goldman sachs

goldman sachs

Frontrunning: September 10

  • Obama Shrinking Second-Term Hastened by Syria Opposition (BBG)
  • Obama says Russian proposal on Syria a potential 'breakthrough' (Reuters)
  • Poll Finds Support Fading for Syria Attack (WSJ)
  • France to Introduce Resolution Aimed at Dismantling Syria's Chemical Arsenal (WSJ)
  • Apple to Unveil IPhones Seeking End to Year of Struggles (BBG)
  • Verizon Plans Largest Debt Sale Ever: Proceeds From Deal, Expected to Raise $20 Billion, Would Fund Venture Buyout (WSJ)
  • Shipping Rates Seen at 2010 High on Record Ore to China (BBG)
  • Ads coming to Twitter: Twitter makes its largest acquisition, a mobile ad company (FT)
  • Houses on fire as fighting erupts in southern Philippines (Reuters)
  • Banks Seen at Risk Five Years After Lehman Collapse (BBG)

Syria, China Define Overnight Sentiment For Second Consecutive Day

For the second day in a row, better than expected Chinese "data" set sentiment across the board when following an improvement in its trade data (even as crude oil imports dropped to an 11 month low), last night China reported a better than expected August Industrial Production print of 10.4%, compared to 9.7% for July, and higher than the 9.9% expected. This was driven by a pick up in Chinese M2, which rose from 14.5% to 14.7% Y/Y, as the PBOC has once again resuming what it does best, injecting liquidity into the system, even if said liquidity no longer makes its way into the proper channels, as new CNY loans missed the expected CNY730bn, rising to 711.3bn for August. Elsewhere, not all was good on the Industrial Production front, following a French miss of -0.6% on expectations of a rebound to +0.5%, as well as a miss in mfg production of -0.7%, down from -0.4% and below the expected 0.7%. This, in parallel with Moscovici once again saying the 2013 deficit will be "slightly higher than 3.7%" means that just like in 2012, and with German economic metrics continuing to contract, as the periphery stages a modest rebound it is the core that threatens Europe's stability once again. Finally, and since in Europe everything is ultimately funded by current account positive Germany either directly or via TARGET2, the recent Italian economic strength, which also means a bounce in imports, meant that Italian TARGET2 liabilities (through which Germany indirectly funds Italy's current account deficit) are once again back at a 4 month high. And so the cycle repeats.

Goldman Pours Cold Water On The Exuberance Of European PMIs

Always on the look-out for a silver-lining, the world's commission-taking asset managers are flooding into the new cleanest dirty shirt of European stocks (the more beaten-down, the better) - apparently on the basis of the exuberance in surging PMIs. Aside from the fact Draghi himself already poured cold-water on people's belief in the strength of the European recovery last week, and our note this weekend on the 'roughness' of PMI survey "soft" data, investors remain unmoved and momentum has taken over now. However, as Goldman explains some of the optimism on the basis of recent manufacturing PMIs may not square with evidence of a structural break in the link between the PMIs and growth. While a reading of 50 may in pre-crisis days have indicated positive growth on the periphery, it today may only indicate flat (or even negative) growth, as the external financing constraint prevents better sentiment from translating into activity.

Tokyo To Host 2020 Summer Olympics

Despite Mariano Rajoy's solemn promises that awarding the 2020 Olympics to Madrid would boost the Spanish GDP by 1.8% and lead to the creation of anywhere between 168,000 and a few hundred million new jobs (the latter number is a joke but since it comes from Rajoy, both are equally credible), the Olympic committee cut the Spanish contender before the final, which pitted Tokyo vs Istanbul. And when the final votes were tallied it was not even a contest: with 60 to 36 votes, the 2020 Olympics Games will be held in Tokyo: the city that was supposed to host the event in 1940 but due to the break out of World War II the event was delayed until 1964 (when it was almost cancelled again, permanently, following a modest escalation in nuclear deterrence between the US and USSR surrounding Cuba). Let's hope history does not rhyme.

Goldman's Quick Answers To Tough EM Questions

As most know by now, over the past month or so, pressure on the currencies of EM deficit countries has intensified again. Goldman's EM research group, however, remains negative on EM FX, bonds, and even stocks suggesting using any strength, like this week's exuberance to add protection or cover any remaining longs.  Central banks in most of these countries have become more active in attempting to stem pressure in the last two weeks. But with a Fed decision on ‘tapering’ looming, investors have also become more cautious and are now focused on the parallels with prior crisis periods. In what follows, Goldman provides some concise answers to the questions on the EM landscape that we encounter most often, confirming their longer-held bearish bias.

"Overly Optimistic" Earnings Expectations Are In Jeopardy

The ongoing deterioration in earnings is something worth watching closely.  The recent improvement in the economic reports is likely more ephemeral due to a very sluggish start of the year that has led to a "restocking" cycle.  The sustainability of the uptick is crucially important if the economy is indeed truly turning a corner toward stronger economic growth.  However, with interest rates rising, oil prices surging and the Affordable Care Act about to levy higher taxes on individuals, it is likely that a continuation of a "struggle" through economy is the most likely outcome.  This puts overly optimistic earnings estimates in jeopardy of be lowered further in the coming months ahead as stock buybacks slow and corporate cost cutting continues to become less effective.

Frontrunning: September 6

  • Summers Faces Key 'No' Votes if Picked for Fed (WSJ)
  • NYT Editorial Board Says Summers Would Be Wrong Fed Choice (NYT)
  • Russia says it's compiled 100-page report blaming Syrian rebels for a chemical weapons attack (McClatchy)
  • China says Syria crisis can't be resolved with military strike (Reuters)
  • G-20 Faces Growth Threats as Syria Adds to QE Exit Risks (Bloomberg)
  • Apple Supplier Fire Spurs Biggest Chip Price Rise in 3 Years (BBG)
  • U.S. Decided Not to Horse-Trade With Russia on Assad (WSJ)
  • Financial Crisis: For Corporations and Investors, Debt Makes a Comeback (WSJ)
  • Gorman Says Chance of Another Financial Crisis ‘Close to Zero’ (BBG) and in other news, "no risk of a Us downgrade" -  Tim Geithner
  • A Biotech King, Dethroned (NYT)

Yet Another "Most Important Jobs Number Ever" On Deck

The highlight of today's economic releases will be the 8:30 am non-farm payroll data, expected to print at 180K jobs, up from July's 162K, and result in an unchanged 7.4% unemployment rate. The "most important jobs number ever " is neither, because even if it comes as a wild outlier to the good or bad side, the Fed is unlikely to change its tapering intentions this late in the game. Still, it will provide fireworks in a very jittery market and if the number is far stronger than expected, expect the 10 Year to finally blow out from below the 3% range which it breached briefly overnight, and never look back, at least not until there is an August 2011 wholesale risk revulsion episode and stocks tumble. Speaking of jittery, overnight the WSJ reports that if picked as Bernanke's replscament, Larry Summers' faces an uphill battle to get the votes of three key democrats on the Senate Banking Committee (Jeff Merkley, Sherrod Brown and Elizabeth Warren). It would be only fitting that the dysfunctional Democratic dominated senate now lashes out against the president, and in the process scuttles the market's only hope of maintaining its Fed-derived gains over the past five years... And there is, of course, Syria which is becoming increasingly problematic for Obama whose support in Congress is looking ever shakier. Will he go it alone in the case of a no vote?

It's A Syria's Market

Today's morning summary is a carbon copy of yesterday's. Some things happened, China continues to make up data to fit its current policy outlook, things in Europe continue to go bump in the night ever louder as we approach the German election despite reflexive diffusion indices - this time Service PMIs - desperately signalling a surge in confidence, Italy has just reminded everyone it is a big political basket case as Berlusconi is said to consider withdrawing his support for the Letta government and calling for elections this year, and so on, but it is still all about Syria. Last night the Senate Foreign Relations Committee has agreed on a resolution on using military force against Syria. The resolution would limit the duration of any US military action in Syria to 60 days, with a 30-day extension possible if Obama determines it is necessary to meet the goals of the resolution. In other words, a "surgical strike" lasting a minimum of 90 days, and then with indefinite additional extensions tacked on. Yet judging by the modest drop in crude and gold, the market may need more than just fighting words at this point to push to th next level of risk aversion.

'Ben'-edictions On The Economic And Profit Cycle

1:1 In the beginning, Ben Bernanke hath said, let there be liquidity.

...

1:6 And so each among them sayeth the following benediction: “May the Fed bless you and keep you; may the Fed extend its balance sheet to shine upon you; and may the Fed lift up asset prices and protect you from harm”

Syria Returns To The Spotlight But Risk So Far Unperturbed

The equity futures euphoria carryover from this weekend, buoyed by sentiment that the Syrian war is postponed if not cancelled, carried over into Tuesday morning despite news that Israel had launched a missile test, which looked at from almost any angle was an attempt at provoking a response from its adversaries. Also the Chinese boost driven by a solid beat in the country's two manufacturing PMIs persisted despite a drop in the August Non-manufacturing PMI reported last night. So once again we have returned to a state where good news is good news and bad news can be ignored. This, even with the Taper announcement just two weeks away. Of note also is that overnight Nokia shares surged 40% after Microsoft announced that it is to buy Nokia mobile business. In tandem, other EU based related names such as STM and Ericsson also gained ground, trading up 3% and 4.5% respectively. Nokia shares traded sharply higher today after Microsoft said it will pay €3.79bln to purchase substantially all of Nokia's devices & services business and will also pay €1.65bln to license Nokia's patents. A fitting farewell present from Steve Ballmer perhaps. Once again, keep an eye on Syria as the president begins his congressional consultations to take the escalation to the next level, with or without provocations from Israel.

Guess Which "Bearish" Bank Bought A Record Amount Of GLD In Q2

In early April, the status quo was exuberant when none other than Goldman Sachs issued a "sell" on the barbarous relic that has become so indicative of the exuberance of central planning. At the time, we were skeptical (to say the least) and, just for extra Muppetting, the bank also suggested its clients buy Treasuries. Well, now that the full details of holdings changes have been released for Q2, it is perhaps clearer than ever before that as the bank was telling its clients to "sell, sell, sell" it was itself "buy, buy, buy"-ing the Gold ETF (GLD) with both arms and feet. In Q2, Goldman Sachs added a stunning (and record) 3.7 million 'shares' of GLD. As Paulson dumped his GLD, Goldman lapped it up to become the ETF's 7th largest holder.

Why Emerging Market FX Has Further To Fall

The current external environment and consequence of past policies are limiting options for EM nations (most specifically Indonesia and India). Citi believes the best they can do now is to smooth the (inevitable) macro adjustment (weaker FX, higher risk premiums, slower growth) through improved policy credibility (to curb volatility and overshooting) and find offsets to portfolio flows to ease the pressure. The 4 choices of various rocks and hard places do not hold much hope for anything but further FX devaluation. As Citi's Matt King points out, what goes up (in terms of Emerging Market central bank FX reserves) risks coming back down with a thud... and in case you were wondering why India, Turkey, and Indonesia were the most-hammered...

Nigerian Scam Emails To Get Facelift Thanks To Goldman, UBS, Credit Suisse

Nigeria, Africa's top oil-producing nation, has a problem - too much money in its sovereign wealth fund and no idea what to do with it. Have no fear though, for as Reuters reports, Goldman Sachs, UBS, and Credit Suisse have kindly responded (to emails from long-lost cousins?) and will be allowed to managed 20% of Nigeria's $1 billion fund (which is meant to cushion against oil price shocks - good timing?) This should come as no surprise to Zero Hedge readers as we have been discussing Africa as the only place left in the world capable of incremental debt capacity (and therefore growth). There are consequences (the boom-bust cycle) to this politically-motivated capital inflow; but for now the Nigerian Sovereign Investment Authority (NSIA) states (in a reassuring manner) that the banks will invest "the fund's assets conservatively, with capital preservation in nominal terms being of primary importance," which 'nominally' fits with UBS managing their Treasury exposure and GS and CS their corporate debt exposures.