This past week has been a virtual tennis match watching the evolution of the Greek bailout negotiations. No Deal, Deal, No Deal, Deal. However, despite the fallout that would likely come from a Greek "exit," the markets have largely managed to ignore the risk and hit an all-time high this week. Market valuations, bullish sentiment and complacency are all pushing higher as the focus remains on the ignition of the ECB's QE program as a stimulus for the markets. In fact, this is so much the case that the net percentage of managers overweight Eurozone equities is at the highest level on record.
The retail sales data proved it... The Fed admitted it... and now Goldman Sachs has proved it... there is no 'economic stimulus' benefit from low gas prices for the US consumer (it is, simply put, merely a transfer of consumption from one good to another - or worse, it is saved or used to pay for healthcare or debt). As Goldman explains so clearly in its analysis of WalMart's results, the correlation between gas prices and WalMart same-store-sales "is nearly zero."
"We think that negative snowstorm effects could potentially subtract as much as half a percentage point from Q1 growth compared with a neutral baseline, although there is still plenty of time for activity to bounce back within the quarter. In light of our analysis, we reduced our Q1 GDP tracking estimate by two-tenths to +2.8%."
- Goldman Sachs
This won't end well...
Remember: any time Goldman tells you to do something, do what it does, not what it tells you (thank you Tom Stolper for teaching us that lesson) and as the case may be, Goldman's prop, pardon, flow (because those are illegal under Volcker wink wink) traders have some AAPL shares to sell to you, to wit: "We increase our 12-month target price to $145 from $130 previously which is based on a 16X (up from 15X reflecting our increased confidence in Apple’s outlook) multiple applied to our CY2015 EPS estimate of $9.03 ($8.64 previously)."
With reports of near mutiny in Syriza's ranks amid the back-bending they have done to try to meet Germany's demands - only to be abjectly denied by a non-ultimatum-setting Schaeuble - it is perhaps time to prepare (ahead of tomorrow's apparent "G" day) for the possibility that Greece creates a systemic event. As Goldman recently warned, there are aspects that leave us more worried than we have been since the start of the Euro area crisis with a tight schedule to avert a disorderly outcome. Risk markets so far have traded in a resilient (well managed) manner but risks of an accident remain and here is how Goldman suggests you hedge that exposure.
When you owe someone $340, it is YOUR problem.
When you owe someone $340 BILLION, it is THEIR problem.
Here's a plan where the drachma will be more desirable than the euro after Greece defaults on anything euro denominated and backs its redeemable drachma with fractional gold. Upon default euros drop, drachma pops!
After spending the past year deteriorating with each passing month, as global acceleration dipped decidedly in the negative camp, the only thing that kept the Goldman Global Leading Indicator "swirlogram" somewhat buoyant was that "Growth" measured in absolute terms had remained slightly positive. Not any more: according to Goldman's latest global economic read, the world is now officially in contraction, following a sharp plunge in both acceleration and growth in February.
When Everybody Thinks They're Right, They're Almost Guaranteed to be Wrong! I Think This Is The Biggest Bubble In World HistorySubmitted by Reggie Middleton on 02/19/2015 10:31 -0400
But guess what? It's really, really, really different this time! In this one short post, there's more than enough indisputable evidence of a bubble than anyone can justifiably ignore.
Moment of Brutal Honesty: Political Commentator Quits Over HSBC Coverage, Accuses Telegraph Of "Fraud On Readers"Submitted by Tyler Durden on 02/17/2015 15:54 -0400
What happens when the "impartial and independent" media puts its relationship with advertisers (especially when said advertisers are admitted criminal consortiums among whose chief sources of revenue in recent decades has been facilitating tax evasion and "laundering the world's drug money") above the interests of its readers and the presentation of "imperatial and independent" facts? This: "The coverage of HSBC in Britain's Daily Telegraph is a fraud on its readers. If major newspapers allow corporations to influence their content for fear of losing advertising revenue, democracy itself is in peril."
Get back to work David Kostin... your 2,100 S&P 500 2015 year-end target just got taken out...
When it comes to trading the possibility of a Grexit, Bloomberg strategist Vassilis Karamanis writes,that there are three possible outcomes.
Scenario 1: Greece exits the euro
Scenario 2: Capital controls are imposed on Greek banks
Scenario 3: Agreement is reached within the next days
This is just the beginning of the oil crisis.
While so much has been made of the considerable decline in US rig counts as the driver behind the recent price bounce in oil, Goldman Sachs' Damien Courvalin pours cold water all over that narrative as he explains that the rig count decline is still not sufficient, in our view, to achieve the slowdown in US production growth required to balance the oil market. Worse yet, he concludes, with the producer hedging that has occurred over the past weeks and the recent wave of equity issuance, the risk that the US production slowdown will be delayed is high, meaning oil prices will need to remain lower in the coming quarters in order for the announced capex guidance and rig reduction to materialize into sufficiently lower production growth.