Bloomberg Interviews Goldman's Rapaciously (For The Time Being) Bullish Jan Hatzius

Tyler Durden's picture

Jan Hatzius is the bellwether of the sellside economist crowd. When he was bearish (2009), most were bearish, when he turned bullish (early half of 2010), everyone else followed suit. Then he turned bearish again (early August 2010) and convinced his friend and former co-worker Bill Dudley to launch QE2. Then, in December, he turned very bullish again. And now we are here. We expect Hatzius to be fake bullish for another 3 months max, at which point he will have no choice than to start telegraphing to Jon Hilsenrath that it is time for QE3. In the meantime, for those who are not too familiar with his work, here is an extended interview with Bloomberg TV, in which the GS head economist talks about Goldman's call for 18% gain in stocks this year as well as trends in jobs, inflation and other data indicators.

Part 1

Part 2

Summary thoughts:

On the Middle East and how it plays into Hatzius' economic outlook:

"It's certainly a reminder that there are still some significant risks in the global economy and of course, especially to the extent that it affects oil prices and commodity prices more generally. Having said that, our outlook for global growth and the U.S. economy is pretty positive. We think close to 5% GDP growth this year and next year in the global economy and sort of 3.5% - 4% over the next two years in the U.S.  It's a reasonably upbeat view."

On global food inflation:

"[Food inflation] is certainly on our radar. It is not yet fully in the inflation data here, that 's still going to happen over the next few months.  We will see upward pressure on the headline CPI numbers as the food price inflation shock feeds through.  At the margin, that is going to be a drag on household budgets.  Having said that, there are also a number of more positive factors pointing in the other direction and that improve household budgets, the improvements in the labor markets probably the most important of them. It is a potential negative, but I think it is being outweighed by other forces."

On unemployment levels:

"I think it's going to take a long time for the unemployment rate to get back to the pre-2007 levels. I do think that job creation is in the process of picking up.  I think that is not yet as visible in the payroll numbers as is in a lot of other labor indicators like the household survey, like the jobless claims data, like the job vacancy data, like the household perceptions of job availability. None of these things are going to normalize in the short term.  But I think at the margin, they are getting better. Labor market income is going to be a more important force in terms of household income than the food price inflation in the United States.  Elsewhere in the world, it is going to be different. In the emerging world, food takes up a much larger share of overall household budgets and that is why it is a more acute issue."

On consumer spending:

"I think the first quarter looks a lot softer than a fourth. The number now on record for the fourth quarter is 4.4% … I think it will come down a bit in the wake of the downwards revisions to the retail sales report.  I think the first quarter will be softer. Over the next year or so, I would expect something like 3.5% consumer spending growth, definitely better than what you have seen for the last few years, though not as strong as the recent spurt."

On whether this is a buying opportunity in the market:

"Our strategists are generally pretty constructive.  I think it's the flip side of an economic outlook that is reasonably good in terms of GPD growth…It is not a super strong relative to the downturn we saw, but it is clearly better than we have had in the past few years. A low inflation, low rate environment, policymakers staying on the sidelines and letting that return to higher levels of employment happen for while, I think that's a fairly positive environment and the way our strategists translate it is to S&P 1500 by the end of the year."

On inflation:

"I'm not that worried [about inflation].  I do think the headline inflation numbers are going to be higher as the food price inflation shock does work its way through the numbers.  But in terms of the underlying inflation trend, my view is there's a lot of slack in the system early in the recovery. Typically when there is a lot of slack, inflation remains very low and that is our outlook.  I am probably at the margin a little more sanguine."

On job creation:

"We're expecting it by the second half of the year, 200,000 to 250,000 on non-farm payrolls. That means you move to a situation in which you sustainably create more jobs than the trend increase in the working age population, which means the unemployment rate comes down on a sustained basis. But because the starting level was so high, you are still at 8% by late 2012.  It is a level verses rates of change thing.  The rates of change look like it will be significantly better but the levels are unsatisfactory.  That is very much true in the labor market as in other areas."

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slaughterer's picture

"policymakers staying on the sidelines"

how long will they stay there on the sidelines and let Jan and his company do God's work without interference?

ghostfaceinvestah's picture

Classic psychology - herd following behavior.  It served our ancestors well, but makes investing, or forecasting, very, very hard.

Not to mention the real career pressures to conform to the company's stated position.

gwar5's picture

Later, among the ashes, he'll testify that he was just following orders...

Inflation "a drag" on households but, by golly, the S&P should be go to 1500 this year.

Zero Govt's picture

"..we're early in the recovery.."

Yes sure, and I'm off to grab my pot of Gold at the end of the Rainbow too... i suspect we'll arrive at the same time to 'Point Fantasy' 

thepigman's picture

Nirvana's just around the corner

hanging out with the housing bottom.

thepigman's picture

What???? Everything's already priced

beyond nirvana? Well, fuck all.

Zero Govt's picture

how much better Goldman Sachs had gone bankrupt in 2007-08 and we wouldn't have had to put up with 3 years of BS from these insolvents?

Capitalism is supposed to work by killing shit like this, now you understand why it's so important, gives your bleedin' ears a rest just for starters

thepigman's picture

He's already hedging. My bs meter

detects he is  shifting all the happy

outcomes to the 2nd half,  so he's

already sensing trouble ahead.

Rainman's picture

Low inflation is an easy call when you know the CPI is rigged to the overweight in housing. Rock on, dude.

99er's picture


18% "gain"?

Edit: Russell futures added.

co2010's picture

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co2010's picture

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Caviar Emptor's picture


On whether this is a buying opportunity in the market: 

First of all it's a Borse not a Market anymore. 


Savonarola's picture

We're on our way to the mother of all train wrecks.



Zero Govt's picture

no, more subsidies to prop up AmTrak

Caviar Emptor's picture


Global Food Inflation: here to stay as a chronic thorn in the side, a sore that never fully heals. It will eventually turn ugly as it ends up being the only thing that matters anymore to an increasing number of countries and populations. 

Unemployment levels: this was another leg down in the ongoing downsizing of America. There won't be full or even adequate replacement of jobs lost as a result of the crisis during the ensuing business cycle. And then the next leg down. Around the world tonight, levels of unemployment are unprecedented. In the US the numbers appear better than they real are thanks to the magic of data massage (read participation rate and other stupid BLS tricks). But nobody's fooled except for those who chose to fool themselves or con others. There won't be a reaction until the elite begin to fear for their lives and property. 

Consumer spending: the nub of the issue since our partners in crime (mainly China) depend on this. Biflation will continue to ensure the further erosion of consumer buying power. That in turn will erode margins further. Wash rinse repeat. Double WHammy. 

Inflation: Headline numbers appear better because inflation and deflation are canceling out. As I've said many times. CPI is 40% housing related. Nuff said. 

Job creation: is fine in China and Russia thanks to US multinationals shifting their focus and endeavors. They'll sooner hire there than here. 


RobotTrader's picture

Jan Hatzius is just another "cattle prodder" in the PPT's arsenal to get the herd moving in the direction the PigMen are trading.

May 2008:  "Buy, Buy Buy!!!  Subprime is contained, no impact on the economy whatsoever!!"

September 2008:  "Sell!!!  There are cracks in the system, GDP is going to implode!!!"

April 2009:  "Buy, the Fed is going to keep buying more CDO Squared/Cubes!!"


May 2010:  "The Fed is stopping QE!!  The Flash Crash means the system is going to implode!!  Sell!"

September 2010:  "The Fed is cranking up QE2!  They were only kidding about withdrawing stimulus.  Full speed ahead!!  Buy, Buy, Buy!"

TradingJoe's picture

Mein Gott Jan, halt endlich die Schnautze Du blamierst dich nur!




Judge Judy Scheinlok's picture




chump666's picture

So the dumb arse investments banks hold commodity/stock/risk FX longs, they are about to get squeezed to hell.   They are long everything.  With the Fed backstopping they couldn't go wrong. 

now the feeble attempt at a bull trap

poor fella's picture

He looks, talks, and thinks like Jack Nicholson in One Flew Over the Cuckoo's Nest.

Post lobotomy...    drivel and b.s.

** time - for - the pillow **

Bansters-in-my- feces's picture

Lying,cheating,thieving Banksters make me puke.

But I hear they make good compost.

maneco's picture

This guy is full of it. Seems more like a PR man than an economist!

Fíréan's picture

I have no faith in any public statements coming out of Goldman Sachs.

If any of their employees have the time, please explain why we ought to trust or believe.

Lord Koos's picture

"Having said that, there are also a number of more positive factors pointing in the other direction and that improve household budgets, the improvements in the labor markets probably the most important of them. It is a potential negative, but I think it is being outweighed by other forces."

Can somebody translate this for me?