goldman sachs

Status Quo means Hillary. Financial Mayhem means Bernie. Fear means Trump.

Iin an interview to be aired tomorrow on Wall Street Week, Hayman Capital's Kyle Bass says that "this has been one of the worst years in the last ten"as a result of his dogmatic views on energy prices. And yet, instead of backing out the Texan is doubling down: "If you are going to allocate capital for the next three to five years, you should do it now" into the energy space over the next 6 months. Will he be right this time? Find out in 12 months.

The unfolding correction of the visible excesses of the credit inflation - such as overinvestment and malinvestment - will destroy incomes and profits; the Great Unwind of the less visible effects, such as the sovereign wealth fund liquidations, are a giant pin aimed squarely at the monumental worldwide bubbles in stock, bonds and real estate.

As WSJ reports, "more than two dozen companies and groups and one foreign government paid former President Bill Clinton a total of more than $8 million to give speeches around the time they also had matters before Mrs. Clinton’s State Department."

My overriding theme and the central drama for the coming year is that unexpected events can take on greater importance as the Federal Reserve ends its near-decade-long Zero Interest Rate Policy. Consensus premises and forecasts will likely fall flat, in a rather spectacular manner. The low-conviction and directionless market that we saw in 2015 could become a no-conviction and very-much-directed market (i.e. one that's directed lower) in 2016. There will be no peace on earth in 2016, and our markets could lose a cushion of protection as valuations contract. (Just as "malinvestment" represented a key theme this year, we expect a compression of price-to-earnings ratios to serve as a big market driver in 2016.) In other words, we don't think 2016 will be fun.

Everyone who is convinced that the current status quo is permanent and unbreakable should consider what happened to the super-wealthy private landholders of the Western Roman Empire. When the empire's power to coerce broke down, the super-wealthy vanished into the dustbin of history. Few believed that possible in 475 AD, but history isn't a matter of belief. Believing it isn't possible doesn't stop history.

I bet OPEC never factored into their analysis the lifting of the US Oil Exporting Ban in 2015 after being a non-starter for so many decades.

Two weeks ago we said that "those who have savings at US banks, please don't hold your breath to see any increase on the meager interest said deposits earn." We were wrong: some should certainly have held their breath, because as the WSJ reports today, "some bank customers won’t have to wait much longer to reap benefits from the Federal Reserve’s decision to raise interest rates." Some, such as clients of J.P. Morgan, which will begin raising deposit rates for some of its "biggest clients" in January. "Biggest" clients, of course, is a universal euphemism for "wealthiest."

More and more countries are jumping on the gold bandwagon...

Louisiana’s board of education is going to implement a new policy which requires all students to fill out a Free Application for Federal Student Aid in order to receive a high school diploma. This requirement in Louisiana is exactly the type insane laws which were imposed by the Government as described in the narrative laid out in “Atlas Shrugged.” Acts of mandate which enabled the Government and the corporate friends of the Government to suck wealth from the populace and from productive workers and redistribute the largesse among themselves.

Three years after 2012, Goldman has finally admitted that all the talk about a major exodus of your Americans from parental houses and into the harsh crony capitalist world, was nothing but hot air. As the chart below shows, the share of 18-34-year-olds living with their parents has never been higher.

"Unfortunately, an institution that was created to serve all Americans has been hijacked by the very bankers it regulates.” 2016 Democratic presidential candidate and Senator from Vermont Bernie Sanders said in an op-ed on Wednesday that a full independent audit of the Federal Reserve is necessary “to reign in Wall Street."

Investors have bought increasing volumes of put options that will pay out if the price of WTI drops to $20 to $30 a barrel next year. The largest open interest across options contracts - both bullish and bearish - for December 2016 is for puts at $30 a barrel. The open interest for June 2016 put options at $25 a barrel has nearly doubled over the last week. Investors have even bought put options that will pay if WTI drops below $15 a barrel by December next year. The volume of financial bets at that level is tiny - 640,000 barrels in total.

Needless to say, these names are just the beginning: once the redemptions - and gating - genie is out of the bottle, there is no putting it back.

Despite every effort by The Fed to convince the world that everything is awesome, it's not. From China growth risks to concerns about tightening financial conditions, Goldman warns so-called 'grey swan' fears are rising with Brexit, Trumpe elected, widening terrorist threats, and increased protectionism the most impactful.