Goldman Predicts Recession
Submitted by
CalculatedRisk on Wed, 01/09/2008 - 11:43am (82 comments)
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Goldman is official short folks....look out below.
Who bought short shorts
Goldman bought short shorts
In all seriousness I wonder how Paulson feels about GS releasing this statement?
Finally, troothsayerz....
a recession contained to the economy.....
frist?
Question - Merrill and the other that called the R word so far are supposedly the more bearish IB houses. Where does GS usually fall? I thought they were pretty mainstream. Of course, that changed the past few years since mostly they've been putting out economic calls that are market movers and then trading off their own calls. Nice work if you can get it.
I like how the US has to already be in a recession before any of the mainstream economists can forecast it. Roubini excepted.
Hmmm a 6 mo. to 9 mo. old epiphany from these overrated asshats and their brethren.
Yeah. I always thought that when Goldman Sachs said that the credit squeeze would cause a "substantial recession" what they meant was that they saw a recession coming.
Was that an "unofficial" remark?
Does GS have a Conjure Bag too?
Thanks for the sample newsletter. Roubini is doing the same on his site. I guess I don't need the Money Honey and Crazy Cramer any longer...
OK, so economists are starting to realize that it's already here. Now if we could just convince the optimists among us. The corporate earnings bubble is about to pop loudly.
Goldman is official short folks....look out below.
Just remember... the biggest rallies occur in bear markets.
That's probably the only time you'll get to see the DOW put on 2500 points in 3 weeks.
With the amount of short interest out there we could set some new records.
Better late thsn never.
And all the pundits said Obama would win in a landslide. People believe the predictions that fit with their preconceptions.
Sorry, but I wouldn't give a nickel for ANY predictions.
Levy at Bofa says "Not"
What is Goldman's prediction for the 2007 world Series?
Of course the difference is GS is allowed to bet and hedge its bets and be the bookie and charge vig on all the transactions.
Just bot 4500 CFC just under $5
i deserve to lose it all
"What is Goldman's prediction for the 2007 world Series?"
Didn't they broker the deal for A-Rod to stay with the Yankees?
"Just bot 4500 CFC just under $5" Are tanning privledges included?
What the hell is happeing with the Dow now?
ac, I have wondered if the US equities market has already taken much of its beating via currency valuation. Do you have any opinion on whether there's any validity to that?
I know there's a strong arguement that a deflated currency makes for attractive assets to overseas buyers, but at the same time the slowdown/recession being priced in is denominated in the same currency.
Thanks for any reply.
didn't abby joseph cohen just predict dow 14k by the end of the year while dismissing the previous failed 2007 prediction, saying it was old news? didn't goldman warn people off of gold mid december when it was 10% lower than it is now, saying that rally was over?
I'm telling you: nobody knows nothin!
Fed announced yesterday that Credit Card Debt was up at an annual rate of 11.25 percent in November. And to think Nov. retail sales weren't even very good.
I guess without MEW the consumer has finally turned to the last option available. I think the consumer is on the ropes and will be KO'ed by next quarter. Recession indeed.
FRB: G.19 Release--Consumer Credit--November 6, 2009
What the hell is happeing with the Dow now?
Dunno, short covering? Nobody short this market wants to hold overnight with Bernanke scheduled to open his yap tomorrow.
I'm guessing a short covering rally. The shorts may be nervous that BB is going to say something that will magically fix the problem tomorrow.
I'm not good enough to play these swings.
But, it may be time to start bottom fishing financials. They usually bottom once everybody wakes up and realizes there is a recession. The hard part is sorting the sheep from the goats.
This falls under the Homer Simpson Syndrome...
Well Duh! or Doh!
This would be the best anticipated and announced recession in US history. That alone would make me very cautious. When everyone and their banker is calling for one, it has the same value as the NAR calling for a permanent RE boom. Neither one has happened.
Well, we'll have to wait what happens this January and early February with the FED and Treasury. They can still realitively easily avoid it. I bet they will. This will shortly set us up for the stock buying opportunity of a lifetime.
O-Joe
ac, I have wondered if the US equities market has already taken much of its beating via currency valuation. Do you have any opinion on whether there's any validity to that?
I know there's a strong arguement that a deflated currency makes for attractive assets to overseas buyers, but at the same time the slowdown/recession being priced in is denominated in the same currency.
Well, US corporate earnings are dollar based, so when you pay for a US stock you are paying for a claim on earnings that are in dollars.
The problem with the strong exports argument is that despite the recent growth, reported earnings were down in Q3 from a year ago (see this link).
That seems to suggest that strong exports aren't helping much. Until I see the weak dollar boosting the earnings of public US companies I'm going to be very skeptical of the argument.
This would be the best anticipated and announced recession in US history.
It wouldn't be "anticipated" if we've been in a recession since November.
OT - WCI is having a day that makes CFC's look like a day at the beach by comparison. Down 55% ... trading below $2. The catalyst appears to be Standard and Poor's throwing them under the bus:
<a href="http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b66D50AA7-F403-4BB5-ADA7-95B7C9D4BEEB%7d&siteid=yhoo&dist=yhoo>Roadkill
We may not have to wait very long for the next public builder bankruptcy ... remind me who had WCI in the pool?
It wouldn't be "anticipated" if we've been in a recession since November.
Kicker
Why do I hear such a statement in this blog every quarter before the GDP number get published? Last time I heard this in a 4.9% GDP growth quarter.
O-Joe
Rumors about CFC, DSL, and FED are flying fast and furious, as are unannounced rate cut rumors.
Turned out to be a good day on Wallstreet... well unless you own WCI.
Good gravy, I'm in near-total agreement with an O-Joe post! Someone get out the paddles and shock me back to my senses, stat!
One minor difference, though: in place of Joe's "avoid" I'd substitute "postpone".
Gary Halbert's newsletter at Investors' Insight this week shares the Bank Credit Analysts' (BCA) 2008 outlook, which is well worth reading (their long-term track record on both the economy and stock markets has been phenomenal).
Broadly paraphrased: they see a 40% or less chance of recession in '08; a sideways market in the first half of this year followed by a "melt-up" on the back of a recovering economy, lasting through 2009; and when the recession does arrive, around 2010, it's gonna be a doozy.
As these types of educated guesses go, it makes sense. I'm not sold on it, but I'm not sold on the belief that we went from ~5% growth in Q3 to a recession in Q4, either. It's far from making me jump back into stocks, though; I still think we'll be significantly lower in the markets 3-6 months from now than today.
The real question will be: will that represent one last great buying opportunity, or one last good chance to save one's skin?
What the hell is happeing with the Dow now?
Please go and look at some charts of the markets in 2000-2002 to see what the we may be in for. Huge rallies should surprise no one when you have a declining market dominated by speculators.
"bottom fishing financials"
any ideas as to which ones are likely to sail through this relatively unscathed?
lama,
paying attention to currencies' impact on stocks is a waste of time.
focus on earnings.
The environment has turned from a huge tailwind for earnings in early 2007 to a huge headwind in 2008. This wind shift affects all U.S. companies, from Microsoft all the way down to WCI.
That's 90% of what you need to know to do well in stocks this year.
Broadly paraphrased: they see a 40% or less chance of recession in '08; a sideways market in the first half of this year followed by a "melt-up" on the back of a recovering economy, lasting through 2009; and when the recession does arrive, around 2010, it's gonna be a doozy.
Mook: "postponed" is always better in recession-prediction than "avoid" as there will always be a next one. I agree. I have not yet spent too much time on when the next real one will hit, but it will be for sure in the 2010-13 time frame. There will be no bear market beforehand either, rather the complete opposite. February 2007 until late 2009 are extremely bullish in my book.
So the timing is: make big bucks in stocks now and then buy RE ~late 2009 when homes are nice and cheap again.
O-Joe
As these types of educated guesses go, it makes sense. I'm not sold on it, but I'm not sold on the belief that we went from ~5% growth in Q3 to a recession in Q4, either
It comes down to consumer spending...
There isn't any other sector of the economy large enough to keep the economy growing if consumers pull back.
O-Joe -
This is the best anticipated recession?
You must have not been around in 1990.
There was a tremendous amount of recession chatter early that year.
Mook,
I won't buy until 2009 when someone new is in the White House and all the dirty laundry is aired. I'm sure there will be attempts to paper over the problems in the 2nd half of this year, but I doubt they'll be successful and I'm not going to try to time that...
central_scrutinizer --
remind me who had WCI in the pool?
Ooo! Ooo! That would be me!
"Put me down for WCI" I said. "You're crazy" you all said.
OK nobody actually said that.
Still a little worried about losing to SPF.
Last time I heard this in a 4.9% GDP growth quarter.
that was Ivestia-quality numbers reporting thanks to the fiddling with the deflator number.
ac/rich,
Thanks. That was more of a mental exercise than anything. I thought of it while shoveling snow just before Christmas. Maybe next time I should just bring my Ipod out with me.
Berksire a new bond insurer?
Warren Buffett's Berkshire May Invest in Bond Insurer (Update4) - Bloomberg.com
Berkshire, oops (burp)
o-joe,
are you joe battipaglia ?
rich: Good to hear from you. I was afraid you might have jumped out the window today.
I really don't understand trying to time the market or the economy. It has a very poor long-term track record. I look for companies that have real breakthrough opportunities; not some bogus financial shenanigans, but real products with sound science behind them. I started buying one such in 2002 under $ 2; it just passed $ 25 today.
They aren't a dime a dozen, but they are out there. And in addition you profit from something that actually does good, like improving treatment for debilitating diseases.
Good luck to all
Nemo you are lookin' good. SPF is trading at $2.63 with a market cap of $191 million, vs. WCI @$1.50 with a market cap of $63 million. BZH @ $4.99 still a distant third.
Perhaps we should all pool our money together and buy WCI, heck 63 million is chump change. Think of all the granite, copper and cement we could salvage for scrap and sell on the commodities markets ...
Posted by Ebo on 03-16-05 02:03 PM:
Joey BAG-O-DONUTS has been a perma-bull for 10 years.
That guy is another bag of wind.
Where's Seth Tobias when you need him to run ahead of your orders?
Seth is dead...
just a prediction, but i think the lifespan of your avg 2/20 guy has been reduced significantly
Sebastian, how is that little Write Model B coming along?
(Models work, until they don't work ...)
Nemo,
(arms waving wildly..) I have SPF, best of luck to you sir, and may the best doomer win...
Write Model B -> Wright Model B ...
Ill bet it feels like a recession if you walk around cubicles at GS.
I think I just figured out why we have elections every four years. It is not about the term limit, it is about these asshats not ever being responsible for all the carnage they
cause.
didn't abby joseph cohen just predict dow 14k by the end of the year while dismissing the previous failed 2007 prediction,
Flabby Cone is a nonsense peddler and she make a pretty penny doing it.
"SIVs Must Refinance $70 Billion This Year, Merrill Lynch Says
By Neil Unmack
Jan. 9 (Bloomberg) -- Structured investment vehicles have $70 billion of medium-term debt maturing this year, according to Merrill Lynch & Co. analysts.
Dresdner Bank AG's K2 Corp., Bank of Montreal's Links Finance Corp. and nine other SIVs have to repay $21 billion of medium-term notes before April, Merrill analysts wrote in research dated yesterday. The figures are based on SIVs that haven't been bailed out by banks."
SIVs Must Refinance $70 Billion This Year, Merrill Lynch Says - Bloomberg.com
Well, looks like another shoes about to fall. Anyone want to buy some medium term notes from a SeIVe? Oh yeah, at the rates they were paying when first issued? Because otherwise, these turkeys are gonna roast.
Cheers,
I predict that all those who predict will be unable to predict. That's my prediction.
Maybe equities jumped because Paulson whispered to his buddies at GS that there will be a surprise rate cut tomorrow.
Doug Kass says fed is cutting "momentarily"
Kass: Fed Is Cutting Soon | Financial Advisor Update | Financial Articles & Investing News | TheStreet.com
But it's a prediction, so who knows?
Ahead,
It's not a prediction, it's a rumor.
I predict the rumor may or may not be correct.
I also have a theory. Brontasauri were very small at the front end, much, much bigger in the middle, and very small at the back end.
Cheers,
Cheers to you Misean. By the way, they're having a heat wave in Saskatoon; its 7 deg F today.
"This would be the best anticipated and announced recession in US history. That alone would make me very cautious."
O-Joe you are right, a recession isn't coming. So once again contrarian theory holds and the herd is wrong at key inflection points. A depression is coming.
aotc - heh! nice prediction
mise - apatosauri my friend
other OT: The slow downward/upward grind of ABX/CMBX resulted in 4/8 new lows/highs today.
Glad someone brought up Abbey Cohen and her horrible track record!
Americas inflated asset prices must fall
By Stephen Roach
The US has been the main culprit behind the destabilising global imbalances of recent years. Americas massive current account deficit absorbs about 75 per cent of the worlds surplus saving. (...)Americas current account deficit is due more to bubbles in asset prices than to a misaligned dollar. A resolution will require more of a correction in asset prices than a further depreciation of the dollar.
FT.com / Comment / Opinion - America’s inflated asset prices must fall
Ah, a recession. That must explain the 200+ point jump on the Dow from the lows to the high close today. Okay, I know there was some technical reason for this (in theory) Fibonacci numbers, or something like that, but I also fully expect the PPT to be involved.
My thoughts:
Actually Joe Batipaglia these days is a bear.....
As far as recession calls go and the contrarian view would be to expect the opposite, that doesn't always work out. Perhaps the contrarian view would be to expect a much deeper recession (depression) than what GS is expecting? I'm sure Abbey isn't expecting a recession, or if she is, it will be 'short and shallow'. That's the next call we'll hear.
Just because Hurricane Katrina was projected to hit NOLA days in advance and everyone expected it, to take the contrarian view and drive TO New Orleans would have been stupid, if not deadly.
"Perhaps the contrarian view would be to expect a much deeper recession (depression) than what GS is expecting?"
Pretty much the same thing I was thinking. We've got to get the word out that the contrarian view would be a depression not a recession and stop the MSM hijacking of the contrarian mantle.
ac
That's exactly what I'm doing. The charts are incredibly parallel. You can download a great Dow/S&P chart and data in Excel at:
Stock Market Momentum Indicator
Go to the bottom of the spreadsheet and click on the different tabs for historic charts, including momentum indicators.
We are now at December 00. If the pattern holds, a brief rally of about 5% will be followed by a monster drop of 20% in Feb. Then, a 15% rally back in the spring.
Of course, if the pattern holds, we'll eventually lose 40% off the high.
The only difference between 00 and now is that things seem to be more time-compressed now.
Sold SRS today at 143+ in mid afternoon and it's already back down to below 130. Geez!
Play the vol on the downside!
In regard to the recession debate, there's one source that I've found that has been consistently right about the developing downturn for more than a year, and that is the consensus (the mean, the median) of opinion on this blog.
It's going to be really bad, worse than GS says. But not ultimate doom.
Soon, the big shoes start dropping like nightmare lows on ABX and CMBX, homebuilder defaults, MBIA and credit default swap defaults. That's probably February.
rich,
I like your idea, maybe the trimmed mean (clip the top and bottom outliers, say 1% each) then take the mean...
This "contrarian theory" nonsense has really gone over-the-top. If something is seen as likely by a majority, they must be wrong...
...um, how about if that thing is merely obvious? I guess it would have been contrarian to go into the market buying in 1930?
People being worried without sufficient cause may be a contrary indicator. People worried about something that is clearly happening are merely showing common sense.
drangonmaster...oh, REALLY? Always did find him hot, and the years have been kind...
O-Joe,
You remind me of all the RE Specs on blogs a few years ago "optomistic" about the state of real estate,..oh well. Guess you can't talk it better.
Fundamentals are fundamentals.
If it looks like shit, and it smells like shit,...it probably is no matter how much you or the government tells us it isn't.
This is just noise and you had better do your homework.
Appreciate your thoughts though!
I repeat... we need O-Joe's bullishness. Who else is going to take the other side of our short trades?
energyecon,
Brontasauri. It's a quote from a Monty Python sketch.
Cheers,
From Wikipedia: Brontosaurus
[snip]
To perfect his find the largest dinosaur ever discovered at the time and nearly complete, lacking only a head, feet, and portions of the tail for what was to be the first ever display of a sauropod skeleton, at Yale's Peabody Museum in 1905, Marsh added some feet he had discovered at the same quarry, a tail fabricated to appear as he believed it should, and what he apparently felt was the "correct" skull for the massive creature: not a delicate Diplodocus-style skull matching what was actually a large Apatosaurus skeleton, but instead a chimaera composed of "the biggest, thickest, strongest skull bones, lower jaws and tooth crowns from three different quarries", primarily those of Camarasaurus. (This "scientific sloppiness" is considered to be symptomatic of undue haste resulting from Marsh's notorious rivalry with Edward Drinker Cope, which would later become known as the "Bone Wars".)
[snip]
British comedy group Monty Python's 1974 season includes a sketch involving a "Miss Anne Elk" whose trivial theory about the Brontosaurus parodied the controversy of the time.
[snip]
mise,
I leave it to your expert devices to provide the obligatory video clip!
rich-Just for fun, let's compare your favourite, SRS, with mine, ELN. Since Feb 1 07, SRS is up 90 %. ELN is up 91 %. Both pretty darn good.
However, ELN was up approximately 500 % from its low in Nov 02, when I began buying it. During that time SRS, had it existed, would have been murdered.
And I'm making my money on a breakthrough treatment for MS, with Crohn's disease awaiting FDA approval this week. Oh, and the best hope at present for a treatment for Alzheimers which entered phase III last month. How much do you think a drug that could keep millions of people out of nursing homes for 3-5 years or even longer would be worth? Might be quite a bit, no?
I'm not saying you're wrong or right on the economy, just that that is only part of the story.
Best of luck to all
Thanks for the information on the 2000 charts. I am anticipating the FED cut for 1/29 and then I will be out on 1/30 or 1/31 depending on the market. I expect the same results with February being down and then an up March and April. After April, look out below as the US starts to really slow and China starts to slow for the August Olympics.