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Flashback One Year: A Study In Comparisons And Contrasts, And Why Q4 GDP Was Really Over 7% Lower
As David Rosenberg points out, "what a difference a year makes." Here is the compare and contrast.
- A year ago, China was embarking on a massive fiscal and credit stimulus plan that would send commodity prices and global exports surging. Today, the People’s Bank of China (PBoC), along with other Asian central banks, is now withdrawing the stimulus (India as well). Is the near 10% correction in the Chinese stock market telling us something about the Chinese economic outlook? Something tells us the Reserve Bank of Australia was on to something when it didn’t hike rates yesterday when the market was fully priced for another move — after all, China is Australia’s most important customer.
- A year ago, it was all about saving the insolvent banking sector. Now it is popular to bash the banks and de-risk them. Notice how the financials haven’t done a thing in five months?
- A year ago, it was all about fiscal reflation. While there is now tepid support for job creation and small business incentives, the emphasis is also on ending the Bush goodies and taxing the rich (defined as anyone making more than $250k).
- A year ago, it was all about quantitative easing and the need for the Fed to add more than $1 trillion of mortgages to its balance sheet. Today, it is all about the exit strategy.
- A year ago, the U.S. dollar’s bear market rally was about to give way to a 6%-plus decline in support of global carry trades. Today, the dollar has broken out on a trade-weighted basis and has broken above the 50, 100 and 200-day moving averages.
- In 2009, what would growth be in the U.S. without the massive stimulus? We ran the numbers and real GDP would have declined close 4.0% as opposed to the reported -2.4% tally
- A year ago, the VIX index was at 40. Today, it is barely above 20.
- A year ago, Baa corporate bond spreads were in excess of 550 basis points. Today, they are 260 basis points.
- A year ago, the S&P 500 was undervalued by 18%, on a Shiller normalized P/E basis. Now, it is overvalued by 25%.
- A year ago, we were coming off a -6.4% real GDP print in the U.S. and a 35 ISM reading and only ‘green shoots’ lay in our path. Today, we are coming off a +5.7% GDP headline and a 58.4 ISM index and the days of “sequential improvement” are clearly over.
- A year ago, 10-year Treasury note yields were 2.7% and rising. Today, they are 3.7% and falling.
Furthermore, never satisfied using a sledge-hammer on rose-colored economic glasses on a daily basis, Rosie speculates that real GDP in Q4 would have been down more than 7%from the announced 5.7% expansion, if one strips away the stimulus benefits.
We ran some simulations to see what would have happened in 2009 without all the massive amounts of fiscal and monetary stimulus. Instead of real GDP contracting 2.4% for all of 2009, it would have been close to a 4.0% decline. And, as for the last two “positive quarters” — well, Q3 would have been -1.0% QoQ at an annual rate and -1.5% for Q4 (as opposed to the +5.7% annualized print). Still no sign of organic private sector growth and here we have the Fed discussing exit strategies and the Obama team about to soak it to the rich (for anyone who makes over $250k). This is what is otherwise known as a ‘low quality’ recovery.
And in a rare forray into political analysis, Rosenberg is not too hot on the Democrats' grasp of a Senatorial majority.
Not only did the Democrat filibuster-proof majority evaporate with the Scott Brown victory in Massachusetts but there is a legitimate chance that the Republicans will take over the Senate over the next four years. It’s all about the turnover — the Democrats have 23 seats to defend in 2012 compared to 10 for the GOP; and the Dems have 14 in 2014 while the GOP have 13 members up for re-election.
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I wish I fell into that tax the rich group........
A year ago they created 824000 jobs out of thin air, this Friday the party is over:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aNSc0oQ0vb4M&pos=10
I printed that one out quick before the WH tells them to pull it.
In that article, you should click on the "Bloomberg Multimedia interactive visual analysis of the economy’s job losses" presentation for some very interesting graphs.
http://www.bloomberg.com/insight/birth-death-model.html
Thanks!
Wait.....you mean they lied to us? Crap!
.
Dey tuuuk our makebelieve JOBS!!!! Just when I had a 2nd interview.
Those bastards!!
Thanks for that laugh, man. First time my face has cracked for real all day . . .
And, hell, I've been feeling bad about not getting any interviews! Will this timely adjustment make my terminal discouragement evaporate as well?
No you can't compete with thier relentless stupidity. They won't get discouraged or depressed or quit. You have to do it for them. Just pack your bags and exodus.
Give eternal stupidity a deadline and make it stick.
http://www.youtube.com/watch?v=H67uEgRZs2Y
"This is what is otherwise known as a ‘low quality’ recovery."
Here it is only February 3, 2010 and Rosenberg has just uttered what will surely qualify as the understatement of the year and quite possibly of the decade.
In fact, if "low quality" is correct and we really are in recovery, we should all consider ourselves lucky as hell that we just missed having our heads blown off by a 16 inch explosive shell fired from the mothballed USS Wisconsin.
http://www.youtube.com/watch?v=nsNlmiLJGIw
http://en.wikipedia.org/wiki/USS_Wisconsin_(BB-64)
I just love day dreaming at 10 in the morning.
Its unclear that there won't be a double dip, personally I think there will be, the underlying economy is still getting reamed. Oil is still fairly high per barrel despite reduced demand as well. It will put the brakes on any recovery.
It is wistful to imagine that a Republican controlled senate of 'old guard' senators can take the country in a meaningful positive direction. The part of compromise has no brass. The debt bomb is going to explode; it is inevitable. Might as well just let the dems continue to lead us down the highway to hell and get it over with so we can start fresh. I'm not feeling very cheery today, speaking of understatements.
Is anybody still listening to Rosie? That buffon is as accurate as a blind dog.
You misspelled 'Buffoon'.
Hilarious.
I never knew he was a soccer player
Gianluigi Buffon (born 28 January 1978 in Carrara), is an Italian FIFA World Cup-winning goalkeeper who plays for Serie A club Juventus and the Italian national team
I had a friend whose dog went blind. It spent most of the day drooling, yelping uncontrollably and scratching its balls.
Kinda like you.
It seems that he's waffling based on no new data or trend. Heat from the top??? I'll stick to the philosophy of "were all doomed". These things usually take months, years to play out but unless you see wage and salary income rising rapidly, employment gains rapidly and credit growth rapidly this economy is going nowhere. Those are the only three things you need to watch. All the rest is nothing but smoke and mirrors……talking points for the pundits.
The analogy would be a sailing ship stuck in the dreaded Sargasso Sea, with no wind, barely moving an inch for months. That is our economy. Good news - Recovery is OOOOver! as per the WH.
I meant RECESSION is OOOOOvvverr.
You were probably just as right the first time.....
Oh, be still my beating heart; the brass-less Republicans back in charge of the Senate? We're saved! Geez; why is there any faith left in anyone on either side of the aisle? Gets old listening to the mainstream automatons mouthing the 5.7% number in between "yippees", and it is my personal goal to explain this reporting fraud to at least one person a day to anyone who will listen in my own little world - gives me some measure of illusory satisfaction.
The debt-bomb is gonna explode, faster with the dems in charge, and I'm just looking forward to starting over fresh. Or to Obama declaring marshall law. My main reason for reading Zero-Hedge is to learn about soccer players, anyway.
Geez; why is there any faith left in anyone on either side of the aisle?
I hope not, but I'm afraid there is. I see it all the time. The sheeple are more into playing partisan food fights than actually seek the real truth, so they must still think one side it better than the other. At the same time, they learn it well from the clowns you speak of. That's all they seem to do as well. I just watched Geithner in front of the Ways and Means panel - one of the biggest jokes of a hearing I have ever witnessed. Pathetic on all counts, and we pay these people.
Thats right, keep the "Morts" busy fighting over what they conceive as power, politics, while the reality is far more sinister and completely within their power to expose and correct but they are blinded from it by playing Republican vs Democrat. Let God suffer these fools, I'm tired of it.
Short version:
Those who read the LA Times want to run the world.
Those who read the NY Times think they run the world.
Those who read the Wall Street Journal run the world.
An old wag recently told me something like "the dems want to take us over a cliff at 90MPH, while the reps want the same at a nice, residential-zone safe 25MPH. The problem is not how fast you go over. Once you go over, you'll still hit the bottom just as hard."
Apparently, no one knows how to hit the brakes. Witness the re-appointment of our driver, Helicopter Ben.
hey this saids we've come a long way... wish i was more certain as to the direction
When does somebody finally have the guts to say publicly that it's not a recession, but a depression and it's not by any means over?
"...there is a legitimate chance that the Republicans will take over the Senate over the next four years."
The Dems should hand it over willingly. The party in power cannot look good for the next few years.
Well, they don't call it gross domestic product for nothing. Imagine if Haiti were a US state, for example. An absolute disaster any way you look at it, but all of the rescue, cleanup, and reconstruction would go toward GDP. Think Bastiat's Broken Window Fallacy -- http://freedomkeys.com/window.htm -- on steroids, and then think of all the pollution and waste our economy generates each year. Leave it for future generations to handle, and it's not subtracted from GDP. Handle it, and it's added to GDP.
One big clusterfuck, in other words, the point being that we're going down the tubes a helluva lot faster than anyone realizes.
So how long can we go on robbing future growth and deferring payment through credit creation (debt) ?
Now we have the answer. We are living it now.