Goldman last made a meaningful downward revision to their EURUSD forecast in August, just after ECB President Draghi’s speech at Jackson Hole. At the time, the message was that EURUSD has begun a protracted weakening trend, reflecting cyclical underperformance vis-à-vis the US and a more activist ECB, which would take the single currency to parity versus the Dollar by 2017. Today, Goldman further revises down their longer-term forecasts, bringing the end-2016 forecast to 1.00 (from 1.05) and that for end-2017 to 0.90 (from 1.00).
Goldman Sachs expects nonfarm payroll job growth of 230k in December, slightly below the consensus forecast of 240k. Labor market indicators continue to point to a strong pace of employment gains, but softened on balance in December. In particular, jobless claims rose modestly and the employment components of service sector business surveys weakened somewhat. With respect to wages, we expect a softer +0.1% gain in average hourly earnings following an unusually large gain in November. On balance, labor market indicators looked somewhat softer in December, but remain consistent with a solid trend rate of employment growth.
For now, they've failed............but the fact that this watering-down was even considered is something I find sickening.
The stealth LBO of the S&P 500 will not only continue in 2015 but accelerate, with another 2% of the entire market cap converted into debt, thanks to a whopping $450 billion in net corporate inflows, $35 billion more than the $415 billion in corporate inflows in 2014.
- French policewoman killed in shoot-out, hunt deepens for militant killers (Reuters)
- The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
- Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
- Oil holds above $51 as traders search for floor (Reuters)
- Gross Helps Fuel New Fund With His Own Cash (WSJ)
- ECB warns Greek funding access hinges on keeping bailout (Reuters)
- Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
- Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
- Scientists find antibiotic that kills bugs without resistance (Reuters)
The 114th Congress formally convened yesterday. In what follows, Goldman Sachs presents its views on some of the central questions regarding the political and policy outlook for the coming year. In general, Goldman expects most of the deadlines Congress faces over the coming year to result in only limited uncertainty, though the debt limit increase that will be necessary later in 2015 is the main potential exception. Additionally, they expect legislation to "audit" Fed monetary policy decisions is likely to pass the House again in 2015, but enactment looks less likely.
History literally appears to be repeating. The mainstream media and our politicians are promising Americans that everything is going to be okay somehow, and that seems to be good enough for most people. But the signs that another massive financial crisis is on the horizon are everywhere.
Is the world's biggest hedge fund going all-in on HFT and Dark Pools? We ask because Ray Dalio's Westport, CT-based Bridgewater, which at last check manages around $160 billion between its Pure Alpha and All Weather fund products, and which according to preliminary data had a solid performance in 2014, has just hired Jose Marques, the former global head of the quant and algo-heavy electronic trading at Deutsche Bank, to become Bridgewater's new head of trading.
- Average 10-year yield of U.S., Japan and Germany dropped below 1% for the first time ever: Free Money in Bond Markets Shows Global Economy Still Struggling (BBG)
- Brent falls below $52 as oil hits new five and a half year lows (Reuters)
- China Fast-Tracks $1 Trillion in Projects to Spur Growth (BBG)
- Saudi Arabia Raises Price of Main Oil Grade for Asian Buyers (BBG)
- Oilfield Writedowns Loom as Crude Slump Guts Drilling Values (BBG)
- Biggest Oil-Rig Drop Since 2009 Spells Tough Year Ahead (BBG)
- CIA says its inspector general is resigning at end of month (Reuters)
- Pipeline IPOs Climb on Demand for Returns Immune to Oil (BBG)
- Natural Gas No Savior for Investors Seeking Oil Refuge (BBG)
- Euro zone economy ended 2014 in poor shape (Reuters)
The surreal nature of this world as we enter 2015 feels like being trapped in a Fellini movie. The .1% party like it’s 1999, central bankers not only don’t take away the punch bowl – they spike it with 200% grain alcohol, the purveyors of propaganda in the mainstream media encourage the party to reach Caligula orgy levels, the captured political class and their government apparatchiks propagate manipulated and massaged economic data to convince the masses their standard of living isn’t really deteriorating, and the entire façade is supposedly validated by all-time highs in the stock market. It’s nothing but mass delusion perpetuated by the issuance of prodigious amounts of debt by central bankers around the globe. But now, the year of consequences may have finally arrived.
“Don’t look back - something might be gaining on you,” Satchel Paige famously warned. For connoisseurs of civilizational collapse, 2014 was merely annoying, a continued pile-up of over-investments in complexity with mounting diminishing returns, metastasizing fragility, and no satisfying resolution. So we enter 2015 with greater tensions than ever before and therefore the likelihood that the inevitable breakdown will release more destructive energy and be that much harder to recover from.
Something stunning and unexpected took place in the third quarter: Citigroup, or rather its FDIC-insured Citibank National Association entity, just surpassed JPM and is now the biggest single holder of total derivatives in the US. Furthermore, as the charts below show, while every other bank was derisking its balance sheet, Citi not only increased its total derivative holdings by $1 trillion in Q2, but by a whopping, and perhaps even record, $9 trillion in the just concluded third quarter to $70.2 trillion!
Not satisfied with merely "nailing the number", Goldman Sachs' David Kostin forecasts the S&P 500's trajectory through 2015. Recognizing, as we did, that Bullish Sentiment is as highs as it gets, Kostin expects short-term weakness during the next month (the drop), earnings growth thanks to lower oil prices into mid-year (the pop), but multiple compression after rate hikes into year-end (the slop)...
What "wall of worry"? Goldman Sachs S&P 500 Sentiment Indicator has reached 11 on the Spinal Tap amplifier of euphoric positioning...
- The year of dollar danger for the world (Ambrose Evans-Pritchard)
- Draghi Says ECB Prepares Action as Deflation Risk Non-Negligible (BBG)
- Obama Pivots to Lawmakers: New Plan to Advance Policy Goals by Working With Congress Draws Skeptics (WSJ)
- Affordable Care Act Creates a Trickier Tax Season (WSJ)
- Oil pares early gains, trades near $57 as supply glut prevails (Reuters)
- Iran says Saudi Arabia should move to curb oil price fall (Reuters)
- Pimco Fund Trails Peers in 2014 After Missing Rally (BBG)
- Piketty rejects Légion d’Honneur award (FT)
- UK manufacturing activity hits three-month low (BBC)