Goldman Boosts Q4 GDP Estimate From 4% to 5.8%; Economic Status Quo Expected To Continue

Tyler Durden's picture

And you thought JP Morgan was aggressive. Goldman just threw out the last trump card in its current sell-side arsenal by increasing Q4 GDP estimates from 4% to a paroxysmal attack inducing 5.8%. While Zero Hedge long ago gave up discussing corporate fundamentals due to our long-held tenet that currently the only relevant pieces of financial information are contained in the Fed's H.4.1, H.3 statements, and, when Ron Paul's attempt at Fed deobfuscation is finally successful, the Fed's daily Sources and Uses of Funds statement, it would appear even macro economic data now is essentially one big joke. We are confident that JPM and Goldman are right on the money, and that the government will present the economy as having grown by nearly 6% in Q4. What is troubling is that after having taken over the housing and treasury market, and according to some others, the equity market as well, the Treserve (thank you Marla) has also singlehandedly added several log scale orders of magnitude of volatility to the general economy itself. Too bad GETCO does not have some predatory algo floating around, and overextending GDP momentum in any one general direction, as at this rate we would not be in the least surprised if Obama's Disinformation Czar (TBD) were to announce that the US is now competing for 10% GDP growth with China. As the two countries' centrally-planned economic systems now differ, well, not at all, it is only a matter of time before the race to the bottom in currency devaluation is enjoined by a competition as to who can fabricate, manipulate, inflate, stimulate and other "-ates", the fastest.

Back to Goldman and Jan Hatzius' latest "Q&A on Housing Policies in 2010." As housing will be the wildcard that determines the outlook of the economy in the next 12 months, we read this particular report with great interest to get the reverse psychological recommendations that Goldman's prop desk will not be pursuing.

First, Goldman discusses the most pertinent topic currently of whether the Fed will indeed end MBS Q.E. on schedule. The conclusion is a definite maybe.

Q: Will the Fed end its asset purchases on schedule? It seems likely that the Fed will end its program to purchase $1.25 trillion in agency MBS on schedule at the end of March. However, there is clearly some uncertainty, related to three issues: first, the minutes of the last two FOMC meetings indicate that several committee members support extending the MBS purchase program. Second, our expectation is that growth will weaken again over the course of 2010. Renewed growth concerns could add support for an extension. Third, the Fed will accumulate interest income and is likely to see significant prepayments on its MBS holdings. The latter implies that some additional purchases would be necessary simply to maintain the level of assets on the Fed?s balance sheet. The issue of whether to reinvest the proceeds is likely to be on the agenda in upcoming FOMC meetings.

A logical corollary, and a topic that is troubling Goldman's competitor Morgan Stanley (whose analysis about the need to "unearth" a massive incremental buyer of fixed income securities in 2010 is precisely what this Goldman piece is a response to) much more than it seems to concern Mr. Hatzius, is what happens to conforming MBS spreads. Amusingly, Goldman also takes a stab at Sprott, and the mysterious "household" buyer category of securities. However, unlike Sprott who looks at "households" from the perspective of a securities' buyer, Goldman analyzes them from the supply side.

Q: What will happen to the conforming mortgage spread if asset purchases end? It seems likely to widen, but not that substantially. Along with Treasury and the GSEs, the Fed?s purchases absorbed a net average of $100 billion per month in 2009 (Exhibit 1). By the time the program ends in March, combined MBS purchases will have taken $1.55 trillion of MBS out of the market. Broker dealers, ?households? (this includes hedge funds and other nonspecific entities), and foreign holders were the main sellers.


Over the same period, total agency MBS outstanding, including GNMA securities, increased by only $600 billion. The result is a $1 trillion decline in agency MBS in private hands, along with a $200 billion decline in outstanding non-agency mortgage debt. There is no reason to expect any greater supply of agency MBS in 2010; it is more likely to be lower, given what was probably peak refinancing volume in the first half of 2009, a potential decrease in first time homebuyers, and increasing foreclosures.

As for the conforming mortgage spread, which as the chart below demonstrates is at what is likely an all time tight, Goldman says don't worry about that either. Some widening is expected by nothing that should keep you awake at night.

In October we estimated that Fed purchases may have narrowed the conforming mortgage spread by 30 bps. This still looks accurate, but the spread has tightened even further since then despite the upcoming end to purchases (Exhibit 2). The most recent move was probably driven in part by the strengthened financial support for the GSEs, discussed below.


So if indeed the Fed is stuck without an option to extend Q.E. directly, and the ability to funnel money straight from Bernanke's printer to purchase a low mortgage yield (not as difficult as it sounds), who will be the next artificial buyer of GSE MBS to continue the game of extend and pretend? Well, courtesy of the administration's recent move to basically let the GSE's do whatever they want as everyone now realizes they will be the next AIG-like financial black hole sooner or later, regardless of regulatory intervention, it appears that the GSEs themselves will soon be primed.

Q: What can the GSEs do to keep rates down? The most obvious approach would be for the agencies to add to the $1.5 trillion in mortgages and mortgage-backed securities that they collectively hold in their portfolios. As shown in Exhibit 1 above, the GSEs have not been large buyers of MBS over the last year, accumulating roughly $100 billion. This is largely because when the Treasury put the GSEs under conservatorship, it required them to reduce their portfolios by roughly $150 billion below year-end 2009 levels by the end of 2010.

In December, the Treasury amended this agreement, effectively raising the portfolio cap to $110 billion above current levels, or $260 billion above where it otherwise would have been (Exhibit 4). This is a relatively small amount, equivalent to roughly one month?s worth of Fed/Treasury purchases in 2009. It is also worth noting that the last time the portfolio limit was increased, it had little effect. In May of 2009, the Treasury increased the cap on the GSE portfolios by a combined $100 billion, but this resulted in little GSE net buying. In fact, the agencies? retained portfolios began to shrink soon after.

That said, the agencies will still have some flexibility to influence rates. The cap on portfolio size applies only at year end. During the year, the GSEs are limited only by the cap on outstanding debt, which is set at 120% of their portfolio cap, or roughly $2 trillion in 2010. However, this expansion would necessarily be temporary, since the agreement requires that the retained portfolio be reduced to $1.6 trillion by calendar year end.

And another sleight of hand the government can pull to put some more lipstick on a rapidly amortizing pig:

In light of substantial federal support, regulators could also reduce the risk weighting on agency debt and MBS, from 20% to 10%, thereby reducing the capital banks must hold against agency securities versus other assets. This was proposed in late 2008 but never finalized. If the conforming spread widens significantly in response to the end of Fed purchases, this proposal might be revived as a means of increasing demand for MBS. Indeed, the linkage between the Treasury and the GSEs is much stronger now than it was when this was last contemplated.

As for end-demand, it looks like the March cliff is really going to hurt, as Goldman envisions no new stimulus in the form of homebuyer tax credit:

Q. What will become of the homebuyer credit? The homebuyer tax credit appears to have had a stronger effect on home sales than we previously estimated, due to a revision in survey data from the National Association of Realtors (NAR), and may have added as much as 400,000 units of first time demand in 2009. However, now that the credit has been extended through April, there is little discussion of a further extension.3 Given the debate over additional stimulus, as well as the upcoming election, we can?t entirely rule out another extension, but even the provision?s most ardent supporters for now concede it is likely to end on schedule.

Yet the main observations in the piece revolve around the projected Q4 GDP boost, the ongoing increase in the unemployment rate (if Goldman is right and unemployment indeed trickles down without a "green shoot" moment before 2011, the Democrats can kiss the mid-term elections goodbye), inflation (fear not, all shall be well there), and whether or not Treasury rates will do what Morgan Stanley expects them to do (hit 5.5%) - Goldman firmly believes this is not the case, precisely for the same reason why Japan's rates are where they are.

On the GDP front, the problem as even Goldman acknowledges, is all stimulus driven. Look for more stimulus-hyperventilation out of Krugman soon.

1. Recovery in 2010 is apt to be slow after a large, inventory-driven, fourth-quarter surge. The 5.8% annualized increase we now estimate for real GDP in the fourth quarter would boost the average growth rate for the second half of 2009 to 4%. We reckon that fiscal stimulus (including its multiplier effects) and inventory stabilization accounted for all of this growth, on balance; by the second half of 2010 these supports will have dissipated. Meanwhile, the US economy faces several structural headwinds. Among them: (a) efforts by households to boost saving out of current income, aggravated by (b) weakness in labor income, reflecting the impact of high unemployment on wages and employers? reluctance to rehire aggressively, (c) fiscal drag from the state and local sector, (d) large overhangs of vacant homes and unused industrial capacity, which limit the potential for major improvements in private-sector investment, and (e) limited credit availability from a financial sector that is still on the mend. As a result, we expect growth to slow gradually to an annual rate of 1½% in the second half of 2010 before reaccelerating in 2011.

A sugar high indeed. And a high that is about to slam into a wall of governmental denial. Rosenberg could not be more correct. Yet who says the government can not print in perpetuity? So far buyers for hundreds of billions have materialized - what would change this. This is indeed the $64k question.

This will be aggravated by the ongoing "jobless recovery." Then again if Jim Cramer is correct, the more unemployment, the better for the economy and stocks, so buy, buy, buy... Geodon indeed.

2. The unemployment rate should continue to drift up, to about 10¾% by early 2011. We think the ?jobless recovery? pattern of the 1991-92 and 2001-03 recoveries provides a better template for corporate hiring decisions over the next year or two than the more robust payroll rebounds of earlier cycles, and so far the payroll data support this judgment. If this pattern continues, then net hiring will not absorb all of the influx into the labor force that is apt to occur over the next year and a half, in which case the cyclical peak in unemployment will again lag far behind the
mid-2009 bottom in real GDP.

On the inflation front, even with hyperinflation in the marijuana market due to supply-side problems in Cali, Goldman is convinced all is good, gold bugs be damned.

3. Inflation is not a significant threat, at least for the next few years. Although highly expansionary fiscal and monetary policies have caused many market participants to worry about inflation, these concerns miss the point that the policies have been undertaken to combat a large and growing gap between actual and potential output. Under any reasonable economic scenario, the aggregate US output gap is huge?- currently about 8% of GDP-?and thus will require years of above-trend growth to eliminate. Given this prospect, we expect inflation in the core consumer price indexes to trend down further from their year-end levels (1.8% in December for the CPI, 1.3% in November for the PCE index).

And with low inflation comes little risk of near-term tightening. This we agree with - look for Fed Fund futures to increasingly get reacquainted with gravity.

4. Monetary tightening is highly unlikely before the end of 2010, and we do not expect it in 2011 either. The outlook for Fed policy hinges on how strong the incipient recovery will be, and what the strength of that recovery means for inflation. We think most members of the Federal Open Market Committee (FOMC) will be reluctant to raise the funds rate target-?even from its near-zero current setting?-until they have some confidence that the unemployment rate has reached its  cyclical peak or will do so shortly. This is especially true if our outlook for further disinflation is right. Accordingly, we see the FOMC?s strong commitment to low interest rates as reiterated in its most recent policy statement and in officials? speeches as consistent with our outlook for stability in the funds rate through year-end 2011.

And the best for last: Goldman sees the 10 Year going back down to 3% in the next few months, diametrically opposite of where Morgan Stanley's duo of Cashin and Caron expect the curve hump to go. We believe Goldman's primary assumption that the increasing household savings rate will be sufficient to boost demand is flawed, for the same reasons which Dylan Grice highlighted will precipitate a demographic shock and force the transition in Japanese internal demand from a secular end-buyer to a net seller of JGBs. To expect the ageing US population and the ever-older babyboomers to continue to gobble up USTs with the same fervor with which they used to buy equities is near-sighted. Increasingly more educated babyboomers (all the free time they have courtesy of unemployment is presumably spent reading various increasingly more skeptical media outlets) are all too aware that buying a 10 Year at 3% or a 30 Year at 4.5% will certainly be a disastrous proposition in the mid- to long-run. Goldman's bet on the stupidity of America's population may finally backfire.

5. Treasury yields should come down. The Treasury curve still builds in too much Fed tightening next year. We expect 10-year note yields to slide back toward 3% over the next few months as final demand remains sluggish and disinflation continues. We also remain convinced that the increase in Treasury supply is less important for bond yields than many investors believe, for two reasons. First, increased saving by households and businesses creates a potential demand for Treasury securities as well as less competition for lenders? funds; flow of funds data and bank balance sheet reports confirm that the domestic private sector is increasing its allocation to Treasury securities. Second, the Treasury?s auction schedule for coupon securities is now more than adequate to meet funding needs over the next few years; as this becomes evident, concerns about further increases in auction sizes should abate.

As always, readers are cautioned to accept Goldman's interpretation of the economy with a mountain of salt. If there is one entity that benefits more than anyone from continuing cruising along the status quo, it is Goldman Sachs. Which is why this report could have as easily been titled "Why nothing will change." Alas, we think that on this assumption Goldman is wrong. There are market aspects Goldman's massive economy of scale can push simply by its involvement; however, there are those which even it falls short. The inexorable demographic shift, the increasingly weary upper middle class, the skepticism with which the population perceives attempts to fix the economy which only end up benefit the likes of Goldman, and an overall belief that AAA-rated Uncle Sam-issued pieces of paper are the traditional store of value are just some of these.

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E pluribus unum's picture

".... a competition as to who can fabricate, manipulate, inflate, stimulate and other "-ates", the fastest. "


Don't forget masturbate. They seem to be doing that one particularly well.

Anonymous's picture

An rather disgusting visual in terms of 8-armed cephalopods.

Dexterity, a trait essential for tool use and manipulation is also found in cephalopods. The highly sensitive suction cups and prehensile arms of octopuses, squid, and cuttlefish are just as effective at holding and manipulating objects as the human hand. (Wikipedia)

seventree's picture

Confabulate: that says it all

Hansel's picture

Squid propaganda

Careless Whisper's picture

Whoever invests or trades based on GoldmanShams press releases is an idiot, in my opinion.

7 months and still no indictment on that July 4 arrest of Sergey for stealing software "that can manipulate markets in unfair ways".



Anonymous's picture

The elite are extracting as much blood from the rabble's suffering as they possibly can. JP Morgan running food stamp program, bankruptcies enriching the elite thugs.
Eventually this shill will collapse, who knows when?

Problem Is's picture

"JP Morgan running food stamp program, bankruptcies enriching the elite thugs."

You got it, anony. JPM issues food stamp debit cards for several states...

And then charges the poor saps a transaction fee every time they use the card. It is a fat fee like an ATM charge.

The excuse is that it stops the poor from selling food stamps for cash, less than face value or getting change back (coins) from dollar denominated food purchases... oh the fraud of collecting change from your food stamp purchases to buy a beer...

Let's replace it by allowing JPM to skim millions off of the broke ass sheeple. Disgusting bloodsuckers. I see no change.

Obama is George Bush in black face... ask Harry Reid.

Hephasteus's picture

Ya you have to make your giving the most controlling possible or people will take advantage of you.

Oh wait. JP Morgan doesn't MAKE anythig those people consume. I wonder why they are involved at ALL. Get your farmer slave access. We've got the farmers convinced about supply and demand and keep things priced to keep them share cropping for us.

Anonymous's picture

If China's currency devalues, then the Dollar would gain. If it's all deflationary, then gold marches back down and the dollar gains.

Seems impossible to believe, but there it is.

DavidC's picture

The Fed will not raise interest rates until it has to - it will use QE or MBS (etc) purchases/sales to move money into (or out of) the system.

Krugman displays an amazing naivete and lack of common sense for a Nobel prize winner.

What can the GSEs do given their current parlous situation and continued support by taxpayers' money? If they try and do more to keep the system where it is, the more of a message they will be sending out to say how dire the housing or economic situation is.

Jim Cramer? Hmm, all I can say there is bring back Dennis Kneale, I had at least a bit more sympathy for him!

Your final paragraph sums up the GS side of things very well.


HumbleServant's picture
My guess is that the Fed knows that the US will never pay off the debt it has accumulated and is now continuing to accumulate at an exponential rate.  They don't even have the goal (or mindset) of trying to pay it off.  All they want to do is "manage" it.   Well, now it has become "unmanageable".  Why do I say that?  Because if you really look at all the different types of "programs" and new accounting rules that have come into play recently and call a spade a spade, they are all forms of monetization.  When a country has a fiat money system that has become so inefficient that they have to monetize to keep the game going, that tells me that they have run out of options.   The Fed knows if interest rates go up that the housing market is history, unemployment will skyrocket, the stock market will crater and that leads to more mortgage defaults and another big loss in 401K values.  This will lead to big problems for the govt. and the Fed.   Therefore, I think they will do everything in their power to continue their "backdoor monetization" plans to keep interest rates down.  When natural market forces actually overcome this monetization and force interest rates up, look out.  Remember, we're really only a little over a year into these monetization programs.   Has any country that has resorted to monetization ever fixed its problems by doing that and then returned to a normal, healthy economic system?
jesus's picture

It is far too early for such thinking. Our debt:GDP is really not that bad (yet).

Nout Wellink's picture

Add unfunded liabilities and the ratio IS bad. Very bad.

Anonymous's picture

What we are watching is an exact replay of preworld
War II financial issues. Just at that time it was
Germany that tried what the US is doing. I call it an
"all in" approach by the Governement. It may fail (I
think it will fail) but if you put yourslef in their
shoes you would probably do some of the same things.

From my perspective I thnk the key things are to stop
senseless progams like the Helath Care tax increase
legislation along with the "pork" spending.

We must breakup or tax the monoploies of land labor
and capital that we have permitted. If we dont we will
never create jobs; capital will flow to these monsters
and starve the start ups; labor will stop imagination;
and we will live in a worldwide glut of structural over capacity.

Anonymous's picture

Does Goldman own Litton or did they sell it?

Obama mortgage relief program fails to deliver
Obama mortgage plan doesn't deliver 11 months later; only 66,500 homeowners helped so far

That's a problem for homeowners like Cindy Rose, 52, of Murietta, Calif. She and her husband have seen their painting business drained by the recession.

So they went to their mortgage company, Litton Loan Servicing Inc., for help. In August, they were approved on a trial basis for the Obama plan. The couple's new payment was about $1,700 a month, down from about $2,650.

But a few weeks later, they got a confusing letter in the mail explaining several potential reasons for their rejection.

A Litton spokeswoman declined to comment on the Rose family's case, but said that the company "is following the program's guidelines."

They have since filed for bankruptcy and staved off foreclosure so far. But Rose fears she and her husband, who was recently diagnosed with lung cancer, will soon lose their home of 13 years.

"All these horrible things have happened in the economy," she said. "And there's nobody there for you."

Fish Gone Bad's picture

Is 6% even believable?  <start sarcasm> I find 10% even more credible because 10 is bigger than 6 <end sarcasm>

bugs_'s picture

I got the 6% Q4 GDP blues.

john_connor's picture

As a follow up to what TD said, who cares what the 4th quarter GDP number is?  It is whatever bs number the gov feels like reporting.  Equities are forward looking anyway, and good luck comparing against the current "good" (ahh yes, better than expected) numbers when earnings are reported next quarter and beyond.

Also, as an extension to the above, who gives a phuck as to what the headline employment number will be?  Everyone knows the number is bs and that real unemployment is somewhere north of 20%.  And most of the jobs lost are never coming back, at least not for a long while.

In the end, this economy is the mother of all Madoffs, Lehmans, and Enrons combined to the 10th power; reporting "solid" numbers while everything rots underneath or with nothing underneath to begin with.  Cash flows do matter, and the cash crunch of the millenium is just getting started.


pak's picture

"A large, inventory-driven, fourth-quarter surge"? Care to show the data proving the inventory rebuild was THAT large?

Is this a reversal of the now-famous Q3 downward revision deception?

rawsienna's picture

Political winds are changing.  Additional stimulus will be difficult in that most voters are against it.  Most economist think that congress will pass stimulus if needed in a election year - I doubt Congress can pass any meaningful stimulus.  Budget hawks will be rewarded. Spenders will be sent home.  Fed will have to do QE2 when economy slips in Q2 and they will buy long term treasuries this time -not mortgages.  GOldman will be right about rates Morgan Stanley will be wrong. Plus, where would stock be if mtg rates are 7%.  If retail investors can buy govt guaranteed MBS at a 6.5% yield in a 1-2% inflation environment -stocks get destroyed.

lawton's picture

These GDP numbers are a joke but even with their manipulation I think by Q3 or Q4 the number will go negative again and it will be called a double dip recession but we will be going into a depression for quite a few years imo.

Anonymous's picture

...a depression with inflation where everyones home is worth $0, stocks are worth even less, and gold is golden!

Anonymous's picture

And how are $0 value homes and stocks (somehow less than zero, apparently bought on margin) inflation? Just asking...Not that I think we won't approach something that FEELS like that, but please clarify. Sounds like Deflation.

the grateful unemployed's picture

Making those rosy GDP numbers is going to require some help from the GDP deflator. We've already had a long and fruitful discussion about how government intervention in the commodity exchanges has prevented large speculators from pushing up the price of oil, and certainly they can do the same thing in the grains.

In the final outcome you may want to own Fannie and Freddie, as their current pile of debt is zero interest denominated, (when rates go up buyers will scramble for their paper) -which is something I don't understand, just ahead of the 2008 crisis I thought the Fed would raise rates, because they would provide the -re-inflation kick start? instead they took them to zero, which put the economy in an induced coma -

to the benefit of the GSE's rising rates would cause a scamble for the paper that is already out there, and bring their balance sheets up to snuff in a Wall Street minute. Since the Treasury is backing the asset value of these homes, the only matter of interest to the lender is the cost of servicing their loan portfolio. Buying the GSE's is like buying a coupon, the asset price of the bond doesn't matter.

In a value neutral world, the cost of a home is a formula based on the value of the land, the labor and materials, and the cost of borrowing, so any one of those changes the other changes. Raise rates and the selling price has to be adjusted lower, and labor and commodity costs deflate as well. Lowering rates had the opposite effect, however the supply demand ratio in construction labor was offset by lax immigration policy, and commodity prices spiked because interest rates were too low, and the supply demand equation, driven by the 'wealth effect', stock appreciation in a hyperinflated equities market, coupled with low rates, which fueled the housing bubble. If you raise rates in this environment, housing prices will appreciate because commodity prices will fall, and labor and construction wages will rise, which is a desirable thing.

Rising rates also inflate away a mountain of Treasury debt, and put a floor under housing prices. The fed must have known they could solve the problem by pursuing a more normal market yield, but they clearly had another agenda, (saving the investment banks). Bernanke came onto office on a mantra of targeted inflation!!! Where the hell do these guys go once they are elected, or appointed??

The financial crisis was engineered to poison the ground for the incoming administration. When Obama failed to realize this you had to know it was going to be a bumpy ride.


deadhead's picture

I find it interesting that as of the last approx 3 weeks or so, an increasing number of bullish sell side pumpers are adopting the shitty 2nd half 2010 mantra.  Just an observation of a trend that I've read developing.


Rainman's picture

I've noted likewise, DH. It appears to be an effort to haze the Fed on discontinuance of agency MBS a " don't stop now or else" deal on impeding growth.

A bunch of crack addicts running out of supply at midnight.

deadhead's picture

yep, i believe you are right.  it's also a setup for yet another couple of different stimulus programs to fund Rahm's mid term campaign committee.

naturally, the street wants more liquidity to pump her higher and higher and really make a killing when the rug gets pulled again.


Anonymous's picture


Current monthly budget deficit is running at $120 billion (i.e. stimulus). That is equal to
- all monthly sales at WalMart, Target, Costco, Lowes, Home Depot, and McDonalds PLUS
- all monthly new car sales PLUS
- all monthly new home sales
with $20 billion left over.

No wonder the economy is growing - all on the nation's credit card. Yeah, that worked real well last time too.

SDRII's picture

Inventory build? Where? Business inventories have been rising as a function of petroleum/coal and to lesser extent food stuffs.  Durable inventories continue to shrink while nondurable scontinue to rise. Retail wholesale inventories dropped -0.4% last month while sales climbed 2%. The inventory mirage is almost exclusively driven by oil - wihthe glut well covered. Industrial production showed a slowedown in manufacturing - with vehicles build rates declining. What a complete joke

D.M. Ryan's picture

"Goldman just threw out the last trump card in its current sell-side arsenal by increasing Q4 GDP estimates from 4% to a paroxysmal attack inducing 5.8%."

And the number just might hit their target...

...before the first revision.

Anonymous's picture

The economy is growing much faster than 6%.

The key metric (from God's Man Sachs) is the cost of purchasing a key congressman (Barney Franks*, while not very tasty, would be an example). This is an updated version of the PPP McDonald's Hamburger index for assessing the relative worth of various currencies.

The Key Congressman Index (KCI) has been on a tear. KCI is up 50% in just the last two years. Adjusting for increased effectiveness (M. Boskin, thank you) of about 20% over the same time period, we see a "blowing adjusted" increase in value of about 25% over two years. YOY this is a little under 12% (remembering to adjust for compounding).

There you have it, God's Man Sachs taking the long view as owner of these United States is seeing costs rising at ~12% per annum. As God's Man never gets a bad deal, this must mean that the productive value of the country is rising at at least the same rate. Bingo God's Man sandbags the estimate at 6% (always need to leave room for the upside surprise).

I do miss the days of Abby Joe.

* Note that the Franks' example is not necessarily representative. While Franks' appearance continues to degrade, the pleasure derived from his services has been continually improving. (Apparently somethings get better with practice.)

Anonymous's picture

My 2 year old old nephew can throw out numbers too. Who cares anymore. They are just GDP numbers. Who is checking them anyway? What ever the market wants to hear. Lets just say 9,000% GDP and call it a day. Who the fuck cares anymore? This whole administration is one big lie anyway. While they are at it, say unemployment is now 1%. WHO CARES? ITS ONE BIG LIE!!!

Molon Labe's picture

I see GDP right now as the flaccid washed-up porn star who can only get a hard-on by taking a bottle of purple pills with a vodka chaser and snorting coke off a hooker's behind.

Not exactly the picture of health, no matter what type of stimulus is the inflationary vehicle.

4%, 6%, hell, make it 25%.  Call your primary dealer and let the powder flow.

deadhead's picture


Is this a triple or a quadruple reverse psychology play?

Thank you in advance.

Anonymous's picture

The GDP number is like, Corporate earnings, do whatever it takes to make the number the street is looking for.

Hephasteus's picture

This is nothing. The 1st Q 2010 lie will be EVEN BIGGER.

emsolý's picture

is this estimate on the advance or the final number? you know, there's a difference. sometimes a big one.

Gimp's picture

Total BS on the GDP predictions. Looks like the old pump and dump by the wall street gangstas...they are probably singing "it's my birthday, by fiddy in the office.

Where I live businesses are struggling, sales are down, businesses are not hiring and keeping inventories low. I would be surprised if the real GDP is 2%.

Hephasteus's picture

No people bought a TON of computers last quarter. REALLY. They all had to set up new workstations for their new employees. And everyones computer was old so they bought a new one. And ok you caught us. The government bought it all cause they got tired of the World Bank getting it's dark mysterious financial transactions tracked.

docj's picture

Simply. Incredible.

Rocket the market up, short the hell out of it the day before the first estimate is announced, buy at the bottom - again.

Lather. Rinse. Repeat.

mcarthur's picture

I think Goldman nailed it myself.  There is way too much slack out there for inflation and interest rates to track upwards.  If everyone is so concerned about debt loads then explain the 10 year Japan bond yield to me.  An orderly decrease in the $USD is perfectly fine since it should have never been where it was in the first place.  And I would not worry too much about Fannie and Freddie.  The trick is to get these guys off everyones radar screen like the CMHC is up here in Canada.  Their balance sheet has tripled in the past two years and in consequence house prices have rebounded 19% in the past year.  So Obama is taking a page from this playbook. 

Anonymous's picture

Uh, as some of you don't miss the point,
(noting that reading comprehension is not a strong
suit for some ZH readers) the vampire squid is now bearish. GS regards its own 4th quarter GDP estimate as all stimulus and inventory adjustment followed by a slippery slope downhill for the balance of the year. Good luck with that dip buying, bulls.

swordfish's picture

Buying more MBS, even by GSE, will not prop up the equity makrets. Its the PD accounts (balance sheets) that matters. If PD gets money, then BANG, here goes the pump. If they will not get new money (will not sell more MBS ) then market would fall.


BTW, read a lot more in FED liquidity report from


really good reports

Cyan Lite's picture

American Idol is back on.  While the public is in a dazed trance, expect non-sense economic stimulus that benefits a few select states (namely Virginia, California, Ohio, Florida) for their blue-leaning tendencies.  Crony Stimulus FTW!

Everybody expects a recovery to happen because it's "always happened", as if it's some natural right of the Universe. 



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