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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bugs_'s picture

Could Goldman be right this time?

99er's picture

Chart: DX

Did someone say "Dollar devaluation"?


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

Red Neck Repugnicant's picture

One venti caffe latte and a croissant.


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?

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.

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.

BobWatNorCal's picture

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

ZeroPower's picture

GS is always right - assuming a contrarian view.

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...



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".

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.

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

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

pamriallc's picture

own a big portfolio of everything, go back to sleep

Threeggg's picture

All markets about to go green !

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



HedgeFun's picture

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

deadparrot's picture

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

MarketTruth's picture

Umm, Huston we have a problem...

RobotTrader's picture

Goldman PigMen turning bearish?

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

Seer's picture

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

RichardENixon's picture

Not to mention the Prime Rib specials.

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

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

Bankster T Cubed's picture

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

Bankster T Cubed's picture

whoever junked me on this - I junk you back

GFS is a threat to humanity

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.

Pladizow's picture

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

carbonmutant's picture

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

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...

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.

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.


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...

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 computers freeze...its full-medal-jacket nuts.....let them take the market to WHATEVER...

vote_libertarian_party's picture

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



RobotTrader's picture

Manical dip buying in AAPL.

Hard to say which item is stronger....

Uncle Gorilla's TIPs or AAPL?


99er's picture

Chart: DX

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

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.

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.

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.

rapacious rachel wants to know's picture
rapacious rachel wants to know (not verified) RobotTrader Sep 28, 2010 11:23 AM

how does one upload images?

Careless Whisper's picture

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


Bear's picture

Forget it ... Only Robo has the good stuff

LoneCapitalist's picture

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

Cognitive Dissonance's picture

Manipulation and distortion extraordinaire.

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

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.

StychoKiller's picture

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

scratch_and_sniff's picture

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