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Even Wall Street's Biggest Permabulls Are Throwing In The "Recovery" Towel

Tyler Durden's picture




 

When 2015 rolled around, Wall Street's best weathermen, pardon, "economisseds" eagerly proclaimed that growth in 2015 in general, and Q1 and Q2 in particular would be superb, "above consensus" and on an "escape velocity" by which we mean a continuation of the Q3 GDP surge courtesy of Obamacare (they completely ignored the pervasive snowfall that was blanketing the Northeast around the same time, on which 3 months later they would blame why they were so very wrong).

Instead what happened yet again was another year of utter humiliation for said weathermen, pardon "economisseds" when Q1 GDP did, well, this.

 

In other words, a carbon copy replica of what happened last year. Well, not quite.

Unlike last year when every single weatherman, pardon "economissed", quickly declared the collapse in Q1 GDP from an initial consensus of 3% to an abysmal -2.5% was due to the weather, and not due to a dramatic tightening in Chinese end demand, this time there is suddenly no silver lining, and one after another, the economisseds are lining up to say that, ooops, they were all wrong.

We start with everyone's favorite permabullish economissed, Groundhog Phil's nemesis, Joe LaVorgna. His initial Q1 GDP was in the 3%+ range.It ended up being off by a few thousands percent. But what's truly scary is that even Wall Street's most amusing permabull can no longer see a silver lining in the current quarter.

Advance Q1 real GDP rose just +0.2% at an annualized rate compared to a +2.2% gain in the prior quarter, below the consensus +1.0% estimate. Inflation-adjusted consumer spending increased 1.9% compared to a 4.4% gain in the prior quarter. Final sales to private domestic purchasers, the best proxy for measuring underlying private demand, were up only 1.1% in the quarter, similar to the weather-impacted 1.0% gain in Q1 2014.

 

... 

 

Additionally, there was a much larger inventory build ($110 billion) in Q1 than what we had expected—it added 74 basis points to Q1 real GDP. This was the largest inventory accumulation since the $116.2 billion build in Q3 2010. Given the fact the various regional purchasing manager surveys have been weak in April, it appears that producers will allow inventory positions to run off. This tells us that current-quarter growth is likely to run around 2.5%, not the 4% snapback we had previously been anticipating.

Are you feeling ok Joe?

But before you assume that Joe has finally figured it out, a deeper look reveals much Kool Aid still remains:

GDP growth is likely to be significantly stronger in the second half of the year (3%-plus), because the negative effects of the pullback in energy spending and the strengthening dollar will fade. This will keep the Fed on track to initiate interest rate normalization at the September FOMC meeting. Moreover, even with only a relatively modest snapback in growth expected this quarter, significantly reduced potential real GDP means that the labor market should continue to tighten.

We wouldn't expect any less. Still, even assuming 3% growth in both Q3 and Q4, which is highly unlikely unless the Fed too launches QE, then the highest possible 2015 GDP print is 2.2%, which would be tied for the lowest since 2011.

Are the recovery wheels suddenly coming off?

And just in case LaVorgna was not enough, here is permabull #2, BofA's Ethan Harris who just released a note titled "GDP: too weak to ignore" in which we read that he too, just slashed his Q2 forecast by more a third.

The economy only expanded by 0.2% in 1Q, coming in below consensus expectations of 1.0% and our forecast of 1.5% (Table 1). This is the exact same story as last year — the consensus was for low-1% and the first estimate of GDP was 0.2%. But last year, the data were subsequently revised even lower to -2.1%. And, it was easier to explain away the weakness from abnormally harsh winter weather and peculiar swings in a few of the components of growth. While there are “special factors” this year as well, including a port shutdown on the West Coast and poor weather in February, we are less comfortable dismissing these data.

 

There were two big shocks to hit the economy at the beginning of the year — the effect from the plunge in oil prices and rapid appreciation of the dollar — which are clearly serving as a bigger drag to growth and showing up earlier than we had expected. The strong dollar should remain a drag on growth in the coming quarters, but we expect the oil shock to turn neutral as consumer spends spend some of their savings from gas.

Uhm, Ethan, maybe hit F5 on the WTI chart buddy. If anything the ongoing surge in oil prices is about to slam a few nails in the US consumer's coffin. And just as they bought all those brand new and shiny gas-guzzling SUVs (using an Uncle Sam loan of course).

BofA's conclusion:

Considering these factors, we have revised down our forecast for 2Q GDP growth to 2.5% from 3.5% previously. We are holding with our forecast of 3.2% growth in 3Q and 4Q (Chart 1). However, for the year, growth is now averaging 2.4%, matching the pace last year. The long awaited pick-up in growth remains a forecast.

Good luck. We will revisit in a few months, just after the harsh spring showers make a mockery of this too economic forecast.

 

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Wed, 04/29/2015 - 13:07 | 6043242 davidalan1
davidalan1's picture

Green by the close..

Wed, 04/29/2015 - 13:16 | 6043279 TeamDepends
TeamDepends's picture

That guy could sell advertising space on his forehead and make a few bucks.

Wed, 04/29/2015 - 13:18 | 6043290 flacon
flacon's picture

Throwing in the towel ahead of FOMC? What are you fucking nuts? S&P to 2250 by end of May! 

Wed, 04/29/2015 - 13:37 | 6043356 Creepy A. Cracker
Creepy A. Cracker's picture

Please...  "The Recovery" happened years ago.  Just ask Dear Leader Obama and Little Joey Biden.  Everything is fantastic with this amazing unemployment number that is issued by the government.

Wed, 04/29/2015 - 13:39 | 6043363 flacon
flacon's picture

Look, I'll break it down for you. The worse the economy gets the better it is for all of us because the people running the show have pH Dees from accretided Ivy League universities such as Princeton, Harvard, Yale, Columbia. I believe in America's exceptionalism that is why it's good for the economy to go down because the only way it can move is up! 

 

 

/SARC

Wed, 04/29/2015 - 14:24 | 6043558 Ward cleaver
Ward cleaver's picture

Creepy, I laugh every time I hear his name but little Joey Biden should actually be little creepy Joey biden. Ever see his pictures touching women?

Wed, 04/29/2015 - 15:50 | 6043865 Creepy A. Cracker
Creepy A. Cracker's picture

Yes, and his skinny dipping when women Secret Service agents are on duty fits little Joey to a tee.  He's creepier than me.

Wed, 04/29/2015 - 13:19 | 6043291 CrimsonAvenger
CrimsonAvenger's picture

I don't know how much I'd pay to post the word "Tool" there, but it would be a lot.

Wed, 04/29/2015 - 13:26 | 6043318 BandGap
BandGap's picture

"Eat at Joe's"

Wed, 04/29/2015 - 13:32 | 6043344 oddjob
oddjob's picture

Can't top that...just walk away.

Wed, 04/29/2015 - 15:06 | 6043747 Baldrick
Baldrick's picture

Banzai7 should print that up.

Wed, 04/29/2015 - 13:16 | 6043283 Hype Alert
Hype Alert's picture

Maybe, the lack of volume on the news today is just weird.  Machines are waiting on the text this afternoon I guess.

Wed, 04/29/2015 - 14:39 | 6043336 Jumbotron
Jumbotron's picture

What all these guys are doing is singing the blues for Mr. Yellen.  Once she hears enough of them howl.....then she'll throw them another Q.E. bone.

Buy the fucking dip.

Wed, 04/29/2015 - 14:12 | 6043492 dcohen
dcohen's picture

The bitch is lying - I don't see how anyone can quote one of these aholes as though they were being honest about what they think of the markets.

Wed, 04/29/2015 - 14:30 | 6043595 Ward cleaver
Ward cleaver's picture

It's f'ing amazing that these Assholes get paid 7 figures to guess at different
gov't stats. The game is to not be too off the consensus so as to not make your brethren look like fools. They sit around a table each month/quarter and make picks much like a fantasy football game. Question is how does a little munchkin like Joey from Deutsche get that position. Opinions?

Wed, 04/29/2015 - 23:40 | 6045782 legend247
legend247's picture

I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com

Wed, 04/29/2015 - 13:08 | 6043248 LawsofPhysics
LawsofPhysics's picture

Hhmm.  Looks like a "rocky" forecast...

Wed, 04/29/2015 - 16:44 | 6044166 Shaznardickleze...
Shaznardickleze the Doon's picture

Silver IS the fucking silver lining. Not that complicated. Short fake ass fiat and long real fucking money.

Wed, 04/29/2015 - 13:11 | 6043255 KnuckleDragger-X
KnuckleDragger-X's picture

They keep "optimising" the GDP calculations but for some strange reason, the numbers still suck. Oh well, just a little more adjustment and it'll all be shiny again....

Wed, 04/29/2015 - 13:40 | 6043369 Creepy A. Cracker
Creepy A. Cracker's picture

Since much of our GDP is from illegal, non-U.S. citizen, "workers" does the U.S. government add the GDP of other countries to ours?  Maybe with the next release of numbers?  "Whoa... GDP up huge!"

Wed, 04/29/2015 - 13:12 | 6043261 Mister Delicious
Mister Delicious's picture

The Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) will both be very good for "the economy" - AND, apparently, Israel...

http://www.globalresearch.ca/aipac-sponsored-fast-track-measures-on-beha...

No surprise there, but this inevitable add-on isn't even close to being the worst thing about the fast tracking and the "free trade" neofascist arrangement.

Wed, 04/29/2015 - 13:15 | 6043275 Colonel Klink
Colonel Klink's picture

Who do you think writes all those agreements?  Like the nuclear non-proliferation agreement.  Then they don't have to sign it!

Wed, 04/29/2015 - 13:12 | 6043262 lawyer4anarchists
lawyer4anarchists's picture

The markets are simply a manipulated sham.  An extension of the fiat system.  Fiat is only possible because of legal tender laws. Which were jammed down our throats in a case nobody ever heard of.

So when the court strikes down the legal tender law, what do those who really run things  do? Well they ALREADY knew that the decision was coming. Something this important never “just happens”. They were ready for it. They knew they wouldn’t have the votes so they had gotten a law passed right before it came down to BUMP UP the number of justices BACK up to 9. And while the Southern States were operated under military occupation in this great free country, they got their man Grant and the reconstruction Congress to put two justices on the court that were friendly to the concept of stealing from the people. And thus just ONE YEAR after the decision STRIKING DOWN the legal tender scam they REVERSED the decision. Knox v. Lee, 79 U.S. 457 (1871).  http://www.thetruthaboutthelaw.com/they-make-you-use-money-that-is-backe...


Wed, 04/29/2015 - 13:27 | 6043266 Colonel Klink
Colonel Klink's picture

Why do I feel this overwhelming urge to punch that guy who's pictured, right in the face?  Repeatedly!!

Wed, 04/29/2015 - 13:30 | 6043337 pods
pods's picture

BOOM, headshot!

Wed, 04/29/2015 - 13:36 | 6043355 Colonel Klink
Wed, 04/29/2015 - 13:16 | 6043277 venturen
venturen's picture

your missing the chart of all time high stock market as GDP crumbles.  I now know what it felt like in the USSR when the government lied and stole!

Wed, 04/29/2015 - 13:53 | 6043407 Arnold
Arnold's picture

All for the Fatherland, Mother Russia and the Homeland.

 

(I was undecided as to how many exclamation points to use; deciding on none,  for sarcasm's and drama effect.)

Wed, 04/29/2015 - 13:16 | 6043280 Jonesy
Jonesy's picture

Hot sure how just yet, but this has got to be good for the Jews.  Always is, after all Joe Lavorny doesn't get all that airtime on Jew TV for nothing!

Wed, 04/29/2015 - 13:28 | 6043331 valley chick
valley chick's picture

Someone actually listens to this ass?

Wed, 04/29/2015 - 13:20 | 6043299 Jacksons Ghost
Jacksons Ghost's picture

look at his head! Giant, hed!

Wed, 04/29/2015 - 13:32 | 6043341 TrumpXVI
TrumpXVI's picture

It's because he's so smart.

Haven't you ever heard of phrenology?

Wed, 04/29/2015 - 13:25 | 6043317 10mm
10mm's picture

His alias name is Mr Morehead.

Wed, 04/29/2015 - 13:28 | 6043327 Colonel Klink
Colonel Klink's picture

Yeah that's not a forehead, but a Fivehead!

Wed, 04/29/2015 - 13:56 | 6043421 Arnold
Arnold's picture

Hey, my forehead now runs to my back and I am not that smart.

Wed, 04/29/2015 - 14:49 | 6043685 Colonel Klink
Colonel Klink's picture

Not near as bad a Joan Rivers, when she smiled she had a goatee.

Wed, 04/29/2015 - 13:27 | 6043326 Weaponized Innocense
Weaponized Innocense's picture

U mean all those who have been predicting strong numbers pretend they weren't expecting as high of numbers as they were predicting so they can again predict too high of numbers only to do this dance again.. For the next how ever long it takes for magic beans to get us to the land of giants.

Wed, 04/29/2015 - 13:32 | 6043343 wissen dass scheiBe
wissen dass scheiBe's picture

That boy's head is like sputnik, 

Spherical and pointy in parts

....

Watch him go cry himself to sleep 

On his huge pillow

Wed, 04/29/2015 - 13:40 | 6043367 Duc888
Duc888's picture

 

 

 

 

Timmae' G's brother?

Wed, 04/29/2015 - 13:37 | 6043359 Jack Burton
Jack Burton's picture

Here is a market equation.

Stock Prices  [ - QE, - ZIRP, - manipulation, - money printing] =  ?

Where would stock prices sit if we returned to a fundamental free market? My guess is in the crapper!

Wed, 04/29/2015 - 13:57 | 6043427 Uber Vandal
Uber Vandal's picture

Somewhere between August 8, 1896 (28.48) and July 8. 1932 (41.22)?

Seriously, what would the DJIA and NASDAQ be IF the original components were put back into it, and nothing was allowed to leave when it went belly up, or take its place?

 

Wed, 04/29/2015 - 13:45 | 6043387 aliki
aliki's picture

until someone has the balls to pull the plug on this QE shit, cut the debt, cut taxes, and let the market clear-out prices, nothings going to change. people simply don't want to hear the reality which is all we've done is prop things up & they HAVE TO be ripped down & rebuilt on an actual foundation. the fed & gov't have too much invested; they've sold this story as a "workable solution" and so in their eyes, it can't fail because there is nothing else when in reality, after lehman was the time to reach in & gut this debt pig. pain will be felt 1 way or another; either man-made or market-based. take your pick. i think we already know the way we're heading. its the latter and its much harder.

Wed, 04/29/2015 - 13:46 | 6043388 LooseLee
LooseLee's picture

Joe LaVorgna was not hired for his economic skills. He was hired because he is an OBEDIENT BOOTLICKER---like most people in his position. The good economists must be self-employed 'alternative' forecasters as they are not, by definition, a conformist coward.

Wed, 04/29/2015 - 13:54 | 6043415 Arthur Schopenhauer
Arthur Schopenhauer's picture

Fed day.

Same old shit.

The markets open up in the morning and they sell off until mid-day.

Then the bulls rush in to buy the dip.

Same old shit.

Wed, 04/29/2015 - 13:58 | 6043429 MFL8240
MFL8240's picture

Yes,. the courrption is entertaining!

Wed, 04/29/2015 - 13:57 | 6043422 MFL8240
MFL8240's picture

Economy does not matter; this is all about an illusion of prosperity!   Today, again the corrupt Federal Reserve will again levitate the stock market because they do not want to deal with the issue of letting things seek their own level.

Wed, 04/29/2015 - 14:06 | 6043460 mpath
mpath's picture

Woody Dorsey's "trend duration analysis" says a top on 4-26-15 matches the duration of the 02/02/15 rally. Some interesting stuff--he is a wizzard-that is for sure. Take a look

Wed, 04/29/2015 - 14:18 | 6043527 yogibear
yogibear's picture

QE4 is assured. The Federal Reserve PhDs only know how to print.

Currency destruction is the only thing they know how to do.

Wed, 04/29/2015 - 14:31 | 6043601 mtndds
mtndds's picture

QE4 is probably already happening though it is not offically announced.  Smoke and mirrors everyone.

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