Santelli Slams The "Self-Sustaining Recovery" Myth

Tyler Durden's picture


One glimpse at the following chart and it's clear that the US economy has not reached the much-vaunted "escape velocity." As CNBC's Rick Santelli explains in this succinct summary of the quandary of GDP hopes, inventory-build fears, and extrapolation-dreams, "many of these programs, procedures, and plans offered by the Fed - or the government - actually work to jump-start the economy... but they can't reach sustainability." His simple analogy of the economy as a heart-rate in a chronically sick (if not dead) person and Fed juice as a defibrillator seems very fitting. As the chart below shows, the US economy is very much still on life-support.



"What's the real issue with inventories? The issue is when you build widgets, that figures into GDP - but the real question is, the drawdown of that inventory... How aggressively does it get consumed?


So, if you look at 2013 in its entirety and break it up mid-year, the inventory build at the end of the year was close to 2 1/2 to 3 times as large as the inventory build in the first half of the year.


Why is this important?


Because, first of all, we are seeing all the revisions that I look at for the next addition of our second look at fourth quarter gdp most likely to be under 3%.



If you recall it was originally 3.2, but maybe more important is the fact that many shops are also downgrading Q1... and it isn't from 4% to 3%, you know, we were all thinking we were going to get the lofty numbers. We're looking at Goldman, for example, at 1.9%. "

Simply put, that is not the kind of "growth" and "consumption" needed to cover the massive inventory build and so once again - thanks to Federal Reserve intervention - managers have been 'fooled' into believing in the future sustainability, have mal-invested, and next comes another stagnation (and the cyclical downturn that we noted here).

(h/t @Not_Jim_Cramer)


As an aside, we note this little tidbit (via Bloomberg):

S&P’s Jan. Drop May Be Recession Signal: Nautilus Capital


There are 19 instances since 1900 where S&P 500 falls in January after two or more years of gains; in 14 of those occurrences, it pre-dated the onset of a U.S. recession, writes Nautilus Capital research team led by Tom Leveroni in note.


Considered a positive signal if a recession commenced within 15 months (using NBER recession dates); avg. onset of recession after signal was 7 months


Positive signals occured in 1910, 1913, 1920, 1923, 1926, 1953, 1957, 1960, 1970, 1973, 1981, 1990, 2001, 2008


False signals occured in 1928, 1956, 1977, 1984, 2005

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Thu, 02/13/2014 - 22:36 | 4435030 Soul Glow
Soul Glow's picture

So everyone knows why gold is important by now, right?

Gold bitchez.

Thu, 02/13/2014 - 22:50 | 4435090 natronic
natronic's picture

Gold Mining is my gold play right now, working pretty good so far................DROP MARKET DROP!!!

Fri, 02/14/2014 - 02:10 | 4435584 James_Cole
James_Cole's picture

The key with investing in miners is getting into the groove of buy / sell along with the insiders (who frequently dump, often with total disregard to how it may affect the price). People tend to make the mistake of holding miners with an eye on the commodities markets - dont, miners are totally an insiders game.

Take a look at this chart and keep it in mind:;range=5y

Thu, 02/13/2014 - 22:57 | 4435100 DoChenRollingBearing
DoChenRollingBearing's picture

Yep, SG.  Gold is (brace for metaphor) a vector, a vector that goes in a different direction than most other assets, most of the time.  It is wealth.

I just met a "family banker" today.  Even he is OK with 5% of net assets in gold.

Moi?  5% minimum.

Gold: the Anti-Squid™

Thu, 02/13/2014 - 23:00 | 4435123 Tasty Sandwich
Tasty Sandwich's picture

WTI back above $100/bbl.

There's a reason oil is called black gold.

I doubt you really want to have start paying for oil imports with gold.

There will be no recovery to anything we of industrialized nations might consider normal.


No government official will ever publicly admit this.  Most Americans (and other peoples of the industrial world) cannot handle the realization that their way of life is coming to an end and there is nothing that can stop it.

German Peak Oil Study

The governments know.

Fri, 02/14/2014 - 02:16 | 4435591 James_Cole
James_Cole's picture

Yep. I actually mentioned this on another thread in reference to a pentagon paper about agw - military reports are one of the few places not filled with endless bullshit.

Fri, 02/14/2014 - 07:41 | 4435866 Wahooo
Wahooo's picture

Is Santelli an actual trader? If so, does anyone know how he's done over the years? He sure talks a game.

Fri, 02/14/2014 - 09:57 | 4436139 ReactionToClose...
ReactionToClosedMinds's picture

he used to be before he wos offered positin as reporter/analyst.  Heard he had a solid record & was respected in the pits

Fri, 02/14/2014 - 21:11 | 4438354 Tale2cities
Tale2cities's picture

He was a bond spread trader. I was a back months 30yr bond broker in the CBOT pit in the late 80s. Don't know if he trades his own account.
He's the real deal. Trustworthy and means what he says. No BS
Just hope he quit smoking

Thu, 02/13/2014 - 22:38 | 4435038 Cognitive Dissonance
Cognitive Dissonance's picture

Don't worry. Yellen was slotted into position because of her expertise with the Fed crash cart. CLEAR!! Code fiat green stat.

Thu, 02/13/2014 - 22:59 | 4435119 disabledvet
disabledvet's picture

Her husband is bought and paid for by UBS.

"There are squid...and then there are Giant Squid."

Fri, 02/14/2014 - 00:09 | 4435301 CrazyCooter
CrazyCooter's picture

Tis much more simple. Banking and executive leadership is a boy's game. When banking blows apart (this time) we will have a woman running the CB and likely have a woman (shudder) in the WH.

And, why is she always dressed like she is at a funeral?



Fri, 02/14/2014 - 00:41 | 4435374 DoChenRollingBearing
DoChenRollingBearing's picture




(... shudders ...)

Fri, 02/14/2014 - 08:38 | 4435956 DaddyO
DaddyO's picture





Thu, 02/13/2014 - 22:47 | 4435046 NoDebt
NoDebt's picture

"There are 19 instances since 1900 where S&P 500 falls in January after two or more years of gains; in 14 of those occurrences, it pre-dated the onset of a U.S. recession, writes Nautilus Capital research team led by Tom Leveroni in note."

This will not be the 15th instance.  Not because it isn't happening, but because it won't be reported.  You have already seen the last officially reported recession in the US.  


The economy has been on a downward trajectory since August (I repeat myself for the 20th time at least on this point).  I believe it is already negative, but I'm shouting into the wind on this one.  Nobody cares, nobody will believe it.  It's easier to believe we are still growing, if ever so slightly.  For financial assets, this belief is existential.  They know the next reported/admitted recession would be game-over for much of the the banace-sheet-crutching rehypothecation chain.


PLEASE NOTE... this does NOT apply if those figures are admitted to be negative by later revisions.  Several qurters of barely-positive growth being revised to show significantly negative growth 6 moths later will NOT do it (which is most likely what will happen).  It MUST be first-print headline negative growth.  Those days are gone and won't return.  You will never live to see a first-print negative growth number.

Thu, 02/13/2014 - 23:53 | 4435253 TheReplacement
TheReplacement's picture

Just because we won't live to see it doesn't mean it won't happen in the near future.  Ponder that.

Fri, 02/14/2014 - 08:38 | 4435960 DaddyO
DaddyO's picture

The MOPE is strong, may the farce be with us...


Fri, 02/14/2014 - 14:51 | 4437118 grekko
grekko's picture

I guess we're talking game over!  Watching the gold/silver markets, I'm getting a real bad feeling here.  There hasn't been an "in your face" manipulation in 2 days.  Something is going to happen.

Thu, 02/13/2014 - 22:42 | 4435057 pachanguero
pachanguero's picture

No, but the NWO puppet Big Ovomit said we were all going to be rich! FREEE Health care and risk free Myra!

Just buy the dip you muppets!  And did'nt the Vampire Squid aka Goldman Sacks tell us gold was dead money?

Steve Liesman will strighten all this out for us on the finacial Porn channel CNBC in the morning.



Fri, 02/14/2014 - 00:00 | 4435276 TheReplacement
TheReplacement's picture

Why is everyone so negative about Myra?  I want one, or two, or three...  how many can I have?

Fri, 02/14/2014 - 14:49 | 4437114 grekko
grekko's picture

For you?  Please take them all!

Thu, 02/13/2014 - 22:49 | 4435064 Murf_DaSurf
Murf_DaSurf's picture



Thank God that Rick doesn't wear a fucking bow-tie.

I say the bow-tie guys are first on the list to get it.

Sorry Jim Rogers, but for the sake of nailing Tom Keene at Bloomberg in the dragnet you will have to take one for the team, pal.


Own a pussycat? You are also on the list

Fri, 02/14/2014 - 00:06 | 4435214 superflex
superflex's picture

Krugman is a not doubter pussycat.

Spare Dr. Paul Craig Roberts though. 

Fri, 02/14/2014 - 14:48 | 4437108 grekko
grekko's picture

Definately spare Roberts.  He's a good guy!  He even answered an email I sent him.

Fri, 02/14/2014 - 14:47 | 4437101 grekko
grekko's picture

Don't worry for Rogers, he's too smart.  He probably has a closet full of long ties when that day happens (dark and cheap sunglasses as well, as I think he looks like a ZZ Top fan).

Thu, 02/13/2014 - 22:43 | 4435065 Ness.
Ness.'s picture



Thu, 02/13/2014 - 22:46 | 4435076 Murf_DaSurf
Murf_DaSurf's picture



Yellen wears a bow in her hair?

Whelp, She's on the List, too.

Thu, 02/13/2014 - 22:56 | 4435111 Ness.
Ness.'s picture

Yellen has already stated that she has negative interest rates in her quiver.  She'll do whatever it takes to manipulate the yield curve to keep equities elevated.  If she loses control of either, it's game over.  


She's the Fallgal.


Thu, 02/13/2014 - 23:11 | 4435153 Quaderratic Probing
Quaderratic Probing's picture

So if I buy a stock to get a 3% div put it in the bank and she applies 3% negitive interest to it somehow the economy will recover?

I just lost any hope there is a brain in her Quiver

Fri, 02/14/2014 - 14:44 | 4437092 grekko
grekko's picture

Dude!  I'd be suprised if she even has a quiver.

Fri, 02/14/2014 - 14:43 | 4437083 grekko
grekko's picture

"She's the Fallgal"  That's the way I see it.  Or that's what they'll tell us when it happens.  Problem is, we all know that the rabbit hole goes much deeper than that.  TPTB have a real problem because pitchfork, torch and rope futures are performing pretty well in the commodities market.  Home Depot has a shortage today.

Thu, 02/13/2014 - 22:43 | 4435068 skwid vacuous
skwid vacuous's picture

Maybe Lies-man and the new hebe chik can have another debate in the a.m. about the more brilliant central banker, Dragi or Ben Shalom... that was captivating until my ears started bleeding

Fri, 02/14/2014 - 07:44 | 4435872 Wahooo
Wahooo's picture

They should lose all pretenses and simply replace Lies-man and the hebe chick with Timmy and Blythe. What a Valentines that would be.

Fri, 02/14/2014 - 14:42 | 4437066 grekko
grekko's picture

When this finally all blows-up, my enterpreneurial spirit will come into play.  I'm going to build a Coliseum and import a few lions.  I'll make a killing when my invited guests/contestors are Blythe and Timmy. 


But then again, I might get sued by some animal rights activist group for giving those poor lions indigestion.

Thu, 02/13/2014 - 22:47 | 4435080 USofAzzDownWeGo
USofAzzDownWeGo's picture

Nothing makes sense in this market, however, we've learned how to play in this. QE will never end and the economy will never recover. Last year SUCKED in gold even with massive qe but back then the "recovery talks" were still everywhere. Right now, the economy sucks and supposedly tapering but the market is roaring. Usually when you see intervention like we've seen the past week, after that 5% drop, there're signs of a breakdown just like in 07 when the system started to crack. Ive been long GG calls the past 8 weeks and don't intend on selling them right now. I am long those, short LOW's via puts and long KOG calls. I'm just not convinced that the market is ready to break down yet. I would think 2015 would be the year, in the pres's last year, the market usually cracks down.

Thu, 02/13/2014 - 22:48 | 4435083 Debt Slave
Debt Slave's picture

It seems very hard for most "economists" to understand that when a nation turns away from production and instead embraces consumption, the economy is ALWAYS going to be crap. FOREVER.

Mass production is what made America great. The Clinton Marxists decided it was a good idea to move it all to China.

The "economists" seem to think that the Obama Marxists can fix it.

I would laugh, but most of those retards make more than I do.

Fri, 02/14/2014 - 00:04 | 4435285 TheReplacement
TheReplacement's picture

I would laugh, but most of those retards make more than I do.

They make more, today.  Check back in soon as they are definitely encouraging demand for rope production, among other things.

Fri, 02/14/2014 - 14:37 | 4437053 grekko
grekko's picture

Make sure the rope is made from hemp.  That way you can trust it not to break.  But in reality, why waste good rope on them when there are a slew of better uses, like the Blankfeins, Dimons, Clintons, Bushes, and  Rothschilds of the world.

Fri, 02/14/2014 - 14:33 | 4437051 grekko
grekko's picture

Hey Debt Slave, the economists know that, they just aren't allowed to say it or they lose their jobs.  It's amazing how stupid you can be when your job/livelyhood depends on it.

Thu, 02/13/2014 - 22:49 | 4435088 Shrapnel
Shrapnel's picture

We'd need to toss Earth's escape velocity in favor of something more like that of a massive star for this "recovery" to have a chance. Something along the lines of Rigel, perhaps.

Thu, 02/13/2014 - 22:51 | 4435093 BrigstockBoy
BrigstockBoy's picture

"You've had an economy that's like a great athlete that's had a heart attack, cardiac arrest, and the paramedics that have come, (and are) arguing (about) who was at fault, the athlete should have been checking his blood pressure more carefully. The important thing is to apply the resuscitator. It doesn't help spending time worrying about who is to blame for the patient having the heart attack."

- (Bullshit from) Warren "Fucking" Buffett 10/1/2008

Thu, 02/13/2014 - 23:05 | 4435137 disabledvet
Thu, 02/13/2014 - 22:53 | 4435107 Frank -THE COIN -
Frank -THE COIN -'s picture

Rick Santelli is trying his best to not let the public become blindsided by all the "Cheerleader " reporting. People were pretty pissed by the 2000 crash because they felt the MSM didnt  report the facts as they were. Rick is doing a fantastic job to try to prepare people for whats coming this time.

Thu, 02/13/2014 - 22:57 | 4435120 SweetDoug
SweetDoug's picture

What don’t these idiots get about not having a job?

How many people are off the UI reporting?

In school hiding?

On disability?

On food stamps?

On welfare?

How many cars and new washing machines and crap do the top 5% need?

Now how many do the bottom 95% need?

What don’t they get?

Any body ever noticed that nobody wins in Monopoly?

There’s a PHd in here if I wasn’t so lazy…

Nobody “wins”.

The game simply stops.

We’re heading for a catastrophe.


Thu, 02/13/2014 - 23:10 | 4435151 fijisailor
fijisailor's picture

Thanks Tyler for translating that.  I like Santelli but don't always follow his trains of thought as they jump quite rapidly and without explanation.

Fri, 02/14/2014 - 14:29 | 4437040 grekko
grekko's picture

For a guy that earns his living from the MSM, he's fairly coherent and speaks his mind.  Santelli is lucky he's with NBC and their lousy ratings.  If he was with a different station with better ratings he'd end up not being able to say what he thinks...only what he is told to say, just like all the others.

Thu, 02/13/2014 - 23:15 | 4435162 Atomizer
Atomizer's picture

The dirty Kenyan negro has always been ploying to make GDP growth through forced insurance coverage mandates. No one has to make a widget to create taxation for government to collect. You simply hand over your money and avoid the IRS audit. This is called extortion/racketeering at the highest US Presidential level. Completely unconstitutional and illegal in terms of a publically elected Presidential official.  

Thu, 02/13/2014 - 23:56 | 4435259 DoChenRollingBearing
DoChenRollingBearing's picture

Yet they elected him.  I do not say "we elected him" anymore, because clearly the "we" thingie is gone in America.  TPTB try to rob us, we step out of the way.

Constitution?  Que es eso, señor?

"Press 1 for English, 2 for Spanish and 3 for Arabic." <-- Michigan

Fri, 02/14/2014 - 02:41 | 4435611 kurt
kurt's picture

"We have to pass it to see what's in it."

To pass it  ... take a shit. To see what's in it  ... to plop it on a plate and poke around. 

Conclusion: it's shit alright.



Fri, 02/14/2014 - 14:29 | 4437027 grekko
grekko's picture

I can testify to that.  When my son was 3, he swallowed a 1 Euro coin.  Wifey got scared and took him to the hospital against my better wishes.  Great x-ray pic.  I had to dig through his shit for 5 days.  But I finally hit paydirt!  I cleaned off the Euro coin and pit it in a ziplock bag to give his future wife as one of the wedding presents (he won't like it, but that'll be my payback!).

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