Goldman Sachs

Though the November election will be hyped as two opposites squaring off against each other, both candidates are considered rather moderate compared to who could have been the nominees.

The question is, are Barack Obama and Mitt Romney really that moderate?

Let’s account for the similarity in policy of both.

All you can read.

The announcement by the UK Treasury and BoE to take co-ordinated steps to boost credit and with the central bank re-activating its emergency liquidity facility has resulted in a sharp move higher in UK fixed income futures. GBP swaps are now pricing in a cut of 25bps in the base rate by the end of this year and following on from Goldman Sachs, analysts at Barclays and BNP Paribas are now calling for an increase in QE next month. The new measures have seen the likes of Lloyds Banking Group (+4.3%) and RBS (+7.0%) outperform the more moderate gains observed in their European counterparts. Meanwhile in Europe the focus remains on the possibility of co-ordinated action from the major central banks. However, it would seem more realistic that any new measures will likely come after the Greek election results are known and once ministers have conducted their G20 meetings. Given that there is an EU level conference call this afternoon scheduled for 1500BST the likelihood of rumours seem high but as the wires have indicated already these conversations are purely based upon co-ordination ahead of the meeting which is usual practice. The yields in Spain and Italy have been a lot calmer so far with the 10yr in Spain at 6.88%, off the uncomfortable test of 7% seen yesterday.

Lower growth expectations and higher risk premia on peripheral European assets have weighed heavily on the EUR since the sovereign crisis began in late 2009. But, as Goldman's FX anti-guru Thomas Stolper notes, we have not seen evidence of a net capital flight crisis out of the Euro area that would have led to disruptive EUR depreciation (yet). Much of the reasoning for the relative stability is the Target 2 system and the high degree of capital mobility in European capital markets which have enabled the rise in risk aversion to be expressed by internal flows (as well as repatriation). With this weekend's election (and retail FX brokers starting to panic), it is clear that the interruption of these internal channels may well lead to a disorderly capital flight and a full-fledged crisis in flows. Stolper outlines four potential catalysts to trigger this chaos (which is not his base-case 'muddle-through' scenario) as we already noted the huge divergence between implied vols and realized vols indicate the market is starting to price in more extreme scenarios and safe-havens (swissy) are bid.

Back in February 2010, in the aftermath of the discovery that none other than Goldman Sachs had facilitated for nearly a decade the masking of the true magnitude of non-Maastricht conforming Greek debt, Zero Hedge first identified the prospectus for a Goldman underwritten swap agreement securitization titled Titlos PLC. We titled the analysis "Is Titlos PLC The Downgrade Catalyst Trigger Which Will Destroy Greece?" because for all intents and purposes it was: at that time a rating agency downgrade of the country would lead to a chain of events which would make billions in assets ineligible for ECB collateral, forcing a massive margin call on the National Bank of Greece, which likely would have precipitated a Greek default there and then.  But that is irrelevant for the time being: what is relevant is Titlos itself, and what Bloomberg did after we posted the analysis. It appears that in following in the footsteps of Mark Pittman, Bloomberg sued the ECB under Freedom of Information rules requesting "access to two internal papers drafted for the central bank’s six-member Executive Board. They show how Greece used swaps to hide its borrowings, according to a March 3, 2010, note attached to the papers and obtained by Bloomberg News. The first document is entitled “The impact on government deficit and debt from off-market swaps: the Greek case.” The second reviews Titlos Plc, a securitization that allowed National Bank of Greece SA, the country’s biggest lender, to exchange swaps on Greek government debt for funding from the ECB, the Executive Board said in the cover note. The ECB's response: "The European Central Bank said it can’t release files showing how Greece may have used derivatives to hide its borrowings because disclosure could still inflame the crisis threatening the future of the single currency." Maybe. But what is far more likely is that the reason why the ECB, headed by none other than former Goldmanite Mario Draghi, is desperate to keep these documents secret is for another reason. A very simple reason:

Mario Draghi - 2002-2005:  Vice Chairman and Managing Director at Goldman Sachs International

As we witness the riotous dissolution of corrupted capitalism, we need not wait for the history books to identify the mile markers of self-destruction. If we are to rebuild capitalism, even as it is tearing itself down, then we will need to become street-smart detectives in analyzing the current economic murder-suicide in progress. Every fall has its tell-tale confirmations and corrupt capitalism is no exception. There arrive key points where a system’s own contradictions become so evident and self-damaging, where motive, means, and opportunity become so clear, that one can mount an informed, effective counter-offensive.

This brings up a lot of interesting legal questions. 

All you need to know.

• Greek Banks Under Pressure (WSJ)
• France Seeks Eurozone Stability Package (FT)
• Germany Dashes Eurozone Expectations (FT)
• Geithner Says European Leaders Know They Must Do More (Bloomberg)
• In Athens, Party Aims to Delay Austerity (WSJ)
• Rajoy Battles ECB for Loans; Monti Appeals for EU Action (Bloomberg)
• Nokia Slashes 10,000 Jobs, Cuts Outlook (WSJ)
• H-1B Visas Hit the Cap, Sending Companies to Plan B (Businessweek)
• Swiss National Bank Vows to Defend Currency Floor (WSJ)
• Euro Crisis Deeper With Moody’s Downgrading Spain, Cyprus (Bloomberg)
• When all else fails... Truckers As Leading Indicator Show Stable U.S. Economic Growth (Bloomberg)

SemGroup in 2008 and the London Whale in 2012 have given the people a blueprint to kill JP Morgan's alleged massive manipulative position in the silver market.

Two months ago, as we were carefully reading the latest Goldman explanation of how the firm had completely missed something Zero Hedge predicted back in January, namely the record warm winter's impact on skewing seasonal adjustments for payroll data (which has since validated our day 1 of 2012 predication that 2012 will be a carbon-copy replica of 2011, and which has made the comedy value of another Goldman masterpiece, that of Jim O'Neill's idiotic "2012: Not a Repeat of 2010 or 2011" soar through the roof) we stumbled upon something we knew was about to get much, much more airplay: Goldman's quiet and out of place admission that what matters for a country's central bank is the flow of its purchases, not the stock (another massive economic misconception we have been trying to debunk since the beginning). Recall these words: "...we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields..." This is how we summarized this observation two months ago (pardon the all caps): "UNLESS THE FED IS ACTIVELY ENGAGING IN MONETIZATION AT EVERY GIVEN MOMENT, THE IMPACT FROM EASING DIMINISHES PROGRESSIVELY, ULTIMATELY APPROACHING ZERO AND SUBSEQUENTLY BECOMING NEGATIVE!"

Halfway into the year, my warnings on the FIRE sector are starting to come into there own. The first look, banks and bank stock analysts!

• How original: Syria prints new money as deficit grows (Reuters)- America is not Syria
• Former SNB head Hildebrand to become BlackRock vice chairman (FT)
• Osborne says Greece may have to quit euro (Reuters)
• Osborne Risks the Wrath of Merkel (FT)
• China second-quarter GDP growth may dip below 7 percent - government adviser (Reuters)
• Italian Borrowing Costs Surge at Auction of 1-Year Bills (Bloomberg)
• Greeks withdraw cash ahead of cliffhanger vote (Reuters)
• Merkel’s Choice Pits European Fate Against German Voter Interest (Bloomberg)
• Italy Tax Increases Backfire as Monti Tightens Belts (Bloomberg)
• Dimon says JPMorgan failed to rein in traders (Reuters)

All you need to know.

• J.P. Morgan Knew of Risks: Warning Flags Raised Two Years Ago About CIO (WSJ)
• Cyprus Poised to Seek Bailout within Days (FT)
• U.S. Exempts India, South Korea From Iran Oil Sanctions (Bloomberg) - so those countries who need Iran crude?
• Barroso Pushes EU Banking Union (FT)
• Hollande Set for Poll Victory (FT)
• Fed Says U.S. Wealth Fell 38.8% in 2007-2010 on Housing (Bloomberg)
• Fed Officials Amplify Concerns over Europe (Reuters)
• Fed's Lockhart Says Lower Yields Bolster Case for No New Action (Bloomberg)