Goldman Reality Denial Continues, Though Facade Is Cracking

Tyler Durden's picture

We predicted Goldman would be first to cut its Q1 GDP back in January. We were right.  We predicted Goldman would be the first to cut its Q2 GDP in late March (around the time we said Goldman will soon start pushing for QE3). So far, said prediction is being met with staunch denial. That said, we give Jan Hatzius at most 2-3 more weeks before the firm's 4% Q2 GDP is cut to 2.5% or lower. Denial: "In conclusion, the report is a disappointment, and suggests some
downside risk to our Q2 GDP forecast of 4%, but probably not as big a
disappointment as the numbers suggest on the surface."
Anger is next...We are looking forward to the bargaining part.

GS Skinny: Sharp Drop in Service-Sector Activity Index


1. The Institute for Supply Management’s nonmanufacturing index dropped sharply in April, to 52.8 from 57.3 previously, one of the larger drops in its history.  The new orders index fell particularly precipitously, down  11.4 pts—its biggest monthly drop in the 14 years of the survey—to 52.7.   The business activity index, the component most correlated with GDP growth, fell six points to 53.7, a reading suggesting moderate growth.

2. The employment index held up somewhat better, declining to 51.9 from 53.7 in March.  This is consistent with downside risk to consensus forecasts for payrolls on Friday (we forecast +175k, versus a +185k consensus).

3. While the basic message of the report is clear – decelerating service sector activity – we are very skeptical of the magnitude of the move.  In particular, the seasonal adjustments look odd.  For example, the non-seasonally adjusted orders index looks more stable than the seasonally adjusted series in recent years (on an NSA basis, the orders index fell from 63.5 to 60.0).  If we take the NSA data and apply a standard Census seasonal adjustment, we find a somewhat smaller (8.7pt) drop in new orders.  If the underlying seasonal processes are changing, that could be an additional factor affecting the size of the seasonal move.   In conclusion, the report is a disappointment, and suggests some downside risk to our Q2 GDP forecast of 4%, but probably not as big a disappointment as the numbers suggest on the surface.

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apberusdisvet's picture

So the $ 2Trillion that Timmie needs is really going to be for LLoyd?

dcb's picture

the damn thing doesn't let me cut and past the article!!!

1) that means it must be good

2) If I had a program that could manipulate the market and wasn't allowed to use it, I'd be upset too (LOL)

Them with that program is like adolf hitler with the a-bomb before the US had it!!!

gulf breeze's picture



Show us a solar chart.  I lost all of my granmother's IRA following your incredible advice

Slim's picture

I'm not saying this to take a shot here but if you lost an entire IRA on a single sector bet, you are better served studying up on portfolio design and risk management as opposed to finding someone else's advice to follow in pursuing strategies of all-in bets.  At the end of the day it is far better to have made a little money or simply preserved capital than get taken out and go to zero.  Volatility and downside risk really matter as they erode the asset base (i.e. a 50% down move requires a 100% up move to get back to even).  I know it doesn't sound as cool at a dinner party as an all-in fundamental bet and win but long-term winners in investing or trading require either stupendous luck or strong risk management foundations, and it is better to have both as you stand a better chance of being in the game longer for the former to show up on your side.

dcb's picture

the only things I am currently saving are in a taxable account that I have had less than a year, or  bought very near the bottom, and those things are hedged with double long inverse funds so I can make money going down as well as up.

stop losses two days ago!! I have been slowly adding towards the end of the rally the past few days on the shorts to be more market neutral si if the trade doesn't go my way I amk still making on the upside just in case.


I'd prefer to use puts, but I don't knowwhere I can find good options charting (help please, (for free)

RobotTrader's picture

Right now I don't see any signs of economic distress.

Commodities prices are now headed back down, and retail stocks are celebrating, with Macy's and JCP still pinned at 52-week highs.

The only thing dragging down equities the last 3 days are oil and gold stocks.

unky's picture

how about the 44.2 million americans on food stamps `?

kaiserhoff's picture

Oh ye of little faith.  According to Nancy Piglosi, the multiplier effect for food stamps is 1.79.  The USDA cites an even higher figure of 1.84.  So as soon as we are ALL on food stamps....   Oh, the humanity;)

Tunga's picture

Are Food stamps in a bubble? 

AgShaman's picture

+1....oh, Nice!

1% of the populace involved in precious metals (bubble?)

15% of the populace involved in food stamps (bubble?)

plocequ1's picture

I noticed M too. I was out in the Mall Sunday . Macys and Apple were packed. I passed the Amoco station on the way home and people were pumping gas like they always do.  Moral of story.. Just do what you gotta do.

Ruffcut's picture

So the zombies are out on a nice day. Doesn't mean they bought something.

Many people during the depression went "window" shopping and looking for a great deal.

More people buying gas, because they can't afford to fill up and only buy a few dollars at a time.

DRT RD's picture

Actually volume at our four c-stores have held nicely.

Magnix's picture

Thats called "Normalcy Bias" or "Heads in the sand" :-)

rocker's picture

No economic distress.   I thought you were a trader.

Whenever CSCO, OMX, HHS, AKAM, NOK, all the Tankers, Various Banks and random stocks are hitting the 52 Week low list, I see a recession coming. Has worked that way for three cycles.  Read the tea leaves.  Oil tops also pull a weak economy into recession.  How many indicators do you need?   

Re-Discovery's picture

QE3 is a must just to soak up treasury demand.  Otherwise I rates are going vertical.

Thomas's picture

That is the presumption that keeps me from backing out some of my inflation hedges.

Clorox Cowboy's picture

"If the underlying seasonal processes are changing, that could be an additional factor affecting the size of the seasonal move."  

See, what we need to do is re-order the seasons...I'm partial to winter, summer, fall, spring personally.

Also, what they didn't mention is that only fools use the experimental "Gregorian" calendar system...Julian has more empirical data on it's side...and you can make up months to honor your favorite emperor...uhh...President.  Yes, I predict a strong rebound as we move into the Baracktober printing season...


NuYawkFrankie's picture

Enquiring minds are aXing:

"Wot happened to the Binny Bounce?"

ivars's picture

Stocks in 2011-2012 predict sharp slowdown in H2 2011 and recession in Q1 2012:

Based of course on oil price growth:

Which from this feb 6th graph that has correctly placed 2 peaks and 2 dips, tells Brent will reach 140 in July, before dipping a bit and moving into 160 in September and 180-200 in q1 2012.

No QE3 after oil will reach 140. Tightening will start faster then expected, around October 2011.After September oil ( and inflation ) peak.  There simply will be no choice left.





RobotTrader's picture

I noticed that Allergan is trading at 52-week highs.

Never ending demand for Botox and facelifts.

Maybe some of you coin-clutchers should invest your savings in Botox instead of gold and silver coins.

Why subject yourself to so much pain from the volatility of the PM prices?  When you can own a steady performer like AGN?

RobotTrader's picture

By the way, my utility stocks like SO and ED are trading at new highs again today.  And they still pay over 5% dividends.  Sure beats getting your head chopped off trading Nasdaq screamers or PM ETF's.

TruthInSunshine's picture

How  has your ass not gotten tossed from ZH, and I don't care when you signed up, given your endless stream of useless, dribble-chin, no value added bullshit?

And how the hell do you pull chart/img posting priviliges, you full on retard?

I really don't care what someone's thoughts or opinions are, or even whether they're right or wrong, but at least try to add substance to the mix of conversation.

You and Harry belong together stamping out Hecho En Mexico urinal cakes.

TexDenim's picture

Talk about ambiguity and straddling the fence! GS must hire as many linguists and propaganda experts as financial types. They are masters at sounding smart while bamboozling everyone, sometimes even themselves. Fuck 'em.

Nihilarian's picture

So, bottom line is, Jan Hatzius forecasts are meaningless. If he's that much off on GDP forecasts that look out only a few MONTHS, then either he's a moron or he should realize the futility of his profession.

Wakanda's picture

"We are looking forward to the bargaining part."

Bargaining with the vampire squid?  Who?

Bubbles the cat's picture
Bubbles the cat (not verified) May 4, 2011 11:33 AM

Couldn't give a rats arse about 5%, 10% or 20%. Bought into gold in 2005@~$450oz (like many friends). When I'm feeling in the mood, I intend to flop out my tool kit and empty my bladder on JPM, GS and any bwankers in the vicinity.

AgShaman's picture

It's always been easy to spot the most desperate "Junky" in the room ravenous for another fix...sometimes it even transcends to their "Pusher Man" (just picture Hank Paulson at the podium a couple years a "Salt Monster" from Star Trek...trying to curb his cravings)

slewie the pi-rat's picture

jan hazmat is between a rock and betwixt a hard place. 

macro-wiZe, he had to dig pretty deep there (see #3, from tyler's summary) to find any unicorn shittles, at all. 

slewie to batmanke & hazmat:  japan is not transitory. 

japan seems poised to "do the hanky panky" and has created enuf yen to buy "troubled assets" and keep the fiatsco going---the "trust" in the system.

so they are gonna kick the economic consequences down the freaking road.  meanwhile, the same freaking road has a sign flashing:  warning:  tokyo becoming uninhabitable. 

but, pssst!  don't tell anybody, ok?  it's a secret!

AgShaman's picture

China saw it coming....they built Ghost cities for their Japanese neighbors out of kindness from WW II.

Not to be a complainer....but could you from now on, replace your h's with k's when referencing Unicorn droppings....It will really help me to stay optimistic about the economic landscape knowing that somewhere....a Unicorn will be putting forth "Rainbow Candies"



Your Friendly Neighborhood Griffon

slewie the pi-rat's picture

you know, Ag_sham, i felt something when i first wrote it that way.  then b/c of a typo i went to edit, and considered, again, the h V. k there.  again, since i was goin with hazmat's thought process, i decided to stay w/ the h. 

i'm glad you rolled with the punch, AgS_man.  those chinese cities are weird.  now, i'm sure the commie bastards will use them to house those criminal vietnamese gold traderz and the childrenother nations might sell for...rice.

altho they may let some young japanese families in, too.  just to show they're fair and don't carry any grudges.  they sure the fuk don't wanna alarm those asswipes is brussels, at this point, now, do they? 

besides, now that the leadership of "Odyssey Dawn" is getting charged w/ war crimes for that shit in tripoli, even the russkies are reportedly ready to r-r-r-rumble around the "unrest" in syria.  they have about had it w/mossad and their rothschild banksters and puppet nations.  "no fly zone" my fukin ass!!!  french leadership my fukin ass!!! 

even the turks have had it with mossad and the zionist power parade.  they are saying "we can help!  you ottoman buy now!"  the syrians seem to prefer the bang to the whimper, and if r-r-r-russia will help, i'll see ya in megiddo w/ the arjunians, junior! 


AgShaman's picture

Hahaha....I likes it alot Slewie. You are a first rate troublemaker.

Soon the troublemakers like yourself will be force fed your "programming" (and made to enjoy it).....the TalmudVision will be bringin' it to you.

Where's Charlie R? We need to raise the Draft age before any more countries get in the mood to fire up the War Machines and beats' US to the gold cache's

Yen Cross's picture

Mc Donalds is up .17cents. Nice to see all those part time hires are keeping input costs down.

Bartanist's picture

Sadly the irony of it is that the naivete at Goldman of their role has been washed away as they have been able to view themselves clearly in the eyes of the world.

They are despised, not for being brilliant free market capitalists that they always deluded themselves into believing, but as a group of humans that add little of value to society but serve the decaying political desires of a corrupt and crumbling elite.

Masters of the Universe, NOT! A distribution arm in a decaying system of crony capitalism. Productivity, creativity and drive are failing in America against the rancid marshmallow wall of uninspired inertia and tax.

Do we deserve better? No, they and those like them need to understand that to be what they want to be they need to get out of the way.

Grand Supercycle's picture

Copper gave the warning.

‘COPPER has ignored the recent equity bounce. Daily and weekly are not bullish’ ~ March 31, 2011.