goldman sachs

goldman sachs

Frontrunning: Mayan Apocalypse Edition

  • This is signal, the rest is noise: Russia's Putin set for stand-off with EU on Syria, energy (Reuters)
  • Boehner's Budget 'Plan B' Collapses (WSJ)
  • Boehner has few options in "fiscal cliff" mess (Reuters)
  • Maya "end of days" fever reaches climax in Mexico (Reuters)
  • Monti Praised by Merkel Favored Less by Taxed Italians (BusinessWeek)
  • China probes Yum Brands' KFC over safety of chicken productsa (Reuters)
  • Looting in Aregentina: 400 Border Guard officials deployed to Bariloche over looting (BAH)
  • Regulatory 'Whale' Hunt Advances - Comptroller Expected to Take Formal Action Regarding JPM's Trading Fiasco (WSJ) - but no punishment
  • U.K. Banks Seen Sacrificing Lending to Meet BOE Demand (Bloomberg)
  • US banks face rise in bad loans cover (FT)
  • Daily Gun Slaughter in U.S. Obscured by Newtown Rampage (BBG)
  • China Restricts Bond Sales by Risker Companies (BBG)

Who Will Keep The German, And Thus Europe's, Economy Running?

After a significant slowdown in the years before the crisis, Goldman Sachs notes that the number of immigrants coming to Germany is rising strongly again. While it is not clear at this point how sustainable this development is, it will nonetheless help to ease the strains in the German labour market. But, given the underlying demographics, we suspect, like Goldman, that an increase in immigration by itself is unlikely to prevent a meaningful decline in the labour force after 2020. Only a continuous rise in the participation rate can offset these demographic trends.

Frontrunning: December 18

  • Obama Concessions Signal Potential Bipartisan Budget Deal (BBG)
  • Cerberus to sell gunmaker after massacre (CNN)
  • With New Offers, Fiscal-Cliff Talks Narrow (WSJ)
  • Judge rejects Apple injunction bid vs. Samsung (Reuters)
  • U.S. policy gridlock holding back economy? Maybe not (Reuters)
  • President fears for Italy’s credibility (FT)
  • Struggles Mount for Greeks as Economy Faces Winter (WSJ)
  • Abe leans on BoJ in post-election meeting (FT)
  • Bank of Japan to mull 2 percent inflation target as Abe turns up heat (Reuters)
  • EU exit is ‘imaginable’, says Cameron (FT)
  • Mortgage Risk Under Fire in Nordics as Bubbles Fought (BBG)
  • Sweden cuts interest rates to 1% (FT)
  • External risks impede China recovery, more easing seen (Reuters)

Visualizing The Wealth Of Nations

In the past we have explored the life-cycle of a sovereign nation, and, perhaps more importantly when allocating capital to specific idiosyncratic investment ideas, we strongly believe, as Goldman notes below, that the competitive strengths of companies often stem from the advantages of the countries they reside in. These include a combination of resource availability (food, energy, mining and others), demographics, trade positioning, infrastructure quality and above all, the presence of strong, inclusive institutions that encourage innovation. So, what follows is Goldman's attempt to map the various success drivers of the world’s countries. Of course, the components of each category aren't exhaustive (and in some cases they are they overlapping), but we hope it is a good starting point from which to understand the fundamental advantages that some countries enjoy over others. Still think the U.S. is the greatest nation in the world? Try telling the Scandinavians...

On The Under-Represented American Citizen

Having just undergone the Presidential election and the democratic right of every citizen to vote and have their voice heard, we thought it interesting that of the world's major nations, the US citizen is in fact the second worst represented when it comes to government. The Chinese citizen, empirically at least, has a fractionally greater weight in their politician's actions. Only in India does each politician represent more of the nation's citizens. How long before we hear the chants of "Over-Taxed And Under-Represented"?


Daily US Opening News And Market Re-Cap: December 14

Overnight the Shanghai Composite index rose 4.3%, marking its biggest advance since October 2009, supported by the latest HSBC flash manufacturing PMI which came in at 50.9 vs Exp. 50.8 (Prev. 50.5) – 14-month high, and with hopes for supportive policy direction to come out of this weekends central economic work conference where Chinese leaders will look to set next years GDP target and layout more information on policy for urbanisation. As such WTI crude has been trending higher since the Asia session testing around the USD 87.00 to the upside with close to a 1 USD gains ahead of the NYMEX pit open. In terms of Europe, bund volumes have been light as markets head closer toward the Christmas break with European manufacturing and service PMI’s having little sustained impact with Italian and Spanish 10yr government bond yield spreads over German bunds seen 2.5bps and 3.5bps tighter respectively. Elsewhere, in the FX market there has been talk of US names selling 1 week 25 delta risk reversals in positioning ahead of this weekend’s Japanese elections.

CBO Releases Sandy Damage Estimate: At $60.4 Billion, It Would Send US Over The Debt Ceiling

At the end of October, as the Tristate Area was being flooded by Hurricane Sandy, one after another Wall Street firm tried to position Sandy virtually as a non-event, with total damage "forecasts" by such "reputable" firms as Goldman Sachs and Bank of America forecasting a total bill between $10 and $20 billion (as anything above that and the Q3 damage to GDP would be far more substantial than their recently bullish forecasts had accounted for, and would also imply a substantial spillover effect into Q1 2013), the same as various insurance companies who had other far more obvious reasons to undershoot on the total damages. We said the opposite, and based on historic damage forecasts, predicted the damage would likely be between $50 and $100 billion. Once again the sellside consensus was wrong and a fringe blog was accurate, as the CBO has just released the Obama administration's full aid request. Bottom line: $60.4 billion, or roughly what one year of what the ultimate tax hike compromise will bring into the government's treasury. Furthermore, if fully funded by debt today, this amount would send the US (which has a $57 billion debt buffer as of this moment) over the debt ceiling immediately.

Guest Post: On Jamie

Warren Buffett is one of America’s biggest bailout beneficiaries, having profited hugely from buying into firms whose assets were subsequently bailed out. Shortly after the crisis began in 2008, Warren Buffett loaned money to, and bought options from, Goldman Sachs, seemingly with the knowledge the bailout of AIG — a counterparty to which Goldman had massive, massive exposure — would take place. Dimon as Treasury Secretary would intend more of the same. Dimon and Buffett and others like them believe in having their cake and eating it. Buffett and Dimon surely have in mind more cronyism, bailouts and free lunches, but the reality of the next four years and beyond may be very different indeed.

 

Preview Of The Key Events In The Coming Week

The upcoming week is comparatively less loaded with policy events, though the ongoing fiscal cliff negotiations in the US remain one of the key developments to follow. Important is also the FOMC meeting on Wednesday, where Goldman and everyone else now expect the Fed to increase their monthly asset purchase target under the QE3 program to $85bn per month, up from $45bn per month; this will keep the pace of asset purchases constant after the Operation Twist expires at the end of December, as Zero Hedge predicted the day QE3 was announced. There are is a handful of other central bank meetings in emerging economies (Russia, Indonesia, South-Korea, Philippines, Chile) although consensus expects no change to the base-rate in most cases. On the data front industrial production numbers for October will be released around the world including in the Euro-area, US and China. We also get the US retail sales number and December flash PMIs for the Euro-area and China.

Italy's Technocratic Government Coming To An End: Goldman's Mark-To-Mario Gambit

In what is the day's most overhyped piece of non-news, we go to Italy to learn what many already knew on Thursday, namely that with the loss of support of Berlusconi's PDL party, Mario Monti's technocratic government, which correctly "feels" it lost its parliamentary support, is coming to an end and after a two hour meeting between the former Goldman advisor and Italian president Napolitano, Monti announced he "intends to resign after checking to see if parliament can pass next year's budget law, President Giorgio Napolitano's office said on Saturday... If the budget law can be passed "quickly", Monti said he would immediately confirm his resignation. Monti's announcement came after a two-hour meeting with Napolitano, who has the power to dissolve parliament." The reason this is non-news is that Monti government's tenure is ending in a few months anyway, and general elections are coming in Q1 regardless. In other words, it may take weeks or months for the budget law to pass, or not, at which point it will be time for new elections anyway.

Gold ‘Storm’ - Could Rise Sharply Next Week On Fed Say UBS And Nomura

UBS and Nomura have suggested that gold could rise next week as the Federal Reserve may announce further easing at the FOMC meeting – on Tuesday (11/12/12) and Wednesday (12/12/12). Nomura said it is worth considering whether the FOMC will announce further easing to replace so called ‘Operation Twist’. The research house noted that gold remains at the same level as during the October meeting, which suggests gold has not yet priced in any move by the FOMC – creating an opportunity for gold bullion buyers. Regardless of whether the FOMC actually eases at this point – Nomura thinks there is a non-negligible probability – gold is likely to rise. Therefore, Nomura expects gold to rise and prices in this probability as the December meeting approaches, just as gold rose when the September meeting was approaching.