Charting The Second Half Economic Slowdown

Tyler Durden's picture

A useful presentation for all those who continue to be bullish despite that fact that the double dip has officially begun. In one of the better compendiums of bearish data, oddly enough coming from Goldman's Jan Hatzius, the chief economist summarizes all the adverse trends that continue to not be priced into stocks. He notes that while the inventory cycle has boosted growth, this artificial rise is now losing steam. Key headwinds facing the economy are that fiscal policy, which has been expansionary, has now become to restrictive;  that there has been no overshoot in layoffs for a mean reversion expectation; that the labor market multiplier is very much limited; that while capital spending is just modestly above replacement levels, the large output gap suggests spending should be subdued; the housing overhang is still huge and house prices have further to fall; that there are risks to US from European crisis; that inflation is dropping (and non-existent) even as utilization is low everywhere, which creates a major deflation risk; that the scary budget deficit will destroy any hope for future fiscal stimulus as public debt is surging out of control; lastly, with Taylor-implied Fed rates expected to be negative, the Fed's monetary policy arsenal is non-existent. All this in 18 pretty charts. 


full presentation here

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hellboy's picture

can you please attach pdf's? scribd is blocked at my work for example...

buzzsaw99's picture

Fed's monetary policy arsenal is non-existent...


nah, zimben is going to tell CONgreff that he is buying the entire stock and bond markets.

johngaltfla's picture

Fed's monetary policy arsenal is non-existent...

I'm amazed at how many times I've heard that but so few of these clowns read what the Riskebank did in the early 1990's. The Fed is never out of bullets, they will just have to switch from .357 to nukes, that's all.

Paper CRUSHer's picture

Agree we all need to wise up a little around here.

'Galt,take this gift and leave it on Bernanke's desk.

"May you burn in hell"


Blues Traveler's picture

The Fed is our monarchy but the real enemy is main stream media, they have not only failed us, but they are conspiring/contributing in conspiracy against the People.

buzzsaw99's picture

at twice face value


from his friends only

umop episdn's picture

Amazing. They plot all those gubbermint numbers just as if they meant something. What a freakin' waste of time-but I do appreciate the post, Tyler!

bonddude's picture

green chutes = we're screwed (stimulus 2.0 coming)

lizzy36's picture

Well by these numbers we have seen an additional $700B in stimulas in the last year.  So stimulas 2.0 was covert, like all GOOD operations in the US.

"Indeed, the current outstanding balance of overall Federal support for the nation's financial system...has actually increased more than 23% over the past year, from approximately $3.0 trillion to $3.7 trillion -- the equivalent of a fully deployed TARP program -- largely without congressional action,

primefool's picture

Life's good. We are all still alive. Bennie boy is gonna do stand up comedy in a few hours. plenty to drink - the market is "in the mood" -- fur LOOVE - L- O- V - E .... love.

bonddude's picture

Question of the day is...

"Will the pump continue?"

primefool's picture

everybody just remember - the markets ar enot about neurons ( than goodness - IQ between a dog and a dolphin) - Nooo Nooo - its all about HORMONES - yeah!!

primefool's picture

Agreed that Bennie - well .. he's got nuttin. Well - sure he can always print money and buy yer wife ( lucky you!). But - he sure provides some good comedy eh?

primefool's picture

Actually - by hollywood standards - I figger we gettin a pretty good deal - I mean the congress sritters, bennie etc etc - I mean in Tinsel town that stuff would run ya at least double.

No Mas's picture

Why does this site spend so much time on the "economy?"  It doesn't matter if we slow down, speed up or even stop.  Look at the market!! Look at Apple!!!  My god, the only reason Apple doesn't double its sales everyday is because they can't make enough of this crap.  But there are lots of chinese born every day and soon enough they are old enough to work in the gulags and make more crap.

The point is the consumer is incredibly strong!! They will not be stopped from buying more crap.  As a result, the market will just keep going up as corporate profits will never stop rising.  Every day there is some article on this site about the end of fiat currency.  What BS!  More paper baby - more paper!!  Move this market up, up and away!

High unemployment?  Who gives a damn? Let 'em eat cake.  Depressed housing market?  Who gives a damn?  Let 'em sleep on the street.  Contracting GDP?  Who gives a damn!  The people want their ICrap and they will not be denied.

Look at the pre-market numbers permabears and weep.  I don't care if this market drops 1000 points in a day it will simply make them back.  Blame (or thank) the fed, the PPT, Biden, Pelosi or Mikey Rooney because it just doesn't matter.  It is like our entire culture - nothing matters but Dancing With the Stars baby!!!  Treat the market like your marriage and swing!!! It makes for a great life.

Life is so very good when you're not stupid!

lizzy36's picture

I agree with just about everything you said except your last statement, which i believe should have been:

"Life is very good when YOU ARE stupid!"

taraxias's picture

How did you get to the last line, lizzy? I stopped reading right after the "consumer is incredibly strong". 

FEDbuster's picture

Like sticking around to listen to the dance band on the Titanic.  Keep dancing till the booze runs out and your shoes are wet.

First There Is A Mountain's picture

While I'm sure many here can appreciate the sentiment behind your post, it isn't quite that cut and dry. Your seemingly reasonable post on the upward trajectory of the market based purely on conspicuous consumption has some merit in these unusual times, but wider economic fundamentals will eventually catch up, no matter the interminable amount of stimulus, unemployment benefits, cram downs, etc. thrown at the problem.

1. There will always be Chinese peasants willing to service our overconsumption.

-Barring pandemics, uprisings, protectionist trade policies, consumption taxes, resource depletion and a host of other variables, this could be true. The question is, will the rest of the world be positioned to partake of the fruits of China's labor? At some point, permanent expansion hits the brick wall of resource depletion, but it's a nice thought.

2. The consumer is incredibly strong

-Hmmmm - in my way of thinking, the consumer is, generally speaking, incredibly leveraged and indebted. Granted, homes aren't iThings, but people are running from homeownership even with historically low rates. And as far as I can tell, there is no greater aspiration in this country than home ownership with all the stainless steel trappings. Auto sales plummeted, and without CFC and the extension of easy credit, they would still be in the doldrums. Just have a gander at average credit card indebtedness per household and tell me the consumer is incredibly strong.

3 . Corporate profits will never stop rising.

-I suspect that corporate profits would have been rather anemic were it not for EXTREME cost cutting measures and stimulus. And this recent trend of "streamlining" has only come at the expense of the average worker who will see his jobs offshored/wages evaporate and benefits slashed.

Qu'ils mangent de la brioche, you say? Well, those famous last words were uttered just in advance of a public decapitation. I understand where you're coming from, but bad things can and will happen here . . . even in the good 'ol US of A. Unemployed workers have families to feed and bills to pay. I'm afraid thumbing noses in the face of hunger and homelessness only goes on temporarily before politicians start doing the lamp post Mamba. And while we agree that this is Dancing With The Stars nation, a true financial catastrophe will change that in one hell of a hurry. iCrap will have to take a back seat once credit contracts altogether. And as far as the market being representative of the true health of the nation . . . well, just ask the soon-to-be 99'ers who won't be getting any Unemployent Benefits extensions whatsoever.

Andy_Jackson_Jihad's picture

Why even bother with a long and well reasoned response? He's missing the forest for the trees. He cannot envision a black swan until it has already shit on his head.

First There Is A Mountain's picture

I guess I felt like I owed him a "well reasoned response". I could have merely labeled him a short-sighted fool and been done with it, but then I'm really not much better. Who knows . . . . maybe the hamster wheel is starting to turn a little.

poor fella's picture

Whew! It's posts like yours that save me from being a complete a-hole and snapping into a frenzy of lunatic whip-sawed emotion... Smart people are great! It allows me a "What he said"!

I argued back in the day with somebody about inflated Santa Barbara real estate and kept hearing how it "'HAS to go up, they're not making any more land'" - my argument was that at a million big ones, lots of people couldn't afford the payment plus $1k/month in taxes if the screw turned... He said people don't have a choice and I said, "They'll move".. It was a heated discussion (and it's still a heated market - but nowhere near the heyday) - Pretty sure that guy moved.

So you short Apple when 90% of Earth's population has all their iCrap? Or will they all update to iCrap 2.0? KCHeeerIYST!!

Careless Whisper's picture

why can't those cheap bastards at 200 west add some color to their charts?


primefool's picture

Let me give a quick example:
Mega-bank - beats "earnings" ( yeah !) - sez things be dandy.( Yeah!).
Now then - you can get all academic on this sheet and start lookin at the balance sheet and sheet ( nuttin marked ta market - all fantasy) - but - hey - why not just enjoy- EH?
Buy da mans stock. It WILL go up. Then ya'll sell it. If it dont go up - ya dont buy it in da foist place.

virgilcaine's picture

Eu currencies aren't cooperating with the earnings hoopla.

primefool's picture

OK a semi serious - semi trick question: Is there any diference between an autographed photograph of Jobs and a share of Apple stock?
Lets assume the photograph's value goes up when they do sumpin good and down when dey done bad- CrapVision will help market all good things.

firstdivision's picture

So; most earnings have been misses, and thoses that do meet (or as they say "outstanding earngins beating a lowered standared by a penny") are from bottom line growth.  Yet becuase Apple and MS post good earnings it is pump away.  Well we are at the 50DMA now, so this is going to be a make it or break it day.  Good times we live in.

financeguru500's picture

I think most everyone is missing true financial disparity that we currently have. The only true way to understand economic wealth in terms of income is to relate it to gold. The reason being is because for the past. 30 years our country has outsourced production of goods creating artificial wealth in the U.S. If you look directly at income to gold price you can come to the realization of what has really happened in the U.S. over the past 50 years.

In 1950 an average worker could buy 180 ounces of gold per year if all wage could be spent on gold. In 2005 before gold prices doubled to what they are today the average worker could buy 60 ounces of gold if all wages could be used to buy gold. Today... Less than 30 ounces!


Winston Smith 2009's picture
How To Lose Money: Listen To Goldman

Conclusion of above column:

"When you're wrong half the time you look like a monkey with a fistful of darts.

When you're wrong 80% of the time one is forced to wonder if the bad calls are intentional."

Personally, I think Goldman's projections in that report are WAY too optimistic.

financeguru500's picture

lol what you say reminds me of things like mad money or warren buffet. When Warren Buffet gets on television to say he believes in investing in "X stock or X company" it is because he has already purchased stock in that company and he is wanting to profit from his advice. He is not a billionaire because of giving away money to others or giving away advice and not taking it himself.

Anything Warren Buffet says is based on moves he has already made.

JW n FL's picture

Let’s call it $2 Billion a month in benefits paid out... just for conversational proposes...

$750 Billion (TARP) =’s 375 Months… or 31 plus years of benefits?

I think we all can agree that the stimulus Packages… or monies being poured into the AAA Rated Corporations coffers exceeds the trillion dollar mark in multiples…

So, is the burden of debt really a bunch of couch potatoes milking the system? Or is the real problem or the real burden the amount of monies being poured into Wall Street?

The real problems are belittled daily by a bunch of wanna be Republican Conservatives… who pontificate about people pulling themselves up by their own boot straps or abortion... while the Country is Robbed Blind!

Drill Baby! Drill!!

Austerity Measures! For / or Against the un-employed / fellow American Country Men and / or Women… while we (as a Country) offer Tax Breaks to Companies who move Jobs Offshore / out of the United States.

The Democrats continue on the same path as laid by Bush… The Lobby controls our Government in Total! The Lobby owns US! ALL!! No exceptions!

The un-employed benefits being paid is NOT! the drag that is holding US! As a Country! Back… 


poor fella's picture

"Well DAMNIT! If we can build an advanced society where the super-majority makes minimum wage and the people with 'forsight', 'intelligence' and 'motivation' can make money using their CAPITAL instead of, God forbid, LABOR; we're damn well gonna try!"

Latin America went down this path for decades and they are still trying to pull themselves out (with many of 'our' jobs due to bad trade policies (many jobs can be done elsewhere as well as here). 

When people start putting razor-wire around their homes because they own an air conditioner or television, I'll know the middle class has been exterminated. The only thing that trickles down is anger about over-compensated CEOs, spine-less boards of directors, and the predominance of 'finance' within this economy...