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Jan Hatzius On Centrally-Planned Goldilocks

Tyler Durden's picture




 

Ever since his transition from a critical, respected and objective economist to the third coming of A Joseph Cohen, Goldman's Jan Hatzius has become an increasingly irrelevant second fiddle-cum-broken record, and as such his observations have merited less and less attention. His latest spin piece on why the centrally planned US economy will grow within the parameters of "perfection pricing" is merely more confirmation of this sad transition. To wit: "2012 is still a long way off, and the uncertainty surrounding any forecast is large.  But if we are right, the implications of this forecast are reasonably benign for the US Treasury market and very benign for the equity market.  Indeed, our strategists expect only a moderate increase in 10-year Treasury note yields to 3¾% at the end of 2011 and 4¼% at the end of 2012, as well as an increase in the S&P 500 index to 1500 by the end of 2011." In other words: the debt-fueled Frankenstein of a Goldilocks monster, currently rampaging around on government-funded steroids, is really completely under control. It appears that all the gloves have come off in this last attempt to reflate the global ponzi, and sadly credibility once relevant, is now completely out of the window.

Full Hatzius note:

Our Forecast vs. the Consensus: Room to Grow (Hatzius)
 
The January 2011 Blue Chip Economic Indicators survey illustrates just how much “room to grow” our forecast implies relative to the consensus.  Out of all 48 economists that submitted forecasts for 2012, we have the 8th highest forecast for real GDP growth, the 3rd lowest forecast for inflation, and the 3rd lowest forecast for the 3-month Treasury bill rate.   In other words, we have a very out-of-consensus view for how much the economy can grow before this growth generates higher inflation and interest rates.  If we’re right, the likely implication is a decent environment for the Treasury bond market and a very good environment for the equity market.
 
The January 2011 survey by Blue Chip Economic Indicators, Inc., taken just prior to the December employment report and published on January 10, provides a comprehensive look at economists’ forecasts for 2011 and 2012 now that the dust from the December fiscal agreement has settled.  The table below shows Goldman Sachs and consensus forecasts for 2011 for real GDP growth, CPI inflation, the GDP price index, and the 3-month Treasury bill rate.  For each indicator, we also show the highest and lowest entries in the survey.  (Note that the survey covers neither core inflation nor the federal funds rate.)
 
Forecasts for 2011 (GS vs. Consensus)

 

Real GDP Growth

CPI Inflation

GDP Price Index

3-Month T-bill Rate

Goldman Sachs

3.4%

1.7%

1.2%

0.2%

Consensus

3.1%

1.7%

1.5%

0.3%

Minimum

2.3%

0.9%

1.0%

0.1%

Maximum

3.9%

3.1%

2.5%

0.7%

Source: Blue Chip Economic Indicators, Inc.
 
Our forecasts are moderately above consensus for real GDP growth and slightly below consensus for both inflation and short-term interest rates.  In interpreting the relatively small differences, it is important to note that the Blue Chip forecasts are specified in terms of annual averages.  Since the annual average GDP growth rate for 2011 is influenced by the sequential pattern of GDP growth through 2010, this means that the survey results reveal a mixture of known information and a forecaster’s expectations for sequential growth in 2011.  It is also important to note that our close-to-consensus view on headline inflation reflects the combination of a below-consensus view on core inflation and an above-consensus view on oil prices.
 
To sharpen the distinctions, it therefore makes sense to go out another year to 2012, as in the table below.  Now, the pattern becomes very clear—our forecasts are well above consensus on GDP growth and well below on both inflation and interest rates.  Indeed, out of all 48 economists that submitted forecasts for 2012, ours is the 8th highest for real GDP growth, tied for the 3rd lowest for headline CPI inflation and the GDP price index, and the 3rd lowest for the Treasury bill rate.  In other words, we believe the US economy has lots of room to grow before inflation becomes a problem and Fed officials start to increase interest rates.

Forecasts for 2012 (GS vs. Consensus)

 

Real GDP Growth

CPI Inflation

GDP Price Index

3-Month T-bill Rate

Goldman Sachs

3.8%

1.0%

0.5%

0.3%

Consensus

3.2%

1.9%

1.6%

1.2%

Minimum

2.1%

0.5%

0.2%

0.2%

Maximum

4.3%

3.2%

2.8%

3.0%

Source: Blue Chip Economic Indicators, Inc.

Admittedly, 2012 is still a long way off, and the uncertainty surrounding any forecast is large.  But if we are right, the implications of this forecast are reasonably benign for the US Treasury market and very benign for the equity market.  Indeed, our strategists expect only a moderate increase in 10-year Treasury note yields to 3¾% at the end of 2011 and 4¼% at the end of 2012, as well as an increase in the S&P 500 index to 1500 by the end of 2011
 
Jan Hatzius

 

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Wed, 01/12/2011 - 08:57 | 869572 Tic tock
Tic tock's picture

Big if, sunshine. ..a moderate increase on the 10yr is dependant on the reserve currency status..and the US is rapidly losing sole superpower status. In fact, it's going to need a War to reaffirm it - there's no way in this current hell that any single other nation is going to go along with that sort of plan.

Wed, 01/12/2011 - 09:01 | 869578 snowball777
snowball777's picture

Okay, Jan...here's mine: 10 yr @ 4.5% by 2012 with +0.75% GDP print.

Wed, 01/12/2011 - 09:10 | 869588 alexwest
alexwest's picture

#1
useless junk GDP/CPI/etc
who fucking cares ? nobody calculates those.. its just guesses..
mental msaturbation...

what exchange GDP/CPI being traded? how do we know he's any good ?
did he long or short his forecast?

as far as macro concerns what's federal deficit is gonna be this year and next ? 1.5 - 1.7 $ trln.. so in 2 years US national debt will be around 17-18 trln$.. thats food for thought.. whats next ?

alx

Wed, 01/12/2011 - 09:17 | 869594 snowball777
snowball777's picture

Your sure the GDP and Fed bottom line aren't related in some way? Maybe it will come to you by April.

Wed, 01/12/2011 - 09:17 | 869592 EscapeKey
EscapeKey's picture

The economy is fine, because there's always a greater fool willing to buy US Treasuries.

Wed, 01/12/2011 - 09:19 | 869598 snowball777
snowball777's picture

...and Euro-trash.

About that 'always'...checked with the ChiComs on that lately?

Wed, 01/12/2011 - 09:17 | 869593 Cash_is_Trash
Cash_is_Trash's picture

If S&P @ 1,500 then Gold @ 1,600.

Wed, 01/12/2011 - 09:25 | 869607 101 years and c...
101 years and counting's picture

S&P 1500 means QE 3 and 4 of over $2 trillion.  Gold would be over 2K by then.

Wed, 01/12/2011 - 09:24 | 869603 Robslob
Robslob's picture

If S&P 1500 Gold will be 2,000...

Wed, 01/12/2011 - 09:26 | 869609 Bartanist
Bartanist's picture

Everyone knows what they "need" to say and do to keep shoes on the kids' feet, a roof over their heads and the wife (or hubby) from adopting a less than favorable stance. It may be Hatzius, a politician, a judge, the bernank or any random corporate executive. We ironically call it "maturity" when people are cynical and will still not do the right thing.

... and so we deserve neither. (to partially quote Ben Franklin)

If we are to believe The Fourth Turning, it really matters not. The old will be overturned regardless how tight Governor Tarkin's grip becomes, and a renewel of spirit and ethics will come about. The new generation in control will not have the "me centeredness" predominant in their parents and be more concerned with the whole of our society ... starting in about 2025. (just a few years before we can be struck by a known meteor in the early 2030s). Unfortunately, none of us can conceive of this now ... our society is so corrupt and self-centered.

Wed, 01/12/2011 - 09:30 | 869615 DaddyO
DaddyO's picture

 

Ok, Tyler, while stats, charts and forecasts have some relevance to traders and wall street wonks, us poor serfs here on main street could give a rip. I understand it's important to know what the idiots of irrelevance are thinking, it's more important to know what the single moms on main street are doing to feed their brood. I say we put Susie Sweetcheeks, the single mom in as Treasury Secretary. She'll start squeezing those pennies until they squeal.

As the TPTB continue to stoke the fires of fundom at the FED, Wall Street wizards continue to spew the company mantra trying to placate all who hang on every word looking for a glimmer of hope that the bubble will reinflate and they can salvage something of their stolen fortunes. Meanwhile, the banksters continue to sweep the chips off the table and make it seem that the Jan Hatzius' of the world know what the hell their talking about.

I'm not buying a word of it...just sayin

DaddyO

Wed, 01/12/2011 - 09:45 | 869639 SWRichmond
SWRichmond's picture

Ever since his transition from a critical, respected and objective economist to the third coming of A Joseph Cohen, Goldman's Jan Hatzius has become an increasingly irrelevant second fiddle-cum-broken record, and as such his observations have merited less and less attention. His latest spin piece on why the centrally planned US economy will grow within the parameters of "perfection pricing" is merely more confirmation of this sad transition.

Does anyone besides me wonder if this has something to do with the ongoing investigations into Goldman et al?  Has Goldman's public rhetoric been co-opted?  That would be an interesting turn, shoe being on the other foot and all.

Wed, 01/12/2011 - 09:58 | 869657 thepigman
thepigman's picture

It would be interesting to find out how

they got to Hatzius, wouldn't it? He was

at 1% GDP even as GS knew the Bush

tax cuts would be extended and now he

is at 3.7% based on what? The 2%

payroll tax cut which only covers the

higher price of gasoline or perhaps a

donut and coffee?  Very peculiar.

 

Wed, 01/12/2011 - 10:12 | 869679 The Profit Prophet
The Profit Prophet's picture

Hatzius is but a minion, doing his bit for the oligarchy. Integrity has been for sale in America for generations. The economy has become a national security issue, therefore many former "proud" intellectuals will find themselves buying into the economic logic required to "save the empire", sacrificing their integrity on the altar of national interest (with a large dose of self-interest mixed in).  The tragedy of course is the economic fallacies required to support and promote bubble economics are beyond insane, and can be easily argued to be evil at their core. The rich have been getting richer and the poor have been getting poorer, and one needs to look no further than the paradox of Paul Krugman's continuing support of a system that effectively cancels out his primary political ideology, to realize that there is far more at play than competing economic theories.  The present American economic system can not possibly survive the irresistable force of cheap Asian labour, and the oligarchs have realized this for decades.

T.E.I.N. everyone.      

Wed, 01/12/2011 - 10:34 | 869727 ElvisDog
ElvisDog's picture

I don't really blame Hatzius. His job, like Obama's press secretary, is to toe the party line. If he didn't, he would lose his high-paying job. Once you understand the situation and ignore his "analysis", no harm done.

Wed, 01/12/2011 - 10:28 | 869712 Downtoolong
Downtoolong's picture

It appears that all the gloves have come off in this last attempt to reflate the global ponzi, and sadly credibility once relevant, is now completely out of the window.

 

Research has shown that 3-4% of the entire population is pathological liars. Among the top managers, economists, analysts, and traders on Wall Street, no one will admit to knowing a single one of them.

 

Wed, 01/12/2011 - 11:41 | 869976 Ned Zeppelin
Ned Zeppelin's picture

As much as I think these predictions are based on policies, such as Fed printing and debt monetization, that I view as utterly unsustainable, I will not be surprised if these predictions are proved true.  Fighting the Fed and these policies on an individual investor/trading basis is a fool's game for now.  Long term, a different story, but even there, I do not see the catalyst for any major downturn.  And that's coming from someone who thinks there is one or more there, it's just not all that visible, and I guess that's how these things work.  Europe will muddle through its debt crisis, and the ECB will be monetizing somehow.

Wed, 01/12/2011 - 12:47 | 870231 Coldfire
Coldfire's picture

Churnside fortunetelling from the steel and glass tent of 200 West.

Wed, 01/12/2011 - 12:48 | 870238 Hedgetard55
Hedgetard55's picture

Hatzius' numbers are meaningless unless cast in "real" terms vs. nominal. Anything can happen if the dollar sinks 40%.

Wed, 01/12/2011 - 14:22 | 870615 DisparityFlux
DisparityFlux's picture

Another Pod Person from the Invasion of the Bailout Snatchers.

Thu, 01/13/2011 - 03:33 | 872407 alexwest
alexwest's picture

@Ned Zeppelin
#Long term, a different story, but even there, I do not see the catalyst for any major downturn.

are you kind of mentally challenged? do you really understand what is federal deficit means? do you really think FED/gov is going print 1$ for each 1$ in revenues.. ?? do you really think FED is going pring 1.5-1.7 trln per year each/every year and investors/ foreign investors gonna buy 10-30 yy curve what 3-5%.. ?

do youself a favor get some books to read and basic math classes about 'Geometric progression ' , will you ?

alx

ps
thank me later in couple years

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