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Morgan Stanley: "We Have Been Arguing For A Stronger 2H US Economy.. And We Are Capitulating"

Tyler Durden's picture




 

And so the last true blue, and much ridiculed economics team, that of Morgan Stanley's David Greenlaw's and his merry Buryini-ruler clad automatons, has waved the white flag. Specifically, in an email sent out yestrday by the firms' overabundant and soon redundant salespeople, both institutional and retail, we read: "WE HAVE BEEN ARGUING FOR A STRONGER 2H US ECONOMY..AND WE ARE CAPITULATING..." The all caps comes from them lest someone accuses us of being overly dramatic.

More:

US ECONOMY:  Late today our global economics team published the piece below downgrading their view on global growth (See piece below).  The note revising US growth prospects is attached as well.  Specifically, they see US GDP expanding at a sub-3% pace during 2H, and moderating to a 2.25% pace over the four quarters of 2012.  They also highlight a 30% chance of a US recession.  The views are intended to dovetail with the recent note from the Global Cross-Asset Strategy team where they noted a more balanced tactical outlook globally on risk assets near term, as well as heightened worry on structural challenges over the longer term ("Cross-Asset Navigator - And For the Next Trick...", August 12, 2011). 

 

GLOBAL ECONOMY:  We cut our global GDP growth forecasts to 3.9% in 2011 and 3.8% in 2012, from 4.2% and 4.5%, respectively. DM growth looks set to average only 1.5% this year and next (down from 1.9% and 2.4% previously), making the BBB recovery even more bumpy, below-par and brittle.

 

EM GROWTH:  EM isn’t immune, but generates 80% of global growth: We now see EM growth decelerating from 7.8% in 2010 to 6.4% (6.6% previously) this year, and further to 6.1% (6.7%) in 2012. Given its 50% (PPP) weight in global GDP, EM generates 80% of global GDP growth. EM policy-makers are likely to cushion domestic growth, but drastic policy stimulus remains unlikely.

 

Dangerously close to recession, but not our base case: Our revised forecasts show the US and the euro area hovering dangerously close to a recession – defined as two consecutive quarters of contraction – over the next 6-12 months. It won’t take much in the form of additional shocks to tip the balance. Still, recession is not our base case because: i) the corporate sector looks healthy; ii) household real incomes will be supported by lower headline inflation; and iii) we expect more action from central banks, including rate cuts and more non-standard easing from the Fed and the ECB.

Why, did Morgan Stanley, as usual about 2 weeks behind the curve, just come to Goldman's realization that for bonuses to be paid, the Fed must proceed with QE3, which in turn needs a major market flush to be activated?

The full report which will be absolutely not market moving

Dangerously Close to Recession

 

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Thu, 08/18/2011 - 07:29 | 1571876 markmotive
markmotive's picture

ECRI leading index has been declining since spring 2011.

http://www.planbeconomics.com/2011/08/17/chart-ecri-leading-index-declin...

The forecasters are simply playing catchup.

Thu, 08/18/2011 - 07:29 | 1571879 michigan independant
michigan independant's picture

They should get out more.

Thu, 08/18/2011 - 07:38 | 1571900 RunningMan
RunningMan's picture

Maybe this comment was made in jest, but this is precisely the problem. Washington DC was booming from gov't expansion through this year, so politicians saw no crisis (or paid it lip service). Wall Street saw the crisis from their terminals, but even NY didn't decline as much as one might have expected (yet). So we have this 2 year bull market courtesy of the Fed, and all is good, right? But work this year has been harder to come by since 2008, which was abysmal.

Thu, 08/18/2011 - 07:59 | 1571964 DarkStarDog
DarkStarDog's picture

They cant mingle with peasants, it's way too dangerous.

Thu, 08/18/2011 - 07:31 | 1571882 DogSlime
DogSlime's picture

No-one could have foreseen this...

Thu, 08/18/2011 - 07:31 | 1571883 ZackLo
ZackLo's picture

Ah so after blowing up their rates desk blow up ,now they just had their long equity positions blow up in the last couple weeks too?!?!? the house of morgan has lost it's touch for sure...so when do they file chapter 11?

Thu, 08/18/2011 - 08:19 | 1572030 Pay Day Today
Pay Day Today's picture

When silver flies up to $100.

Thu, 08/18/2011 - 07:50 | 1571915 bigdumbnugly
bigdumbnugly's picture

if MS is two weeks behind the curve as you state here, and at the rate of this market's schizophrenia, ironically it won't be long until they accidentally become cutting edge again.

Thu, 08/18/2011 - 07:44 | 1571919 j0nx
j0nx's picture

Like weathermen, financial 'experting' are the only two professions where you can be incredibly wrong in your predictions and yet still get to keep your job somehow.

Thu, 08/18/2011 - 08:12 | 1572009 WonderDawg
WonderDawg's picture

And now that the weathermen have gotten their shit together, it's only the financial experts that can be incredibly wrong and still keep their jobs. The weather forecasts are pretty damn accurate these days.

Thu, 08/18/2011 - 10:37 | 1572906 Temporalist
Temporalist's picture

You both forgot Politicians who can not only be wrong but blatantly lie.

Thu, 08/18/2011 - 08:01 | 1571970 DarkStarDog
DarkStarDog's picture

I bet the data feeds get all funked up today.

Thu, 08/18/2011 - 08:12 | 1572007 somethingelse
somethingelse's picture

On a long enough timeline....even Morgan Stanley comes around to a more ZH point of view

Thu, 08/18/2011 - 08:25 | 1572050 firstdivision
firstdivision's picture

So in summary, MS is saying "whaa! We need QE3 or our bonuses will suffer".

Thu, 08/18/2011 - 08:57 | 1572163 Downtoolong
Downtoolong's picture

We Are Capitulating

Oh, the vernacular of Wall Street.

I know that love means never having to say you’re sorry. What emotional state means never having to say I WAS WRONG?

Thu, 08/18/2011 - 09:15 | 1572291 oogs66
oogs66's picture

cramer just threw them under the bus for adding fuel to the fire...how stupid is that?  at least they are trying to admit they were wrong

Thu, 08/18/2011 - 13:21 | 1573707 dotrodfag1961
dotrodfag1961's picture

Morgan Stanley Smith Barney - We put the COUNTER in "counterintuitive." 

Sat, 01/21/2012 - 01:33 | 2083465 jaffa
jaffa's picture

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