Posted on 09/28/2010 10:27:50 AM PDT by blam
Goldman Releases Most Bearish 2011 Outlook Presentation Yet, Sees S&P In 725-800 Range In QE2 Case
Submitted by Tyler Durden
09/28/2010 10:20 -0500
Gross Domestic Product
Goldman's Investment Strategy Group has just circulated the most bearish 2011 outlook presentation, detailing why the US economy in 2011 will likely stall and post negative growth. As the chart below demonstrates, the current case, where ongoing QE will likely persist through 2011 and even into 2012, and thus make any discussion of raising rates irrelevant (likely forever, as the Fed will not be able to absorb all the excess slack before it is forcefully removed after 2-3 sequential dollar devaluations) lead Goldman to a GDP expectation of well under half of the Fed's greenshooty outlook of 3%.
Here is how Goldman describes the its across the board outlook revision:
* Lower growth: We expect GDP to grow 1.5-2.5% in 2011 (down from 2.5-3.0%). Our view is that the growth baton will be passed successfully from inventories and government spending to consumption and investment so growth should remain positive over the next 12-18 months.
* Higher uncertainty: Our forecast range for GDP is wider (1% instead of 0.5%) at 1.5-2.5%
* Lower rates: We are lowering our long-term rates forecast to 3.0-3.75% by end 2011 (from 3.75-4.25%).
And according to the "Bad Case" which the Fed is about to enact, Goldman sees a fundamental S&P valuation range of 725-800 based on 10-11x multiples:
It is all about to get very interesting.
Your headline featured the worst case scenario. Their Central case isn’t all that bad.
Blam! Check out my thread, from Denninger’s website, and tell me if my panic is unreasonable?
Since Goldman rat-holed billions in our tax dollars - I don’t see them having any problems.
Their predictive skill hasn’t been good of late, so most all their cases are suspect. eg, GS had to reverse their predictions about the Euro and Euro-zone growth only this past June - a complete about-face.
If the Fed is considering a QE2, then the Fed’s economists see trouble ahead, and the GS central case doesn’t justify a QE2. The central case is basically saying “where we are right now is where we’re going to be...”
Yet the leading indicators are pointing downhill - the Richmond Fed release this AM, coupled with consumer confidence, show that where we are now is going to be increasingly difficult to maintain.
So there’s wide divergence of the models, to say the least. The SP500 valuation they lay out in the central case is also rather rich in valuation for the GDP growth they’re laying out in the central case, which points to another flaw in their modeling.
I can't find what you're talking about. Please provide a link.
Sorry, Blam. My thread was right below yours when I posted to yours, and I assumed....
http://www.freerepublic.com/focus/f-news/2597789/posts
I think you are seeing a lot of articles written by people who are getting crushed because a few months ago they were all predicting a crash in September, and people didn’t listen to them and now they are having to cover their short positions.
Remember, September is generally a bad month, so they probably thought it was an easy bet, and their pronouncements during the summer would simply help push the market down.
Now, they seem desparate to scare the bejeebers out of people in the hopes they can get the market lower long enough to unwind.
It could be they simply didn’t count on the republicans winning the fall election, which is a bullish sign.
Or, they could be right, but their timing was off.
Goldman’s central projection isn’t bad, so I think these people have to write about their worst-case scenario in order to scare the markets.
Apparently, Rush Limbaugh has been swayed by a couple of these people today, I’m surprised because he’s pretty savvy when it comes to money, but with him it could a purely political, as a way to deflate those who claim an up market is good for the democrats.
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