I bought 2,000 SRS @ $53.40
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Joined Nov 10, 2007
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I like a man that puts his hedge (against overall bias) position on first.
ok then..guess your not Jake LaMotta after all..as you were the raging fucking bull yesterday…what about FAZ then too mate?
Ssshhh GS daily:
We expect world GDP growth of -1.3% in 2009 vs. consensus view of -0.6%.
If we are correct, the market will have to “catch-down” with our view…
… which is something that suggests more headwinds for markets.
But perhaps our forecasts are too low?
Certainly, there have been some encouraging signs that global demand is stabilizing.
Is this a blip or the start of something more sustainable?
Unfortunately, the answer is somewhere in between.
It does seem that the global downdraft might be abating…
…but we also do not see a strong cyclical upswing.
1. GS vs consensus on world GDP growth
With US equities advancing further yesterday despite continued weak signals from the jobs market we take this opportunity to look at our world GDP forecasts.
As things stand, we are currently more bearish than the consensus on world GDP growth this year. Our forecast of -1.3% compares to the consensus view of -0.6%.
This suggests markets have some way to go to adjust to the economic reality we foresee. Historically equity markets have tended to underperform whenever consensus GDP growth views have been revised down over the prior year. Indeed, holding equities only when the consensus GDP forecast has bottomed and started to trend higher has been a much more profitable strategy.
An alternative view is that we have cut our world GDP growth forecasts by too much. At the start of this year we were forecasting world GDP growth of +0.2% in 2009, compared to our current view of -1.3%. Within this overall aggregate we have kept our 6% GDP growth forecast for China unchanged.
Comparing our current world numbers to what we showed in January, we have made steep downward revisions to average world growth in H1 from -0.4% to -1.9%, a reduction of 150bp. Interestingly we have made a similar cut to H2 world growth expectations from +0.65% down to -0.9%.
Much of the downward revisions to our 2009 growth expectations have been centred on Q1 GDP growth, where on an annualised basis the US has been cut from -3% to -7%, Euroland from -2.4% to -7.6% (with Germany cut to -11.5%) and Japan from -5.2% to -10.9%. The most recent data from Consensus Economics suggests that the market is more sanguine for the US and Germany, with a mean forecast of -5.5% and -4% annualised respectively, though is broadly in line with our view on Japan.
Overall, the changes we have made have left us somewhat below consensus for Euroland growth this year (-3.6% vs -2.6% consensus), less so for the US (-3.2% vs. -2.8% consensus) and only little under for Japan (-6.1% vs. -5.8% consensus). These adjustments broadly account for our more bearish stance on the world economy, particularly considering we are also below the market view on China (-6% vs -7% consensus)
2. The world “feels” better as we approach the cycle trough
On balance, we continue to expect to see the trough in the current world cycle being reached in the middle of this year. But unlike a few months ago when we argued that the risks on global growth prospects were firmly skewed to the downside, we are seeing reasons to be a bit more optimistic.
Indeed, in a recent Global Economics Weekly, we listed a number of factors that could “go right” and provide upside surprises in the world economy. These included signs of US consumer strength, earlier stabilisation in US and UK housing markets, a reacceleration in China’s economy on the back of significant fiscal stimulus and more effective policy action to resolve continued banking sector issues. We concluded that all of these are potential sources of upside surprises to our global views.
Moreover, there have recently been indications from several areas in the financial markets that investor sentiment about global economic activity is beginning to improve. In particular, share prices in the cyclical sectors of the major stockmarkets are enjoying a bounce and some metal prices have recovered from their recent lows.
A key question for the markets is whether this is merely a blip which will be quickly reversed, or whether it is the start of a more meaningful trend towards stronger economic activity.
Unfortunately the answer lies somewhere in between. We do not think that the world economy has yet embarked on a sustainable upswing in demand. But we do think that the recent better activity indicators might suggest that the first quarter was likely the low point in global growth and that our current world GDP views are subject to more upside risks and that growth will improve – albeit in an anaemic fashion – later this year.
3. Reasons for optimism
In a Global Markets Daily at the end of last year, we suggested that prospects for global activity over the next year could depend in part on the interaction between business and consumer confidence (see “A Confidence Crisis”, December 4, 2009).
At the time, we suggested that business confidence will lead consumer confidence as it would trigger employers cutting back on investment spending, production and employment, leading to higher unemployment and reduced consumer confidence.
As such the recent signs of stabilization in global business confidence data are encouraging. While we recognize these signs of stabilization are tentative, with the drag from inventories looking set to diminish in coming months, business confidence surveys could possibly show further improvement.
Our latest FX Monthly Analyst describes latest developments in global business surveys, making the point that the BRIC and CEE countries are showing the clearest signs of a cyclical recovery though surveys in many of the major advanced economies also appear to have troughed.
This week has also brought further good news in the form of a stronger Belgium manufacturing survey and firmer manufacturing and services Euroland PMIs. The US durable goods report was also stronger than expected in February, despite the downward revisions to the previous month.
Of course, many of these business surveys are captured in our Global Leading Indicator (GLI), which on a monthly momentum basis improved for the third consecutive month – we will get the final GLI for March after the ISM print next week.
4. Reasons for caution
However, we would not push this optimism too far, since the key reasons for expecting the global growth to remain sluggish on a 12-month view remain intact. These include the following:
Business conditions in global manufacturing sectors continue to point to a slowdown in capital spending as the year progresses. Our latest forecasts show capital expenditure in the advanced economies falling at an annual rate of 8% in 2009H1, and then declining at an annual rate of 12% in H2.
Bank lending will remain tight for some time. The unprecedented policy interventions that have taken place over the last few months have led to relaxation of stresses from the very extreme levels of last autumn, but conditions remain far from “normal”. A renewed narrowing of funding spreads and the still heightened concern about the creditworthiness of key financial institutions still have the potential to upset business and consumer confidence.
Policy measures have yet to gain real traction. In this week’s Global Economics Weekly, Dominic Wilson and Alex Kelston introduce a composite private borrowing rate (PBR) for the US and UK as a gauge on how successful central banks are at lowering real borrowing conditions. For the US, it is clear that more easing still looks necessary to lower private borrowing rates.
5. Is the world outlook improving?
Possibly. Global growth indicators have improved in recent weeks, removing the bearish bias in our assessment of the balance of risks in our forecast. We think this could go further during the first half of this year, owing to a number of factors including the rising need for global industry to restock at some point.
It is possible that as a result of this we may at some point need to upgrade our calendar year forecast for world growth in 2009. Market sentiment may also become more positive towards growth prospects as this process continues.
However, we do not think that the world economy is set for a sharp cyclical upswing. In fact, for the reasons outlined above, we continue to think that the best we can hope for is still sub-trend growth for several quarters to come.
A bold move my friend.
I have been averaging into SRS since last week. lookinf for a nice bounce here soon. If it turns around today with late day market fuckery I will buy more
J– GS is a tarnished entity..they talk their book, how is that $200 Oil call working out…whatever any i bankers say is complete horse shit..rather let my dog pick stocks.
“Blip”? It is not a blip – over 20% advance in 3 weeks is STRENGTH. The home builders have moved like 50%. If this is a record BEAR, then why not record rallies? Why not a 30 to 40% rally?
WFC rocking here now
Have a little patience on the SRS – when was the last time we closed red on a Friday? SRS entry point is $48, and get ready to re-load at $42 is this rally holds a bit. $53? I’m disappointed, Fly.
Fly,
At what point would you be willing to take a loss on that SRS position. If it went to $45?
Cash & guns
It’s very likely they’re wrong in their estimate. It doesn’t matter though as you want to see the direction.. the trend these dudes are heading in. That’s what is important. Now if the most bearish house in the street is thinking about upgrading their forecast you have to listen to them especially if it is GS as they are listened to in the street. Love them or hate them they do have a considerable following.
Get to learn how to use information correctly, Guns and cash, you hillbilly. It’s not the absolute stuff their talking about that is important, it’s the direction they’re skewing towards.
If it’s a hedge okay.
But it’s yesterday’s news.
Buy homies, regional banks through KRE etf.
As I said the other day bank problems are 80-85% over.
Look back at 1982 when the unemployment continued to climb for months while the market went up 60% beginning in Aug. By the time employment turned around the big market gains were done.
That’s right, TC. Employment stats are a lagging indicator and the market will overlook bad numbers for the next few months.
Guns and Hookers
This is what I’m talking about… this shit is important. add it to what the fed has been doing and you ignore this stuff at your peril.
As Washington labors to revive the economy, a consumer sentiment index rose in late March to 57.3 from 56.3 in February, according to a survey released Friday by the University of Michigan and Reuters.
“you have to listen to them especially if it is GS as they are listened to in the street. Love them or hate them they do have a considerable following.”
Bullshit. They spew bullshit to get the heard started then they take the other side of the trade.
I bet that when they came out with their bullshit $200 oil call, their traders shorted oil right after the crowd began to go long on their call.
j- the game is rigged, when will you understand this
When was the last time that any of these idiots, the so called economist, on CNBC had the right forecast. Kudlow is the biggest idiot on earth. Yes spending was up a little because people are receiving their tax refunds and spending it like idiots instead of paying off debt.
Moe:
Did you work at any of the I-banks?
You see the shit being published when it comes out for everybody. Perhaps GS guys get theirs sooner.
You don’t realize the contempt the traders have for the analysts. As far as traders are concerned analysts are worth even less than dog turd.
The whole GS thesis rests on accuracy and no downward surprise in BRIC growth rates – China drops below 6% and GS worst case scenario, whatever that is, will come into play.
J…suggesting I am a “hillbilly” is comical..thanks for the chuckle…sure the street listens to GS..but why…cause they are percieved to be the best, when in reality they are the creme de la creme of Pond Scum
hillbilly was a term of endearment, Cash. No offense. Some of my best friends are rednecks… even in Australia where I now live.
they may very well be pond scum. However if the most bearish scum in the sewer is thinking about upgrading it means the other turkeys could be too. As I said the direction of these fuckers can count.
In the final analysis, why argue with me. Don’t like it, don’t fucking read the crap.
You red neck 🙂
J- cogent comments for the most..no offfense taken..Australia is quite nice, at least when i was there 6 yrs ago…Philippines will be where i expatriate to someday. Direction is the key..no doubt thanks for the read.
“Hillybilly” is a term of endearment coming from an Oz-mandian.
Whole damn country is 100% hillbilly.
No shit, read Jim Webb’s book.
___________
Thx fly but you’re a little late to the party. Been doin’ the ol’ in-out with SRS for a while now. Recently bought it at 51.5, sold at 56.8. Today bought at 52.25. You shoulda waited a bit instead o’ overpaying, CHUCKLES(referencing Jeff Goldblum/Fly arm wrestling-over-a-skank bar scene).