Goldman Sachs

Austerity: Also known as “sado-fiscalism”. A forlorn attempt to stave off government bankruptcy.

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Keynesians: Economists “who hear voices in the air (and) are distilling their frenzy from some academic scribbler of a few years back” (John Maynard Keynes).

As we pointed out previously, the growing convergence between BLS-reported initial jobless claims (at 42 year lows) and reported job cuts (highest since 2009) suggests someone is lying. It appears we have found the cuplrit as Goldman Sachs confirms that changes in gross labor market flows (e.g. gross hires and quits), as well as changes in the unemployment insurance benefit take up rate, affect the relationship between jobless claims and employment growth over the cycle. For this reason, today’s low level of jobless claims should probably not be taken as a sign of a booming labor market.

Hot on the heels of Deutsche Bank's admission that all is not well, Credit Suisse's announcement last night of a major capital raise was greeted by buying pressure from investors. However, reality punched them in the face this morning as CS releasaed its investor day details and, as Bloomberg reports, is looking to raise up to CHF8 billion (almost 50% larger than Goldman Sachs investor survey suggested). Clearly, CS' has a much more massive capital shortfall than expected.

• Global stocks eye biggest rally in four years on Fed relief (Reuters)
• FOMC Minutes Sap Confidence in Fed's 2015 Rate Hike Resolve (BBG)
• Glencore to cut annual zinc production by a third (FT)
• Tea Party wave that lifted Republicans threatens to engulf them (Reuters)
• Why Kevin McCarthy Came to Quit Speaker Race (WSJ)
• A U.S. Recession Just Got a Little More Likely (BBG)

News That Matters

Just a day after no lesser world-renowned newsletter writer than Dennis Gartman went full bull-tard of crude oil (in $29.95 terms), Goldman Sachs has come out with a "lower for longer" warning about the crude complex noting that the gains have been exacerbated by still large short positioning and the break of key technical levels. Despite the magnitude of this rally, Goldman does not believe that data releases over the past week suggest a change in oil fundamentals. In fact, high frequency data continue to point to an oversupplied market despite a gradual decline in US production.

Not everything is "fine" in the land of European banks, in fact quite the opposite.

• Congress probing U.S. spy agencies' possible lapses on Russia (Reuters)
• Defense Ministers From NATO Hit Out at Russian Action in Syria (WSJ)
• U.S. Rules Out Cooperation With Russia as Moscow Launches First Naval Strikes on Syria (WSJ)
• Man Who Called China's Boom and Bust Says Use This Rally to Sell (BBG)
• For Volkswagen, New Questions Arise on U.S. Injury Reporting (BBG)
• Deutsche Bank May Swell $14 Billion Selloff in China Bank Stakes (BBG)
• Emerging market slowdown hits German exports (FT)

Deutsche Bank warned it expects to record a third-quarter loss of $7 billion, tied to a huge write-down in its corporate-banking-and-securities segment.  The bank said the charges are driven by the impact of expected higher regulatory capital requirements and its disposal of Postbank. It also said it will consider reducing or eliminating its common dividend for fiscal 2015.

DEUTSCHE BANK SEES 3Q NET LOSS EUR 6.2 BLN
DEUTSCHE BANK TO RECOMMEND DIVIDEND CUT OR POSSIBLE ELIMINATION

News That Matters

The US and world economies are drifting inexorably into the next recession owing to the deflationary collapse of commodities, capital spending and world trade. These are the inevitable “morning after” consequence of the 20-year global credit binge which has now reached its apogee. The apparent global boom during that period was actually a central bank driven excursion into the false economics of household borrowing to inflate consumption in the DM economies; and frenzied, uneconomic investing to inflate GDP in China and the EM. The common denominator was falsification of financial prices. By destroying honest price discovery in the financial markets, the world’s convoy of money-printing central banks led by the Fed elicited a huge excess of financialization relative to economic output.

• How Iranian general plotted out Syrian assault in Moscow (Reuters)
• China FX reserves post record quarterly fall as cenbank steps up yuan support (Reuters)
• MSF calls for independent inquiry into U.S. attack on Afghan hospital (Reuters)
• Yen Advances as Bank of Japan Refrains From Adding to Stimulus (Reuters)
• Abu Dhabi Said to Explore Asset Sales After Slump in Oil Price (BBG)
• U.S. Oil Approaching $50 Boosts Stocks as Emerging Markets Surge (BBG)

In the real world, any casino (legal or otherwise) which refused to pay when the “house” lost would quickly be driven out of business

"As you know, the environment for global macro fundamentals-based trading continues to be challenging. That factor, combined with the lack of certainty over when a recovery will take hold, led us to conclude that the time was right to return capital to you."

The popular belief that the U.S. economy has been steadily recovering has endured months of disappointing data without losing much of its appeal. But the downright dismal September jobs report that was released last Friday may prove to be the flashing red beacon that even the most skilled apologists can't explain away. But rather than questioning the Fed's credibility in missing another forecast, most economists are lauding it for supposedly seeing weakness that others missed, which allowed it to wisely do nothing in September. But this is simply a continuation of the Fed's long-standing playbook: Talk the economy up through optimistic statements while continually holding off an actual rate hike that the Fed is concerned could undermine an economy teetering on the brink of recession.