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Goldman's Top Economists Just Answered The Most Important Questions For 2014 — And Boy Are His Answers Bullish
Goldman's Top Economists Just Answered The Most Important Questions For 2014 — And Boy Are His Answers Bullish
Joe Weisenthal
11 comments:
The only slight problem is that Goldman Sachs has a long history of pumping stocks, house prices, commodities or whatever, with a view to getting suckers to invest in same, meanwhile Goldman bets on the relevant prices collapsing.
I think Hatzius is Monetary Realisms very own JKH.
Greg,
I'm pretty certain JKH is retired.
"there's going to be very little fiscal drag."
Oh really?
y,
JKH is Canadian I believe...
Dan,
We are currently 40b behind last year in net fiscal spending... all from October shutdown... so this is 'water over the dam' this quarter...
What we dont yet know is what the impact this 40b hit in leading flow (with a multiplier) is going to do to earnings this quarter...
I dont subscribe to any service all I get right now is FactSet's free email service...
here is an excerpt from their latest:
The Q4 2013 estimated earnings growth rate for the S&P 500 is 6.3%
Dec 27, 2013
The Q4 2013 estimated earnings growth rate for the S&P 500 is 6.3%. The Financials sector is projected to have the highest earnings growth rate for the quarter, while the Energy sector is projected to have the lowest earnings growth rate for the quarter. On September 30, the earnings growth rate for Q4 2013 was 9.6%. All ten sectors have recorded decreases in earnings growth rates over this time frame, led by the Energy sector.
For Q4 2013, 94 companies have issued negative EPS guidance and 13 companies have issued positive EPS guidance. The current 12-month forward P/E ratio is 15.4. This P/E ratio is based on Thursday’s closing price of 1842.02 and forward 12-month EPS estimate of $119.66.
Of the 19 companies that have reported earnings to date for Q4 2013, 63% have reported earnings above the mean estimate and 58% have reported sales above the mean estimate.
So only 107 firms have issued any guidance (Sarbanes-Oxley) and these are averaging saying a 6.3% earnings growth down from over 9% as of Sept 30th... so trend is down in earnings growth... revenues are predicted about flat YoY for Q4 by this same FactSet outfit...
I'm seeing what I view as conflicting reports about this holiday retail season... here is a mixed one:
http://www.cnbc.com/id/101297087
So we are going to have to see what the firms end up doing in Q4 in the face of the October shutdown... And then how that gets priced in by the market participants...
Seems like the 'hot money' people are trading off of the "taper talk" and what soap-opera circus whirls around today's Fed operations which is run by morons who can add up numbers... but eventually the way I look at it, the fundamental issues of revenues/earnings have to win out and these look to be: flat on revenues and mid single digit positive and down trending on the earnings...
I'd have to think if the SPs end up reporting an unexpected fall in earnings YoY this will have short term negative repercussions in the equities...
So to summarize, FactSet has 107 firms out of the 500 predicting a 6.3% growth... IF IF IF, the other 393 firms end up reporting numbers that result in a net down YoY in earnings for the 500, then I do not think this is currently priced in the market... ie this will "blind side" the market in early 2014... then we have to look at the fiscal trends for clues going forward from there...
rsp,
The very large deficits over the past few years and the subsequent private sector re-leveraging, should result in robust growth ahead, if MMT is to be believed. If you count population growth, a couple percent inflation, and a couple percent real growth, we get back to that 5% growth rate pretty quickly even if on going fiscal is only meeting savings demands and providing little excess. I've no clue why Mosler remains so pessimistic and thinks zero-percent growth, he bangs on endlessly, chart after chart, but population growth and immigration alone will create more growth than the 'new normal' growth he seem to think should exist.
Anyhow World labor is becoming less cheap. From Africa to Latin America and through out Asia billions of people no longer work for only a couple dollars a day. We aren't out of impossibly cheap labor yet, there are still alot of poor people, but we are nearer the end of the cheap labor period than the beginning. The highly subsidized US minimum wage worker looks fairly cheap compared to much of the developing world now.
Ryan,
Warren looks at 'the deficit' and his current thinking is that 'govt has let it get too low'...
Like he said in a post the other day:
"But the bottom line is the federal deficit (the ‘allowance’ the economy gets from Uncle Sam) is likely to fall to under $500 billion in 2014, after falling from just under $1 trillion in 2012 to just over 600 billion in 2013. And worse, the automatic stabilizers are extremely aggressive this time around, where 2% growth cuts the deficit maybe by as much as 4% growth cut it in past cycles."
So if you gave your child an 'allowance' of $100 per month, and the child went out and spent $80 on video games, mall food court and movie tickets and taxes, and kept $20...Warren looks at it as though your child's 'allowance' was only $20, which is bad for gdp, meanwhile you gave the child $100.
And then if the child knew that he/she would be for sure getting another $100 on the first of the next month and they didnt keep any and spent the entire $100 on the goods/services they like and taxes, it would be like you didnt give them any 'allowance' at all and this would be bad for gdp although more was actually spent.
So this is hard for me to understand...
I'm with Bill Mitchell on this issue, where Bill (usually) says:
"the deficit is irrelevant and they should be talking about the extra spending and jobs that are required. The deficit will be whatever it is – a win-win – the nation reduces unemployment and at the same time rids itself of a major neurosis (worrying about irrelevant sets of numbers)."
So Mike and I follow the actual govt topline spending in this environment (the 'topline allowance' that is paid out before the gdp components are added up ex post on C or S or T) which YoY in 2013 was up (albeit very little amount) and like you point out, via just certain real factors we should be able to get lower single digit growth in gdp out of it...
Here is the 'uses' or whatever gdp equation:
gdp = C + S + T
So if the govt net spends more $ from year 1 to year 2 on direct govt C and xfers, and C ends up increasing and the other two terms break even or flip flop back and forth, gdp can be seen to have gone up...
But that doesnt get anybody back to work necessarily which is also a point Warren often makes ie "good for stocks, bad for people", etc...
rsp,
Net exports, in financial terms (opposite of real) have improved by ~$20-25 bln per month since the GFC. That allows for higher levels of activity with less government re-injection to offset dollars leaked into Asian/European central banks.
Right Ryan that is another real factor that can lead to an increase in GDP from one time period to the next...
BTW just saw this wrt China:
http://latestnews.thefiscaltimes.com/2013/12/27/china-formally-eases-one-child-policy-abolishes-labor-camps/?utm_source=rss&utm_medium=rss&utm_campaign=china-formally-eases-one-child-policy-abolishes-labor-camps
"SHANGHAI (Reuters) – China formally approved on Saturday easing its decades-long one-child policy and the abolition of a controversial labor camp system, the official Xinhua news agency reported."
Looks like more domestic consumption coming China's way... and perhaps a bit less focus on exports... helps the US as far as domestic production a bit too I'd think longer term...
rsp,
You may be right y, I just remember one time in a thread a year or so ago I suggested that JKH might be Hatzius and he didn't deny it!
As part of the Plunge Protection Team, they may also be privy to some things we're not allowed to know.
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