In response to the Greece statement.. are not the Banks in control ALWAYS? Unfortunately

Goldman’s “Conspiracy Theory” Stunner: A Greek Default Is Precisely What The ECB Wants
Tyler Durden’s pictureSubmitted by Tyler Durden on 06/22/2015 11:37 -0400

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Last week, we showed a curious thesis by Goldman, which asked if there is a new and “ominous” development in European currency swings, namely the emergence of what may be a “under the table” fight between the ECB and the Bundesbank on which bonds to monetize.

This is what Goldman said then:

the average maturity of ECB bond buying is around 8.0 years, in line with what Executive Board member Coeure said in his May 18 speech. However, while Italy and Spain see purchases that have an average maturity above that of the outstanding debt stock, Bundesbank buying has fallen short from the very beginning…. This kind of signal – from the key hawk in the Eurosystem – has the potential to undercut the credibility of ECB QE, since it weakens the portfolio balance channel.

After all, it was supposed to be low yields in core Europe into risk assets. If those yields now rise and become more volatile, such portfolio effects will be lessened.
Today, in a follow up report by Goldman’s Robin Brooks and company, and one which seeks to validate Goldman’s “top trade” thesis of a weak Euro currency, (recall Goldman top trade #1 for 2015: “Stay long EUR/$ downside via 1-year 1.00/0.95 put spread (originally at 1.20/1.15 with a premium of 70bp EUR at initiation, expiring on 20 Nov 2015, opened at a spot EUR/$ of 1.253 on 20 Nov 2014, currently at 1.135.”) Goldman explains why despite relentless Greek drama, the EUR hasn’t moved and its conclusion is that this is due to “growing question marks over ECB QE” as a result of the surprising bond-buying on the short end (at the expense of reducing longer-term maturity holdings) out of the Bundesbank which has “reduced the maturity of its QE buying.”

From Goldman:

As tensions around Greece have mounted, it is something of a puzzle that EUR/$ has shown little reaction. Our explanation, laid out in our last FX Views, is that much of this price action stems from the Bundesbank, which has reduced the maturity of its QE buying, enabling the Bund sell-off and moving longer-dated rate differentials in favor of the Euro. EUR/$ thus hasn’t traded Greece, but instead growing question marks over ECB QE.
Here is Goldman’s full take:

From an economic perspective, Greece shows that “internal devaluation” – whereby structural reforms are meant to restore competitiveness and growth –is difficult politically and a poor substitute for outright devaluation. Emerging markets that devalue during crises quickly return to growth, powered by exports, while Greek GDP continues to languish. We emphasize this because – even if a compromise involving a debt haircut is found – this will not do much to return Greece to growth. Only a managed devaluation, with the help of the creditors, can do that. With respect to EUR/$, we think the Bund sell-off increases EUR/$ downside if tensions over Greece escalate further. This is because the ECB, including via the Bundesbank, would almost surely step up QE to prevent contagion. We estimate that the immediate aftermath of a default could see EUR/$ fall three big figures. The ensuing acceleration in QE would then take EUR/$ down another seven big figures in subsequent weeks. We thus see Greece as a catalyst for EUR/$ to go near parity, via stepped up QE that moves rate differentials against the single currency.

Incidentally, “internal devaluation” is a very polite way of saying plunging wages, labor costs, and generally benefits, including pensions.

But if this is correct, Goldman essentially says that it is in the ECB’s, and Europe’s, best interest to have a Greek default – and with limited contagion at that – one which finally does impact the EUR lower, and resumes the “benign” glideslope of the EURUSD exchange rate toward parity, a rate which recall reached as low as 1.05 several months ago before rebounding to its current level of 1.14. Needless to say, that is a “conspiracy theory” that could make even the biggest “tin foil” blogs blush.

A different way of saying what Goldman just hinted at: “Greece must be destroyed, so it (and the Eurozone) can be saved (with even more QE).”

Or, in the parlance of Rahm Emanuel’s times, “Let no Greek default crisis go to QE wastel.”

Goldman continues:

Greece, like many emerging markets before it, is suffering a balance of payments crisis, whereby a “sudden stop” in foreign capital inflows caused GDP to fall sharply. In emerging markets, this comes with a large upfront currency devaluation – on average around 30 percent across nine key episodes (Exhibit 1) – that lasts for over four years. This devaluation boosts exports, so that – as unpleasant as this phase of the crisis is – activity rebounds quickly and GDP is significantly above pre-crisis levels five years on (Exhibit 2). In Greece, although unit labor costs have fallen significantly, price competitiveness has improved much less, with the real effective exchange rate down only ten percent (with much of that drop only coming recently). This shows that the process of “internal devaluation” is difficult and, unfortunately, a poor substitute for outright devaluation. The reason we emphasize this is because, even if a compromise is found that includes a debt write-down (as the Greek government is pushing for), this will do little to return Greece to growth. Only a managed devaluation can do that, one where the creditors continue to lend and help manage the transition.
Here, Goldman does something shocking – it tells the truth! “As such, the current stand-off is about something much deeper than the next disbursement. It signals that the concept of “internal devaluation” is deeply troubled.”

Bingo – because what Goldman just said in a very polite way, is that a monetary union in which one of the nations is as far behind as Greece is, and recall just how far behind Greece is relative to IMF GDP estimates imposed during the prior two bailouts…

… simply does not work, and for the union to be viable, a stressor needs to emerge so that broad currency devaluation benefits not only the peak performers, i.e., the northern European states, but the weakest links such as Greece.

Incidentally, all of this was previewed long ago in, in December 2012 when we wrote “Next Up For A “Recovering” Europe: A 30-50% Collapse In Wages In Spain, Italy And… France.” To Greece’s great chagrin, all of this internal devaluation has mostly impacted the impoverished country, which continues to be a shock absorber to broader internal devaluation across the entire Eurozone.

Which brings us back to Goldman’s assessment of the current Greek state, and the suggestion that all the smoke and mirrors flooding the headline-scanning algos is nothing but noise, and that in reality the forces are alligned to “push the EUR near parity in fairly short order.”

Paradoxically, Goldman keeps pushing for a worst-case outcome, and one where the market finally reprices all the risk it has ignored for months:

Even if Greece ultimately stays in the Euro (our base case), the immediate aftermath of such a non-payment will be to push bond yields up across the periphery. This rise in the fiscal risk premium (Exhibit 3) will of course be limited, because the ECB will likely accelerate QE, including via the Bundesbank. That will push rate differentials, especially longer-dated ones (Exhibit 4), against EUR/$. We estimate that the initial fiscal risk premium effect could be three big figures, while the subsequent QE effect could be worth around seven big figures.
The conclusion:

In short, we see mounting tensions over Greece as a catalyst for EUR/$ to move near parity in fairly short order, with much of that move driven by rate differentials. If, instead, a compromise solution is found (including possible debt haircuts), we see the upside to EUR/$ as very limited, i.e. on the order of one big figure at most. The reason for this is that the market is broadly expecting an agreement to be found, even with the possibility of a default in the near term on debt repayments coming due.
And of course, going back to the start of the note, a “favorable” outcome pushing EUR higher will be one that “will do little to return Greece to growth” and as a result will force the insolvent nation back to the negotiating table until such time as the Eurozone finally realizes that it desperately needs EUR much lower, not higher, and will do everything it can to achieve that, even if it means “siloing” Greece in a state of suspended default indefinitely if only to eliminate the “risk on” euphoria in the currency pair.

Indeed, as we said last year, the entire escalation over the Ukraine conflict was merely to push Europe to the verge of a triple-dip recession, which in turn was the catalyst that finally greenlighted the ECB’s first episode of QE with Buba’s blessing (after all Germany’s economy was finally on the brink as well and it had little to lose). Well, the next such “catalyst” will come from none other than Greece as per Goldman’s punchline:

We encounter many who argue that mounting tensions over Greece could be Euro positive. The short term angle is that risk reduction will lead to a squeeze of Euro shorts, so that EUR/$ could squeeze higher. The reason we don’t believe this is because we think stepped up ECB QE will dominate any risk-off response. Or, to put this in another way, the ECB will not allow the fiscal risk premium to go all that much higher. The medium-term angle is that the Euro zone might be more cohesive without Greece. That rationale assumes that Greece is a case apart, when of course it isn’t. After all, the Spanish unemployment rate is not far behind that of Greece and populist political pressure is also building. The underlying commonality, in our minds, is that “internal devaluation” is very difficult. As a result, we think mounting tensions around Greece could just as well focus market attention on the sustainability of the adjustment program on the Euro periphery.
Whoever would have thought that none other than Goldman would serve as the source of what may be the biggest “conspiracy theory” gambit of 2015…

One final thought: what Goldman wants, its former employee at the ECB tends to deliver.

Bob, the person who predicted the last 5 of ZERO starts of world war 3.

Those who are in the prediction business should be prepared to eat a lot of glass.
And Bob sure gets his mouthful of glass.

Moriarty ought to be on LOTS more

sorry I don’t think I double clicked but obviously I did

The Reserve Currency.

BRICS and other countries want a new system.

A currency backed by the worlds largest military and a government that uses it to solve every major foreign policy problem cannot last forever.
‘Good Will’ is an important concept in business, without good will even the biggest company will fail sooner than later.
I’m worried that we have spread too much ‘Ill Will’ throughout the years with our efforts to promote dollar stability throughout the world.
Examples include bringing Saddam to power and training and supporting Osama bin Laden in our efforts to try and keep Russia bottled up.
While this was a worthy goal, they had backfired on us and we needed even more military involvement creating more ill will.
It seems like our best intentions to stabilize have done nothing but destabilize.
Each evolution of the stabilization model leads to greater destabilization requiring even greater military involvement.
Liste the speech of Putin in Munich (2007).

Wasn’t it DeGaulle who led the world against the U.S. in the 60s demanding delivery of gold and thus forcing Nixon to end that system in 1971?
Also the London Gold pool.

http://www.compassclassroom.com/degaulle-vs-nixon-nixon-wins-the-battle-degaulle-wins-the-war/

History of the XXe century:
https://www.dropbox.com/s/g2q96jkiugyzeyp/history1.jpg?dl=0

I love Bob Moriaty’s often provocative way of expressing his opinions. He always makes one think and even if he does not un stand entropy, his top analogy is most apt.
I always believe that rarely anything happens by pure chance, and that if one does not understand something e.g. Ukraine, then one must re-evaluate one’s premises upon which the expectation has been built that does not agree with reality.
I know many disagree with my thoughts about the president.
Probably because I have adjusted by premises to fit what has been happening, so as not to believe a certain person is acting in the best interest of the country, but on other motivation.
Certainly the prevailing wisdom out there is that something may happen in the September-October time period.
Armstrong says it will be more geopolitical than market in its origins. (I do not have the ability to confirm or deny his belief.)
I just note his comments and file them in my memory banks.

I do believe the bond market is currently over-valued and also believe it will eventually move closer to the norm.
I note the stock market is high, but realize the mitigation factor of interest rates being artificially held low.
We do live in interesting times.

iPad changed understand to un stand!

It will be a series of events that take place that change the landscape of the country. The markets are in continuous feedback loops. In other words as costs increase, more and more money must be allocated toward equities. This is the reason that margin debt is expanding so quickly. Now lending is opening up and the realtor clubs released comments stating they believe the markets are strong. And it was actually embedded in the report that they felt homebuyers may be priced out of the market if they don’t purchase now. The bio-tech sector is up almost 400% from the 2011 bottom. The energy stock index, XLE, is trading well-above it’s average to crude oil. Technicals in the market do not matter until they do. The media has been dismissing many important technical indicators for months now. These are NOT the type of technical readings one sees as the beginning of a new upleg in equities.

The Donald like Bob M has the ability to show the flip side of the coin and he could just be the right man for the times, I think others will start to take him more seriously, IMHO.

Yes… more Bob M…as much as possible! He is to be respected!!

Moving troops into Ukraine not being beneficial?
Great for banks.
The military gets to be patriotic ra ra.
Beneficial depends on your position.

I love the comment that anyone sane should be in a nuthouse.

I think Cory’s question is the question to ask, “Why is it going to stop now? Why is the can going to stop being kicked now?” I like Bob’s ability to have an opinion on many issues, but he never answered the question. Or maybe better put, he didn’t give a good answer….again, “Why is it going to stop being kicked, NOW?”. Just because Bob and maybe you, Al, want it to stop, and are frustrated, is not a reason it will stop. To Cory’s point, Bob, you have been saying this madness will end, for the past 11 years. Why now? Did God send an angel to speak to you in your sleep.? …Being frustrated at the direction things are going, or even seeing a few events happen, is no indication that the end is imminent.
The issue Cory, and maybe myself have, is not that it will happen, but why NOW?

Thanks Cory for providing some kind of balance to that discussion. That segment would’ve been unlistenable if it weren’t for you.

BOB IS SPOT ON…………………

Your right Nawanda.
Austrian economic thinking says it does have to end, but Im not to sure if they have the how it ends figured out.
They people “running” things are powerful enough to literally start world wars and convince people to volunteer for it believing its a good idea.
They have been controlling most of the monies at least since Napoleon/Wellington at Waterloo.
That’s power, we have no idea what they have decided.
Life as a peon is great isn’t it?

In the interest of fair play I don’t think it was sporting of me to put it out there and then not come back to the site to respond to your responses.

So with that in mind I read your responses to my last post and will respond.

It will not be as lengthy as my last post

Let’s go right down the list again

Original jj
Nothing has changed.
He disappeared for two years, changed his stripes and is a moms riding the obvious trend
He has no credibility

Chartster
He acknowledged he made some wrong calls and had some humor with it
Stand up guy

Matthew
You responded that you don’t deny we are in a cyclical bear market but we are still in a secular bull market. I can’t accept. This was a bear market, period.
Many people want to compare this market to the 1970s – it is a faulty comparison.
You also state I was wrong in my call because I was 80 off
I have to disagree again.
I have made it clear repeatedly I am not a trader, 99%of traders lose
I am a long term buy and hold investor.
So if a friend came to me and asked me if they should buy gold, I would have said no at 1800, I would have said no at 1700, I would have said no at 1600,1500,1400,1300

At 1212.80 I would have said it is a good entry point to buy gold for the long term.
I thin this call has worked out perfectly.

Once again 1212 is the bottom zone of support.

From a traders perspective it would have been a losing trade
Again I am not a trader
From along term perspective 1212 is a good spot to get into the gold market.
Not for a week, or a month, but 3 to 5 years

So if you want to call my call wrong that’s your business
But the fact is from a long term perspective a save someone from having getting in anywhere from $100 to $600 higher
That’s a good call in my book

Heavy hitter
You respond by going through a litany of all your trades and how you only had 1 bad trade.
I remember distinctly how you said people who were trading gold were losers and going to lose when gold blasted off, and how you needed to buy gold, not trade gold.
This was one of the few things you said that made sense.
Now,you are,talking about all your “trades”
This just goes to show you how confused you are.
Not only does that famous system of yours have its signals crossed but you are as schizophrenic as ever. You are all over the board and can’t find your way back to go.

Gary
Your reasons is completely weak and shows once again you are an empty sweater.
Your calls have been called “uncanny” by Al but all you ca respond with is two calls.
The Nasdaq top and gold 1000
Let’s really think about this and I will leave it to unbiased people to make up there own mind.
First Nasdaq – everyone and his brother knows stocks, Dow, s&p and Nasdaq are in complete bubbles and supported by infinite QE and ZIRP. This is a no brainer.
For 7 years stocks have been climbing uninterrupted.
To stand here claiming your Nasdaq call is so insightful remarkable is laughable.
Everyone on this site knows stocks have been going higher and taking out all time highs.
This is equivalent as giving away the proverbial snow on the winter
Your other response in your defense was your gold is going to 1000
You claim you will be proven right.
You are already wrong, because earlier you said a bottom could be in.
So all you have in response is a no brain Nasdaq trade and a wrong gold call
I guess we need to have more faith in you.
Not to mention you got oil completely wrong
IMHO this is hardly uncanny

Rick
No response needed.
I respectfully disagree with his deflation stance and his 120 $ call and $800 gold call.

Avi
No response needed
I disagree with his $1000 gold call

Addendum
Bob Moriarty
This guy really has the gift of gab
He has been completely wrong on all counts but really knows how to sell it
He is laughing all the way to the bank

Wright or rong, Bob is fun to listen to.

Matthew again I have to disagree
As you say yourself “sure it’s a fine price for the long term”
You make my case
Again you say “a huge amount of trading has taken place…”
Operative word is “trading” again I made it clear I am not trading.
I also have to disagree on your “when gold hit 1180 way back in 2013” that it was a better call.
I made my call in September of 2014.
From a long term perspective I would rather get in at 1212 late in 2014 then 1180 all the way back in 2013.

Bob Notoriety setting young whipper snapper Corey strait. You go BOB! Meltdown started 01-2014. Joe 6-pack won’t know about it until 2016. I am going to take a bear hedge on oil and the S&P EOS.

I am well aware that investors buy and sell. That’s what a market is.
From a long term perspective I have to disagree with your position that it would have been better to get into gold at 1180 way back in 2013 then 1212 in sept of 2014.
You really believe for $32 an ounce it is better to be a whole year early. You really don’t believe that.
BM THE QUESTION IS HOW MANY BOTTOMS AND TOPS HAVE TOU CALLED

First you said 1180 back in 2013, now you are saying 1130 in November
Your call was 1180 in 2013, I don’t know about BM
Yes 1212 in September is better than 1180 way back in 2013
Do you really think $32 an ounce over a year early is better?

The point is 1212 September for price and time and risk is a better entry point for long term investors than your 1180 2013 call. It is a 9 out of 10
Any call after that , including 1130 November is a 10 out of 10

Hey BM I GOT IN GOLD AT $272 back in 1999. I DONT JUST TALK THE TALK!

I MAKE MY MONEY SPECULATING! Not selling worthless opinions!

Bird man great to hear from you!
Some of these aholes who have to make a living peddling crap really burn me up
They can’t make it on their own, they can only sell it to others

Great to hear from you!

quoting:

“BMO Research is initiating coverage of six of the North American-based gold miners.

“After two years of cost cutting, balance sheets are showing positive improvement and debt is less of an obstacle toward a new stage of growth focused on return
that will drive the next cycle.

“1. We have moved toward a more constructive view and believe that
the senior miners looks to begin to screen more constructively in early 2016
when viewed by generalist investors.

“2. We recommend that investors position in advance of this catalyst, taking advantage of seasonal weakness through the summer.”
-end quote

http://nulegacygold.com/i/pdf/BMO-says-Go-for-Gold.pdf

JTL

I got into gold at $35 in 1968, got out in January of 1980, back in $227 in 1999-2000, called the bottom in silver to the week in Nov of 2001 and purchased thousands of ounces of silver under $5, sold the crap out of thousands of ounces of silver in April-May of 2011. I’m buying back that silver now.

And don’t bother telling me gold never hit $227 in 1999-2000. There was an auction house that committed fraud and the CFTC required them to hold auctions in 1999-2000 with no reserve and I bought dozens and dozens of gold coins at $227 a troy ounce delivered.

I don’t need to make anything from my website, I’m doing just fine on my own.

If you feel that the political establishment needs change, why hasn’t anyone on this site proposed who they would like to see, not who they know they will see. It’s easy to say it doesn’t matter but it does, so let’s here it, don’t be a fence sitter and suggest that there isn’t anyone out there. I don’t expect all the armchair pundits here to answer, Ron Paul is not in the running so he isn’t included. DT

All I can say is that I never imagined the present financial and monetary course would have lasted this long. I saw the top wobbling a long time ago. Best I can tell, it will wobble for Lord only knows how many more years. Personally, at this point, I have come to conclusion that the standard of living here in the US will slowly grind down to some minimal level, leaving us no better off than many other people of the world.

Bob
The biggest mistake I ever ran into. What a waist of time and money.
We should keep our money under our bed?
And hypothecation was rehypothication is going to blowed us all up!!! How many times Years ago!!?
bobbo you sure as hell have no business making guesses about how we are going to blow up next. Fricken rookie.

It’s rare to find someone that can talk out of both sides of there mouth. So full of Sh*t it’s not even funny.

Thanks for having Mr Moriarty back on. Those that stick their neck out will always take some heat. Their are two kinds of people.Those that watch and those that do. Racers and spectaters. Without the racers we have no spectators. https://www.youtube.com/watch?v=_txdqnVP3-c

John K
Those who make guess’s with no real market analysis should take the heat and that’s an understatement. Calling a 70% correction in silver is exactly what I’m talking about as that is NOT and correction by any market standard. That a snake tongued analysys. Follow people that had a top drawer track record through at least 10-15 years. I’ll be meeting with a hedge fund manger that has one and dam near a crystal ball. Not a one trick pony snake oil salesman like Bob Moriarty. This global market is way out of his depth.
One example is our call for a souring dollar and a melt down and in commodities over the past few years.

Bill :
Yesterdays hero can easily become todays zero.
I agree that track records are important. Global markets today are a different animal today then they were say ten years ago.That being said, investment advice must be taken with a grain of salt.Some people hit 300 yard drives and miss two foot puts.Some don’t drive as far but they make their puts.It’s up to you who you want to play golf with.

John K I completely concur…
I can count on 3 fingers guys that I would put a large sum down on their accuracy of what is actually happening and where you may make solid gains for an extended period. Ill be meeting with a great and humble manager Thursday.
He ABSOLUTELY RAN FROM GOLD 4 years ago and said that they ARE NOT PRINTING enough to worry about….

Bobs a fraud call me Bobbo 604-7575-1939
We will have you thrown in jail. I’ve talked to the regulatory bodies USA and Canada. You are a registered nobody you piece of Sssshiiiit. I know people that have lost a zero or amount due to you. You fear mongering loser. Call and I’ll rip you one and if you want my address I’ll use my 2nd degree Blk Blt to knock you teeth down your throat.

Pump in dump. I’ll prove it just call me. A hole