Bill Gross Proven Half Right (For Now): Fed's Kocherlakota Just Reduced His 2011 GDP Forecast From 3.0% To 2.5%

Tyler Durden's picture

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berated's picture

" Inflation is a little low, but only temporarily."

Let's re-visit this little gem in a few years and have a good laugh....

ZeroPower's picture

More like stagnation in the near future, inflation later on. What did you think the printing press would achieve?

RobotTrader's picture

People still hate stocks, and continue to flee into bonds.

AGG within a hairsbreadth of making new highs.

snowball777's picture

  • the recovery in the US is underway but "distinctly modest"
  • inflation will rise to a more desirable 1.5% to 2% in 2011
  • unemployment will be above 7% well into 2012. 
  • Impact of QE will be "muted", and confirms rumors that the hawk-wing in the Fed is not likely to roll over and accept a November QE2 announcement
  • the recovery in the US is a complete fabrication
  • inflation will rise to at most 0.5% in 2011
  • unemployment will be above 10% well into 2014. 
  • QE2 will be too little, too late...can't blow up a tire with a dixie straw, bitchez.

mnevins2's picture

"unemployment will be above 7% well into 2012."

Typo in this comment from the headline - and it's not a good one. The narrative has him actually saying "unemployment will be above 8% well into 2012."

For me, this is the issue that, for the Fed, determines/trumps everything: deficits, taxes, inflation/deflation, gold - everything.

sushi's picture

Bill Gross half right??

But which half??

Sudden Debt's picture

Among the other things Kocherlakota has announced is that:

  • inflation will rise to a more desirable 1.5% to 2% in 2011

MY ASS! For example inflation in Europe is up from 2.4 to 3.1% IN ONE MONTH!!!

NOTW777's picture

when do they downgrade the summer of recovery to half a summer of recovery.

MSM is a total fraud - they are ignoring the disaster; the crooks are sneaking out the back door little by little

Buttcathead's picture

I still aint buy'n nuttin, But I raised my Dow target price from 444 to 2447.  I mis calculated one of the waves.  I will buy something once we get to 2500.

Dr. No's picture

Make sure you wait until it bounces off 2447.

Cognitive Dissonance's picture

Pimco's Bill Gross, who is now rumored to be Larry Summers replacement.....

Bill Gross was interviewed on CNBC by Erin "Tiny Bubbles" Burnett yesterday. And he flatly gave a non denial denial, saying he was a poor candidate and that there were many more qualified people.

I love absolute denials, don't you?

BearOfNH's picture

Ah, but the "many more qualified people" don't swing the 0bama way. Smilin' Bill wins by default.


buzzsaw99's picture

Gross was only half right because the fed altered their forecast after he spilled the beans that Pimpco always has the insider info. RICO bastards.

Cognitive Dissonance's picture

I have no idea why people would be afraid to trade.

Oh wait, maybe it's because the HFT computer algos can eat my lunch before I can even remember if I had any.

septicshock's picture


Any word on the riots all over Europe?

Spalding_Smailes's picture


`Toxic bank' cement truck blocks Irish parliament

DUBLIN — A cement truck plastered with anti-bank slogans blocked the entrance to the Irish parliament Wednesday as tensions mounted over the country's debt crisis and enormous bank bailouts.

At least one police guard narrowly escaped being hit as the truck drove up to Leinster House about 7:15 a.m., one lawmaker said. The truck stopped as it touched the entrance's ornate wrought-iron gates but caused no significant damage.

Police arrested the 41-year-old driver, who climbed out of the truck cabin's skylight. The doors of the cement truck — which has been used before in anti-government demonstrations — were welded shut and its windows covered in metal grills to prevent police from gaining access.


Update ***

Those tensions were writ large on the truck itself. It displayed the slogans "All politicians should be sacked" and, in huge capitalized red letters, "TOXIC BANK," alongside the corporate logo of government-owned Anglo Irish Bank.

It took three hours to remove the truck from the parliament entrance because its brake lines were also cut to make the move difficult.

RockyRacoon's picture

You're expecting a personal reply on something off topic?

Google it.    May we peel you a grape as well?


Europe ETFs Fall As Riots Take Hold


News roundup: Strikes in Europe protest austerity measures
Gloomy's picture
Meredith Whitney's new target: The states

The housing crash not yet realized its full impact on budgets in the most vulnerable states. It's the banking crisis all over again – and it's time to stop ignoring it.

Meredith Whitney, the superstar analyst who famously forecast disaster for America's big banks before the credit crisis struck, is now warning about another looming threat: The wreckage from over-stretched state budgets.

Today, Whitney is releasing a 600-page report, colorfully entitled "The Tragedy of the Commons," that rates the financial condition of America's 15 largest states, measured by their GDP. Whitney claims that the study is the most comprehensive, in-depth analysis of the states' murky patterns of spending, revenues and benefits programs ever assembled by the government, foundations, or another research firm.

What Whitney found reminds her of the poor disclosure and arcane accounting rules that hid the fragile condition of the banks and monoline insurers that she unmasked. "The states represent the new systemic risk to financial markets," says Whitney. "I see a lack of transparency and an abundance of complacency on the part of investors and politicians, just as we saw before the banks imploded."

The study represents a departure for Whitney, whose boutique research firm specializes in providing its clients, including hedge funds, big institutions and banks, with proprietary research on the financial condition of consumers, ranging from projections on credit card defaults to regional employment trends. So why the mega-work on the states? "It's not that my clients requested it," says Whitney. "I was just so shocked by what I was seeing that I couldn't stop. Any long-term strategic plan needs to take account of the dangerous, mostly overlooked problems in the state finances." Whitney describes the reports as "her favorite child."

The title, "The Tragedy of the Commons," ­­comes from a parable about greedy farmers who let their sheep gobble up all the grass in a pasture, leaving the land barren and unfarmable––reflecting the spending frenzy that promises to decimate the prospects for many of America's largest, and formerly most prosperous, states.

Bigger economies, lower ratings

In the report, Whitney rates the fifteen states on four criteria, their economy, fiscal health, housing, and taxes. For each category, she assigns a rating of one, two or three for best, neutral or negative. Only two states get positive overall ratings: Texas and Virginia. Eight are either negative, or rated neutral, with a negative bias. The rub is that those are typically the states with the biggest economies: California, Ohio, New Jersey, Michigan, and Illinois (all negative) and Florida, Georgia, and New York (neutral, negative bias).

The full rankings:

Worst states

1. California

2. New Jersey, Illinois, Ohio (tie)

3. Michigan

4. Georgia

5. New York

6. Florida

Best states

1. Texas

2. Virginia

3. Washington

4. North Carolina

Neutral states: Pennsylvania, Maryland, Massachusetts

Put simply, the study warns that the giant gap between states' spending and their tax revenues, estimated at $192 billion or 27% of their total budgets for the 2010 fiscal year, presents two dangers that investors are seriously underestimating. First, municipalities could start defaulting on their bonds guaranteed by the cities and towns themselves, an exceedingly rare event over the past three, mostly prosperous, decades.

"People keep saying it can't happen, just as they said national housing prices could never go down," says Whitney. "Now, it's a real danger."

The reason: the municipalities receive one-third of their revenue from the states. If the states hold back that money for their own stricken budgets, towns and cities won't have the funds to make their interest payments. "It has to happen," says Whitney. "The states will secure their own shortfalls, and leave the cities to fend for themselves." It's all about inter-dependency, she says, with the federal government aiding the states, and the states funding the last and most vulnerable link, the municipalities.

Housing fallout continues

Second, Whitney sees the budget shortfalls as a far stronger leash on both employment growth and overall expansion than investors realize. The common thread between the banking and looming state financial crises, she says, is housing. "The entire financial system was over-leveraged to real estate," says Whitney. "So were the states."

During the boom years from 2000 to 2008, the states that grew the fastest were the ones where housing prices grew fastest, and where construction flourished, including California, Florida, New York, and New Jersey. In Florida, almost 30% of income growth came from real estate, an astoundingly high figure. Tax revenues soared during the real estate frenzy, and spending soared along with them. Now, revenues have collapsed with housing prices, and spending is proving far stickier. The legacy: Today's gigantic deficits.

Then, as housing prices fell, the states that grew the fastest and outperformed in the strong years, are now posting the worst economic performance––for the obvious reasons that they face the biggest mortgage delinquency and foreclosure rates, as well as high unemployment due to the collapse in construction and mortgage lending. The "haves," says Whitney, have suddenly evolved into the "have-nots."

The problem is that the states that benefited disproportionately from housing are generally the biggest economies, so their woes have become a deadweight on overall economic growth. "Other states such as Nebraska, even with larger ones like Texas, aren't large enough in total to offset the weak growth in the states that depended on real estate," says Whitney.

What investors are missing, says Whitney, is that growth in those states is destined to remain feeble because of the drastic measures needed to redeem their finances. By law, almost all states are required to balance their budgets. Right now, the Obama stimulus package is making up over $60 billion of the $192 billion shortfall for fiscal 2010. But that money is slated to disappear next year. States are already raising taxes, or planning to -- voters in Washington will soon vote on a referendum to levy an income tax.

The biggest source of funds to fill the still-giant gaps is especially worrisome: Raiding pension and healthcare funds. States from California to New York are shifting contributions needed to pay workers' benefits in the future toward funding current expenses.

The housing collapse will leave a different legacy by forcing big tax increases, and cutbacks in benefits including a rise in retirement ages. Millionaires who provide a huge share of the revenues will leave the high tax states, leaving the poor who need most of the services.

"The scary thing," says Whitney, "is that no one wants to talk about it. When you get the data and mechanics together the situation is as basic as it was for banks or consumers." "The Tragedy of the Commons" should get people talking, and the daunting scale of the numbers should get them outraged.

prophet's picture

ZH consider inviting Whitney, Yamada, and others into the fold via some sort of experts forum observed by all with contributions only by those willing experts.

(Sponsored by those taking the other side of that trade.)



JR's picture

August Annual Consumer Inflation: 1.1% (CPI-U), 8.5% (SGS)

“What’s in a Name?  NBER Declares Recession Ended in June 2009.  Speaking to her beloved Romeo, Juliet declares, "What’s in a name?  That which we call a rose, by any other name would smell as sweet." There is a corollary here involving economic contractions, recessions, double-dips and recoveries, but the final descriptive would involve something other than a sweet fragrance. “ – John Williams September 26, 2010

On today’s Market Ticker, Karl Denninger “illuminates” Gross’ “New Normal”  :

Anyone who has read me for any length of time knows that I have nothing but disgust for Bill Gross and PIMCO, and in fact call them "PIMpCO", because it is my belief that he has repeatedly prostituted himself with both The Fed and Government.

Nonetheless, he is highly intelligent.  And what he's written in his last public missive is something you better pay attention to.

·    The New Normal has a new set of rules. What once pumped asset prices and favored the production of paper, as opposed to things, is now in retrograde.

·    The hard cold reality from Stan Druckenmiller’s “old normal” is that prosperity and overconsumption was driven by asset inflation that in turn was leverage and interest rate correlated.

·    Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns.

Got those three points?

arkm's picture

If also Plosser sends signals that QE2 is unlikely (ok citing improved market conditions, ahah) why is it that Treasuries are not falling and dollar is not recovering (especially vs €)? non voting members are laughable?

wawawiwaa's picture

New normal is going to bang Gross and that El-Erian bozo who people listen to because of his retahded accent. That entire firm has been one single trade its entire existence. Long FNM and FRE and GNMA and they got their asses saved in 08 when Treasury said that FRE and FNM were part of uncle sam...

gwar5's picture

GDP should be contracting in 2011, +2.5% is a pipe dream. Heard it through the grapevine.