Goldman's Post-Mortem: "Congratulations Mr. President, We Are Cutting Q4 GDP To 1.5%"

Tyler Durden's picture

Congratulations on the four more years, Mr. President. To celebrate, Goldman starts by cutting the Q4 GDP forecast from 1.9% to 1.5% (and let's not forget that the same Goldman is predicting a 15% drop in the S&P in the next two months to get the Fiscal Cliff deadlock to break).

Full just released note.

President Obama Wins; Slight Changes to Fiscal Policy Assumptions and Forecast

BOTTOM LINE: The election has produced a status quo election outcome. We are changing the fiscal policy assumptions in our forecast, to assume expiration of the upper-income tax cuts.


1. President Obama has won reelection, with a status quo outcome in Congress. Some results are still preliminary, but the President has won with around 50% of the popular vote and 303 electoral votes (29 votes in Florida are still undecided) compared with the 270 votes needed to attain a bare majority in the electoral college. Republicans lost two seats in the Senate with two Democratic-held seats still undecided (but preliminary results indicating they will not shift the balance of power). Republicans won the majority in the House, though Democrats made incremental gains as expected, with 15 seats still undecided.

2. We are making slight changes to the fiscal policy assumptions embedded in our forecast. President Obama has indicated he would veto legislation that extends the 2001/2003 tax cuts for income over $250k, while congressional Republicans have objected to decoupling them from the middle-income tax cuts. In light of the President's reelection, we have opted to assume that the upper-income tax cuts will expire. These are worth $56bn in 2013, and their expiration is likely to increase the drag on growth from fiscal policy by around 0.2 percentage points in 2013, on a Q4/Q4 basis. While there is a clear possibility of a compromise at a higher income threshold like $1 million, this is roughly balanced by the possibility of fiscal restraint from other unexpected sources, or the possibility that Congress fails to address the fiscal cliff until early 2013.

3. Based on these slightly modified fiscal assumptions and other developments, we are changing our forecast slightly. We are taking down our Q4 GDP growth forecast from 1.9% to 1.5%, due to a change in the tracking assumptions for October after Hurricane Sandy. Our forecast for Q1 and Q2 2013 will remain at 1.5% and 2%, respectively. Although the additional fiscal restraint would weigh on growth, the rebound from Hurricane Sandy is likely to lift growth which should mostly offset the fiscal effect.

4. Congress will return next week to begin work toward a compromise to avoid the tax increases and spending cuts scheduled to take effect at the start of 2013. The President is expected to release a fiscal proposal in the next few weeks as well

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A_S's picture

Isn't obama one of the muppets they bought?

jekyll island's picture

That's with the gov't contributing a third of the GDP.  Nice.  

GetZeeGold's picture



Let the revisions commence.

imaginalis's picture

How long before he is forced to step down so Blankfein can take over and implement austerity measures?

LMAOLORI's picture



I don't think it will take too long lol like he really needs any urging wait until the people who voted for him start to get things taken away the riots they said they would do if Romney was elected may take place after all

Bill Black: Wall Street Urges Obama to Commit the Great Betrayal


Wall Street’s leading “false flag” group, the Third Way, has responded to the warnings that Robert Kuttner, AFL-CIO President Trumka, and I have made that if President Obama is re-elected our immediate task will be to prevent the Great Betrayal – the adoption of self-destructive austerity programs and the opening wedge of the effort to unravel the safety net (including Social Security, Medicare, and Medicaid).

Read the Rest...


LMAOLORI's picture



"Isn't obama one of the muppets they bought?"

Yes he sure was

he is still loved 

Obama's best friend at Goldman Sachs


Obama, he still has an important ally at the firm: Goldman's chief economist, Jan Hatzius.

To be sure, the German-born Hatzius hasn't publicly stated that he supports the President. But his analysis, which is widely read in financial circles, has long jibed with the monetary and fiscal policies embraced by Democrats. In numerous notes published over the last few years, Hatzius has advocated stimulus spending and called for more quantitative easing, renouncing efforts to slash the deficit as premature.

He summarized these views in a speech last year, after accepting the 2011 Lawrence R. Klein Award for making the most accurate forecasts during the previous four years. In his remarks, the economist quoted former Treasury Secretary Larry Summers, who said that, while the crisis was "caused by too much confidence, borrowing, and spending," it could only be resolved by "increases in confidence, borrowing, and spending." Hatzius continued:

I believe that this is true. But unfortunately, it is probably too much of an irony to resonate with most voters and elected officials. Especially after a period in which some fiscal stimulus has already been applied and the economy is still in bad shape, it is all too tempting to believe that government deficits are part of the problem rather than part of the solution, and that macroeconomics is a morality tale where virtuous governments are rewarded and wicked ones are punished. That view is held more strongly in some countries and cultures than in others but it has been gaining ground everywhere, including the United States.

Hatzius' views have endeared him to the likes of liberal economist Paul Krugman, who has mentioned the Goldmanite nearly a dozen times in his New York Times blog. Krugman has repeatedly referred to Hatzius' group as "excellent," calling the economist a "very calm, measured guy." Back in 2009, he noted that Hatzius' analysis was "spot on."

Quinvarius's picture

My thesis on GS trying to scare people into selling for the last month is bullish.

fonzannoon's picture

The congress is lining up for punt formation. Isreal is lining up in goal line formation to punch it in. Yet gold is stagnant and oil is down.

GetZeeGold's picture



Most of the gold traders are drinking heavily......we'll get back to you tomorrow. We pretty much knew what was going to happen yesterday.

solidus's picture

Time to start strategizing for the 2014 midterms.  Fiscal cliff is an oppositions wet dream.  Bring on the collapse now.  Don't even pretend that Boehner isn't thinking that there is just no upside to cooperation at this point.  I have to agree with him.

knotjammin2's picture

I wouldn't bet one way or the other on Boehner.  Except maybe he would peg out a breathalyzer at any given moment!!

MFLTucson's picture

Yep, he is totally pathetic and needs to be replaced by someone with some balls and brains.

Waterfallsparkles's picture

So, did the Obama voters really win?

pods's picture

If history is any guide, the MATH will win.

Always does.


Waterfallsparkles's picture

So, did the Obama voters really win?

MFLTucson's picture

Yes, the hand-out, give me more free shit to play with in the hood won!  The American way of life lost!

Waterfallsparkles's picture

Cannot get blood out of a Turnip.

With all Americans suffering with lower wages and many without Jobs, where is the Money going to come from to give more free shit in the hood?

marathonman's picture

The way its come since 1913 - the fucking Federal Reserve will expand its balance sheet to buy those US bonds - i.e. they will print the fucking money and deflate the dollar and steal the value of your money with a healthy exchange fee for Goldman and JPMorgan.  They can bleed a turnip.

Waterfallsparkles's picture

Just look at Greece.  When you run out of people to pay into the welfare state the Country collapses.  Then no more free shit in the hood.  Everyone for themselves.

Chuck Walla's picture

1.5% - Yes We Can!!!


GetZeeGold's picture



We fought a cold war with them to keep it out of this country. Then we said....screw it....this is just too much work.

Jason T's picture

someone posted this yesterday, thank you poster, the U.S. recession probabilities on the fed research site.. at 20%, and its has never hit 20% without recession..


Ratscam's picture

and this is the August number, go figure what the september and october numbers will be.

northerngirl's picture

There will be some sort of compromise at the 11th hour, they always find away to kick the can down the road.

marathonman's picture

Why bother now?  The House should let the spending cuts hit and bring on the depression to hang right on Barry as the fall guy.  Boo-yah!

Cynthia's picture

And thanks to all of the paper-pushing bureaucratic waste being generated by ObamaCare, my guess is that the medical-industrial complex scarfed down most of that GDP number and then quickly vomited it up, leaving the taxpayer to pay for the massive cleanup.

youngman's picture

What will be funny is how the statistics will change ...CPI....PMI...Durable goods...unemployment..all will change I bet...they tweeked them before..but now they really have to prediction is food stamps to 70 million...disability also..the new redistrbution

GetZeeGold's picture



Acorn is in charge of the new formulas......might come way ahead of the game this time.

irishlink's picture

While talking to friends this morning, we were wondering will he fluff his lines as he is sworn in this year.

MFLTucson's picture

Perfect timing by the most courrpt Jewish trash can on the planet.

Wakanda's picture

Goldman is not happy, and bad things are about to happen - fast.

This forecast is just a little wink, a whisper.

orangegeek's picture

And here comes the reality.  Elections are over.  SP500 could be in for a "slope of hope" ride down.


How many more quarters of higher earnings (firing employees) on lower revenue (stuffing channels) will keep this market up?

falak pema's picture

morning hangover in markets as the Obammy euphoria evaporates; as EurUSD rollercoasters once again : 1.274 from 1.285.

Orly's picture

I didn't know you were into the 4X thingy, falak.  That's nice.

There is a bullish Gartley pattern just formed on the EURAUD pair Daily chart at 1.22.  Also, there is a butterfly way up the line on the Weekly, so the pair could be in for a big run-up soon.

Keep your eyes on it.


falak pema's picture

thanks Orly I'll keep my eyes open and my wallet shut. Not in 4X thingie, just trying to understand the amateur ropes.

To put it rudely but I hope not crudely, I grope  but I don't take a poke. Good for a cuddle as that girl would say! 

And its not a USD a minute! 

dyna66's picture

Regular gas up $0.08 overnight here in Austin. 


roadhazard's picture

If only Romney had won everything would be back to good times today. heh

Marley's picture

Goldman should be taxed off the face of the earth, whoever won

modelsofreality's picture

Anyone have a source/pdf to the GS note?