SocGen Initiaties Coverage On Goldman With "Sell" Rating, $138 Price Target

Moments ago shots were fired when a (French) bank broke the unspoken Omerta code among sellside bankers: it downgraded another bank in a time when the S&P is just shy its all time highs (downgrading banks when the market is tumbling is usually a-ok). The note came from SocGen’s Andrew Lim, whse thesis is rather simple: “Valuation too expensive in light of regulatory and revenue challenges.”

From the note:

Initiation of coverage We initiate coverage of Goldman Sachs with a Sell rating and target price of $138. This is part of our Global Investment Banks initiation.

 

Key investment themes GS is a top-tier bank in primary and secondary capital markets business. However, with expectations of rising US 10-year yields, we fear the  prospect of a credit bear market will pressure FICC trading revenues.

 

We see GS as already strong on B3 leverage (and B3 common equity). However, in endeavouring to maximise ROE by maximising share buybacks, we feel that management’s capital return policy is too aggressive and needs to be scaled back. Dividends and buybacks combined should account for just over 100% of earnings in 2013.

 

We see a risk of GS continuing to be impacted more than peers by regulations. The Volcker rule, while manageable for the bank, should nonetheless put pressure on revenues as it forces GS to scale back investments in covered funds. Meanwhile, we see the risk of market RWA inflation from the BCBS’s review of the trading book.

 

How we value the stock We use an SPFV approach to obtain a target price for GS of €138. We include on top of this the expected 12m forward DPS of $2.20, which results in a total shareholder return of -21%. Our full SPFV model is available on page 68 of our global investment banks initiation report. Looking at the valuation from another perspective, an ROE of only c.10% does not support a P/BV rating of over 1.0x in our view.

 

Risks to our target price and rating Pressure on the credit market may prove temporary rather than structural and longer term in nature as we model. On top of this, GS may be able to take much more market share from competitors than we estimate. GS may be able to reduce leverage and RWA considerably without hurting revenues. Management may be able to mitigate the impact of the Volcker rule with much less detriment to group ROE than we expect.

Sorry Andrew, no Goldman “elves” Christmas party invitation for you this year.


    

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TrxsFVmRYto/story01.htm Tyler Durden

SocGen Initiaties Coverage On Goldman With “Sell” Rating, $138 Price Target

Moments ago shots were fired when a (French) bank broke the unspoken Omerta code among sellside bankers: it downgraded another bank in a time when the S&P is just shy its all time highs (downgrading banks when the market is tumbling is usually a-ok). The note came from SocGen’s Andrew Lim, whse thesis is rather simple: “Valuation too expensive in light of regulatory and revenue challenges.”

From the note:

Initiation of coverage We initiate coverage of Goldman Sachs with a Sell rating and target price of $138. This is part of our Global Investment Banks initiation.

 

Key investment themes GS is a top-tier bank in primary and secondary capital markets business. However, with expectations of rising US 10-year yields, we fear the  prospect of a credit bear market will pressure FICC trading revenues.

 

We see GS as already strong on B3 leverage (and B3 common equity). However, in endeavouring to maximise ROE by maximising share buybacks, we feel that management’s capital return policy is too aggressive and needs to be scaled back. Dividends and buybacks combined should account for just over 100% of earnings in 2013.

 

We see a risk of GS continuing to be impacted more than peers by regulations. The Volcker rule, while manageable for the bank, should nonetheless put pressure on revenues as it forces GS to scale back investments in covered funds. Meanwhile, we see the risk of market RWA inflation from the BCBS’s review of the trading book.

 

How we value the stock We use an SPFV approach to obtain a target price for GS of €138. We include on top of this the expected 12m forward DPS of $2.20, which results in a total shareholder return of -21%. Our full SPFV model is available on page 68 of our global investment banks initiation report. Looking at the valuation from another perspective, an ROE of only c.10% does not support a P/BV rating of over 1.0x in our view.

 

Risks to our target price and rating Pressure on the credit market may prove temporary rather than structural and longer term in nature as we model. On top of this, GS may be able to take much more market share from competitors than we estimate. GS may be able to reduce leverage and RWA considerably without hurting revenues. Management may be able to mitigate the impact of the Volcker rule with much less detriment to group ROE than we expect.

Sorry Andrew, no Goldman “elves” Christmas party invitation for you this year.


    

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TrxsFVmRYto/story01.htm Tyler Durden

Does buying your wife that diamond really say to her, “I love you?” Probably not.

 

I believe that sex is best when it is one on one.  However, is physical touch your spouse’s, or significant other’s, love language?  Does buying your wife that diamond really say to her, “I love you?”  Or, perhaps, she would be more satisfied with you spending some time with her in the garden.

Consider taking a few moments with your spouse or significant other to determine each other’s love language,
and then discuss ways to fill each other up with the love we all need. 
Mrs. Horseman and I did this, recently, in concert with discovery and sharing of
our Myers-Briggs personality types, and it was very informative, even after decades of marriage.

The official Myers-Briggs tests cost a nominal fee.  We originally took it as part of the pre-cana counseling required by our church before we were married.  We just took it again, decades later, from licensed/trained clergy as part of a couples workshop offered by our church.

I
am ENTJ and her primary love language is Quality Time. Unless a
conscious effort is made on my part, an ENTJ is unlikley to schedule
activites she considers quality time.

She is a INTP and my love language is Words of Affirmation.  Unless a conscious effort is made on her part, an INTP is highly unlikely to communicate words of affirmation.

Knowing what each other needs sounds so simple.  Unfortunately, like most people, we each thought that our own love language is how the other is best filled with love.  Nothing could have been further from the truth.

Click here to take the free Love Language test.


 

—————————————————————————–

DISCLOSURE STATEMENT:
Long monogamous relationship and sobriety.

—————————————————————————–


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-6TvxWv_WQM/story01.htm hedgeless_horseman

Does buying your wife that diamond really say to her, "I love you?" Probably not.

 

I believe that sex is best when it is one on one.  However, is physical touch your spouse’s, or significant other’s, love language?  Does buying your wife that diamond really say to her, “I love you?”  Or, perhaps, she would be more satisfied with you spending some time with her in the garden.

Consider taking a few moments with your spouse or significant other to determine each other’s love language,
and then discuss ways to fill each other up with the love we all need. 
Mrs. Horseman and I did this, recently, in concert with discovery and sharing of
our Myers-Briggs personality types, and it was very informative, even after decades of marriage.

The official Myers-Briggs tests cost a nominal fee.  We originally took it as part of the pre-cana counseling required by our church before we were married.  We just took it again, decades later, from licensed/trained clergy as part of a couples workshop offered by our church.

I
am ENTJ and her primary love language is Quality Time. Unless a
conscious effort is made on my part, an ENTJ is unlikley to schedule
activites she considers quality time.

She is a INTP and my love language is Words of Affirmation.  Unless a conscious effort is made on her part, an INTP is highly unlikely to communicate words of affirmation.

Knowing what each other needs sounds so simple.  Unfortunately, like most people, we each thought that our own love language is how the other is best filled with love.  Nothing could have been further from the truth.

Click here to take the free Love Language test.


 

—————————————————————————–

DISCLOSURE STATEMENT:
Long monogamous relationship and sobriety.

—————————————————————————–


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-6TvxWv_WQM/story01.htm hedgeless_horseman

Who Is Who In The Central African Republic Crisis: The Infographic

Much has been writtien about the latest straight to YouTube humanitarian conflict (France involvement comment and then the US ) this time not in the middle east but in Africa, specifically the Central African Republic, which has so far pitted French troops and US drones against… it is unclear whom exactly, but supposedly the perpetual strawman, Al Qaeda, is once again involved. So instead of more talking, here is a simple infographic courtesy of AFP (more here) that lays out who is who in the latest hot bed set to escalate, especially if China, as some expect, gets involved.

Source


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-PUqJCvpIEU/story01.htm Tyler Durden

Why is Gold Trading So Low During Balance Sheet Expansion?

Collectively, the world’s Central Banks have put more than $10 trillion into the financial system since 2008. To put that number into perspective, it’s equal to roughly 15% of global GDP.

 

Despite this rampant money printing, the price of Gold has in fact fallen against every major world currency since 2011.

 

 

 

In a time in which every major central bank is expanding its balance sheet through money printing, Gold has fallen against every major currency.

 

Indeed, in the US, the Federal Reserve is now expanding its balance sheet at a pace of nearly $1 trillion per year. The Fed balance sheet is already at $3.8 trillion and will likely surpass $4 trillion in early 2014.

 

Any yet, the price of Gold, denominated in US Dollars is lower today than it was when back in early 2011, when the Fed’s balance sheet was just $2.4 trillion.

 

 

 

 

Does this make sense? Gold falling in value at a time when balance sheets expanded by multiple TRILLION dollars?

 

Make no mistake, gold is not dead. Not by any means. The day is coming when its price will soar again.

 

For a FREE Special Report on a uniquely profitable inflation hedge, swing by….

http://phoenixcapitalmarketing.com/goldmountain.html

 

Best Regards

Graham Summers

 

 

 

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fSbmGSeS4mA/story01.htm Phoenix Capital Research

Muppets Crucified After Goldman Closes One Of Its “Top Trades For 2014” At A 13.5% Loss Less Than A Week Into 2014

That didn’t take long.

On December 2, in its fourth Top Trade recommendation of the year, Goldman urged its clients to go “Long China Stocks, Short Copper.” This is how we decribed the trade: “Goldman is selling China equities (via the HSCWI Index), while buying copper (via Dec 2014 futs), or at least advising its flow clients to do the opposite while admitting that “for the long China equity/short commodity pair trade to “work” best, these two assets, which are usually positively correlated, will have to move in opposite directions.” For that and many other reasons why betting on a divergence of two very closely correlating assets will lead to suffering, read on. Finally – do as Goldman says, or as it does? That is the eternal question, one whose answer is a tad more problematic since the author in this case is not Tom Stolper but Noah Weisberger.” One week into the new year we have the answer.

Yesterday, less than one week into the new year, Goldman closed this “Top Trade for 2014” following a loss of 13.5%. Actually, correction: 13.5% loss to “clients” means a 13.5% profit to Goldman, and all those who followed our advice to trade alongside Goldman, not as a counterparty.

To wit:

Close long HSCEI Index and short Copper Dec 14 LME future, opened at 0.0% (on return basis, corresponding to respective price levels of 11542.1 and 7064.5 in two instruments) on 02 Dec 2013, for a potential loss of -13.5%.

So, as always, losers: Goldman clients. Winners: Goldman’s “flow” desk which took the opposite side of the trades, very much as we expected.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/E3uJqs-ZGMM/story01.htm Tyler Durden

Muppets Crucified After Goldman Closes One Of Its "Top Trades For 2014" At A 13.5% Loss Less Than A Week Into 2014

That didn’t take long.

On December 2, in its fourth Top Trade recommendation of the year, Goldman urged its clients to go “Long China Stocks, Short Copper.” This is how we decribed the trade: “Goldman is selling China equities (via the HSCWI Index), while buying copper (via Dec 2014 futs), or at least advising its flow clients to do the opposite while admitting that “for the long China equity/short commodity pair trade to “work” best, these two assets, which are usually positively correlated, will have to move in opposite directions.” For that and many other reasons why betting on a divergence of two very closely correlating assets will lead to suffering, read on. Finally – do as Goldman says, or as it does? That is the eternal question, one whose answer is a tad more problematic since the author in this case is not Tom Stolper but Noah Weisberger.” One week into the new year we have the answer.

Yesterday, less than one week into the new year, Goldman closed this “Top Trade for 2014” following a loss of 13.5%. Actually, correction: 13.5% loss to “clients” means a 13.5% profit to Goldman, and all those who followed our advice to trade alongside Goldman, not as a counterparty.

To wit:

Close long HSCEI Index and short Copper Dec 14 LME future, opened at 0.0% (on return basis, corresponding to respective price levels of 11542.1 and 7064.5 in two instruments) on 02 Dec 2013, for a potential loss of -13.5%.

So, as always, losers: Goldman clients. Winners: Goldman’s “flow” desk which took the opposite side of the trades, very much as we expected.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/E3uJqs-ZGMM/story01.htm Tyler Durden

India Minister Warns Of “The Return Of The Ugly American”

Authored by Shashi Tharoor (India’s Minister of State for Human Resource Development), originally posted at Project Syndicate,

Nearly a month after American authorities arrested India’s deputy consul general in New York, Devyani Khobragade, outside her children’s school and charged her with paying her Indian domestic worker a salary below the minimum wage, bilateral relations remain tense. India’s government has reacted with fury to the mistreatment of an official enjoying diplomatic immunity, and public indignation has been widespread and nearly unanimous. So, has an era of steadily improving ties between the two countries come to an end?

Judging from Indian leaders’ statements, it would certainly seem so. India’s mild-mannered Prime Minister Manmohan Singh declared that Khobragade’s treatment was “deplorable.” National Security Adviser Shivshankar Menon called her arrest “despicable” and “barbaric,” and Foreign Minister Salman Khurshid refused to take a conciliatory phone call from US Secretary of State John Kerry.

Emotions have run high in India’s Parliament and on television talk shows as well. Writing to her diplomatic colleagues after her arrest, Khobragade, who has denied the charges against her, noted that she “broke down many times,” owing to “the indignities of repeated handcuffing, stripping, and cavity searches, swabbing,” and to being held “with common criminals and drug addicts.” A former Indian foreign minister, Yashwant Sinha, has publicly called for retaliation against gay American diplomats in India, whose sexual orientation and domestic arrangements are now illegal after a recent Supreme Court ruling. The government has not taken him seriously, but his suggestion indicates how inflamed passions have become.

Some retaliation has occurred. The initial American rationale (that foreign consuls in the US enjoy a lower level of immunity than other diplomats) led India’s government to re-examine privileges enjoyed by US consular officials that are unavailable to their Indian counterparts in the US. These privileges – including full-fledged diplomatic ID cards, access to the restricted customs areas of airports, tax-free shipments of items for personal consumption, and no questions asked about the terms of their employment of local domestic staff – were swiftly withdrawn. The cardinal principle of diplomatic relations is reciprocity, and India realized that it had been naïve in extending courtesies to the US that it was not receiving in return.

Likewise, the police have removed bollards and barriers that the US Embassy had unilaterally placed on the street in front of its complex in New Delhi, creating an obstacle to free circulation on a public road that India had tolerated in a spirit of friendship. (The government has, however, reiterated its commitment to the US Embassy’s security, even reinforcing the police presence outside.)

Tempers remain inflamed, with US Ambassador Nancy Powell, in a New Year’s message to Indians, ruefully acknowledging that ties have been “jolted by very different reactions to issues involving one of your consular officers and her domestic worker.” Kerry has also expressed “regret” over the incident. But the US has shown no signs of moving to drop the charges to defuse the crisis.

Indians remain bewildered that the US State Department would so willfully jeopardize a relationship that American officials had been describing as “strategic” over a practice routinely followed by foreign diplomats for decades. Most developing-country diplomats take domestic staff with them on overseas assignments, paying them a good salary by their national standards, plus a cost differential for working aboard. In Khobragade’s case, perquisites included a fully furnished room in a pricey Manhattan apartment, a television set, a mobile phone, medical insurance, and tickets home.

The cash part of the salary may be low by US standards – Khobragade herself, as a mid-ranking Indian diplomat, earns less than what the US considers a fair wage – but, with the other benefits, the compensation is attractive for a domestic helper. More to the point, Khobragade did not find her maid in the US labor market and “exploit” her; she brought her from India to help her in her representational duties, on an official passport, with a US visa given for that purpose. In almost no other country are local labor laws applied in such a manner to a foreign diplomat’s personal staff.

Privately, US diplomats express frustration at their helplessness in the face of theatrical grandstanding by the ambitious federal prosecutor, Preet Bharara, an Indian-American who has launched a series of high-profile cases against Indians in America. For once, however, the zealous Bharara seems to have slipped up, because Khobragade was arrested at a time when she enjoyed full diplomatic (not just consular) immunity as an adviser to India’s United Nations mission during the General Assembly. The State Department’s handling of the matter – which included approval of Khobragade’s arrest – has been, to say the least, inept.

Worse, just before the arrest, the maid’s family was spirited out of India on US visas for victims of human trafficking. The implication that an Indian diplomat in a wage dispute with her maid is guilty of human trafficking understandably riles Indian diplomats as much as the treatment of Khobragade after she was detained. The American habit of imposing its worldview self-righteously on others is deeply unwelcome. To most Indians, common discourtesy cannot be repackaged as moral virtue.

Indian-American relations had been strengthening, owing to both sides’ shared commitment to democracy, common concerns about China, and increasing trade and investment. The Khobragade affair suggests, however, that all of this is not enough: sustaining a strategic partnership requires, above all, mutual respect.

India had handled American diplomats with a generosity of spirit that it felt the bilateral relationship deserved. Now, with the same spirit shown to be lacking from the other side, the friendship has suffered. Until the US displays appropriate deference to the sensitivities, pride, and honor of other peoples and cultures, it will continue to be resented around the world.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/x04wR6J_5FQ/story01.htm Tyler Durden

India Minister Warns Of "The Return Of The Ugly American"

Authored by Shashi Tharoor (India’s Minister of State for Human Resource Development), originally posted at Project Syndicate,

Nearly a month after American authorities arrested India’s deputy consul general in New York, Devyani Khobragade, outside her children’s school and charged her with paying her Indian domestic worker a salary below the minimum wage, bilateral relations remain tense. India’s government has reacted with fury to the mistreatment of an official enjoying diplomatic immunity, and public indignation has been widespread and nearly unanimous. So, has an era of steadily improving ties between the two countries come to an end?

Judging from Indian leaders’ statements, it would certainly seem so. India’s mild-mannered Prime Minister Manmohan Singh declared that Khobragade’s treatment was “deplorable.” National Security Adviser Shivshankar Menon called her arrest “despicable” and “barbaric,” and Foreign Minister Salman Khurshid refused to take a conciliatory phone call from US Secretary of State John Kerry.

Emotions have run high in India’s Parliament and on television talk shows as well. Writing to her diplomatic colleagues after her arrest, Khobragade, who has denied the charges against her, noted that she “broke down many times,” owing to “the indignities of repeated handcuffing, stripping, and cavity searches, swabbing,” and to being held “with common criminals and drug addicts.” A former Indian foreign minister, Yashwant Sinha, has publicly called for retaliation against gay American diplomats in India, whose sexual orientation and domestic arrangements are now illegal after a recent Supreme Court ruling. The government has not taken him seriously, but his suggestion indicates how inflamed passions have become.

Some retaliation has occurred. The initial American rationale (that foreign consuls in the US enjoy a lower level of immunity than other diplomats) led India’s government to re-examine privileges enjoyed by US consular officials that are unavailable to their Indian counterparts in the US. These privileges – including full-fledged diplomatic ID cards, access to the restricted customs areas of airports, tax-free shipments of items for personal consumption, and no questions asked about the terms of their employment of local domestic staff – were swiftly withdrawn. The cardinal principle of diplomatic relations is reciprocity, and India realized that it had been naïve in extending courtesies to the US that it was not receiving in return.

Likewise, the police have removed bollards and barriers that the US Embassy had unilaterally placed on the street in front of its complex in New Delhi, creating an obstacle to free circulation on a public road that India had tolerated in a spirit of friendship. (The government has, however, reiterated its commitment to the US Embassy’s security, even reinforcing the police presence outside.)

Tempers remain inflamed, with US Ambassador Nancy Powell, in a New Year’s message to Indians, ruefully acknowledging that ties have been “jolted by very different reactions to issues involving one of your consular officers and her domestic worker.” Kerry has also expressed “regret” over the incident. But the US has shown no signs of moving to drop the charges to defuse the crisis.

Indians remain bewildered that the US State Department would so willfully jeopardize a relationship that American officials had been describing as “strategic” over a practice routinely followed by foreign diplomats for decades. Most developing-country diplomats take domestic staff with them on overseas assignments, paying them a good salary by their national standards, plus a cost differential for working aboard. In Khobragade’s case, perquisites included a fully furnished room in a pricey Manhattan apartment, a television set, a mobile phone, medical insurance, and tickets home.

The cash part of the salary may be low by US standards – Khobragade herself, as a mid-ranking Indian diplomat, earns less than what the US considers a fair wage – but, with the other benefits, the compensation is attractive for a domestic helper. More to the point, Khobragade did not find her maid in the US labor market and “exploit” her; she brought her from India to help her in her representational duties, on an official passport, with a US visa given for that purpose. In almost no other country are local labor laws applied in such a manner to a foreign diplomat’s personal staff.

Privately, US diplomats express frustration at their helplessness in the face of theatrical grandstanding by the ambitious federal prosecutor, Preet Bharara, an Indian-American who has launched a series of high-profile cases against Indians in America. For once, however, the zealous Bharara seems to have slipped up, because Khobragade was arrested at a time when she enjoyed full diplomatic (not just consular) immunity as an adviser to India’s United Nations mission during the General Assembly. The State Department’s handling of the matter – which included approval of Khobragade’s arrest – has been, to say the least, inept.

Worse, just before the arrest, the maid’s family was spirited out of India on US visas for victims of human trafficking. The implication that an Indian diplomat in a wage dispute with her maid is guilty of human trafficking understandably riles Indian diplomats as much as the treatment of Khobragade after she was detained. The American habit of imposing its worldview self-righteously on others is deeply unwelcome. To most Indians, common discourtesy cannot be repackaged as moral virtue.

Indian-American relations had been strengthening, owing to both sides’ shared commitment to democracy, common concerns about China, and increasing trade and investment. The Khobragade affair suggests, however, that all of this is not enough: sustaining a strategic partnership requires, above all, mutual respect.

India had handled American diplomats with a generosity of spirit that it felt the bilateral relationship deserved. Now, with the same spirit shown to be lacking from the other side, the friendship has suffered. Until the US displays appropriate deference to the sensitivities, pride, and honor of other peoples and cultures, it will continue to be resented around the world.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/x04wR6J_5FQ/story01.htm Tyler Durden