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Rosenberg - Expect Big Time Revisions To The Houdini Q4 GDP
Rosie already shared some insights on last week's blockbuster GDP number. Today, he refuses to leave the topic alone, and warns investors to "expect big-time [downward] revisions." Additionally, and more relevantly, the entire validity of the economic reporting segment of the administration is put into ever greater question, and with good reason: "if you believe that GDP result, then you de facto are of the view that all of a sudden, with no capital deepening or major technological change in the past half decade to speak of, the potential growth rate in the United States has reached an epic scale of 7%." And this key reading into the divergence between pumped-up and real revenue growth "When one weighs in a zero Fed funds rate, $862 billion in “stimulus”
(and counting) and $700 billion in bank and auto sector bailouts, sales
should be running at a 10% clip by now — not 1.7%." With economic data increasingly unreliable (to keep it politically correct), and China having the ability to make or break the U.S., what is the point of continuing the charade that the U.S. is nothing more than an extension of the Chinese experiment across the Pacific.
The U.S. GDP data belied credibility but as we saw with the advanced third quarter data, expect to see significant revisions; that initial Q3 report of 3.5% was eventually cut back to 2.2%.
But consider that never before have we seen a 5.7% GDP growth rate in a quarter when the aggregate workweek was cut by 0.5%. There is no way that productivity is running as high as the data suggest. Either the hours worked and employment data are wonky (though the jobless claims data are still consistent with moderate job loss) or the GDP data are wonky, or maybe they both are.
Here is another way to assess the data: We saw history in the making — an eye-popping 5.7% GDP growth rate the exact same quarter that the unemployment rate rose 40 basis points, to 10%. It is like Houdini’s rabbit! This has never happened before. Normally, when we see a GDP number like this the unemployment rate declines 20 basis points during the quarter in question. The flip side is that in the past, when the unemployment rate rose as much as it did in the fourth quarter, believe it or not, in those quarters real GDP actually contracted fractionally (at a 0.5% annual rate).
We went all the way back to 1947 and so we can say with 100% confidence that at no time in the past 62 years has a 5.7% GDP advance coincided with such a rise in the jobless rate. It makes no sense. In fact, if you believe that GDP result, then you de facto are of the view that all of a sudden, with no capital deepening or major technological change in the past half decade to speak of, the potential growth rate in the United States has reached an epic scale of 7% (the growth rate in the economy that keeps the unemployment rate stable) using a classic Okun’s Law rule.That is really tough to swallow. As we said: expect big-time revisions.
Not only that, but the same holds true for that University of Michigan sentiment reading in January. At 74.4, it is right in line with recession averages but supposedly, the recession is over. If this was truly the end of recession, the UofM would be closer to 78; and if it were a true expansion, or at least how an expansion was defined in the post-WWII era, then the index would have already broken the 90 barrier. We couldn’t help but notice that even as the mainstream economists were waxing over the UofM data on Friday, and even as Mr. Market was heading to the hills, that both the homebuying and the auto buying intentions fell on the month.
As we said in our Friday note, the really big deal in the U.S. GDP report was the slowing in real domestic demand, to 1.7% annualized in Q4 from 2.3% in Q3. Consumer spending actually slowed to a 2.0% annual rate from 2.8%. Here we are, eight quarters after the recession began, and real GDP is still 1.8% below the level prevailing at the onset of the downturn back in the fall of 2007. Until now, it has never before, at least back to 1947, taken more than eight quarters to re-attain the prior GDP peak (it usually takes between four and five quarters). These did not make the headlines.
When one weighs in a zero Fed funds rate, $862 billion in “stimulus” (and counting) and $700 billion in bank and auto sector bailouts, sales should be running at a 10% clip by now — not 1.7%. Therein lies the rub. While the ballooning federal debt is providing an antidote, make no mistake — the future drain from surging interest payments is going to pose a dead-weight drag on the pace of economic activity for years, if not decades, to come. Today’s stimulus-led growth, in other words, is going to come at a cost — not today, but down the road to be sure.
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"an antidote" ? LOL
Problem is, no one cares when the number is revised downward in a few weeks. By that time, everyone is rejoicing over the new green shoot du jour. And it just makes next year's YOY comparison even easier to hit. There's genius in this.
In this world there are just 3 types of lies : Lies, damn lies and statistics.
When you don't like the statistical response, quietly change the question by stinking it up with exceptions. No genius in any of it. An old game.
"no one cares when the number is revised downward in a few weeks. By that time, everyone is rejoicing over the new green shoot du jour"
And the master liars know this oh so very, very well. The revisions never get the "massive media launch" that the "fresh as bullshit" numbers do.
Yes, Prof Gulliver, Yes, Rainman, and Yes, Ripped Chunk.
Diabolical when you think about it. The government announces a 5.7% GDP, a big lie, and gets positive press. Then, a few moths later the government "revises" the 5.7% downward, in other words, retracts the lie.
The lie has served its purpose. Then government gets to claim it is honest, simply correcting an earlier estimate. But the government has created the perfect propaganda machine: spewing lies whenever it is serves its purpose, and then a few months later changing the lie into less of a lie. Diabolical clever.
Yep yep
Bloomberg has interesting data showing what happens the quarter after massive "inventory adjustment" related GDP "growth"
http://www.fundmymutualfund.com/2010/02/what-normally-happens-to-gdp-after.html
A whopping 5.7 "points" lower, not percent. But we get the point.
Yep, those Bloomberg journalists ;)
Rosenberg gets crazier and crazier and he is more and more wrong.
Remember this guy said, "be a seller", "double dip" back in May/June 2009. That, and his unwillingness to change now, should end his time in the business.
Its over.
-BBH
BBH? Ben Bernanke Hore.
My bad, that would be BBW.
no it is bbh - he be a man ho....
Rosenberg also clearly said on several occasions during that time period (as late as July or so that I recall) that the bear market rally could print spx 1200.
let's get all the facts on the table.
Lets also not forget that no one can forsee what games Big brother may come up with to kick this can down the road just a bit longer. Their bag of tricks is running low at this point and most of the investing world seems to be catching on. Look at all the green shoots printed in the last couple of weeks with the market dismissing all of them. Rosenburg's predictions may come to fruition sooner than many think...
Rosenberg crica June 2009
"Rally can continue based on technicals. In late summer/early fall we will rollover"
http://media.cnbc.com/i/CNBC/components/Syndicated%20Video%20Player/vide...
For reference you may also wish to read his June 2 Breakfast with Dave note where he references 1200 as a technical possibility (not a forecast)
(sign in required)
https://ems.gluskinsheff.net/Articles/Breakfast%20with%20Dave_060209.pdf
bottom line is that Rosie has been on the wrong side of the equity rally for almost one year.
it's over when the fat lady sings and she
ain't sung yet....
q4 was an outlier...
rosenberg is fundamentally correct about the
state of the usa economy...his only error was vastly
underestimating the fanaticism
with which congress, the president, the fed, and
fasb would prevent the necessary economic corrections
accumulated from decades of malinvestment and
fraud....
Why does anyone give anything someone named Anonymous any credit. Let the troll move along and maybe he will stop clogging up the boards with drivel.
The ONLY way the msg of 'stop lying' could be sent to DC is by dumping all the stocks and sending the DOW to 4000 which is its true value. They will wake up then and listen to Rosie and others.
Agreed. And with that said:
Are you there yet?
Are you ready to finally pull out all your funds from banks and Wall Street?
Sell off all stocks/trades?
Perhaps even go on a labor strike with your co-workers and picket your State government?
Or are you just sitting there like a good sheeple?
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. This issuing power should be taken from the banks and restored to the people to whom it properly belongs. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered." -- Thomas Jefferson, 1791
"When the people fear their government, there is tyranny; when the government fears the people, there is liberty." - Thomas Jefferson
1) I generally agree with your point
2)For Crist's sake, TJ didn't say that. The quote is a myth. The linguistic history of the word "deflation" shows its first uses at only around 1920, long after Jefferson. He did however, say lots of other things about the banks. Use the Library of Congress to find an accurate TJ quote: http://etext.lib.virginia.edu/jefferson/quotations/jeff1325.htm I swear that one has just been widly circulated to make people figuring things out sound dumb.
Fair enough, and yes i took time to verify and you are right in a pure sense, yet there are some truths to the Jefferson quote. Please see
http://wiki.monticello.org/mediawiki/index.php/Private_Banks_%28Quotation%29
I've moved my accounts to a credit union. I also own no stocks. I refuse to take part in the gambling casino they call Wall Street.
And I'm ready to get on a bus to D.C. Or help lob torches at Wall Street--whatever comes first.
just buy gold instead.
Dump all the stocks, empty all deposit accounts in TBTF then take to the streets all across the US
Don't be surprized if, someday, references to Rosenberg are missing from all records, and pictures of him together with, say, Bob Farrell, have been airbrushed out.
When the coming collapse takes place in earnest as it must, and unemployment soars from its already unconscionable levels to, perhaps, 13% as Rosenberg has earlier predicted, the opportunity for a powerful peoples' response will grow exponentially. The danger always persists, however, that as now, it may be syphoned off into some faux, Tea Partyish fascism, where a quasi-religious faith in "natural forces" only deepens and prolongs the peoples' agony. Keep in mind who your adversary is: Its a corrupt ruling class, not government per se. In his fabulous piece at Counterpunch today, Michael Hudson, among other things, touches on this danger. It's decidedly worth reading:
http://www.counterpunch.org/hudson02012010.html
Yeah, sounds like a job for Winston Smith.
How is the Tea Party fascist? Are you calling Christianity a quasi-religious faith? Your words sound like they have meaning. The problem is you don't know what the words mean.
Trust me, the comment has nothing whatsoever to do with Christianity, but rather more with something resembling its obverse.
Ask yourself who today most prominently speaks for the Tea Party "movement". Is it not the filth that populates Nazi radio? Who is it that claims Brown's Tea Party Senate victory for itself, is it not the fascist RNC? The Tea Party "movement", having quite willingly allowed itself to be captured by such vermin, has become nothing more than a tool of the interests. It is indistinguishable from them. It now exists solely to elect warmongers and torturers under the banner of "free market economics". Is the meaning of those words clear enough for you, chief?
and to add to that, if you read that nauseating
filth at nr online, they were touting the brown
victory as a mandate for more war aginst
terrorism and escalation in the middle east...i
think it was davdi victor hansen who made that remarkable
claim....
national review was a built by cia agent bill
buckley as a cia mouthpiece...his father was
allied with us intelligence in the early 20th c.
the entire outfit is creepy...reading their drivel
is scary.....it's amazing how warped those people
over there are....they play that rah rah liberal
vs conservative and dem vs rep....if i didn't
know that they know it's a charade i would
barf all over the computer screen....
what is hilarious is that they have readers who
actually believe the crap they print....
National Review On-Line is the present day equivalent of Der Sturmer, and its editor, Julius Streicher. There will be a peoples' moment for such bacteria.
Andrei, you are one interesting dude. I would characterize you as an expat from Russia who longs for the wonderful days of the USSR. Do you even know what the definition of nazism is? And no, it doesn't mean "socially conservative". Calling the Tea Party movement "nazis" is a classic example of the powers-that-be marginalizing what originated as a spontaneous outpouring of dissatisfaction with the path our country was on. Why don't you stop the ad-honinem (sp?) name-calling and open your eyes.
"Andrei, you are one interesting dude."
Now you forgot the handsome part, friend Elvis. It should read, "Andrei, you are one handsome, interesting dude." :-)
Never once have felt there to be an equivalence of social conservatism and fascism. Much of social conservatism is based on valid religious instincts, instincts sadly missing in social interchange today.
Not so, however, fascist neo-conservatism and its all-too-willing tools, the TeaParty "movement", currently allowing itself to serve as a kind of RNC Sturmabteilung. There's the fascism, good Elvis, in the Nazi radio leadership and the comfortable associations. I must ask how is it that a valid peoples' movement finds comfort with a warmongering Kristol or Glenn Beck? Truth be known, no valid peoples' movement ever could.
I hear they are building a clone army, too.
AV: "Is it not the filth that populates Nazi radio?"
Can't be.
I read that Air America went out of business last week.
So, relax on that one.
Unemployment is already over 13%
By one measure, yes. Rosenberg's predictions had the present method of calculating unemployment in mind, however.
"Unpleasant, perhaps, as American democracy slips into oligarchy."
The government of the U.S. has always been controlled by an elite class. It never has been a true democracy even going back to the founding fathers when only landowning white males were allowed to participate in the "democracy".
The government has never truly represented the little people, so the bailout of wall st. and all the corruption is no surprise.
"The government has never truly represented the little people, so the bailout of wall st. and all the corruption is no surprise."
Indeed, Masked Man, no surprize, but no less unacceptable, eh?
yes but it is egregiously more corrupt than ever...
The government of the U.S. has always been controlled by an elite class. It never has been a true democracy even going back to the founding fathers when only landowning white males were allowed to participate in the "democracy".
That's because the founding fathers never meant democracy to include the little people.
michael hudson is always worth reading and i
say that as someone who does not always see eye
to eye with him.....thanks for the link....
i wholly agree with him that tax and regulatory
policy need to realign with stronger preference
given to labor and a strong tilting away from
preferring rentier activity....the dominance
of the fire economy must end....
and yes, our ruling elite are internationalist
fascist traitors who should be burned at the
stake....
Yea goddammit we should TRUST the government...they are here to help.
Its a corrupt ruling class, not government per se
Wow...what an incredibly stupid thing to say. Exactly who do you think runs the Government? "Progressives" like you are always believing the next lie. Always waiting for that which will never ever happen, a non corruptible Government. For years and years clowns like you stand around waiting for Socialism to work and it never does...cause you always always run out of other peoples money. The sheer ridiculous naiveté of your bunch is absolutely stunning. Y'all should be kept away from reproducing and heavy machinery.
uhhhh....i think you have had your fucktard
allocation for today....
i am not waiting for socialism to work as it
never has and never will....yet i also know that
the usa government is solely and fully run by
a plutocratic cabal of fascists who are entirely
independent of the electorate....
the real power in this country is owned lock
stock and barrel by the oligarchs...as i have
mentioned here before, read catherine austin
fitt's real life encounter with the oligarchy when
she was hud undersecretary....
you are naive beyond words.....not only should
you be kept away from reproduction but your life
should be terminated for lack of probable iq
to sustain intelligent life....
Dumbass pills being given away free today? Where did I say that the Government was NOT run by oligarchs? Where did I say that one should trust the government? I was responding to
by Andrei Vyshinsky Who does say that IF ONLY the RIGHT people ran the government then everything would be ok. The solution is to have the Government run as little as possible...since they are so corrupt and incompetent. Who seems to have cornered the market on idiocy though you may be catching up.No amount of dumbass pills could lower us to your level of stupidity, neo-con imbecile.
Ah, yes, like a resurgence of bowel cancer after a period of remission, the return of Oberstgruppenfuehrer PierreLegrand. Last time you showed up, we'd suggested your drawing a tub of hot water and going off in search of a razor blade, if I recall. A bit too unpleasant for you, was it? Try self-defenestration.
Project much?
The government is incompetent, it has always been so and will always remain so. Expecting ANY government to run well is so fucking stupid that only a Progressive could believe it.
+100
The danger is the 'goverment per se' ... the government has been run by the 'corrupt ruling class' since U S Grant. 'Tea Partyish fascism'? Where's the threat?
But ... interest rates do not surge when you simply create the buying power to purchase the Treasuries. They only surge when a real market tells us we can no longer do that.
I love Rosie but US manufacturing did see a very strong upturn in Q4. My small business revenues doubled and it's still going pretty strong. There is a real cyclical upturn in the semiconductor industry - notice how well Intel, Qualcomm, Apple and TI have done lately?
Don't get me wrong - I'm uber bearish and believe the peak of the cycle is already behind us. That said, the stimulus and the Fed have poured a lot of sugar into the economy (i.e. Biderman showed us the Fed is printing $$ and putting into the stock market) so it is only reasonable to expect some type of growth. Long term we are still doomed and I hope the markets start reflecting that soon.
I enjoy following your references to your business' activity. It provides a nice snapshot, albeit a narrow one, of how the stimulus is working. The unfortunate part is that that growth is dependant on government largess. But you seem to be aware of this already.
Good luck in the future. Hopefully you can successfully navigate your business through the next leg down.
the types of companies you mention have a large
% of overseas business....thus their performances
are not entirely reflective of usa conditions....
i would love to see a recovery but it's not
happening - especially negative marginal
productivity of debt and many trillions more
of bad investments - particularly real estate -
to be liquidated...
Once again the willingness of the Propaganda Bulls to accept the reality of the government data being presented when considered against economic reality is exposed by Rosey and Tyler. The fact that the Mainstream Media folks actually believe and promote that a recovery is underway even though the average citizen on Main Street will tell you otherwise speaks volumes to the ability to spread the word no matter how false it might be, in a vain attempt to create "Animal Spirits" where there are none.
If we are in such a dynamic recovery, then why are the 1-3-6 month Treasuries still trading with a lower than 0.50% yield? Must be that desire to lose money on their investments because after all we all know the White House Chief of Staff would never allow bad data to be disseminated, right?
The final revision will bring this down to a more realistic 3.2-3.7% range and probably on the lower end of that number. With 750,000 additional job losses to be calculated into the recession losses (BLS report) it is only a matter of time until the rest of the world realizes that we did this with smoke and mirrors and we can not afford to pay for the matches or glass.
if you take out inventory replenishment the number is in the 2% range. After revisions downward and removing the stimulus effect the real number would likely be under 1% if not negative.
Banana republic economic statistics. Banana republic economic policies. Banana republic political leaders.
Rosie - never before have we seen such a manipulated market have we ?
The USA and China operate as an efficient partnership with the USA consuming, borrowing, and acting as policeman while China overseeing FX reserves and the slaves used in manufacturing. China links its currency and supports the bid price on each and every Treasury auction. If the partnership breaksup both countries lose. If the partnership continues, all other Asian countries have to support the dollar or lose exports. The EU however is screwed. Go short big time if the auctions start to look weak. The US has infinite taxing authority and will use it to support the partnership.
I would like to be lied to now so I don't have to face reality.
<Here we are, eight quarters after the recession began, and real GDP is still 1.8% below the level prevailing at the onset of the downturn back in the fall of 2007.>
I'm sure Rosenberg isn't wrong about his GDP data, just a curious observation trying to verify that read. The BLS says nominal GDP peaked 3Q08 and 5 quarters later at 4Q09 we are very close to exceeding that previous peak. Granted the data on the BLS website is all seasonally adjusted and annualized, but thats a pretty big discrepancy.
<But consider that never before have we seen a 5.7% GDP growth rate in a quarter when the aggregate workweek was cut by 0.5%.>
In conversation the other day a small business owner asked me how GDP can be expanding when there are still big layoffs going on across our town (and the country). I guess this is just another manifestation of the idea that the economy doesn't need us anymore.
Ray DeVoe Jr. formerly of Legg, Mason and author of the market’s best newsletter, once wrote about Count Zaroff, the protagonist of ‘Most Dangerous Game’, who, in order to attract human prey to his Ship Wreck Island, re-arranged the warning lights around the island’s shoals and rocks so as to purposely cause ships to crash. Ray likened the current environment of falsified government figures to be the same.
How much does Government Spending contribute to the GDP? Does government spending for health care contribute? Defense?
the federal government takes about 26-27% of gdp -
per the proposed 2011 budget...it's close to
that for 2010....
i believe that most of it is included in gdp -
although i am not certain about transfer payments....
however, transfer payments, once spent are captured
by gdp figures...(my guess is that transfers are
not counted per se as gdp)
This ad should be reposted with a chart of the GDP
http://www.youtube.com/watch?v=M1owcncKCHg
That number wasn't pulled out of a hat.
It was pulled out of someone's a$$
lmfao at the gay d p number
someone really made it up at the fed, im certain....what a crock...lol funny as hell
Maybe Rosie and all you bears should pay close attention to the details of this mornings' ISM Manufacturing Index:
ISM: Manufacturing sector expanded in Jan. for 6th straight month, to highest point since 2004
On Monday February 1, 2010, 10:59 am
NEW YORK (AP) -- The U.S. manufacturing sector grew for a sixth straight month in January, to its strongest point since August 2004. The report bolstered hopes that America's factories will help drive the economic recovery.
The Institute for Supply Management said its manufacturing index read 58.4 in January, compared with 54.9 in December. Analysts polled by Thomson Reuters had expected a level of 55.5. A reading above 50 indicates growth.
New orders, a sign of future growth, jumped to 65.9 in January, the highest level since 2004, from 64.8 in December. Current production surged to 66.2 from 59.7, also to its peak since 2004. Order backlogs grew.
Thirteen of 18 industries said they were expanding, led by the apparel, textile mills and machinery sectors.
Manufacturers have been pumping up production to feed their customers' depleted stockpiles. The ISM said manufacturers' inventories contracted at a slower rate in January, but their customers' stockpiles fell to an all-time low.
As their customers try to restock their shelves, manufacturers will need to ramp up production to match their demands. That will likely mean hiring more workers, which would help invigorate the economic rebound. ISM's employment measure grew last month.
Meanwhile, a weak dollar is boosting exports to fast-growing countries in Asia and Latin America. Monday's report said exports grew more quickly in January, to 58.5 from 54.5 in December.
A resurgence in worldwide trade is helping sales for American companies. In the fourth quarter, U.S. exports rose 18.1 percent, the government said last week. Shipments of goods alone soared 28.1 percent.
Reports from around the globe -- India, China, South Korea and the eurozone -- showed rising strength in manufacturing and exports.
Economists warn, though, that high unemployment and tight credit for small businesses could make the inventory bounce short-lived.
ISM index...a resurgence in worldwide trade?
Here is an index, the Baltic Dry, that relies on pricing data rather than what amounts to little more than a telephone survey of golfing buddies.
http://www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND
You're more annoying than Leisman and more arrogant
than Kudlow, and that's
saying something.
when respondents to the survey respond,
are they responding to strictly domestic
on-land usa production, or to worldwide
production for usa based firms?
Economists warn, though, that high unemployment and tight credit for small business could make the inventory bounce short lived.-
Gee--maybe Obama's wish to double our exports will be realized.
Yeah....right.
So Rosenberg gets to be wrong by 25% in markets... and yet gets credit for knowing the "underlying truth" of the economy?
Good HF guys call that "mental masturbation".
We only want to know things... so as to make better decisions.
-BBH
no it's not mental masturbation...the
economy is not a mechanical device subject
to something like newtonian physics...
nor can anyone know all of the actions
of the actors in the economy....
so having the right framework is important
but timing is another matter...
he has the right equation even if he is
passing incorrect arguments to it...
no one has perfect timing....no one...
rosenberg sees things others are not...
and those things demand an answer....
I have it on good authority that the GDP calculations were
outsourced to the Chinese.
Two charts of data referred to in the article. Unemployment Rate and Real GDP Growth (http://chartfacts.com/chart_frame.php?cid=1670), and Consumer Sentiment and Real GDP Growth (http://chartfacts.com/chart_frame.php?cid=1673).
Here is a chart of historical Productivity http://chartfacts.com/chart_frame.php?cid=1683.