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Goldman Releases Most Bearish 2011 Outlook Presentation Yet, Sees S&P In 725-800 Range In QE2 Case

Tyler Durden's picture





 

Goldman's Investment Strategy Group has just circulated the most bearish 2011 outlook presentation, detailing why the US economy in 2011 will likely stall and post negative growth. As the chart below demonstrates, the current case, where ongoing QE will likely persist through 2011 and even into 2012, and thus make any discussion of raising rates irrelevant (likely forever, as the Fed will not be able to absorb all the excess slack before it is forcefully removed after 2-3 sequential dollar devaluations) lead Goldman to a GDP expectation of well under half of the Fed's greenshooty outlook of 3%.

Here is how Goldman describes the its across the board outlook revision:

  • Lower growth: We expect GDP to grow 1.5-2.5% in 2011 (down from 2.5-3.0%). Our view is that the growth baton will be passed successfully from inventories and government spending to consumption and investment so growth should remain positive over the next 12-18 months.
  • Higher uncertainty: Our forecast range for GDP is wider (1% instead of 0.5%) at 1.5-2.5%
  • Lower rates: We are lowering our long-term rates forecast to 3.0-3.75% by end 2011 (from 3.75-4.25%).

And according to the "Bad Case" which the Fed is about to enact, Goldman sees a fundamental S&P valuation range of 725-800 based on 10-11x multiples:

It is all about to get very interesting.

Full presentation.

 

 


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Tue, 09/28/2010 - 11:24 | Link to Comment bugs_
bugs_'s picture

Could Goldman be right this time?

Tue, 09/28/2010 - 11:24 | Link to Comment 99er
99er's picture

Chart: DX

Did someone say "Dollar devaluation"?

http://99ercharts.blogspot.com/2010/09/dx_8177.html

 

Tue, 09/28/2010 - 11:33 | Link to Comment Chemba
Chemba's picture

Uhhm, Goldman was right last time.  Remember?  Goldman was only bank that made money right through the financial crisis and one of only banks that managed risk well enough to avoid blowing up.

Goldman should be congratulated and praised, not villified.  The morons at Countrywide, Wamu, Citicorpse, etc. should be villified

Tue, 09/28/2010 - 11:48 | Link to Comment Red Neck Repugnicant
Red Neck Repugnicant's picture

One venti caffe latte and a croissant.

Forthwith!

Tue, 09/28/2010 - 11:49 | Link to Comment Voluntary Exchange
Voluntary Exchange's picture

I think you are somehow forgetting the huge booty Goldman managed to extract from the American people via government and then quickly dumped the loot to all their happy henchmen?

Tue, 09/28/2010 - 11:53 | Link to Comment Ripped Chunk
Ripped Chunk's picture

Troll

Tue, 09/28/2010 - 12:27 | Link to Comment Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Hmmm. I believe that the US Govy paid GS 100 cents on the dollar for their AIG exposure, to the tune of $10bn ...

Managing Hank, maybe.

Disclaimer : Long GS.

Tue, 09/28/2010 - 13:21 | Link to Comment Spalding_Smailes
Spalding_Smailes's picture

Remember?  Goldman was only bank that made money right through the financial crisis and one of only banks that managed risk well enough to avoid blowing up.

 

The great Goldman' ...and the ivy league morons that infest that shit hole would all be flip'n burgers if not for the backstop of joe six pack. Most of the G'7 banking industry is totally insolvent,caput,mark'd to fantasy... your god credit/debt is on his fucking death bed. How long can Uncle Ben Sholom Bernankruptcy and the rest, keep the foundation of sand intact.. "the pillars of ponzi". Its over bud ... Good luck.

Tue, 09/28/2010 - 11:37 | Link to Comment BobWatNorCal
BobWatNorCal's picture

"Could Goldman be right...?"
Unlikely. Time to go all in! :)

Tue, 09/28/2010 - 11:47 | Link to Comment ZeroPower
ZeroPower's picture

GS is always right - assuming a contrarian view.

Tue, 09/28/2010 - 12:22 | Link to Comment Sucks_to_be_Smart
Sucks_to_be_Smart's picture

In all honesty, from the 2 slides you posted up, this is pretty shitty.  Obviously i can't read the entire presentation, it is NA for me but these two slides are simple SWAGs.  "oh uh... if things go well what happens to headline cpi?  its gonna be up, above 1.25% y/y.  No shit sherlock."  "oh uh... if things don't go so well what happens to 10 yr yields?  probably under 3%.  Wowww really?  did you have to plug a lot of variables into a multi-variate regression for that? or did you just sorta squint at what its been doing for the last 3 months...

 

weak.

Tue, 09/28/2010 - 13:51 | Link to Comment goodrich4bk
goodrich4bk's picture

Yup, the guys in the paint department at Sears could have done exactly the same chart for a whole lot less money.  GS' "analysis" is nothing more than "good, better, best".

Tue, 09/28/2010 - 12:23 | Link to Comment RichardENixon
RichardENixon's picture

Flip a coin. Consult a Quji board. Read some chicken entrails. Listen to Goldman. Six of one half a dozen of the other.

Tue, 09/28/2010 - 13:18 | Link to Comment 406analyst
406analyst's picture

ZH bashes GS when they are late to the party (or miss the party all together), but when anything comes out in favor of their thesis, time to hop on the wagon!   

I love this site, but gimme the facts! less spin please

Tue, 09/28/2010 - 13:38 | Link to Comment NOTW777
NOTW777's picture

well GS president tells his followers to double down on failure and destruction and to "buck up."  the new catch phrase - from hope and change to summer of recovery to "buck up"

MSM media still fails to report the truth on this disaster

http://apnews.myway.com/article/20100928/D9IGSMBG3.html

Tue, 09/28/2010 - 11:27 | Link to Comment pamriallc
pamriallc's picture

own a big portfolio of everything, go back to sleep

Tue, 09/28/2010 - 11:28 | Link to Comment Threeggg
Threeggg's picture

All markets about to go green !

Houston ........... "Go with throttle up" !

 

BOOM !

Tue, 09/28/2010 - 11:30 | Link to Comment HedgeFun
HedgeFun's picture

Don't you see.  The answer is in front of you all this time.....gold man, gold

Tue, 09/28/2010 - 11:30 | Link to Comment deadparrot
deadparrot's picture

Just talking their book. Joe Retail, please short this market so we can cover at a profit.

Tue, 09/28/2010 - 11:33 | Link to Comment MarketTruth
MarketTruth's picture

Umm, Huston we have a problem...

Tue, 09/28/2010 - 11:37 | Link to Comment RobotTrader
RobotTrader's picture

Goldman PigMen turning bearish?

That's a green light to go long in a big way.

Tue, 09/28/2010 - 11:42 | Link to Comment Seer
Seer's picture

Yeah, and I heard that casinos have payout as well...

Tue, 09/28/2010 - 12:25 | Link to Comment RichardENixon
RichardENixon's picture

Not to mention the Prime Rib specials.

Tue, 09/28/2010 - 12:15 | Link to Comment RmcAZ
RmcAZ's picture

“The next 10 years are going to be just as good as the 1990s. The problems in this current environment we think are so different, and so new and so unique. It’s the same stupid old normal we’ve always had. We’ve got a great future.” - Ken Fisher

http://finance.yahoo.com/news/Ken-Fisher-Dubs-New-Normal-bloomberg-21542...

I feel bad for anyone investing with this guy. Actually, no, I don't.

Tue, 09/28/2010 - 11:38 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

GS can go f*** itself.  too little too late.

Tue, 09/28/2010 - 12:06 | Link to Comment Bankster T Cubed
Bankster T Cubed's picture

whoever junked me on this - I junk you back

GFS is a threat to humanity

Tue, 09/28/2010 - 11:39 | Link to Comment Turd Ferguson
Turd Ferguson's picture

Man, the dollar is absolutely in the fucking toilet. Just plain old ugly.

77 USDX here we come. From there, re-visit the Dec09 lows around 72.

Tue, 09/28/2010 - 11:47 | Link to Comment Pladizow
Pladizow's picture

From your mouth to god, sorry goldman's ears!

Tue, 09/28/2010 - 12:25 | Link to Comment carbonmutant
carbonmutant's picture

And the EU is howling... this is not something they can afford if they want to sell anything for Christmas.

Tue, 09/28/2010 - 11:40 | Link to Comment Seer
Seer's picture

Growth to stall?  Growth to be negative?  No, say it ain't so!

Geez, I've been calling this for a long time.  Only a blind, deaf and dumb person couldn't figure this one...

Tue, 09/28/2010 - 14:23 | Link to Comment FEDbuster
FEDbuster's picture

The presentation is too optimistic.  Third quarter 2010 GDP will be announced under 1% and revised to around zero.  By Q4 2010 we should be back in negative numbers on the announcement and continue to be revised downward. 

The wild card is how far the FED can push the market up and what effect the elections will have on the "mood" of the public.  Since the public seems to have said a collective "fuck you" to the stock market, the election results may not matter too much.  The only ones left at the craps table are the FED, HFT computers, Hedge Funds and Daytraders.

The real economy is fading while on life support.  Another shot of addrenaline (QE, stimulus, etc..) will not have as much effect as the first ones did. 

The real estate bubble created a credit and employment boom, now that real estate is dead there are no good bubbles left to blow up.

Tue, 09/28/2010 - 11:40 | Link to Comment Careless Whisper
Careless Whisper's picture

anyone who took the time to read that report must go to the front of the class and write 1,000 times on the blackboard:

GoldmanSachs is a hedge fund.

 

Tue, 09/28/2010 - 11:41 | Link to Comment MrTrader
MrTrader's picture

All markets green. Very good. Do we have enough idiots on board believing actually QE II ? Yeah ? Very good. While the hedge fund herd is buying deep OTM puts. Must be coincidence...

Tue, 09/28/2010 - 11:47 | Link to Comment The Axe
The Axe's picture

How can you even CARE!!!  Goldman wouldn't tell you a think of value or trustworthy..In a world where a stock flash crashes every day,,,even AAPL drops from 292 to 275 in a few minutes...my computers freeze...its full-medal-jacket nuts.....let them take the market to WHATEVER...

Tue, 09/28/2010 - 11:48 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

690 S+P in 2010?  As in the next 95 days?

 

ZOINKS!!!

Tue, 09/28/2010 - 11:50 | Link to Comment RobotTrader
RobotTrader's picture

Manical dip buying in AAPL.

Hard to say which item is stronger....

Uncle Gorilla's TIPs or AAPL?

 

Tue, 09/28/2010 - 11:50 | Link to Comment 99er
99er's picture

Chart: DX

Hey, Timmy...remember the students at Peking University? The laugh heard around the world.

http://99ercharts.blogspot.com/2010/09/dx_3493.html

Tue, 09/28/2010 - 11:52 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Goldman trying to activate Bernanke put. Or rather, Bernanke short iron butterfly where their bets pay off whether the economy drops or rises, but lose if everything stands still. 

Count on dollar pummeling to continue unfettered. Yields will be measured on negative log scale. And everybody's buying power will be crushed by inflating cost of living with deflating assets.

Tue, 09/28/2010 - 14:47 | Link to Comment Fast Twitch
Fast Twitch's picture

+ 1

Tue, 09/28/2010 - 11:59 | Link to Comment gwar5
gwar5's picture

Wonder if Abbey Joseph is more negative now, or was just too positive in the past? 

I would not be  surprised if the S & P fell further than they predict, though some of their profits come from over seas.

Tue, 09/28/2010 - 12:10 | Link to Comment RobotTrader
RobotTrader's picture

PigMen on Wall St. must be killing it.  And buying $300 handbags for their mistresses.

Believe it or not, COH is within a hairsbreadth of 52-week highs.

Tue, 09/28/2010 - 12:23 | Link to Comment rapacious rachel wants to know (not verified)
Tue, 09/28/2010 - 12:38 | Link to Comment Careless Whisper
Careless Whisper's picture

and TIF is just a silver heart necklace away from an all-time high.

 

Tue, 09/28/2010 - 16:42 | Link to Comment Bear
Bear's picture

Forget it ... Only Robo has the good stuff

Tue, 09/28/2010 - 12:15 | Link to Comment LoneCapitalist
LoneCapitalist's picture

Please excuse my ignorance, but how can treasury yeilds be so low, while dollar index is also dropping? Isnt this contradictory?

Tue, 09/28/2010 - 12:20 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Manipulation and distortion extraordinaire.

Tue, 09/28/2010 - 12:26 | Link to Comment LoneCapitalist
LoneCapitalist's picture

Buying our own bonds makes it look like there is a demand for dollars, while the dollar index tells the true story. Is that what youre saying?  Thanks

Tue, 09/28/2010 - 13:07 | Link to Comment goldsaver
goldsaver's picture

In addition, we are in the opening phases of a currency war. Other countries are buying the dollar in order to devalue their own currencies against the dollar. They believe that a strong dollar will keep prices of their goods lower in the US and spur imports into the US. Sadly, they have miscalculated the market. There can be no increased demand without increased consumer income/credit/confidence.

Wed, 09/29/2010 - 00:56 | Link to Comment StychoKiller
StychoKiller's picture

Okay, so everyone is buying Dollars (FRNs), yet it drops against the yen.  Por que??

Tue, 09/28/2010 - 12:17 | Link to Comment scratch_and_sniff
scratch_and_sniff's picture

Its all been about to get very interesting for longer than i can remember now. Meanwhile, just stay long.

Tue, 09/28/2010 - 12:18 | Link to Comment 99er
99er's picture

Brilliant.

(Reuters) - The upcoming flash crash report will show that regulators have a "very deep understanding" of the marketplace, giving the public a measure of confidence, the head of the Securities and Exchange Commission said on Monday.

http://www.reuters.com/article/idUSTRE68R1QR20100928

Tue, 09/28/2010 - 12:21 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

LOL

Any time you have your head well up your ass, you have a "very deep understanding" of your anal track.

Just sayin', show me the difference.

Tue, 09/28/2010 - 12:29 | Link to Comment gookempucky
gookempucky's picture

So tru CD

Many of the pigs to slaughter just dont understand that the mind is like a parachute- if it doesnt happen to open-- its too late.

 

Wed, 09/29/2010 - 00:58 | Link to Comment StychoKiller
StychoKiller's picture

"Minds are like parachutes -- just because you've lost yours does not mean you can borrow mine!" -- Demotivational Poster

Tue, 09/28/2010 - 12:31 | Link to Comment Pillage
Pillage's picture

Goldman's Abby said it's time to buy. Still wanna buy some contrarians?

Tue, 09/28/2010 - 12:40 | Link to Comment Buttcathead
Buttcathead's picture

I aint buy'n nuttin !  Tim Geithner is insane, the boy has lost his fricking mind.

Tue, 09/28/2010 - 12:45 | Link to Comment carbonmutant
carbonmutant's picture

Nobody in their right mind would have taken the job.

Tue, 09/28/2010 - 12:42 | Link to Comment carbonmutant
carbonmutant's picture

Ummm... There seems to be a plan here...

American products are going to be cheaper, just for the holidays... which means that manufacturers will sell more.

It looks like a plan to improve the deficit.

Tue, 09/28/2010 - 12:56 | Link to Comment rapacious rachel wants to know (not verified)
Wed, 09/29/2010 - 00:59 | Link to Comment StychoKiller
StychoKiller's picture

Not as long as WE keep throwing on the gasoline...

Tue, 09/28/2010 - 13:23 | Link to Comment maynard
maynard's picture

You people are unreasonably pessimistic. I mean none other than Jeffrey Hirsch argues the Dow will hit 38,820 by 2025! Ya'll can keep buying gold and that other yellow stuff, Dow 36K here I come!!!

http://www.bloomberg.com/news/2010-09-27/dow-super-boom-will-drive-avera...

 

 

 

 

Tue, 09/28/2010 - 13:30 | Link to Comment tempo
tempo's picture

There seems to be four alternatives to our economic problems. Raise taxes(not likely); cut spending (even less likely); trade war with China (even less likely) or a massive expansion of the FED balance sheet (QE2) (likely).   No one understands dollar devaluation and it may not hurt much if China ties its currency to the US dollar.  EU and the rest of world gets screwed.   QE2 will work for maybe a year but by 2012, the real serious problems will cause trade and possibly other wars.  Thankfully the US carries a big bad stick.  Maybe the brilliant ones know that war is inevitable and thats the reason for the massive spending levels.   Spend now while the dollar has some value.   Obama may be really smart.

Tue, 09/28/2010 - 13:49 | Link to Comment bada boom
bada boom's picture

This comes from the same company that predicts QE is coming in nov, dec or jan.

They have their most likely scenario for s&p 2010, 1150 to 1225, at 60%.  

To add, their worst case scenario for 2010 is only at 15% chance of occurring.

This is a major contradiction. 

 

 

Tue, 09/28/2010 - 14:01 | Link to Comment digalert
digalert's picture

Uh oh, Rush just mentioned ZH!

Tue, 09/28/2010 - 14:14 | Link to Comment CU1981
CU1981's picture

A LARGE smile came across my face when I heard Rush mention zerohedge ...LOL

 

Made my day !!

 

 

Tue, 09/28/2010 - 14:09 | Link to Comment prophet
prophet's picture

Nice work, but many already see range of 960 to 1280 with overshoots in place for a while now.  One of the less interesting indices anyway. 

Could not find any mention of "US economy in 2011 will likely stall and post negative growth" anywhere in the report other than a mention that one negative quarterly print would be historically normal.

Are we becoming sensationalist?

-profd

Tue, 09/28/2010 - 14:14 | Link to Comment topshelfstuff
topshelfstuff's picture

But...what about a 50 cent Dollar S&P

In just the past few months the USD [Index] has shed about 12% off its 88.70 2010 High,  equal to about 1,300 DOW Points, 100+ S&P Points

Though my two "Best Guess"'s is 1) Simply move the Decimal Point, a 10 cent dollar, or

2) Par with the renmimbi, currently about 15.5 cents

Tue, 09/28/2010 - 15:13 | Link to Comment Hunch Trader
Hunch Trader's picture

Market's been going up ever since Goldman begun turning out bearish pieces end of August...

 

Wed, 09/29/2010 - 01:04 | Link to Comment StychoKiller
StychoKiller's picture

Granted the Fed is "Pushing on string", but a better metaphor might be that their hook is caught on a large snag (world-wide debt level), they keep paying out line and pulling, trying to land the "big one" -- until the line breaks, and whips around the deck killing everyone in its path.  In case no one gets it, this ain't gonna end well!

Wed, 09/29/2010 - 06:37 | Link to Comment bada boom
bada boom's picture

I like the pushing on a string analogy.  You can push on a string, it distorts itself, but moves in the direction you want.  However, once you are done, you have a pile twisted string that needs to be sorted out. 

 

Thu, 09/30/2010 - 06:15 | Link to Comment cw2192
cw2192's picture

just read the presso and its actually pretty bullish on equities.

gs is saying that as long as gdp growth > 0, which they think it will be, equities will rally. 

i dont understand how tyler links (by the way the red highlighting is not in the original) the goldman worse case scenario to the fact that qe2 is the trigger for it. 

i dont really care if gs is bullish or bearish, its not my thing to trust any research, but it kinda makes me wary to think why TD/ZH are being deliberately misleading with their headline.

 

Tue, 11/16/2010 - 10:22 | Link to Comment daniel
daniel's picture

i love zerohedge policy cheap hosting

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