conditions.

 

...

 

Taken together it is understandable that equity markets have weakened and, once again, the few bond markets that are still perceived to offer ‘risk free’ returns have seen yields fall to new lows. We also have concerns about equity markets in each of the major regions that we cover in the near term but, at the same time, recognize that valuations are generally attractive and reflect a great deal of distress already. In most regions our 3m forecasts imply relatively flat or slightly higher markets from current levels. However, little visibility is likely to emerge any time soon and we worry that markets move to price in more risks in the short term before any recovery can take place.

 

In the US, David Kostin and team have argued that the near-term prospects for the market are poor given the combination of very weak profit growth this year and next (3% and 6% respectively), a peak in profit margins, and a sustained period of below-trend economic growth. Our Economists expect 2Q GDP to slow to around 2%. On top of this David and team have argued that investors will increasingly focus on the impact of the fiscal cliff. Our Economists estimate that if Congress fails to address these issues at year-end, fiscal policy will weigh on growth by nearly 4 percentage points in the first half of 2013. While our base case assumes that fiscal restraint will reduce growth by 1 percentage point next year, it is still likely to present a reasonable headwind to growth and therefore earnings. It is unlikely in this environment that US equities will enjoy any multiple expansion.

 

In Europe our concerns over the economies are more structural than cyclical. Nonetheless the aggregate Eurozone economy, which continues to stagnate (and is likely to continue to do so through to the end of 2013) masks a pattern of growing underlying divergence. German activity continues to surprise on the upside while growth in the periphery continues to weaken by and large. These differences are somewhat inevitable and, when we benchmark the market against activity indicators, are largely discounted. In Europe, for example, we estimate that equities are pricing Euro area PMIs to now stabilize at the mid 40s and for GDP to contract by around 0.5% this year, in line with our Economists’ forecasts.

 

But it is the political tensions in the near term in Europe that we think present the greatest risk relative to what is being discounted in equity markets. The forthcoming Greek election, now scheduled for June 17, is an obvious possible flash point. While the majority of parties and, according to polls, the vast majority of Greek people, want to stay in the Euro, the risk is high that the election results in a government that wants to renegotiate the new Memorandum of Understanding reached earlier this year with the ‘Troika’. With the rest of Europe holding a firm ground against re-negotiation, investors are increasingly worried about the impact of a possible Greek withdrawal.

 

Ultimately, many of the risks to the downside from here, whether in Europe or the US, are largely dependent on political developments and possible policy responses which are inherently difficult to forecast with any high degree of conviction. While our feeling is that the risks in the short term are to the downside, we have higher conviction in relative thematic views than directional ones over the next three months. Similarly, the valuation arguments make us more positive over a 6-12m horizon, particularly in Asia and Europe.

We all know the drill: reverse reading Goldman means short term spike as expectations of more imminent easing from the Fed or ECB spike, and then a gradual downdraft as the realization that the 4th time is not different dawns on everyone yet again. Rinse. Repeat. And always do the opposite of what Goldman says.

 

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Tue, 05/22/2012 - 10:45 | 2450946 hedgeless_horseman
hedgeless_horseman's picture

 

 

Oh....so when she says no, she means yes?

Tue, 05/22/2012 - 10:54 | 2450992 CvlDobd
CvlDobd's picture

She won't say no, because of the implication.

http://www.youtube.com/watch?v=ar9spNzOFPk&feature=youtube_gdata_player

Tue, 05/22/2012 - 10:56 | 2450999 Rainman
Rainman's picture

I tried that on Mrs Rainman last night. It doesn't work.

Tue, 05/22/2012 - 11:30 | 2451106 Metalredneck
Metalredneck's picture

"No" means buy another round.

Tue, 05/22/2012 - 11:01 | 2451017 graymnzrc
graymnzrc's picture

Nothing to do with housing numbers? Not saying they are real but perception means more than reality anyway.

It is kind of funny how on this site, all good news is B.S. and all bad news is cannon.

Tue, 05/22/2012 - 14:18 | 2451810 bonderøven-farm ass
bonderøven-farm ass's picture

"Nothing to do with housing numbers?"

You mean the ones fabricated by the National Association of Realtors? Uh, yeah.......

"Not saying they are real but perception means more than reality anyway."

Cognitive dissonance has no place on this blog.  Perhaps try Newsvine or Yahoo chat........

Peace...... 

Tue, 05/22/2012 - 11:25 | 2451089 slaughterer
slaughterer's picture

Put together the GS report with this call purchase:

 


Financial Select Sector SPDR (XLF) 3300 August 15 calls bought in one block on the offer for USD 0.30, plus a separate trade of 4500 August 15 calls bought in one block on the offer for USD 0.33 vs. an open interest of 3783

Tue, 05/22/2012 - 11:30 | 2451108 hedgeless_horseman
hedgeless_horseman's picture

 

 

Please, refrain from turning on the lights in the dark pool.  There are people trying to get lucky in there.

Tue, 05/22/2012 - 13:26 | 2451593 Normalcy Bias
Normalcy Bias's picture

They learned that at Yale.

"No means, yes! Yes means anal!"

http://www.dailymail.co.uk/news/article-1372356/Yale-University-investig...

Tue, 05/22/2012 - 10:48 | 2450955 battle axe
battle axe's picture

How do you know Goldman is lying, their lips are moving. Scumbags...

Tue, 05/22/2012 - 10:46 | 2450958 MFL8240
MFL8240's picture

The Jewish sewer pipe out lying again to F_ck the public.  This is digraceful but excatly what to expect from this group of trash.

Tue, 05/22/2012 - 10:48 | 2450969 SMG
SMG's picture

Illuminati sewer pipe actually.  And yes it is all disgraceful.  But no one except for a few seem to care.

Tue, 05/22/2012 - 10:47 | 2450962 Doubleguns
Doubleguns's picture

Neither a buyer nor seller be.

I. B. Stacker

 

 

Tue, 05/22/2012 - 10:48 | 2450968 dannyboy
dannyboy's picture

I'd like to thank Goldman for my upcoming profits.

Tue, 05/22/2012 - 10:53 | 2450972 adyaner
adyaner's picture

By now everybody knows the game, so maybe they are playing little mind tricks with the muppets with the reverse of the reverse psychology in order to offload the remaining time bombs, but who knows, maybe goldman is not that smart after all...

Tue, 05/22/2012 - 11:04 | 2451034 Dr. Engali
Dr. Engali's picture

You might think that,but then take a look at Stoper. I think he is now  11 in a row when it comes to misses in the FX markets.

Tue, 05/22/2012 - 11:18 | 2451045 slewie the pi-rat
slewie the pi-rat's picture

after taking a lQQk at yer next stoolper, please floosh, but not until after you junk me, ok?

Tue, 05/22/2012 - 11:43 | 2451175 DeadFred
DeadFred's picture

I agree. As Goldman becomes a market moving contra-indicator they will change their game. They're crooked thieves but they're not stupid. The question remains, is this the time they change? Odds are low that any specific call is THE time when they change their game but it's coming sooner or later. Downward trend lines are still holding.

Tue, 05/22/2012 - 10:50 | 2450975 UncleBubba
UncleBubba's picture

Who needs a CFA, when you have rules like this"

"We all know the drill: reverse reading Goldman means short term spike as expectations of more imminent easing from the Fed or ECB spike, and then a gradual downdraft as the realization that the 4th time is not different dawns on everyone yet again. Rinse. Repeat. And always do the opposite of what Goldman says."

Tue, 05/22/2012 - 11:20 | 2451062 slewie the pi-rat
slewie the pi-rat's picture

L0L!!! and don't forget: tyler has disclaimers about his disclaimers, BiCheZ!

plus, the advice is practically free if you subtract out the nuisance factor of the black helis

today we see the EUR "uncoupling" from the weak, expected, technical rebound due to the price derivatives on the graphs and the prices of the derivatives in the deep pools of zombie goo going up and down as the EU situ seems to be pointing to another "let the fuktards who did this now pretend they know how to fix it" moment in herstory

 

Tue, 05/22/2012 - 10:53 | 2450987 LongSoupLine
LongSoupLine's picture

Wow, if Shapiro wasn't so occupied with CONgress she would be doing something about this obvious corruption on Goldman's part...yeah, right.

Tue, 05/22/2012 - 10:56 | 2451003 Dr. Engali
Dr. Engali's picture

Thank you Goldman ....you have yet to fail me increasing my net worth by taking the other side of your trade.

Tue, 05/22/2012 - 11:12 | 2451009 bdc63
bdc63's picture

Do their clients really not realize how colassally wrong Goldman has been?

ZH has been spot on with this for several months now ... props.

Tue, 05/22/2012 - 11:04 | 2451014 Boilermaker
Boilermaker's picture

SURPRISE!!!!

Tue, 05/22/2012 - 11:04 | 2451023 Deep79
Deep79's picture

BULLSHIT

Tyler you have been calling QE since last June, even a broken clock  is right once a day. Give it up

If you think this is why we bouncing, coause of this Goldman note, pretty weak

We were oversold, plain and simple.

 

MARKET MAKES THE NEWS, NEWS DOES NOT MAKE THE MARKET

Tue, 05/22/2012 - 11:20 | 2451074 Tyler Durden
Tyler Durden's picture

Um, we called for it in June, and we got it in August ...

... But you keep paying attention to the market, and not reality.

Tue, 05/22/2012 - 11:41 | 2451166 Deep79
Deep79's picture

Actaully No. I am as bearish as they come. I am paying attention to reality. And Opertion Twist was not QE. come on tyler you know better. 

You for one should know that market makes the news. And opertion Twist did nothing, is was LTRO that goosed stocks short term. 

If you think i am bullish, you are sadly mistaken, my ultimate target is 550 SP, but we will not get their in a straight line as you guys here on ZH think.

I ain't bashing you, you run best site, but be serious about QE, you have said since last June , and we will not get it agian til,we are aerioulsy maing a run at SP 1000.

 

Tue, 05/22/2012 - 11:46 | 2451186 hedgeless_horseman
hedgeless_horseman's picture

 

 

Opertion Twist was not QE. 

...and the Fed isn't really "printing" money.

Semantics, bitchezzz!!!

Tue, 05/22/2012 - 12:33 | 2451379 notbot
notbot's picture

And we got the Euro swap lines from the Fed/ECB.  Yeah, yeah, I know, a swap is temporary (until it's extended).  Still, there are a lot of dollars flooding the market that weren't here prior to the swaps, call it whatever you want.  

Tue, 05/22/2012 - 11:53 | 2451223 ghostzapper
ghostzapper's picture

Just a matter of whether Shalom will blatantly toss some freebies to his boys and Obumma prior to the election.  Shalom knows the Fed's credibility is destroyed in the eyes of informed people he must decide if he wants to destroy what's left of its credibility in the eyes of morons. 

The crisis across the pond is helping Shalom.  Christ the ten year is yielding 1.80%.  Oil is approaching $90 as well.  So, he really can't even come up with a bullshit reason why QE is needed right now.  Personally I think the SPider is already expecting massive QE right here.  When it approaches 1000 then I'll believe the QE expectations have been tamed. 

Tue, 05/22/2012 - 11:56 | 2451233 Tyler Durden
Tyler Durden's picture

Twist is not QE?

Save that for the Friday funnies. Or at least read one of the 100 or so posts here in the past 6 months which explains why (as Goldman and Jeff Gundlach will attest), Twist, or a long-end "flow" operation IS QE.

Of course, the Fed hopes to lure the more naive ones out there in believing precisely what you said.

Oh, and LTRO is not QE either.

Mmmhmm.

Tue, 05/22/2012 - 12:05 | 2451266 Deep79
Deep79's picture

Lets take Goldman's advice when it suits us, and make fun of them when we please

Pretty lame if you ask me

If LTRO was not QE, then why is Opertion twist QE. Did the fed outright monetize, no, they sold short end to buy long end.

 I am on your side Tyler, I am as bearish as they come, but to say Opertion Twit was outright QE is wrong imo. I could be wrong, but hey if Goldman said it it must be true. Right tyler.

In the end dont know why we are arguing. to see who has bigger balls.

Tue, 05/22/2012 - 11:54 | 2451113 slewie the pi-rat
slewie the pi-rat's picture

well, the facts seem to indicate that the centralBanksters can and will print (QE) what is necessary to finance their partner-banksters, the pols and "capitalist MIC"

and "twist" [also a 'type' of QEasing] while they're doing it, too

this, btw, is the "news" being PLAYED OUT in the "markets", imo

since the FED has been given such sweeping NEW powers, "markets" have gotten "screwed down pretty tight" in order to (back to first sentence of mine) finance the fuking goobermints

the cabal IS doing internationally-fiat-fungible QE and has never stopped;  "sterilization" may delay and postpone inflation, but perhaps not forever

maybe this cabal QE will diminish/stop after things "get better" tho, huh?

p.s. tyler knows this too?

that said, +1 for giving & taking the punches here, deep_79.Z!

Tue, 05/22/2012 - 11:03 | 2451025 DrDinkus
DrDinkus's picture

near term risks ...HA!

“You don’t say when you are in an emergency situation, because then you make the situation worse. So I really don’t see the usefulness of being more transparent,” Luc Coene, Belgium’s central bank governor, explained in a Financial Times interview this month.

Tue, 05/22/2012 - 11:04 | 2451030 junkyardjack
junkyardjack's picture

Close all shorts, commence reshorting next week.  That is all...

Tue, 05/22/2012 - 11:04 | 2451032 Dorky
Dorky's picture

Damn, I should start buying already.

Tue, 05/22/2012 - 11:04 | 2451033 midgetrannyporn
midgetrannyporn's picture

GS stock buyers trying to move out of single digits this a.m.. The squid can fool all of the muppets some of the time, and some of the muppets all the time, but they can't fool all of the muppets all of the time. LMAO!

Tue, 05/22/2012 - 11:10 | 2451049 monopoly
monopoly's picture

Works for me. 

Tue, 05/22/2012 - 11:20 | 2451075 Fortunes Favor
Fortunes Favor's picture

Apple Top Leads To Market Top As Predicted, So What's Next... An Epic Gold Entry Point

 

http://seekingalpha.com/article/606821-apple-top-leads-to-market-top-as-predicted-so-what-s-next-an-epic-gold-entry-point

Tue, 05/22/2012 - 11:29 | 2451101 BeetleBailey
BeetleBailey's picture

This just in from Goldman:

"We believe the markets will go down, then up, then down, then up then.....what....Lloyd's on line 5...says what...oh right."

"Let me rephrase: GOD says the markets will go up, then down, then up....."

Tue, 05/22/2012 - 12:32 | 2451374 Go Tribe
Go Tribe's picture

How are the credit spreads doing today?

Fri, 05/25/2012 - 02:49 | 2461469 agagshoes
agagshoes's picture

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