From the every vigilant and never counterpartied Goldman Sachs
Another miserable result today for equities – down 0.6%. After hours another negative wave with the Google CEO talking about a dire economy and Moody’s considering a downgrade of AMBAC. The move lower in equities solidifies the break of 7000 DJIA and 700 SPX putting many technical forces into play for the new month. The drivers of the down move seem clear enough with poor housing, weak car sales and perhaps more talk. The trouble with the headline comments from Obama to Bernanke and Geithner is that they hide the strong actions taken today – namely the BOC rate cut and open talk of Quantitative Easing as the next step. They obscure the TALF start and hope for the March 25 start as a $1 trillion breakthrough for credit markets. Instead we focus today in New York on the trouble in 1Q and how its going to hurt. The OECD economist suggested today 1Q may be the worst quarter of all and that this was the worst recession since 1946. November forecasts seem likely to shift for the OECD from -0.4% in 2009 to something worse. All this gloom and doom has led to a credit spread widening trade that drives from economic gloom, spreads to equities and then reverberates back to FX where safe haven’s return to drive – namely the USD. Gains in the USD today were notable against the JPY and NOK which turns the world upside down on traditional correlations – where equities lower worked for JPY gains for months it no longer holds, just as Oil higher would always help the NOK but not today with oil up 3% and NOK down 0.3%. But perhaps the most distressing story in macro space came from gold down $25 where the precious metal loses its value even in the face of more talk about government action, more need for profligate spending but less belief that actions will work so quickly or so well. So we go back to Memphis – to Elvis – where we all want a little less conversation and a little more action please. Next up will be the ECB and BOE for that challenge. Until then expect markets to roll over and play dead.
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