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Posts tagged ‘Goldman Sachs’

Why Goldman Is Closing Out Its “Tactical Pro-cyclical” European Trades On Grexit Fears

It will be politics rather than economics (or Q€) that drives the shorter-term outlook in Greece. Goldman Sachs warns that the new Greek government’s position is turning more Eurosceptic and confrontational than most (and the market) had anticipated ahead of last weekend’s election. This increases the risk of a political miscalculation leading to an economic and financial accident and, possibly, Greek exit from the Euro area (“Grexit”) and while many assume European authorities have the ‘tools’ to address market dislocations arising from this event risk, Goldman expects significant market volatility. Rather stunningly, against this background, and in spite of Q€, recommends closing tactical pro-cyclical exposures in peripheral EMU spreads (Italy, Spain and Portugal) and equities (overweight Italy and Spain).

Via Goldman Sachs,

Bottom line:

  • It will be politics rather than economics that drives the shorter-term outlook in Greece. Our base case remains that, eventually, some accommodation will be found between the new Greek government and Greece’s official creditors. This view has led us, so far, to expect modest spillovers from financial tensions in Greece to other Euro area markets. Thus far, this has proven correct.
  • But the new Greek government’s position is turning more Eurosceptic and confrontational than we anticipated ahead of last weekend’s election. This increases the risk of a political miscalculation leading to an economic and financial accident and, possibly, Greek exit from the Euro area (“Grexit”). While the European authorities now have better tools to address market dislocations in general (and the re-emergence of convertibility risk in particular), these are unlikely to be activated in a manner that entirely pre-empts market tension should Grexit risks intensify or materialise. We would expect significant market volatility surrounding an event of such systemic nature as Grexit. The intensity and persistence of such volatility would depend on the process by which Grexit occurred, and on the nature of the policy and political response to it in other Euro area countries.
  • Against this background, we recommend closing tactical pro-cyclical exposures in peripheral EMU spreads (Italy, Spain and Portugal) and equities (overweight MIB and IBEX vs. SXXP) until more clarity emerges about the direction ongoing negotiations between the new Greek government and the European authorities are taking. However, we continue to see the medium-term prospects for the European equity market as attractive given the high equity risk premium, the impact of QE in moderating deflationary fears, and improving cyclical prospects driven by the impact of lower oil prices and a weakening Euro exchange rate. We continue to see tighter intra-EMU spreads, steeper EURIBOR and ‘core’ yield curves over the balance of this year, and forecast 390 on the SXXP and 3800 on the SX5E over 12 months.

Greece: Taking stock post-election

Background – Pre-election expectations

1. Ahead of the Greek elections, it was widely anticipated that a new Greek government led by the radical-left Syriza party would embark on its promised renegotiation of the terms at which Greece receives financial support from the European and international authorities. Key elements of such a renegotiation would be: (a) demands for debt relief; (b) less strenuous (or even a reversal of) fiscal adjustment; and (c) relaxation of the conditionality and control over Greek policies imposed by the ‘troika’ (the European Commission, ECB and IMF overseers of Greece’s adjustment programme). These demands run counter to the terms offered by the European authorities in their proposed extension to the existing Greek adjustment programme.

2. The threat of renegotiation promised a period of heightened political tension between the new Greek government and the European authorities, as each staked out its bargaining position. In turn, these political tensions were likely to create strains in the Greek financial sector, reflecting market participants’ concerns that external financial support could be disrupted by the political stand-off.

3. In these circumstances, the risk of a Greek exit from the Euro (“Grexit”) would rise. Whatever the economic incentives to seek a compromise, in a fraught political situation the danger of a miscalculation leading to disorderly exit always exists. Yet nevertheless, ahead of the elections our base case was that ultimately a new accommodation would be found (see: “Greece: Uncertainty to persist and peak well after the election”, Global Markets Daily, January 23, 2015).

On the Greek side, the stated ambition of Syriza (and its leader, the new Prime Minister Alexis Tsipras) – in line with the overwhelming view of Greek public opinion (as reflected in polls) – was to retain the Euro and Greek membership of the Euro area. The realities of financial and economic dependence on external support, as well as the moderating effect of the anticipated more pro-European coalition partners in the new government, would eventually lead Syriza to seek some compromise.

full article at source: http://www.zerohedge.com/news/2015-02-02/why-goldman-closing-out-its-tactical-pro-cyclical-european-trades-grexit-fears

Comment:

By Thomás Aengus O Cléirigh
No matter what happens to Greece, the rest of Europe, Spain, Italy, Portugal, Ireland, Belgium France, peoples are now awakening only to see that the whole austerity “Thing” was nothing short of an engineered smash and grab of the savings ( National pension fund) and cash cow potential ( Tax collections) of the working class! A financial /economic system that rewards private gamblers who infest the national banks and are able to do as they please and if the reckless and downright criminal and treasonable actions result in massive debts the citizens of said countries are forced to pick up the tab! NO MORE! Greece is just the beginning and we the peoples of the various enslaved countries will not stop until we have rid ourselves of this toxic financial system: We want a better future for our children we have shafted all our lives and we are slowly waking up to the lies of this insane financial and political system where we always lose! We must always put of having a decent liven now for some unspecified future, but our political parasites and the bankers can have lottery lifestyles now! NO More! We will ensure our children will not have to pay these odious debts period!
We must end this monopoly money financial system where the ordinary people are always the losers!

Goldman Warns Greeks Of “Cyprus-Style Prolonged Bank Holiday” If They “Vote Wrong”

Funny what a difference two months make. Back on October 4, we wrote “Here We Go Again: Greece Will Be In Default Within 15 Months, S&P Warns” and… nobody cared as the Greek stock market meltup continued. Now, after the biggest three-day rout in Greek stock market history (or about 30% lower), and with the overhyped, oversold, oversusbcribed recent Greek 5 Year bond issue available in the open market some 16 points lower, and suddenly everyone cares. Including Goldman Sachs.

Overnight the bank with the $58 trillion in derivative exposure issued a note “From GRecovery to GRelapse” which is quite absent on the usual optimism, cheerfulness and happy-ending we have grown to expect from the bank whose former employee is in charge of the European printing press. Here is the punchline: “In the event of a severe Greek government clash with international lenders, interruption of liquidity provision to Greek banks by the ECB could potentially even lead to a Cyprus-style prolonged “bank holiday”. And market fears for potential Euro-exit risks could rise at that point.

Dear Greeks, “don’t vote wrong” as EU’s Juncker urges you – you have been warned.

Here is the full note.

Why Have Greek Assets Tumbled?

Over the last three months, Greek assets have come under intense selling pressure. The 10y Greek government bond trades at a yield of 9.1% compared to 5.5% in September and the Athens stock exchange is trading 32% lower over the same time-frame (and 40% below the post-crisis peak). As we have written extensively, this deterioration in market conditions has taken place despite an ongoing improvement in macroeconomic indicators. Markets have sold off on the back of election uncertainty ahead of a key year for Greece’s recovery process.

Greece needs official sector funding to pass the 2015 funding hump and ensure financial stability.

Indeed 2015 is a pivotal year for Greece. The most recent growth data prints suggest that the recovery may be gaining momentum. But financial risks still lurk, which could destabilize the Greek economy back into recession. More specifically, 2015 is the last year the government faces large financing needs, nearing €24bn (net of the established primary surplus). Part of those needs may be covered with domestic resources (see Box 1). However, additional funds will likely be required to ensure the government is able to meet its liabilities. As discussed in Box 1, the additional funds required may range between €6bn and €15bn depending on different economic assumptions.

It is important to note that from 2016 onwards, overall financing needs become a lot more manageable (compared to €24bn in 2015) – at or below €10bn until 2022 (lower primary surpluses or higher bond yields than the ones provisioned in the program could push these calculations up somewhat).

With government bond yields at prohibitively high levels, the Greek government will require official sector financing to provide the additional funds for 2015. €7.1bn of IMF funds are currently available as part of the Greek assistance program under relevant conditionality. In addition, the Eurogroup decided on Monday to grant Greece a precautionary credit line (ECCL) provided Greece completes the ongoing review by end of February. There are three main items to be agreed on for the current review to reach a conclusion: a) further reform in labor markets and in union legislation, b) further pension system reform, and c) further budget cuts. Greece is also likely stay under close economic supervision thereafter.

Political complications arise with the presidential vote.

According to the Greek constitution, the parliament needs to elect a President of the Hellenic Republic every five years. The presidential vote requires an extended majority. The term of the incumbent, President Karolos Papoulias, ends in early March 2015. The parliament would need to start the process of electing a new president at least one month in advance – by early February the latest. Should the parliament fail to elect a president, general elections would need to be held.

Due to a tight timeframe between the new deadline for completion of the program review and the deadline for the presidential election, the government decided to speed up the voting process. Three votes will take place – first two on the 17th and the 23rd of December respectively. The first two votes require a majority of 200 votes, which is unlikely to be achieved given the current parliamentary balances. The one that essentially matters is the third and final one on the 29th of December, where the Greek government would need to find 180 votes in the current parliament (of 300 members) to back their presidential candidate. As things stand, the government majority does not suffice to elect a president and avoid elections. 25 independent MPs and MPs from small parties would need to consent to meet the tally.

full article at source|Here:http://www.zerohedge.com/news/2014-12-12/goldman-warns-greeks-cyprus-style-prolonged-bank-holiday-if-they-vote-wrong

At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World (Hint: Not JPMorgan)

by Tyler Durden

Moments ago the market jeered the announcement of DB’s 10% equity dilution, promptly followed by cheering its early earnings announcement which was a “beat” on the topline, despite some weakness in sales and trading and an increase in bad debt provisions (which at €354MM on total loans of €399.9 BN net of a tiny €4.863 BN in loan loss allowance will have to go higher. Much higher). Ironically both events are complete noise in the grand scheme of things. Because something far more interesting can be found on page 87 of the company’s 2012 financial report.

The thing in question is the company’s self-reported total gross notional derivative exposure.

And while the vast majority of readers may be left with the impression that JPMorgan’s mindboggling $69.5 trillion in gross notional derivative exposure as of Q4 2012 may be the largest in the world, they would be surprised to learn that that is not the case. In fact, the bank with the single largest derivative exposure is not located in the US at all, but in the heart of Europe, and its name, as some may have guessed by now, is Deutsche Bank.

The amount in question? €55,605,039,000,000. Which, converted into USD at the current EURUSD exchange rate amounts to $72,842,601,090,000….  Or roughly $2 trillion more than JPMorgan’s.

German%20GDP%20vs%20DB%20Derivatives_1

full article at source:http://www.zerohedge.com/news/2013-04-29/728-trillion-presenting-bank-biggest-derivative-exposure-world-hint-not-jpmorgan

Billion-Trillion Derivatives Market! … Reform or a Blowup?

Derivatives Reform on the Ropes …

derivative-bomb

 New rules to regulate derivatives, adopted last week by the Commodity Futures Trading Commission, are a victory for Wall Street and a setback for financial reform. They may also signal worse things to come … The regulations, required under the Dodd-Frank reform law, are intended to impose transparency and competition on the notoriously opaque multitrillion-dollar market for derivatives, which is dominated by five banks: JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley. – New York Times

derivatives-scam

Dominant Social Theme: We have this billion trillion market under control. Don’t worry.

Free-Market Analysis: Derivatives reform? We hardly think so …

First of all, nobody knows how big the derivatives market is and no one knows how many dollars are at risk. Those involved in making the regulations are also the largest players in the market. Whatever “reform” is being worked out will benefit those who are part of the industry.

 

Here’s how Wikipedia describes a derivative:

A derivative is a financial instrument which derives its value from the value of underlying entities such as an asset, index, or interest rate–it has no intrinsic value in itself. Derivative transactions include a variety of financial contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards, and various combinations of these…………………………..

full article at source: http://www.thedailybell.com/30657/Billion-Trillion-Derivatives-Market–Reform-or-a-Blowup

The Banking Elite are Not Only Stealing Our Wealth, But They Are Also Stealing Our Minds

by smartknowledgeu

In the past several years, people worldwide are slowly beginning to shed the web
of deceit woven by the banking elite and learning that many topics that were
mocked by the mainstream media as conspiracy theories of the tin-foil hat
community have now been proven to be true beyond a shadow of a doubt. First
there was the myth that bankers were upstanding members of the community that
contributed positively to society. Then in 2009, one of their own, Paul Volcker,
in a rare momentary lapse of sanity, stated “I wish someone would give me
one shred of neutral evidence that financial innovation has led to economic
growth — one shred of evidence.”
He then followed up this declaration by
stating that the most positive contribution bankers had produced for society in
the past 20 years was the ATM machine. Of course since that time, we have
learned that Wachovia Bank laundered $378,400,000,000 of drug cartel money,
HSBC Bank failed to monitor £38,000,000,000,000 of money with
potentially dirty criminal ties
, United Bank of Switzerland illegally manipulated LIBOR interest
rates on a regular basis for purposes of profiteering
, and though they have
yet to be prosecuted, JP Morgan bank, Goldman Sachs bank, & ScotiaMocatta
bank are all regularly accused of manipulating gold and silver prices on nearly
a daily basis by many veteran gold and silver traders.

full article at source: http://www.zerohedge.com/contributed/2013-01-03/banking-elite-are-not-only-stealing-our-wealth-they-are-also-stealing-our-min

The irrationality of it all

 

By David Mc Williams

Over the past few days, I have received all sorts of economic forecasts of 2013 penned by economists in large financial outfits who are confidently telling me what is going to happen next year. Most of these guys were the same people who didn’t foresee this crisis, yet few have lost their jobs and here they are, without the slightest hint of doubt, outlining what is likely to happen in 2013.

Of all the characters we should fear, the overconfident economic forecaster is surely one of them. When the Queen of England asked why none of these professionals warned of the credit crunch, she was only articulating what many people must have thought, which is “if you guys are so clever, why didn’t you see this crisis coming – and if you didn’t see it coming, why should I listen to you now”?

The failure of economics to predict human behaviour is a significant charge that modern economists have not properly answered and the failure to answer this accusation adequately has undermined economics as a whole.

In the final column of the year, we are going to take a quick look at the state of the economics game and ask whether the fundamental laws of traditional economics bear any relation to reality or offer any insight into how people actually behave……………………..

Full article at souyrce:http://www.davidmcwilliams.ie/2012/12/31/the-irrationality-of-it-all?utm_source=Website+Subscribers&utm_campaign=e3ac4be19f-22112012&utm_medium=email

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