Goldman Sachs

Frontrunning: June 11

  • Citigroup Facing $7 Billion Currency Hit on Dollar, Peabody Says (BBG)
  • World has 10 years of shale oil, reports US (FT)
  • ECB prepares to defend monetary policy in German court (FT)
  • European Stocks Sink to Seven-Week Low as Treasuries Fall (BBG)
  • Fitch warns on risks from shadow banking in China (Reuters)
  • Obama administration to drop limits on morning-after pill (Reuters)
  • ACLU asks spy court to release secret rulings in response to leaks (MSNBC)
  • SEC Nets Win in 'Naked Short' Case (WSJ)
  • SoftBank Raises Offer for Sprint to $21.6 Billion (WSJ)
  • Chinese rocket launch marks giant leap towards space station (FT)

Yen Soars Most In Over Three Years, Nikkei Futures Plummet

Overnight, following the disappointing BOJ announcement which contained none of the Goldman-expected "buy thesis" elements in it, things started going rapidly out of control, and culminated with the USDJPY plunging from 99 to under 96.50 as of minutes ago, which was the equivalent of a 2.3% jump in the Yen, the currency's biggest surge in over three years. Adding insult to injury was finance ministry official Eisuke Sakakibara who said that further weakening of yen "not likely" at the moment, that the currency will hover around 100 (or surge as the case may be) and that 2% inflation is "a dream." Bottom line, NKY225 futures have had one of their trademark 700 points swing days, and are back knocking on the 12-handle door. Once again, the muppets have been slain. Golf clap Goldman.

Frontrunning: June 10

  • In Hong Kong, ex-CIA man may not escape U.S. reach (Reuters)
  • Backlash over US snooping intensifies (FT)
  • Apple to Revamp IPhone Software, Ending Product Funk (BBG)
  • Nothing like revising history: Japan revises up Q1 growth to annual 4.1% (FT), just don't look at the trade deficit
  • Coffee Exports From Indonesia Seen Slumping to Two-Year Low (BBG)
  • Euro bailout Troika nears end of road with patchy record (Reuters)
  • Treasuries Little Changed Before Bullard Speaks Amid QE Debate (BBG)
  • Schwab Topping Goldman Sachs Presages Return to Stocks (BBG)
  • Hedge funds take over another city: London’s Forced Renters Fuel Apartment Investing Boom (BBG)

Japan's Ruling LDP Party Joins JGBi Market In Fears that "Abenomics Could Fail"

With JPY back around 98 and the Nikkei 225 indicating further advances, perhaps the fears in the market are mis-represented - at least that's what the other Goldman desk would have you believe. But, as The Japan Times reports, even glorious leader Abe's own LDP party are beginning to voice concerns that all this fluff is - well - just that. As we outlined here the market is already concerned, and additionally as Goldman notes, the fact that the JGBi expected inflation level - a now symbolic indicator of policy success since Kuroda quoted it -  is now suddenly moving counter to its previous extended trend could possibly indicate the markets’ early signal questioning the credibility of the BOJ policy. The recent stock price collapse, Lower House LDP lawmakers noted "shows the market expects little (of Abenomics)." The sky-high approval ratings (and business confidence) for the Abe Cabinet have been bolstered by the resurgence of the benchmark Nikkei since 'Abe(g)nomics began. The stock market’s downturn, therefore, has created a sense of crisis among some members of the ruling LDP, because "Abenomics could fail."

How CEOs Play "Beat The Wall Street Estimate"

While Wall Street is implicitly conflicted in its actions, there is also another group of individuals who are also just as conflicted - corporate executives. Today, more than ever, corporate executives are compensated by stock options, and other stock based compensation, which are tied to rising stock prices. There are billions at stake in many cases and the game of "beat the Wall Street estimate" is critical in keeping corporate stock prices elevated. Unfortunately, this leads to a wide variety of gimmicks to boost bottom line profitability which is not necessarily in the best interest of long term profitability or shareholders. Today we will discuss four tools that have been at the heart of the surge in profitability since 2009 and why such profitability has failed to boost the economy. While the Fed's ongoing interventions since 2009 have provided the necessary support to the current economic cycle it will not "repeal" the business cycle completely.  The Fed's actions work to pull forward future consumption to support the current economy.  This is turn has boosted corporate profitability as the effectiveness of corporate profitability tools were most effective. However, such actions leave a void in the future that must be filled by organic economic growth.  The problem comes when such growth doesn't appear.

Goldman Warns Of Venezuela Hyperinflation Threat

Year-over-year inflation in Venezuela accelerated to 35.2% - up from 20.1% YoY in December. Goldman is concerned as the 6.1% MoM (the highest on record) in May means inflation is now endemic and the economy could easily veer from the current stagflation equilibrium into the dangerous and slippery road to hyperinflation. In a sentence that rings all to close to home, they sum up: All in all, we are increasingly concerned with the inflation and monetary dynamics in Venezuela as the classical Sargent and Wallace (1981) “unpleasant monetarist arithmetic” of severe fiscal dominance brought about by growing monetization of fiscal deficits and very weak policy credibility could easily degenerate in a recessionary hyper-inflationary spiral. That must mean it is time to buy the Caracas Stock Index (+72% YTD, +600% since Jan 2012)?

The Full List Of 2013's Bilderberg Attendees

The only thing more ominous for the world than a Hindenburg Omen sighting is a Bilderberg Group meeting. The concentration of politicians and business leaders has meant the organisation, founded at the Bilderberg Hotel near Arnhem in 1954, has faced accusations of secrecy. Meetings take place behind closed doors, with a ban on journalists. We suspect the agenda (how the US and Europe can promote growth, the way 'big data' is changing 'almost everything', the challenges facing the continent of Africa, and the threat of cyber warfare) has been somewhat re-arranged as market volatility picks up and the status quo begins to quake once again.  The annual gathering of the royalty, statesmen, and business leaders, conspiratorially believed to run the world (snubbing their Illuminati peers and Freemason fellows), will take place this week at the Grove Hotel in London, England. The Telegraph provides the full list of attendees below - for those autogrpah seekers - including Britain's George Osborne, US' Henry Kissinger, Peter Sutherland (the chairman of Goldman Sachs), the Fed's Kevin Warsh, Jeff Bezos?, Peter Thiel, Italy's Mario Monti, and Spain's de Guindos.

Guest Post: Mark Carney's False Ideology

Neil Macdonald of the CBC recently did an investigative piece on central bankers and what they’re doing to the world’s economies. Mark Carney was featured heavily. He told Macdonald, “there is no secret cabal orchestrating things,” despite CBC’s own findings earlier in the program. Central bankers around the world meet in Basel, Switzerland for secretive meetings. Of course, central banks have – and have always had – enormous power that remained more-or-less hidden until 2008. A paradigm shift is occurring where a large number of people (particularly young people) are questioning their assumptions. Some of them are even beginning to read economists like Ludwig von Mises and Murray Rothbard. The “economics” of central bankers can now be revealed for what it truly is: statistical propaganda. Not only is the “Keynesian school” of economics unsound – the entire social science is bunk. Only the Austrian tradition can explain economic phenomena in such a way that makes common sense, scientific. Carney is asking us to trust him. This cannot be done. He is not speaking truth; he is speaking nonsense.

South Korea Demands "International Action" Against "Negative Impact" Of Abenomics

Over three months ago in "South Korea Starts Currency War Rumblings; Has Japan In Its Sights" we showed that the one nation with the biggest sensitivity to Japan's currency-destructive and export-promoting Abenomics policy is its close neighbor, South Korea. With nearly 60% of SK's entire GDP deriving from net exports, every percent drop in its trade balance result in a more than 0.5% hit to GDP: more than any nation in the world. And since South Korea and Japan compete for the same export end markets, there would be no bigger loser in a zero trade sum world than Seoul. However now that Abenomics is in its sixth month, and South Korea's max export pain threshold has been reached, the country no longer will stay silent. As the FT reports, "South Korea has warned that G8 leaders need to do more to tackle the “unintended consequences” of Japan’s monetary easing when they gather for a summit later this month amid mounting concerns about the knock-on effects of a weaker yen. In an interview, Hyun Oh-seok, the South Korean finance minister and deputy prime minister, said that international co-ordinated action was needed to mitigate the impact of so-called “Abenomics” on currency markets."

Morgan Stanley Head Of Treasury Trading Busted For... Trading Treasurys While At Goldman

Perhaps there is a reason why Morgan Stanley is 'giving up' on its fixed income business. It seems, yet again Morgan Stanley has hired an ex-Goldman Sachs criminal   opportunistic trader. Glenn Hadden, the very head of interest rate trading at Morgan Stanley, has been found guilty of engaging in trading that violated CME rules in Treasury futures on December 19th 2008 - while was employed by Goldman Sachs. While Goldman faces a $875,000 slap on the wrist, Hadden, somewhat remarkably will face a mere $80,000 fine and the wonderfully timed (given the summer doldrums) 10-day suspension from trading. Doing God's work wherever they trade... that'll teach him! And now, back to Glenn manipulating buying and selling the 10 Year.

It Is 3 Times Easier To Get Into Harvard Than To Become A Goldman Summer Intern

While the acceptance ratio at Harvard, the lowest of any university, is 5.9%, Goldman Sachs has just topped it for 'exclusivity'. As Gary Cohn explains in this brief Bloomberg clip, the firm hired 350 summer 'intern' analysts in its investment-banking division from a pool of more than 17,000 applicants - an acceptance ratio of 2%. It seems the firm has no problem attracting 'talent' but it remains in second place for most 'difficult' job to attain... behind flight attendant at Delta Airlines.