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Goldman Lowers 2011 GDP Forecast

Tyler Durden's picture




 

Once again Goldman confirms that shooting for the moon, when it comes to an artificial, self-sustainable "virtuous growth" cycle in a centally planned economy is an exercise in futility. As long expected, the gradual roll down in growth forecasts begins, and all of Wall Street's lemmings will rush next week to undercut each other, all the while blaming cold weather, hot weather, and any weather for not being able to see this. Fore one previous example (and there are dozens) of Zero Hedge indicating Goldman's overoptimistic forecast read here.

From Goldman: "Spring Cleaning for Our Forecasts"

Forecast change summary:

1. We now forecast that real GDP will increase by 3.5% in Q2 2011 and 3¼% in the second half of this year. The rise in oil prices —although now partly reversing—is likely to prove a meaningful drag on consumer spending and business investment. Besides this sizable shock [what shocks: , however, we continue to see a broad-based normalization in the economy. Bank lending, the labor market, and business confidence have all improved. We therefore expect GDP growth to remain abovetrend, and to accelerate in late 2012 as the effects of the rise in oil prices begin to fade.

2. A gradual drop in the jobless rate, to 8.5% by year-end 2011 and 8¼% by year-end 2012
. The persistence of above-potential  growth over the next two years should help reduce the rate of unemployment visibly during this period. However, we expect the pace of improvement to slow sharply as the rapid drop in labor force participation gives way to a modest increase.

3. A moderate rise in core inflation. We raised our inflation forecasts, and now expect the core PCE price index to accelerate  modestly to 1.3% from 0.9% now. Despite significant excess capacity, stable inflation expectations should draw underlying inflation closer to the Fed’s target. In addition, rising rent inflation—caused in part by a decline in homeownership and surge in demand for apartments—may put upward pressure on the major price indexes. In our forecast, year-to-year headline inflation as measured by the all-items CPI rises to 4% by the third quarter of 2011 before ebbing to just 1½ % at year-end 2012.

4. No Fed rate hikes before 2013. We have a high degree of confidence in this view for 2011, but see it as a much closer call for  2012. However, with the jobless rate far above the Federal Open Market Committee’s “mandate-consistent” 5%-6% central tendency range and core inflation well below the comparable “2% or a bit less” standard, we think most FOMC members will think it premature to start raising interest rates.

5. Yields on 10-year Treasury notes reach 3¾% by year-end 2011 and 4¼% by year-end 2012. As the jitters about global growth in the wake of the Middle East turmoil and the Japanese earthquake subside, we believe that many participants in the financial markets will turn their attention back to higher inflation and the potential for Fed rate hikes. This is especially likely if the dollar also depreciates, as we expect it will, or if bank loans start to grow. While we do not  forecast that rate hikes will begin until 2013, we believe that many investors may expect them sooner. Increases in Treasury yields will likely be tilted toward the short end of the curve, where changes in market expectations of monetary policy matter more.

Next up: more growth cuts, and Hatzius casually floating the idea of another quantitiv easing episode "if further broad-based deterioration is observed."

Full note:

1. Sustainable above-trend growth. After several years with a below-consensus view on US growth, we adopted a significantly more constructive outlook in late 2010. The reasons for this shift were progress in private sector deleveraging, better signs in the labor and credit markets, a pickup in underlying private demand growth, and another helping of monetary and fiscal policy stimulus.

2. Low core inflation. Our view has long been that inflation depends more on the levels of output and employment relative to  potential than on their growth rates. With GDP 5%-6% below its potential level and unemployment 3-4 percentage points above its sustainable rate, we predicted that core inflation would stay well below the Fed’s target in 2011 and 2012.

3. A near-zero funds rate. Our version of the so-called Taylor rule showed that the “warranted” federal funds rate—based on inflation  and unemployment relative to the Fed’s dual mandate—was likely to stay at or below zero until after 2012. Our forecasts  have reflected this, with no rate hikes predicted until 2013.

GDP Growth—Still Above Trend, But the Trend Itself Looks a Bit Lower

These basic themes remain unchanged. However, we are marking our specific forecasts to the recent information flow. On the  growth side, our prediction that real GDP would grow at a sequential pace of 3½%-4% through 2011-2012 now looks too aggressive, and we are reducing it to the 3%-3½% range as shown in Exhibit 1. However, we still think that the 1.8% GDP growth rate reported for the first quarter understates the “true” pace of activity in the first quarter and will be followed by significantly stronger figures in the remainder of 2011. Our forecasts for annual-average GDP growth go to 2.7% from 2.9% in 2011 and to 3.2% from 3.8% in 2012.

There are three reasons for our downgrade:

1. Less momentum. The most obvious reason to downgrade our forecast is that the broad momentum of the economic activity indicators—which somewhat ironically was quite strong in the first quarter despite the disappointing 1.8% GDP growth figure—has shown some signs of flagging recently. As shown in Exhibit 2, our Current Activity Indicator (CAI) is on track for growth of only 2.3% (annualized) in April following Friday’s employment report, down from an average of 3.7% in the first quarter. This slowdown mainly reflects the weaker Philly Fed and nonmanufacturing ISM surveys, higher jobless claims, and slower household employment growth;  in contrast, both nonfarm payrolls and the manufacturing ISM still look firm. Moreover, the chart also shows a 22-business day (i.e. one-month) moving average of our US-MAP scoring system of economic indicators versus the consensus forecast; this illustrates  that the recent data have not only been weaker in absolute terms but also relative to economists’ expectations.

2. Energy prices. Although energy prices plunged this week, our analysis shows that the surge seen over the last few months is still likely to weigh on growth. Exhibit 3 plots the estimated effect of a transitory 20% shock to retail gasoline prices, which is roughly the
“surprise” relative to the path discounted in our forecast five months ago.1 Assuming that the shock dies out over the next quarter—in line with the predictions of our commodity strategists—the impact is to lower real GDP growth by about ¾ percentage
point for three quarters. Subsequently, growth rises above the “baseline” as real income rebounds in the wake of lower oil prices. This could be a reason for growth to reaccelerate in 2012, although it is important to keep in mind that this “shock” and its reversal need to be evaluated relative to a rising path for the underlying oil price trend in our commodity strategists’ forecast.

3. Fiscal tightening. We have long expected fiscal policy to subtract from growth in 2011-2012, but the recent developments suggest that this tightening might be a little more aggressive than we thought earlier. This is not because of the $38 billion cut in budget authority agreed by the two parties to avert a shutdown of the federal government in early April; after all, the Congressional Budget  Office (CBO) scored this agreement as an actual spending cut in the 2011 fiscal year of only $300 million. Moreover, our current assumption is that the temporary payroll tax cut passed in December 2010—which is currently scheduled to expire at the end of  2011—is extended for another year as the presidential election approaches. However, we expect the emergency unemployment  benefit legislation to expire on schedule in late 2011 and see additional restraint in 2012 from federal discretionary spending cuts, expiring provisions from the stimulus package, and some degree of restraint in the state and local sector.

Slower growth is likely to keep the unemployment rate somewhat higher than we previously thought. The historical relationship between real GDP growth and changes in the unemployment—dubbed “Okun’s law” by economists after President Nixon’s chief economic adviser—suggests that the unemployment rate falls by about half the gap between GDP growth and its long-term trend  over a year’s time. In our updated forecast, growth through the end of 2012 averages 3.3%, or ½-¾ percentage point above our estimate of US potential growth. Taken literally, this would imply a drop in the unemployment rate from the 9.0% reported for April 2011 to 8¼%-8½% at the end of 2012. We choose the lower end of this range because we are concerned that the weakness in  labor force participation over the past couple of years might indicate that potential growth is a little weaker than we had thought.

Core Inflation—Higher Because of Rents, But Still Well Below the Fed’s Target

Despite the slightly higher unemployment rate and the lower level of GDP in our new forecast, we are also making an upward adjustment to our core inflation forecast. As shown in Exhibit 5, we now expect the core PCE price index—the Fed’s favorite  measure of inflation—to accelerate to 1.3% year-on-year in late 2011 and 2012, from 1.0% in our previous forecast.

The main reason is that rent and owners’ equivalent rent (OER) inflation is likely to pick up somewhat further. The private research group PPR is reporting rents that point to higher rent and OER inflation over the next year, as shown in Exhibit 6. This is important because rent and OER together account for a whopping 40% of the core CPI and a still-large 17% of the core PCE index.

That said, it is hard to take at least the acceleration in OER—whose weight is much larger than that of rent—seriously as a sign of higher US inflation. In our view, it is basically a statistical artifact that is  closely related to the drop in homeownership discussed on these pages last week.2 This drop is increasing the excess supply of homes in the owneroccupied sector and therefore putting  downward pressure on home prices; meanwhile, the drop is  reducing the excess supply in the renter-occupied sector and therefore  putting upward pressure on rents. Because the CPI imputes the cost of owner occupation from rents, this shift perversely results in upward pressure on measured homeowner costs even though it puts downward pressure on actual house prices and mortgage payments.

More fundamentally, output and employment remain far below the US economy’s potential, inflation expectations remain well-anchored, and both wages and unit labor costs are consistent with inflation well below the Fed’s target in 2011 and 2012. We  can show this using our estimated top-down inflation model illustrated in Exhibit 7.3 It explains core CPI inflation by the unemployment gap—the difference between the unemployment rate and the estimated natural rate—as well as long-term inflation expectations.

If we measure inflation expectations by the “forward” inflation rate expected by consumers over the next 5- 10 years, our model  implies a pickup in core CPI inflation to 1.4%, right in line with our forecast. However, the message from our top-down model is that the risks to this forecast are if anything on the downside; if we use the 10-year inflation expected by economists, the projection drops to 0.5%. We think it is sensible to “lean” to the higher side of the range projected in our top-down model mainly because of the upward pressure on rents and OER. But fundamentally we still see a very low inflation environment.

Fed Policy—Still on Hold Through 2011-2012

The net effect of these forecast changes on our forecast for Fed policy is approximately zero. In other words, we still think that the first hike in the federal funds rate will occur in early 2013, although the uncertainty is substantial.

The starting point for the Fed policy outlook is our estimated forward-looking Taylor rule model. The latest version is shown in Exhibit 8.4 It uses data over the period from 1988 to 2008 to estimate the funds rate as a function of the Fed’s forecasts for inflation and unemployment relative to its targets for both variables. The model then projects the funds rate forward, under the assumption that the Fed’s forecasts ultimately converge to our own; that is the solid line in the chart. Finally, we adjust the solid line using our estimates of the impact of unconventional monetary policy on financial conditions; that is the dotted line in the chart.

Relative to the prior version Exhibit 7, there are three offsetting changes:

1. Slightly higher unemployment. The ¼-point upward revision to the unemployment rate at the end  of 2012 lowers the “warranted” federal funds rate by about 30 basis points (bp).

2. Slightly higher inflation. The 0.3-point upward revision to core PCE inflation raises the warranted funds rate by about 40bp.

3. Reduced commitment. We were struck by Chairman Bernanke’s answer to the question in the April 27 press conference about the meaning of the “extended period” language. Our interpretation had been that this meant no rate hikes for six months or longer. However, the chairman only indicated that it meant no hikes for “a couple of meetings,” and qualified even that statement by a  “probably.” This is relevant for our Taylor rule because we have found that this type of commitment language has historically kept long-term interest rates lower and financial conditions easier, and we have therefore treated it as a substitute for cuts in the federal  funds rate along lines that are similar to large-scale asset purchases. However, our latest version of Exhibit 7 assumes that the current commitment language is worth only about 20bp, down from 40bp previously.

Similarly, we are making no changes to our long-term interest rate forecasts. We still expect 10-year note yields to drift up gradually to 3¾% at the end of 2011 and 4¼% at the end of 2012; the reason is that the unemployment rate declines, core inflation drifts  up, and the date of the first Fed rate hike comes closer. These figures are moderately above the forwards following the recent rally. However, they still imply that long-term interest rates will remain in the low range that has prevailed for the past several years.

 

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Sat, 05/07/2011 - 12:45 | 1251080 ZeroPower
ZeroPower's picture

You called this months back Tyler, kudos.

 

Wow, main thesis is no rate hikes before 2013. That's pretty ridiculous, i suppose it fits in just fine into the "next crash before the end of the decade" scenario. Free money till 2013, cheap money till 2014; a few years of boom, then 2018 = 2008 and we spend the next 3 years all clusterfucked wondering "WHAT HAPPENED?!1!!12" and blaming the bankers yet all along its the free money policy of the fucking fed.

Sun, 05/08/2011 - 03:38 | 1252512 Bringin It
Bringin It's picture

You do realize the Fed is the bankers?  You seemed to have something to say.

... wondering "WHAT HAPPENED?!1!!12" and blaming the bankers yet all along its the free money policy of the fucking fed.

Sun, 05/08/2011 - 03:54 | 1252515 Bringin It
Bringin It's picture

And nice piece of work TD.  Amazing to see someone outrun the frontrun.

I learn so much here.  Thanks.

Sat, 05/07/2011 - 12:46 | 1251090 Long-John-Silver
Long-John-Silver's picture

Great Depression II Bitchez!

Sat, 05/07/2011 - 12:55 | 1251112 Threeggg
Threeggg's picture

While Goldman is blaming the weather..............

Check out the weather at the Fukushima plant live.

Hows that weather look ?

http://www.youtube.com/user/tbsnewsi?feature=feedlss#p/l/-ZPYlazljME

and yes thats a real time live feed !

Sat, 05/07/2011 - 12:57 | 1251121 cossack55
cossack55's picture

Em' are some smokin' hot pics.

Sat, 05/07/2011 - 13:11 | 1251145 Threeggg
Threeggg's picture

Reactor#3 has deteriorated alot since last night. If you watch that feed for a while you are more than likely to see an earthquake. The camera shakes violently and the live feed has sound as well. http://www.youtube.com/user/tbsnewsi?feature=feedlss#p/l/-ZPYlazljME

Wish us all luck that somehow (although I doubt) they find a solution. There is supposed to be the largest radioactive release since this nightmare began tomorrow May 8th according to a leaked email from TEPCO.

They are going to vacate the containment vessels of radiation saturated air so the "Liquidators" can go in and work in 10 minute stints. Last reports are they have 1700 liquidators on the ready and are looking for another 1300.

 http://ex-skf.blogspot.com/2011/05/fukushima-i-nuke-plant-may-8-release-of.html

Happy Mothers day ! Biatchez !

Sat, 05/07/2011 - 13:27 | 1251168 cossack55
cossack55's picture

I assume you are following enenews and fairewinds?

Sat, 05/07/2011 - 12:53 | 1251116 cossack55
cossack55's picture

I can only assume that anyone listens to GS because they realize that GS is the Gubment.

 

They are expecting unemplyment to drop because of the death/death cycle (no, not businesses)?

Sat, 05/07/2011 - 12:58 | 1251125 FOC 1183
FOC 1183's picture

Well, only 150bps til they get to the 2% that will be the actual post-revision print.

Sat, 05/07/2011 - 13:00 | 1251129 lordcoke
lordcoke's picture

i luv how they have formulae for fed speak.

Sat, 05/07/2011 - 13:03 | 1251136 oldmanagain
oldmanagain's picture

On the other hand, GS predicts higher oil prices which have preceded most turn downs. Although, trying to pin down the real GS opinion is getting tougher each utterance.

Don't think the resource scarcities are going to subside.  Too many people chasing too few resources. declining resources at that. Long term econ slow down until we are forced to adjust or kill each other. Looks as if volatility will be the playground with a long term higher price trend as segments of the world get priced out.

We are used to national cycles, we now have international cycles.  Due to our time slot, most of the world's news is while we are asleep.  

The big trade remains short gov't bonds, selectively around the world as competition for refinancing intensifies.  The risk on era in financials has exceeded all rational numbers, Euro nations are just the canaries in this bottomless mine.

Does anyone really believe QE's, the world over, will not come home to roost.  Add in declining natural resources, the perfect storm.  Corporate interests may own most world governments, but having drained, indebted the consumer, will have to crush each other.

Sun, 05/08/2011 - 03:59 | 1252525 Bringin It
Bringin It's picture

Nice, yet unfortunate summary.  Find life outside the global economy seems to me the most fullfilling trade of the two thousand and teens.

Sat, 05/07/2011 - 13:07 | 1251146 zaknick
zaknick's picture

Goldman joo scum!

Sat, 05/07/2011 - 13:52 | 1251187 topcallingtroll
topcallingtroll's picture

There he is again.

The guy from Colombia who hates Amerikkka and posted he hopes they drop a nuclear bomb on us.

This country is so terrible that he prefers living here to Colombia.

If you want to complain about injustice, corruption, and racism against native minorities you can find plenty of that where you are from.

You are such the hypocrite.

Sat, 05/07/2011 - 14:23 | 1251197 topcallingtroll
topcallingtroll's picture

Hey i got an idea. If Amerikkka is so terrible maybe there is a more enlightened place for you to live.......maybe Colombia?

He gave his country of origin away when he said he was from a place where CIA paramilitaries controlled the drug trade and that Xe corporation was going to start operating soon.

Just remember we know you now, my little tanned friend. Acuerdate que las Colombianas prefieren carne norteamericano. Hombres reales, en vez de Colombianitos como ti.

Sat, 05/07/2011 - 16:20 | 1251363 cossack55
cossack55's picture

Of course he might be from El Paso.

Sat, 05/07/2011 - 13:51 | 1251194 vote_libertaria...
vote_libertarian_party's picture

Here's my forecast.

 

Debt ceiling compromise does nothing to reduce the deficit.

 

Early fall, S+P downgrades US debt

 

Chaos ensues

Sat, 05/07/2011 - 23:34 | 1252248 mayhem_korner
mayhem_korner's picture

Agree with #1.

Agree in sentiment with #2, but not by S&P.  Once the initially-covert QE3 is revealed, the masses will flee from the dollar in accelerated fashion, effectively a market downgrade...

...and the currently almost-palpable chaos will unleash itself (#3).

Real GDP 0.5% by Q3, then negative...DXY at 65 or less by Christmas...Q2 inflation 2.8%, 4.5% by year end...Dow crash to 9K by Labor Day, then bouncing around between 9 and 10K..."official" unemployment at 9.3% for year...all bets off in 2012.

 

Sat, 05/07/2011 - 13:58 | 1251199 Alex Kintner
Alex Kintner's picture

What does GDP matter anyway? It's only a measure of how well the Morbidly Rich are doing.  They keep reporting the Recession ended in 2009 -- but for who? For The Banker Bonus crowd maybe.

Sat, 05/07/2011 - 16:20 | 1251368 cossack55
cossack55's picture

Some like to use it as a measure of debt, i.e., US debt is 100% of GDP. Useless, really. Japan is at about 220%. So what. Keep on printing. 

I prefer Bhutan's measure...GDH  Gross Domestic Happiness

I would think GDH in the US is -93%.

Sun, 05/08/2011 - 03:45 | 1252519 Bringin It
Bringin It's picture

Right.  Nice to see someone refer to GDH.  Bhutan, like Norway seem to have their act together in that the governments seem to act in the interests of the governed. 

 

Sat, 05/07/2011 - 14:01 | 1251205 Traianus Augustus
Traianus Augustus's picture

And the joke continues...like it was funny the first thousand times.  US has become the laughingstock of the world!

Sat, 05/07/2011 - 14:07 | 1251210 The Heart
The Heart's picture

WHY IS ZEROHEDGE CENSORING AND DELETING ALL FUKUSHIMA RELATED POSTS? WHY IS THERE NO MORE REPORTING ON THIS ONGOING ISSUE?

 

 

Sat, 05/07/2011 - 15:59 | 1251334 Tyler Durden
Tyler Durden's picture

Nothing Fukushima related has been censored or deleted.

Sat, 05/07/2011 - 16:21 | 1251372 cossack55
cossack55's picture

I'll endorse that.

Sat, 05/07/2011 - 14:18 | 1251230 slewie the pi-rat
slewie the pi-rat's picture

negative growth, even w/ inflation. fuk_u'd. 

the US, Japan, EU, China.  once "the jitters...subside..." and the gobbermint gets fiscally responsible, we'll get the 4% back, just watch! 

even cramer wouldn't buy what hazmat is selling, here.  

this has gone, now, from what is the FED gonna do, to what can the FED do?  listen to timmah.  carefully.  he has a plan.  raise the debt ceiling, and print.  print here.  print now.  print, PRINT, PRINT!

they killed goldie!  R.I.P. 

Sun, 05/08/2011 - 03:48 | 1252522 Bringin It
Bringin It's picture

Cheers slewie for saying what can't be said.  Micheal too.

Sat, 05/07/2011 - 14:18 | 1251231 Goldman Hufs
Goldman Hufs's picture

 

Tyler,

Long time reader, first time poster.  Love the website and the information it provides.  I think a lot can be learned from the articles and comments while sitting on the sidelines until your understanding, arguments, and opinions have time to develop.  As with anything that exponentially grows in popularity there is going to be an influx of subscribers - some of which enrich the community while others either intentionally or through ignorance distract from the arguments at hand and create interference.  Over the past two months I've noticed a large amount of new participants that appear to hear about the website, immediately create a profile, and then start out by asking remedial questions (most of which can be figured out by taking a few days if they took the time to read the comments) or launching personal attacks that have little to do with the underyling post.  As I am one for diversity I welcome all new commentators whether basic or advanced.  However, I miss the days when I came to the website and 9 out of 10 comments were backed up with charts, statistics, and other tangible references to give an opinion more credibility whether I agreed with it or not.   That is why I am suggesting that you create a "veterans" filter or separate chain that can only be posted by people who have had an account for a certain period of time, a number of posts or a combination of the two.  This would still enable anyone and everyone to participate but help those of us here who know the lingo, the concepts, and market structures to cut through some of the static.

 

Sat, 05/07/2011 - 14:44 | 1251259 AG BCN
AG BCN's picture

and what does this post have to do with Goldman's GDP forecast?

Sat, 05/07/2011 - 17:16 | 1251503 Hephasteus
Hephasteus's picture

You should write him a topic police ticket. Make him pay in hours of detention.

Sat, 05/07/2011 - 18:34 | 1251643 ZeroPower
ZeroPower's picture

Normally i disagree with you, but this was a fine lol sir.

Sat, 05/07/2011 - 14:32 | 1251245 Whatta
Whatta's picture

My forecast...

China ditching 2/3rds of their US$ reserves and QE3 in early 2012 sticks a bottle rocket up Ben's inflationometer leading to a 1 for 10 reverse split in the US$.

The Mississippi River Floods, the TX fires, the MS, AL tornadoes are all blamed on al qaida and we must therefore invade Nicaragua to get the cells residing there (nope, those are not new huge offshore oil prospects in Nic).

 

Sat, 05/07/2011 - 16:09 | 1251354 SWRichmond
SWRichmond's picture

SIlver forward rates negative: http://www.minyanville.com/businessmarkets/articles/gold-price-price-of-...

Keep firing until the target changes shape or catches fire.

Sat, 05/07/2011 - 16:30 | 1251389 cossack55
cossack55's picture

Since it is Saturday I  get to grease myself up and roll around in my ASEs (all in AirTites) naked and dream of Blythe in a hot-air ballon with no ballast and unlimited fuel.

Sat, 05/07/2011 - 14:40 | 1251253 Pepe
Pepe's picture

Goldman is one of the MASTERS. But not the only one.Our Government is the puppet. Obama,Bush,Clinton, Bush,Reagan, work(ed) for the Masters. We are the fools. The object of experimentation.The rats on the treadmill

Sat, 05/07/2011 - 16:32 | 1251393 cossack55
cossack55's picture

If you understand that, you are no longer the fool.  You are now a player on the sidelines waiting to re-enter the game and bring death and destruction to the vampire squid. Congratulations.

Sat, 05/07/2011 - 14:40 | 1251254 silberblick
silberblick's picture

Hey Guys,

Here's a hilarious animation exhorting folks to get even against the banksters and government:

http://thesilvergoldhedge.blogspot.com/2011/05/join-sla-to-get-even-and-...

Sat, 05/07/2011 - 19:53 | 1251764 Ben Dover
Ben Dover's picture

The entire "buy silver/sink JPM" idea actually left me suspicious of buying silver - not that I buy much anyway. I got the idea it was started and promoted by people who stood to make money by artificially inflating the silver market, people who were not really interested in the situations of either myself or JPM. 

For a movement to get traction and take off in a market, it has to be innate or "natural" to the market, methinks. And the bs/sJPM movement just seemed too contrived.

Sun, 05/08/2011 - 04:03 | 1252531 Bringin It
Bringin It's picture

Ben, the premise is that it is not a "natural" market.  You are misssing the premise. 

Sat, 05/07/2011 - 14:46 | 1251265 Franken_Stein
Franken_Stein's picture
A Gold for Goldman! With 134 Laps, Lloyd Blankfein Wins Secret Southampton Swim Race

 

http://www.observer.com/2010/wall-street/gold-goldman-134-laps-lloyd-bla...

 

Ok, this is a bit old news that I dug up here, but we have to systematically rummage around in GS top dogs' private life in order to find some clues and evidence.

 

Sat, 05/07/2011 - 14:53 | 1251269 topcallingtroll
topcallingtroll's picture

Hey Mr Stein

Will the germans be willing to subsidize the south forever? Perhaps by monetizing greek bonds?

If the germans will not stand for a permanent subsidy to greece and portugal what is the end game? When does it happen?

Sat, 05/07/2011 - 15:02 | 1251274 AG BCN
AG BCN's picture

The end game comes when Spain goes, the Germans are not feeling the pain right now so they will muddle through. When Spain does go down (and it will, just ask Reggie) then the severity will hit home because the numbers quoted for the bail out will be spelled out in numbers of new schools, hospitals that the Germans can not have due to paying for the lazy southern neighbours who all retired at 50. Then we go for the 2 tier Euro and all hell breaks loose on the announcement. I can't wait. As for when, NFI..

Sat, 05/07/2011 - 15:56 | 1251329 topcallingtroll
topcallingtroll's picture

So the germans will permanently subsidize the south forever as long as spanish debt remains stable, i conclude from the above two posts.

Sat, 05/07/2011 - 15:46 | 1251313 Franken_Stein
Franken_Stein's picture

 

What the German people wants and what the government is doing are two different pair of shoes.

 

Wait for the German constitutional court's ruling on the lawsuits filed by Profs. iur.  Schachtschneider, Starbatty and Hankel against the EFSF.

The Maastricht Treaty stated clearly that there cannot be a bailout of one country of Eurozone by another.

If the Bundesverfassungsgericht deems the ad-hoc bailouts of Greece and Ireland and the permanent bailouts via EFSF unconstitutional, then of course this means the end of the Euro or a two-tier Euro.

 

Otherwise there will be a full Transferunion and the installation of a economic council, whose task it will be to streamline and unify the national governments economic policy in order to converge the seemingly diverging national economies.

 

But what can one do with one little Napoleon and one Casanova, like Sarkozy and Berlusconi at the helm of 2 other big European countries, who seem to be more interested in their own private life rather than constructively contributing to a pragmatic solution to the debt problem.

Let's not forget that Sarkozy is close friend of the Rothschilds and Stephen Schwarzman, who will try to meddle into European affairs.

Sarkozy was mayor of Neuilly-sur-Seine, where the French branch of the Rothschilds also reside.

 

Again the Jews trying to exploit others. Sigh. Will this never end ?

Currently Schwarzman is in Paris, where he owns a house.

 

Then there is this Goldman Sucks Draghi guy, likely future ECB head, which for me still is a big unknown.

Then there's the "True Finns".

 

A multivectorial attack on the Euro.

Many a hunter are the rabbits death, as they say.

On the other hand a lot of vested interests and careers in Brussels dependent on the Euro, who will certainly fight tooth and nail to keep it.

 

They'll probablly try to tinker with the naming and definition of the "bailout", maybe they'll nudge the one or other constitutional judge in the side, although I must say contrary to the SCOTUS, the BVerfG has a history of total neutrality and independence and more often than not has ruled against governments and chancellors.

 

One thing is clear:

If this bailout is just meant to cover banks' exposure to sovereign debt with bailed-out countries just middlemen, gaining nothing from it, then there'll be serious backlash against governments, not just here in Germany.

 

If not then maybe Germans could barely live with it and just swallow this bitter pill.

What we would like to see is the total ban of CDS throughout Europe.

 

CDS is just another form of tail wagging the dog through a paper derivative.

A self-fulfilling prophecy where big market players can just buy insurance on a sovereign debt that they aren't exposed to and then create the fake illusion of trouble where there's no trouble or at least not with the magnitude that the CDS price seems to indicate.

 

It's a fraud, just like paper silver, courtesy of Mme. Blythe.

 

Ackermann will have to flee back to Switzerland and hide in his bunker under the Alps. ;-)

But only after he has made Jain successor.

 

Sat, 05/07/2011 - 16:37 | 1251413 cossack55
cossack55's picture

Nice. Thanks

Sun, 05/08/2011 - 04:25 | 1252540 Bringin It
Bringin It's picture

Also thanks for the post.

I have a question though.

I remember a while ago, that guy at the Telegraph - A.E.P. was saying the same thing and the court ruled against the plaintifs.  Is this an appeal?

... maybe they'll nudge the one or other constitutional judge in the side, although I must say contrary to the SCOTUS, the BVerfG has a history of total neutrality and independence and more often than not has ruled against governments and chancellors.

Sat, 05/07/2011 - 15:21 | 1251297 Ivar Kreuger
Ivar Kreuger's picture

Goldman: "While GDP in Q1 was only +1.8% we are confident that once the Bernake turns off the liquidity hose, and that steady 5 billion a day is no longer injected into the market,  GDP will increase substantially by at least 2%"

ROFL

Double-dip snitches, get ready.

Sat, 05/07/2011 - 15:31 | 1251306 steveo
steveo's picture

how can you tell when Goldman is lying?  70% is what they say is misdirection.

Another matter--

To use or not to use Stops?

Think if you were long silver futures and has no stop in place? You could have theoretically vaporized a $200k account in the Silver debacle.

However, stops are dangerous also. Esp. since your stop information is usually "sold" from broker to broker so those who run the stops know what their equity curve will look like. No, it is not fair, not proper, not really even morally close to correct, but it is the way it is. The levels of corruption on other matters of even higher magnitude and clarity mean that the issue of your stops being published and sold to the highest bidder will not be one that is addressed soon. 

More stuff on stops here

http://oahutrading.blogspot.com/2011/05/stops.html

Sat, 05/07/2011 - 15:32 | 1251307 RobotTrader
RobotTrader's picture

As of right now, the stock market is pricing in an economic boom in 2012.

Until these retail stocks break, there is absolutely nothing bearish being priced into equities right now.

Sat, 05/07/2011 - 15:40 | 1251311 cosmictrainwreck
cosmictrainwreck's picture

yep, everything's already "priced in" AND we know equity prices are totally legitimate because they are set by totally independent traders in the free market, AND that equity buyers are always right AND "all's well", no question about it

Sat, 05/07/2011 - 15:47 | 1251320 topcallingtroll
topcallingtroll's picture

Actually bonds are more accurate in predicting the future. So far they are saying no problemo to the end of qe2 and no serious inflation on the horizon. The dollar bounce also expresses some tentative summer optimism.

Goldilocks may pay us a brief visit this summer. Take advantage of her.

Sat, 05/07/2011 - 15:45 | 1251315 topcallingtroll
topcallingtroll's picture

True regarding your last statement.

I am about to change my mind about staying in cash this summer waiting for a pullback.

Commodities down. Treasurys flat to up. USA stock market up. Dollar flat to up. Commodity countries down a little. Europe mostly flat. Core inflation remains two percent or less. This will be an american led stock rally this summer.

Of course i might change my mind next week, but my plan now is a huge overweight in stocks and play silver volatility from either end.

Sat, 05/07/2011 - 16:40 | 1251430 cossack55
cossack55's picture

I would normally warn against the unknown natural disaster that is probably on its way now.  However, after Japan, it looks like nothing short of the moon dropping into the atlantic will slow the "market" for more than three days. Very weird.

Sat, 05/07/2011 - 15:54 | 1251327 falak pema
falak pema's picture

robo is a bot and I am a dot.Com bubble...

Sat, 05/07/2011 - 17:47 | 1251565 buzzsaw99
buzzsaw99's picture

The fed will keep rates low because of unemployment, bitchez. :roll:

Sat, 05/07/2011 - 18:23 | 1251623 Drag Racer
Drag Racer's picture

oil may spike up a bit when the market opens. oil tanks blown up in Libya.

http://english.aljazeera.net/news/africa/2011/05/201157112432539341.html

Sat, 05/07/2011 - 19:47 | 1251758 Hephasteus
Hephasteus's picture

We hate them because they have the highest standard of living in africa and they won't take worthless dollars for oil. Plus they were trying to set up thier own communcations systems and not pay us to talk to people. They are horrible horrible rule breakers. Nobody gets to talk unless they pay for us to listen in.

Sun, 05/08/2011 - 04:29 | 1252542 Bringin It
Bringin It's picture

Dejunked.

Sat, 05/07/2011 - 22:29 | 1252099 sgorem
sgorem's picture

DISCLAIMER: I am not a bigot, racist, or liberal,(well, I might be a bigot/racist after a few brewskies and a couple rounds of golf with my buds, but by God I'll never be a fucking Liberal! and even that could go either way depending on how many of them they around me:). Anyway, VENT TIME! To the post above who wanted to know why there wasn't more on the Japan Disaster? Fuck it, it's over 24 hours damnmit! If I want to see the Northeastern third of Japan turn brown before my eyes, I'll click on the webcam. Old news, until the Nuclear lava melts it's way through the earth to Cuba, then it'll perk my interest. Moving along, to the post from the "voyeur" Heart, that thinks we need more charts, data, and info. Well, if you don't know what the hell is going on by now, then YOU r in the wrong alley dude. Making a short story long, we've had Tricky DICK "I'm not a Crook" Nixon, then along came GW "$400,000,000 taxpayer bailout of the savings and loan fiasco" Bush! #3 was Bill "Slick Willey, cigar stuffing, "I didn't have sex with THAT woman, Nafta," Clinton. Bear with me. Then outta the Long Horn state came George "coke head, WMD, Mission accomplished, Good job Brownie" Bushie Jr. Now WE have the person of color, black in this case, Osama (didn't we just murder him?), Acorn, Reverend RIGHT, Change We Can't Believe In, dumber in the head than a hog is in the ass, HUSSEIN Obummer. Then we have the Wailing Wall warriors of Blankfein, Dimon, Gietner, Goldman, Greenstein, shalom, shalom, shalom. Is EVERYONE IN THE WORLD BANKING CARTEL, JEWISH? Sounds like a conspiracy to me. Anyway, sorry if my unrehearsed ramblings offended anyone, but if you look at the PAST, you can pretty well see the FUTURE. Ain't nothin changed except the puppets and puppeteers. ps. Tyler, please don't kick me off here, I don't have anywhere else to go.:) gotta go, my Gallo's  gettin above room temperature.   

Sun, 05/08/2011 - 04:31 | 1252547 Bringin It
Bringin It's picture

Pretty funny

... that thinks we need more charts, data, and info. Well, if you don't know what the hell is going on by now, then YOU r in the wrong alley dude.

Sun, 05/08/2011 - 18:09 | 1253877 sbenard
sbenard's picture

Goldman is the epicenter of Wall Street's Pollyanna complex!

Do NOT follow this link or you will be banned from the site!