Goldman Sachs

Frontrunning: October 2

  • U.S. Government Shut Down With No Quick Resolution Seen (BBG)
  • 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
  • Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
  • Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
  • Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
  • Foreign Firms Tap U.S. Gas Bonanza (WSJ)
  • Behind Standoff, a Broken Process in Need of a Broker (WSJ)
  • Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
  • Microsoft investors push for chairman Gates to step down (Reuters)

Goldman's Global Leading Indicator Plunges Back To "Slowdown"

Everything looked so good in August. Goldman's global leading indicator (GLI) "swirlogram" had recovered quickly from a 'growth scare' in Q1 and was holding firmly in "expansion" territory. Then reality hit as new-orders-less-inventories worsened, various manufacturing surveys rolled over, industrial metals gave up gains, and Korean exports provided no help. Among the few factors holding up the index from already plunging levels was the Baltic Dry Index (which has collapsed now in the last few days) and Consumer Confidence (which appears to also be rolling over). September's plunge into "slowdown" for the GLI is the biggest drop in 8 months.

On The First Day Of Shutdown, The Futures Were... Giddy

If there is one day the Fed's trading desk actually did want futures lower, if only for purely optical purposes and to at least suggest that the government, and not the Fed, is still in charge of the US, it is the day when the US government - for the first time in 17 years - has shut down. They certainly did not want the S&P to be up nearly 0.5% mere hours after Congress and the presidency confirmed to the world that in a world in which "the Chairman gets to work", a functioning government is completely irrelevant. Yet this is precisely what is going on. What is making matters worse is that on the other side of the world, Japan also finally announced the well-telegraphed sales tax increase to8%, offset by a JPY5 trillion yen "stimulus" which however Japan said, much to the Chagrin of Mrs. Watanabe and a 100 pip overnight plunge in the USDJPY, would be funded not with more new bond issuance (and thus without new "wealth effect" generating monetization). It is unclear just how it will be funded but since increasingly more global fiscal and monetary policy is based on science fiction we know better than to ask.

NYPD Searching For Parachutists Who Landed Near Goldman's New York Headquarters

Just in case you thought the surreality of the US political debacle we are witnessing was too much, the NYPD releases a statement that stokes the fire of confusion. The New York Police Department is looking for two unidentified people who may (or may not) have parachuted on to a lower Manhattan Street. Private security guards reported seeing the skydivers land in front of the Goldman Sachs HQ at around 3am (which we could not help but note was the highs of the European session for Gold). The police noted it was unclear if they jumped from a plane or from a high-rise building (or from Bernanke's helicopter).

Frontrunning: September 30

  • Government Heads Toward Shutdown (WSJ), First U.S. Shutdown in 17 Years at Midnight Seen Probable (BBG), Congress in game of chicken (RTRS)
  • Italian Premier Pursues Last-Ditch Rescue of Government (WSJ)
  • Election risk rattles Italian government bonds (RTRS)
  • Obama and Ryan Stay on Sidelines on Budget (WSJ)
  • Volcker Rule Costs Tallied as U.S. Regulators Press Deadline (BBG)
  • Faltering Chinese Factory Growth Adds to Rebound Fears (FT)
  • Health Law Hits Late Snags as Rollout Approaches (WSJ)
  • Apple Overtakes Coca-Cola as Most Valuable Brand, Study Finds (BBG)
  • Euro-Area September Inflation Slows More Than Forecast on Energy (BBG) - Puting will fix that shortly

The Government Shutdown Looms: A Q&A On What Happens Next (And Who Stays At Home)

With a government's October 1 shut down - temporary of course - now seemingly inevitable, and more importantly with the peak debt ceiling negotiations due in just about a week after which point the Treasury will run out of money, many wonder what comes next. That this is happening just two short years after the dramatic August 2011 debt ceiling impasse, when the market tumbled 20% and likely slowed economic growth is still fresh in everyone's mind, is hardly helping matters. Add a potential political crisis in Greece and Italy, and suddenly a whole lot of unexpected variables have to be "priced in."

"A Scam Of Unmatchable Balls And Cruelty" - Matt Taibbi On Wall Street's "Triple-Fucking Of Ordinary People"

"This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.... It's a scam of almost unmatchable balls and cruelty, accomplished with the aid of some singularly spineless politicians. And it hasn't happened overnight. This has been in the works for decades, and the fighting has been dirty all the way."

JCPennyless Announces $9.65/Share Public Offering Price

It's official: the absolute wreck of a soon to be insolvent retailer that is JCPennyless, has just announced the pricing of its 84 million shares (thank you Goldman Sachs), and the price is $9.65. Putting this into context, this offering price is 25% below the $12.90 price at which Bill Ackman dumped his entire stake a month ago to even more clueless "investors", and about 26% below the $13/share price at which Vornado sold its entire stake last Friday. Existing shareholders: congratulations, you just got diluted by 44% (with the full overallotment), but at least you get to enjoy your misery for a few more months as the melting icecube of a company does what it does best: continues melting.

Goldman's Analyst Index Plunges Most In A Year

Goldman Sachs Analyst Index (GSAI) tracks manufacturing and service sectors based on bottom-up analyst input on a firm by firm basis to generate a real-time indicator of US economic strength akin to the ISM data. After spiking to multi-year highs in August, it has collapsed by the most in a year in September as the New Orders sub-index retraced its outsized gains from August. The sales/shipments index fell, while the employment index stayed flat and below the 50 mark. The underlying composition of the GSAI weakened in September with a few sectors noting lower sales and/or a downgrade in expectations, and on balance sentiment with respect to business conditions seemed a touch weaker since August and employment remained below 50 for the sixth month.

So Many Lies, So Little Time: JCP Sells 84 Million Shares Via Goldman Sachs Hours After Telling CNBC It Won't Sell Equity

Remember when one after another JCPenney executive lined up earlier today, mostly using that damage control TV outlet known as CNBC, to promise that JCP does not, repeat not, need emergency public equity funding? Guess what: they were lying. Just out from Bloomberg:

J. C. PENNEY ANNOUNCES PROPOSED PUBLIC OFFERING OF COMMON STOC
J. C. PENNEY COMMENCED PUBLIC OFFERING OF 84 MILLION SHARES

And the punchline:

  • JC PENNEY TO OFFER SHARES VIA GOLDMAN SACHS

Yep: the same firm that just killed JCP two days ago, is now diluting the stock some more.

Chinese Housewives vs. Goldman Sachs: No Contest

Goldman Sachs is once again predicting that gold will fall, setting a new near-term target of $1,050. Never mind the schizophrenic gene that would be required to follow the constantly fluctuating predictions of all these big banks. Sure, the too-big-to-fails can move markets - but they say things that are good for them, not us. As an example, while Goldman Sachs was telling clients and the public to sell gold in the second quarter, they bought 3.7 million shares of GLD and became the ETF's 7th largest holder. When we visited China, guess who no one was talking about? Goldman Sachs. Since January 1, gold ETF holdings have fallen by roughly a quarter (26%, according to GFMS). But Chinese housewives aren't refraining from buying and certainly aren’t selling...

Goldman Goes Medieval On JCPenney: Shorts Bonds; Slams Liquidity; Expects Default Risk Surge

Back in April, in a desperate scramble to raise liquidity courtesy of a hail mary Goldman syndicated term loan, we penned "Confused By What Is Going On At JCP? Here's The Pro Forma Cap Table And The Cliff Notes", where in addition to the obvious - that this is merely buying a few months for the melting icecube company which with every passing day is closer to a Chapter 11 (or 7) bankruptcy filing - we also laid out that what Goldman was doing was merely positioning itself to be at the top of the company's capital structure with a super secured and overcollateralized credit facility, through what is effectively a pre-petition DIP...  As it turns out we only had to wait for five months before the same Goldman that raised the company's emergency liquidity term loan turned around and launched a vicious attack on the same company that paid it millions in dollars in underwriting fees. Specifically, what Goldman just did is write a report (perhaps one of the best bearish cross-asset investment theses we have seen to come out of the firm in a long time) in which it laid out, in a lucid and compelling manner, why JCP is doomed. The report is titled appropriately enough: "Initiate on JCP with Underperform: Looking for cash in the name"... and not finding it.