Jan Hatzius

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Goldman Explains What Yellen Really Said: "Hawkish Shift"





Who best to summarize what Yellen just said (aside from Bernanke of course, however he will demand at least $250,000/hour for his profound insight), than the bank which actually runs the NY Fed: Goldman Sachs. So without further ado, here is Goldman's Jan Hatzius on what Yellen really said. "BOTTOM LINE: The Q&A of Yellen's semi-annual monetary policy testimony contained a few bits of interesting information, including a slightly hawkish shift in her description of when FOMC participants think the first rate hike may occur."

 
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Goldman Admits Market 40% Overvalued, Economy Slowing, So... Time To Boost The S&P Target To 2050 From 1900





Recall that it was Goldman's David Kostin who in January admitted that "The S&P500 Is Now Overvalued By Almost Any Measure." It was then when the Goldman chief strategist admitted there was only 3% upside to the bank's year end target of 1900.  Well, that hasn't changed. In his latest note Kostin says that "S&P 500 now trades at 16.1x forward 12-month consensus EPS and 16.5x our top-down forecast... the only time S&P 500 traded at a higher multiple than today was during the 1997-2000 Tech bubble when margins were 25% (250 bp) lower than today. S&P 500 also trades at high EV/sales and EV/EBITDA multiples relative to history. The cyclically-adjusted P/E ratio suggests S&P 500 is now 30%-45% overvalued compared with the average since 1928." And this is where Goldman just goes apeshit full retard: "we lift our year-end 2014 S&P 500 price target to 2050 (from 1900) and 12-month target to 2075, reflecting prospective returns of 4% and 6%, respectively."

Wait, what???

 
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The Avalanche Of Q2 GDP Downgrades Begins





With all eyes firmly focused on the dismal Q1 GDP print and summarily dismissing it as 'noise', backward-looking, 'weather', and 'exogenous'; today's worrying spending data has sent the serial extrapolators among the sell-side economist herd scrambling to downgrade over-exuberant Q2 GDP expectations (five so far). One glance at this chart is all one needs to know about the "bounce back" in pent-up demand spending (that is not there). As Bank of Tokyo-Mitsubishi's Chris Rupkey told Bloomberg, "Don’t start betting on those 3% GDP numbers yet." This only trumped Goldman Sachs 'oh-so-embarrassed-again' Jan Hatzius who slashed his exuberant 4% Q2 GDP growth estimate to 3.5% (for now).

 
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Goldman Boosts Q2 GDP Forecast Due To Collapse In Q1 GDP





"...we think that Q1 GDP was an aberration, and is not representative of the strengthening underlying trend in US growth." There is nothing we can add to such brilliant weatherman insight as what Jan Hatzius from Goldman just unleashed on the unwitting muppets (all of whom can't wait for Goldman's second above-consensus GDP forecast to pan out... unlike the last time in 2010). In brief: Goldman just boosted their Q2 tracking GDP from 3.8% to 4.0% because Q1 GDP imploded. And scene.

 
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The Inflation Era Has Arrived!





You can ignore and even downplay for a while, but eventually and as sure as the fundamental law of nature that everything has a cost....

 
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Here Are The Funniest Quotes From BofA As It Throws In The Towel On Its "Above-Consensus" GDP Forecast





It is hard not to gloat when reading the latest embarrassing mea culpa from Bank of America's Ethan Harris, who incidentally came out with an "above consensus" forecast late last year, and has been crushed month after month as the hard data has lobbed off percentage from his irrationally exuberant growth forecast for every quarter, and now, the year. As a result, BofA has finally thrown in the towel, and tongue in cheekly admits it was wrong, as follows: "our tracking model now suggests growth of -1.9% in 1Q and 4.0% in 2Q for a first half average of just 1.0%.... Momentum is weak, but fundamentals are strong. We have lowered second half growth to 3.0% from 3.4%."

 
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The Penguin Parade Begins: Goldman, BofA, Credit Suisse All Cut Q2 GDP Forecasts By 0.5% On Average





Remember when the "thesis" for Q2 growth was that just because Q1 was so horrible, Q2 will have to bounce back? Well, oops.

 
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Goldman Boosts Q2 GDP Forecast Due To Weaker Than Expected Q1 GDP





Today is the day when economists weathermen everywhere jump the shark. Here's Goldman's Jan Hatzius: "Because of weaker inventory investment in Q1, we increased our Q2 GDP tracking estimate by two-tenths to 3.9%."

 
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Don't Overthink The FOMC Minutes, Goldman Suggests: "There Were No Surprises"





While everyone tries very hard to read between the lines of the Fed minutes with the consensus conclusion being that suddenly (as opposed to previously?) the Fed is confused about what the best exit strategy is, with words such as reverse repos thrown around for dramatic impact even though this topic has been around for nearly a year, the reality is that there was absolutely nothing market moving or material in today's report (which furthermore reduced the use of the word "weather" from 15 instances in March to just 8 in April although no mentions of El Nino just yet). Here is Goldman's FOMC minutes post-mortem confirming just this. "BOTTOM LINE: The April FOMC minutes contained no major surprises. There was no news on the likely date of the first funds rate hike or the pace of subsequent hikes, and participants' views on the economic outlook were unchanged. Participants discussed the exit strategy and were in favor of further testing of policy tools, but no new policy decisions were made."

 
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Goldman's Q1 GDP Forecast: From 3.0% To 1.0% In Under Three Months





Overnight, four months after our prediction, the FDIC-backed hedge fund not only that, but so much more that even we were shocked, because from a Q1 GDP which Goldman had originally predicted was going to be 3%, the crack team of economists - or is that team of economists on crack - lowered its Q1 GDP to, drumroll, 1%! And that's in the aftermath of the stronger than expected Durable Goods reports. Because it's only logical that good news is bad news. And vice versa.

 
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Goldman's FOMC Statement Post-Mortem





From Jan Hatzius, who needs to coach Yellen much better next time around. Incidentally, this is Goldman's take on the statement and not on Yellen's disastrous press conference: "BOTTOM LINE: The March Summary of Economic Projections (SEP) indicated a more hawkish path of the policy rate than that seen in the December SEP. The statement included a move toward qualitative guidance, but was roughly neutral on net in our view."

 
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Goldman Slashes Q4 2013, Q1 2014 GDP Estimates, Expects Only 1.9% Growth In Current Quarter





It was only two weeks ago when Goldman's Jan Hatzius, as we predicted he would, took a hammer to its GDP forecasts for Q1 GDP upon the shocking realization that Q4 "growth" was all inventory driven. This morning, the hammering resumes as Goldman, in the aftermath of today's disastrous retail sales, not only cut its Q4 2013 GDP forecast from 2.8% to 2.4% (vs the 3.2% initially reported), but slashed its current quarter estimate from 2.3% to 1.9%. As a reminder, this number was 3.0% three weeks ago. Once again, nothing beats an economist forecast to know what the future will not be.

 
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Goldman's Yellen Post-Mortem: A Snoozer





BOTTOM LINE: Fed Chair Yellen's prepared remarks for her semiannual monetary policy testimony before the House Financial Services Committee were brief and did not contain any major surprises. The testimony itself will begin at 10:00am.

 
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Futures Sneak Above 1800 Overnight But Yellen Can Spoil The Party





A sneaky overnight levitation pushed the Spoos above 1800 thanks to a modest USDJPY run (as we had forecast) despite, or maybe due to, the lack of any newsflow, although today's first official Humphrey Hawkins conference by the new Fed chairman, Janet Yellen, before the House and followed by the first post-mortem to her testimony where several prominent hawks will speak and comprising of John B. Taylor, Mark A. Calabria, Abby M. McCloskey, and Donald Kohn, could promptly put an end to this modest euphoria. Also, keep in mind both today, and Thursday, when Yellens' testimoeny before the Senate takes place, are POMO-free days. So things may get exciting quick, especially since as Goldman's Jan Hatzius opined overnight, the third tapering - down to $55 billion per month - is on deck.

 
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Goldman's Payroll Postmortem: "Confusing", "Disappointing", "Little Negative Weather Impact"





BOTTOM LINE: The January employment report contained a confusing set of data, as payroll job growth significantly disappointed, but the unemployment rate declined by one-tenth, reflecting large gains in household employment. Overall we see the report as slightly weaker than expected. Nonfarm payroll employment rose a disappointing 113k in January (vs. consensus +180k). By industry, retail trade declined 13k (vs. +63k in December), while health and education services?normally a consistent support for headline job growth?declined for the second consecutive month (-6k). Construction employment, which declined 22k in December amid adverse weather, added 48k, suggesting little negative weather impact in the January report. Government employment fell 29k, the worst performance since October 2012, split between federal (-12k) and state and local (-17k). Payroll job growth in November and December was revised by a cumulative 34k, consistent with the general tendency for positive back-revisions in the January report. Over the past three months, payroll employment rose an average rate of 154k per month.

 
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