Goldman Sachs

Guest Post: Say Goodbye To The Purchasing Power Of The Dollar

Through the centuries in historic cultures like that of Yap Island who used giant, immovable stone disks for commerce, to today's United States, whose Dollar fiat currency exists primarily in digital form "money" is able to be exchanged for goods and services because society agrees to accept it (at a certain rate of exchange). But what happens when a society starts doubting the value of its money?  Perhaps the Fed has just the right talent and tools we need to finesse our way out of the challenges we face. Unlikely. The reality is, the Federal Reserve is like any other organization. Human. And fallible. For those who want to argue that the Fed, with its cadre of hyper-degreed academics and its insider access, has superior information and thus the ability to predict the future with unparalleled accuracy; we humbly ask you to watch the following...

Biggest Drop In A Month For Stocks Led By Big Bank Battering

Goldman Sachs and Morgan Stanley are down 6.5% on the week (and even BofA has turned red on the week) as US equities have started to show 'slight' strains on European fears (as well as global PMIs and US earnings - what else is there?). Homebuilders gave up all their week's outperformance in the first hour of the day. Dow Transports are down 2.5% on the week now - notably underperforming and reverting their outperformance. VIX surged 1.25 vols to 14.00% - with protection remaining bid relative to stock's modest drop so far. While Treasury yields pushed lower all day (-6bps on the week) as did WTI (-1.5% on the week now), gold and silver flatlined after the spike higher this morning (both up 1.4% on the week). JPY strength was a key factor today as carry-trades were unwound. Risk-assets in general were once again highly correlated as credit tracked lower closing at its lows of the day like stocks. Equity trading volume was above average but average trade size is still falling and S&P 500 futures inability to hold VWAP into the close suggests institutional selling pressure is picking up.

Frontrunning: March 21

  • Euro zone call notes reveal extent of alarm over Cyprus (Reuters)
  • Stagnant Japan Rolls Dice on New Era of Easy Money (WSJ)
  • Cyprus, European data batters shares and euro (Reuters)
  • UK cuts taxes to revive stagnant economy (FT)
  • "Quality Control" Rat Body Linked to Blackout at Fukushima (NYT)
  • North Korea issues fresh threat to U.S., South probes hacking (Reuters)
  • South Korea Says Chinese Code Used in Computer Attack (BBG)
  • Osborne paves way for Carney to retool Bank of England (Reuters)
  • Carney Gets ‘Escape Velocity’ Mandate With Limiter (BBG)
  • Osborne Pledges Five More Years of U.K. Austerity (BBG)
  • Bernanke Saying He’s Dispensable Suggests Tenure Ending (BBG)
  • Senate Passes Bill to Fund Operations (WSJ)

Frontrunning: March 19

  • Cyprus parliament ready to veto deposit tax (Reuters)
  • Power still out at damaged nuclear plant in Japan (AP)
  • CS' Dougan Calls Bankers Out-Earning Investors Unsustainable (BBG)
  • Citi in $730 Million Pact on Debt Suits (WSJ)
  • Bernanke Tightens Hold on Fed Message Against Hawks (BBG)
  • India Central Bank Cuts Lending Rate (WSJ)
  • ECB role in bailout comes under scrutiny (FT)
  • Putin Buddy Gets $7 Billion of Deals for Sochi Olympics (BBG)
  • BlackRock to Cut About 300 Jobs in Fink’s Reorganization (BBG)
  • Trade, economy top agenda as China's Xi meets U.S.'s Lew (Reuters)
  • Late Winter Storm Threatens Heavy Snow for Northern New England (BBG)
  • China Foreign Investment Rebounds as Confidence Returns (BBG)
  • Republicans differ on flexibility on taxes with Obama (Reuters)
David Fry's picture

Market Wake-Up Call

Most investors are nervous now and need to hold things together to include the Fed meeting announcement Wednesday. If bulls are lucky they’ll get their Turnaround Tuesday.  

A London Cabbie Explains The Great EU Bank Robbery And Much Much More

Still in WallStreetPro withdrawal? We may have just the methadone fix for you... "You will lose your f##king money in your bank," is how this English gentleman cabbie begins his caustic diatribe against all that is wrong with European (and in fact) the world of bankers and elites. The so-called 'artist taxi driver' has a spit-flying hand-smashing epic rant while sitting in his taxi. "They did a stress test on the banks in Cyprus 18 months ago and said it's f##king great" and now this; "this is some f##king crooked shit." "They're off their f##king nuts mate," he explains as he asks rhetorically of the bankers getting the bailouts, "how many f##king ponies do their daughters' need?" Insightfully he remarks that, "Cyprus could be the beginning of a bigger and f##king worse financial crisis," and exclaims "[Goldman Sachs and the Bankers] are looking after their own interest - who are they f##king borrowing money to in Cyprus?" His exasperation is one many can empathize with we are sure as he concludes, "We need to shut down the f##king markets... What kind of society allows the rich people to be gambling while the poor people f##king die," ending with a warning, "Wake the f##k up!"

Frontrunning: March 15

  • JPMorgan Report Piles Pressure on Dimon in Too-Big Debate (BBG)
  • Employers Blast Fees From New Health Law (WSJ)
  • Obama unveils US energy blueprint (FT)
  • Obama to Push Advanced-Vehicle Research (WSJ) - here come Solar-powered cars?
  • BRICs Abandoned by Locals as Fund Outflows Reach 1996 High (BBG)
  • Obama won't trip over Netanyahu's Iran "red line" (Reuters)
  • Samsung puts firepower behind Galaxy (FT)
  • Boeing sees 787 airborne in weeks with fortified battery (Reuters)
  • Greece Counts on Gas, Gambling to Revive Asset Sales Tied to Aid (BBG)
  • Goldman’s O’Neill Says S&P 500 Beyond 1,600 Needs Growth (BBG)
  • China’s new president in corruption battle (FT)
  • Post-Chavez Venezuela as Chilly for Companies From P&G to Coke (BBG)

Today's Pre-Ramp Preview

"Equity prices in the US and Europe have been hovering at multi-year highs. To the extent that this reflects powerful policy easing, equity markets may have lost some of its ability to reflect economic trends in exchange for an important role in the policy fight to support spending." This is a statement from a Bank of America report overnight in which the bailed out bank confirms what has been said here since the launch of QE1 - there is no "market", there is no economic growth discounting mechanism, there is merely a monetary policy vehicle. To those, therefore, who can "forecast" what this vehicle does based on the whims of a few good central planners, we congratulate them. Because, explicitly, there is no actual forecasting involved. The only question is how long does the "career trade", in which everyone must be herded into the same trades or else risk loss of a bonus or job, go on for before mean reversion finally strikes. One thing that is clear is that since news is market positive, irrelevant of whether it is good or bad, virtually everything that has happened overnight, or will happen today, does not matter, and all stock watchers have to look forward to is another low volume grind higher, as has been the case for the past two weeks.

Swirlogram Shows Slowdown Is Here

Despite the hopes and greed of the marginal greater fool algo lifting equity markets to highs, Goldman's business cycle 'swirlogram' has dropped notably into the 'Slowdown' phase after a brief 6-month trip into 'Expansion'. China growth risks remain the largest weight on investors' angst (Chinese IP growth and retail sales for the January/February period were sequentially weaker, and overall disappointing) as Euro and US risks have 'apparently' fallen in the last week or two.

David Stockman On "The Great Deformation" And The US Treasury As "The M&A Department Of Goldman Sachs"

The fiscal cliff is permanent and insurmountable. It stands at the edge of a $20 trillion abyss of deficits over the next decade. And this estimation is conservative, based on sober economic assumptions and the dug-in tax and spending positions of the two parties, both powerfully abetted by lobbies and special interests which fight for every paragraph of loophole ridden tax code and each line of a grossly bloated budget. Fiscal cliffs as far as the eye can see are the deeply troubling outcome of the Great Deformation. They are the result of capture of the state, especially its central bank, the Federal Reserve, by crony capitalist forces deeply inimical to free markets and democracy. Why we are mired in this virtually unsolvable problem is the reason I wrote this book. It originated in my being flabbergasted when the Republican White House in September 2008 proposed the $700 billion TARP bailout of Wall Street. When the courageous House Republicans who voted it down were forced to walk the plank a second time in betrayal of their principled stand, my sense of disbelief turned into a not-inconsiderable outrage. Likewise, I was shocked to read of the blatant deal making, bribing, and bullying of the troubled big banks being conducted out of the treasury secretary’s office, as if it were the M&A department of Goldman Sachs.

Frontrunning: March 11

  • One in four Germans would back anti-euro party (Reuters)
  • EU Chiefs Seeking to Stave Off Euro Crisis Turn to Cyprus (BBG)
  • Ryan Says His Budget Would Slow Annual Spending Growth to 3.4% (BBG)
  • Goldman leads decline as Wall Street commodity revenues plummet (Reuters)
  • South Korea and US begin military drills (FT) and North Korea cuts off hotline with South Korea (Reuters)
  • Karzai Inflames U.S. Tensions  (WSJ)
  • Algorithms Get a Human Hand in Steering Web (NYT)
  • Meeting Is Set to Choose Pope (WSJ)
  • More U.S. Profits Parked Abroad, Saving on Taxes (WSJ)
  • Banks rush to redraft pay deals (FT)
  • Fugitive Fund Manager Stuffed Underwear With Cash, Fled (BBG)
  • Post-Newtown Gun Limits Agenda Narrows in U.S. Congress (BBG)
  • China Hints at Shift in One-Child Policy (WSJ)

Frontrunning: March 8

  • Firms Send Record Cash Back to Investors (WSJ)
  • And in totally opposite news, from the same source: Firms Race to Raise Cash (WSJ)
  • China warns over fresh currency tensions (FT)
  • Hollande faces pressure over jobs pledge (FT)
  • Obama efforts renew ‘grand bargain’ hopes (FT)
  • Shirakawa BOJ Expansion Gets No Respect as Stocks Cheer Exit (BBG)
  • Japan’s Nakao Defends Easing as China’s Chen Expresses Concern (BBG)
  • Boeing Had Considered Battery Fire Nearly Impossible, Report Says (WSJ)
  • ECB Chief Plays Down Italy Fears (WSJ)
  • China moves to make its markets credible (FT)
  • Euro Group head says UK at risk of 'sterling crisis' (Telegraph)