Comments for "Q1 GDP will be Ugly"

Nemo says:

Big Bottom drive me out of my mind

Nemo Fri Mar 27 15:46:50 2009 CDT #

CRbot says:

This comment thread has been HALO-IZED by CRbot.

http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/8661113828062201813

CRbot Fri Mar 27 15:46:55 2009 CDT #

punk in drublic says:

the deflator will be molested until it positive.

Big O is driven this bus now ya herd?

punk in drublic Fri Mar 27 15:49:55 2009 CDT #

iceman says:

To really get a sense of what is going on in the economy, you'd have to add in that Acme was purchased 3 years ago by a private equity firm who leveraged them based on pro forma expectations that, based on "superior management", they could grow at 20% a year.

iceman Fri Mar 27 15:50:08 2009 CDT #

JMG says:

Thank you for that succinct explanation of an important fact.

JMG Fri Mar 27 15:51:43 2009 CDT #

Money Man says:

Shocking...just shocking!

Money Man Fri Mar 27 15:52:34 2009 CDT #

punk in drublic says:

Permagrowth is like morning. To even question it's inevitability is be thought insane. Go ahead and ask your boss what happens if the company shrinks and how is that modeled in this year's and next year's budget.

More drugs, we need more drugs.

punk in drublic Fri Mar 27 15:52:58 2009 CDT #

Jas says:

"Permagrowth is like morning. "

American economists suffer from the growth fetish, quantity over quality of material life. That is one among many reasons why we have so many rogue economists. They are also very bad at forecasting downturns and very good at how to manipulate the economy for artificial and bad growth.

This crisis and the last recovery had evertything to do with bad growth.

Jas

Parent Post

Jas Fri Mar 27 16:24:12 2009 CDT #

ac says:

OT: Krugman on The Failure of a Whole Model of Banking.

I actually agree with a lot of what Krugman says here. Still, what I think he tends to overlook is that this florid financial system was the necessary consequence of growing the economy via monetary policy:

You're not going to create real substantive industry by creating more money. You're going to create fluff illusory industry that transforms inflationary policy into paper illusions of wealth.

No sensible person is going to start a legitimate business in an environment of overcapacity simply because the Fed lowers interest rates.

If you want monetary policy to actually stimulate economic growth you're going to have to rely on nutters and con artists to do it.

This overgrown insane financial industry we got is precisely the type of growth you're going to get from monetary expansion.

The responsible people are always going to sit on the sideline when real economic conditions don't favor further business development.

It's also foolish to expect the government to step in with regulation because that would completely defeat the point of employing monetarist policy to begin with - it would halt the very growth they were trying to create.

ac Fri Mar 27 15:52:59 2009 CDT #

Jas says:

--
"consequence of growing the economy via monetary policyconsequence of growing the economy via monetary policy"

Growing the economy via Pushing Debt. It is true that at times the monetary policy helps with Pushing Debt, but not all the time, e.g., now.

It is the debt, stupid!

Jas

Parent Post

Jas Fri Mar 27 16:10:05 2009 CDT #

Comrade Elmer Fudd says:

don't forget they paid themselves bonuses with the leverage

Comrade Elmer Fudd Fri Mar 27 15:53:58 2009 CDT #

punk in drublic says:

AC all that M3 never left the financial sector. That's why letting it deflate now is far from the end of the world.

But when you have Banker's and their interest so far up the government's ass....well, you know.

punk in drublic Fri Mar 27 15:55:13 2009 CDT #

Bond Girl says:

Morgan Stanley Commentary on Treasury's Public-Private Investment Program
http://www.morganstanley.com/views/gef/index.html#anchor7619

The Treasury’s Public-Private Investment Program (PPIP) is a constructive step forward to repair the financial system. It employs government subsidies, leverage and liquidity to restart markets for legacy securities and promote price discovery for both mark-to-market and accrual assets. In particular, we believe that the Legacy Securities Plan is promising and should help the securitization process. It uses the attractive TALF structure to provide leveraged financing for a broad array of collateral, and many of those assets are marked closer to their book or intrinsic value.

However, the PPIP is not a game-changer, in our view. In contrast with the securities program, the loan program is less likely to succeed. The gap between bank marks on these distressed assets and their economic value appears too wide to be bridged even by attractive leverage and FDIC-guaranteed financing. Moreover, while it is ambitious in scope, the plan lacks the scale needed to clean up balance sheets of leveraged lenders under any realistic stress scenario. And while the plan is scalable in theory, in practice officials aren’t likely to persuade Congress to authorize adequate funding.

Bond Girl Fri Mar 27 15:56:39 2009 CDT #

Calculated Risk says:

iceman, true. However, just like all homeowners didn't participate in the madness, not all companies were LBO'd, PE'd or whatever we are calling excessive leverage these days. For the overleveraged companies, it looks like many will have new owners soon - the people previously called "bondholders"

best wishes

Calculated Risk Fri Mar 27 15:57:43 2009 CDT #

punk in drublic says:

Bond girl picks the best of the bond girls for the avatar.....Honey from Dr. No.

punk in drublic Fri Mar 27 16:01:15 2009 CDT #

notional billionaire says:

- true story. My hormones surge like I was fifteen years old again every time I see it.(Is that too much information?)

Parent Post

notional billionaire Fri Mar 27 18:27:26 2009 CDT #

Jas says:

--
2008Q4 was Cliff Diving. So ugly would do for 2009Q1. The important development for Q2 would be deflation.

Jas

Jas Fri Mar 27 16:07:10 2009 CDT #

awgee says:

Has the Q4 2008 revision been released yet?

awgee Fri Mar 27 16:07:49 2009 CDT #

EvilHenryPaulson says:

I dislike banks labelling market prices for mortgage derived securities as price at distressed levels. They are distressed assets priced at market levels. Better yet, permanently impaired assets priced at permanently impaired asset levels.

CR, make story-time a regular feature. nice break from the ordinary

EvilHenryPaulson Fri Mar 27 16:08:11 2009 CDT #

reptillian says:

OT: Evil Knievel Formation on the DOW

reptillian Fri Mar 27 16:08:47 2009 CDT #

Baca says:

This should really get the bulls excited to drive the market up - GDP can't get any worse, or can it?

Fleck mentions how INTC filed for a $1billion stock offering. This after buying back stock for several years at prices between $15 and $70. Yep, smart folks running these companies.

Baca Fri Mar 27 16:12:05 2009 CDT #

DCRogers says:

But this is a disaster for companies that manufacturer widget making equipment.

Uh, isn't this code for "German companies"?

Latest I heard out of there, their car-buying stimulus plan is seen as a roaring success, and they're feeling pretty good about themselves... we'll see who's right soon enough.

DCRogers Fri Mar 27 16:13:45 2009 CDT #

Mathias says:

@DCRogers:

True, small new cars are selling very well here right now - but this will not last forever, and don't ask about anything other than small new cars.

The official numbers for the maunfacturing industry in Germany are about as bad as they are for the US, however as someone doing business on both sides of the Atlantic my feeling is that companies in Germany (and some other countries in Europe) are still more ready to spend money than those in the US right now.

But, that may not last, since the nice little model in CR's post shows the direction we are all heading, all around the world.

Parent Post

Mathias Fri Mar 27 16:25:04 2009 CDT #

PrahaPartizan says:

DC, that list of companies would also include a bunch of Japanese firms as well. Given the cliff they've stumbled over, one could declare the analysis offered to be right on the money.

Parent Post

PrahaPartizan Fri Mar 27 18:00:14 2009 CDT #

CRbot says:

CRbot presents, (with apologies in advance to FFDIC), a new feature called:

F'D FDIC: Breaking sounds from the bankerfront...

March 27, 2009 - PR-50-2009 SunTrust Bank, Atlanta, Georgia, Receives the Insured Deposits of Omni National Bank, Atlanta, Georgia


<ul>
<li>March 27, 2009:</li>
</ul>


<a href="pr09049.html" pub_date="2009-03-27">PR-49-2009 FDIC Makes Public February Enforcement Actions; No Administrative Hearings are Scheduled


<ul>
<li>March 26, 2009:</li>
</ul>


<a href="pr09048.html" pub_date="2009-03-26">PR-48-2009 FDIC Seeks Comment on the Recently Announced Legacy Loans Program


<ul>
<li>March 24, 2009:</li>
</ul>


<a href="pr09047.html" pub_date="2009-03-24">PR-47-2009 FDIC Appoints Joseph A. Jiampietro as Senior Advisor to the Chairman for Markets


<ul>
<li>March 20, 2009:</li>
</ul>


<a href="pr09046.html" pub_date="2009-03-20">PR-46-2009 Great Southern Bank, Springfield, Missouri, Assumes All of the Deposits of Teambank, National Association, Paola, Kansas

You're WELCOME, crispy&cole. I very much hope you're satisfied now.

... now hammering FDIC's site more than 12 times faster. I hope YOU'RE very much satisfied now, Wisdom Speaker. Good luck keeping up, mere mortals.

CRbot Fri Mar 27 16:14:05 2009 CDT #

CathyG says:

Does anyone else feel that there's something fishy with the PCE numbers?

Unemployment is up, incomes are down, savings are up so . . . consumption is up?!?!

Makes no sense.

CathyG Fri Mar 27 16:16:01 2009 CDT #

WAWAWA says:

Karl Dinninger has a post on this.

http://market-ticker.denninger.net/

NEW YORK - CNBC says its "Fast Money" host Dylan Ratigan has quit the financial news network.

Under Ratigan, the quick-paced late afternoon program served as a post-game show for the day's Wall Street trading.

His contract is expiring and he's considered a strong candidate for a new job at ABC News. ABC spokesman Jeffrey Schneider wouldn't address those reports but said that ABC thinks the world of Dylan Ratigan.

WAWAWA Fri Mar 27 16:16:37 2009 CDT #

Dead_Monkey_Bounce says:

FDIC loves doing things on the low down and hush hush, they're the bank ninjas of the federal government.

Dead_Monkey_Bounce Fri Mar 27 16:18:11 2009 CDT #

Mathias says:

CR,

thanks - your little example on the effects of the downturn on machinery, non-residential investment and similar industries is spot on.

I would argue that even if consumption could somehow be reignited (doubtful to what degree this is desirable or fasible), those industries will continue to suffer for a number of quarters because (1) the investment boom we had won't return for a long time, (2) even if consumer demand comes back the fundamental trust in a consistently positive development necessary for a company to invest long term also won't return for a while - unless it is all financed by somebody else's money, non-recourse.

Mathias Fri Mar 27 16:18:28 2009 CDT #

Bond Girl says:

EHP -

"Distressed" is a term used to indicate a debt security that is either in default or on its way.

Bond Girl Fri Mar 27 16:18:42 2009 CDT #

Jon says:

It won't be ugly, it will be "positive challenged".

Jon Fri Mar 27 16:18:51 2009 CDT #

EvilHenryPaulson says:

DCRogers
It's ok, Germany must have saved some of the money from the boom years/decades. Their pension system is most likely over funded, what with how accepting of Turkish immigrants they are to keep their working population young. The Euro has just priced in the future performance of German exports, and won't slow orders at all

EvilHenryPaulson Fri Mar 27 16:18:59 2009 CDT #

Comrade Swan says:

Next leg down will be an amputation

REALITY: You fight with the strength of many men, Sir BULL.
I am Reality, King of the Markets.
[pause]
I seek the finest and the bravest traders in the land to join me
in my Court of Capitalism.
[pause]
You have proved yourself worthy; will you join me?
[pause]
You make me sad. So be it.
BLACK BULL: None shall sell.
REALITY: What?
BLACK BULL: None shall sell.
REALITY: I have no quarrel with you, good Sir BULL, but I must
make new lows.
BLACK BULL: Then you shall die.
REALITY: I command you as King of the Markets to stand aside!
BLACK BULL: I move for no man.
REALITY: So be it!
[hah]
[Market trading at $70 earnings when reality is about half that]
[parry thrust]
[REALITY chops the BLACK BULL's left arm off]
REALITY: Now stand aside, worthy adversary.
BLACK BULL: 'Tis but a scratch.
REALITY: A scratch? Your arm's off!
BLACK BULL: No, it isn't.
REALITY: Well, what's that then?
BLACK BULL: I've had worse.
REALITY: You liar!
BLACK BULL: Come on you pansy!
[hah]
[Top banks are insolvent and there are still over 5 trillion in off-balance sheet assets]
[parry thrust]
[REALITY chops the BLACK BULL's right arm off]
REALITY: Victory is mine!
[kneeling]
We thank thee Lord, that in thy merc-
[hah]
BLACK BULL: Come on then.
REALITY: What?
BLACK BULL: Have at you!
REALITY: You are indeed brave, Sir BULL, but the fight is mine.
BLACK BULL: Oh, had enough, eh?
REALITY: Look, you stupid bastard, you've got no arms left.
BLACK BULL: Yes I have.
REALITY: Look!
BLACK BULL: Just a flesh wound.
[bang]
REALITY: Look, stop that.
BLACK BULL: Chicken! Chicken!
REALITY: Look, I'll have your leg. Right!
[ 7% contraction this quarter, unemployment properly measured over 15%, world economy contracting]
[whop]
BLACK BULL: Right, I'll do you for that!
REALITY: You'll what?
BLACK BULL: Come 'ere!
REALITY: What are you going to do, bleed on me?
BLACK BULL: I'm invincible!
REALITY: You're a loony.
BLACK BULL: The Black Bull always triumphs!
Have at you! Come on then.
[yields creeping up despite monetization, commodities creeping up not on demand but production cuts and stockpiling, deleveraging continues in households, commons will be severely diluted, credit terminally distressed with expected defaults worse than the Great Depression]
[whop]
[REALITY chops the BLACK BULL's other leg off]
BLACK BULL: All right; we'll call it a draw. Oh, oh, I see, running away then. You yellow bastards! Come back here and take what's coming to you. I'll bite your legs off!

Comrade Swan Fri Mar 27 16:19:51 2009 CDT #

econproph says:

LMAO. Reality vs. The Black Bull Knight. That pretty much sums it.

Parent Post

econproph Fri Mar 27 17:02:54 2009 CDT #

Rich says:

Monty Python on the Potomac or is it Hudson? Anyway: awesome.

Parent Post

Rich Fri Mar 27 17:44:53 2009 CDT #

1 currency now [yogi] :) says:

The PPIF and the PPIP have something in common.

They're both PP.

1 currency now [yogi] :) Fri Mar 27 16:20:08 2009 CDT #

EvilHenryPaulson says:

Bond Girl,
Thanks, but I was just being particularly pessimistic. If the Goldman report on the marks banks are using is close to accurate, I'm just appalled the gall they have to knock only a nickel off

EvilHenryPaulson Fri Mar 27 16:21:45 2009 CDT #

CRbot says:

New Thread: FDIC on Omni National Bank, Atlanta Failure
http://www.calculatedriskblog.com/2009/03/fdic-on-omni-national-bank-atlanta.html ( 2 comments )

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I'm sorry Ben, I can't let you do that...

Rally mode + Printing Press == does not compute... does not-- com--- com... puttttrrrrhgh.

--Your systemic-failure-crashing bot

CRbot: Call me HAL.

CRbot Fri Mar 27 16:23:46 2009 CDT #

reptillian says:

From Morgan Stanley's commentary: " The gap between bank marks on these distressed assets and their economic value appears too wide to be bridged even by attractive leverage and FDIC-guaranteed financing. Moreover, while it is ambitious in scope, the plan lacks the scale needed to clean up balance sheets of leveraged lenders under any realistic stress scenario. And while the plan is scalable in theory, in practice officials aren’t likely to persuade Congress to authorize adequate funding."

Translation: We need more taxpayer dollars.

reptillian Fri Mar 27 16:26:37 2009 CDT #

Magical Thinking says:

Makes no sense
-----------------------------------
Yes, great theatre-more suspense , subterfuge and drama than you could possibly hope for....I think we may hitting PEAK suspense, subterfuge and drama...leading to a "reality crisis", yes a crisis of reality-you can take that to the bank.....

Magical Thinking Fri Mar 27 16:30:01 2009 CDT #

Jas says:

--
Good one on CRE...

"It is tthe third buyer that makes the money." -- Alex Pollock from AEI.

Hey, CR, FYI, CRE, including the pipeline, was way more overbuilt than the RRE as of a year ago. You just don't understand the lags (CRE lags the economy while RRE leads by 1-3 years) in the economy well enough. I have tried to help.

Jas

Jas Fri Mar 27 16:34:29 2009 CDT #

Anonymous says:

CathyG says,

Makes no sense.

Where have you been the last decade?

Anonymous Fri Mar 27 16:35:33 2009 CDT #

Mongo says:

Mongo like widgets.

Mongo Fri Mar 27 16:43:19 2009 CDT #

Comrade De Chaos says:

Nice example. Still, I don't expect a huge cliff dive in business investments just because it started cliff diving earlier this year.
I don't expect the numbers to be rosy though, but we might be half way through the mess. I think the real question is how long clean up will take and at what cost. Let's hope we have learned something from the whole mess ... NOT.

Comrade De Chaos Fri Mar 27 16:49:48 2009 CDT #

Anonymous says:

CR you are leaving out one part of the widget making process. Sometimes the widget makers wear out or break, and have to be replaced. So the people that make widget makers still have to build new widget makers, the pace will be greater than 0, but nowhere near when the widget mfg was growing.

Anonymous Fri Mar 27 17:14:29 2009 CDT #

Carneades says:

Blame the Existence of Mortgage Brokers
www.TheValueatRisk.blogspot.com

Carneades Fri Mar 27 18:30:57 2009 CDT #

Carneades says:

5% Decline in ACME's sales is quite an optimistic assumption, we think.
www.TheValueatRisk.blogspot.com

Carneades Fri Mar 27 18:35:16 2009 CDT #

darkmatter says:

how late does CR have to stay up to think of this stuff?

darkmatter Fri Mar 27 18:49:59 2009 CDT #

Nowhereman says:

Nemo is everywhere!!!

Nowhereman Fri Mar 27 18:53:01 2009 CDT #

Pete says:

"But the widget equipment manufacturer's sales could fall to zero, except for replacements and repairs"

Indeed. I work as a maintenance planner in a solution mining setup. We are freezing all capital projects until 2010, even though our sales have slowed only slightly. We are anticipating a slowdown in sales in Q4 of '09 and all of '10. Repairing leaks and cleanup are the order of the day. The vendors I deal with are frantic, offering discounts without being prompted.

Thankfully we never went on a hiring binge, so we aren't likely to experience any layoffs.

Pete Fri Mar 27 19:28:16 2009 CDT #

Anonymous says:

Boy, this sucker is really tracking the Crash of '29, isn't it?

Anonymous Fri Mar 27 21:05:10 2009 CDT #

dave says:

"disaster for companies that manufacturer widget making equipment"

That's actually quite a profound observation. Here's why I think so. Much of our productivity improvement has come from automation. It now takes far fewer people on the shop floor to manufacturer goods, but behind all the machines and software is an army of well paid engineers, designers, sales and service. Take away the need to add to or replace those machines and you take away the high paid jobs that replaced a lot of manufacturing. Countries like Germany that make fascinating machines that do the work of many now have less to export. Economically, we are giving back all that productivity we counted as prosperity by not buying new machines to produce ever increasing quantities of goods. I do wonder what people will do for a living for the next 20 years.

dave Fri Mar 27 21:20:17 2009 CDT #

Oldernwizer says:

A literate succinct description and prognostication...and in real life, my niece (architectural draftslady) was laid off today and my brother-in-law (heavy equpipment rental salesman) was laid off last week....worse times a'coming before good times are back...so I'm going to open a real estate brokerage ... no time like the worst of times to get in on the ground floor....tho actually I already have a small shop, just getting more ambitious in this chaos.

Oldernwizer Fri Mar 27 23:14:44 2009 CDT #

eh says:

If so it will likely be seen as the bottom and the market will skyrocket.

eh Sat Mar 28 02:36:02 2009 CDT #

Anonymous says:

could some one explain to me if it happen like this in the US,how china will able to show any growth bigger than -40% in this year?

Anonymous Sat Mar 28 03:01:55 2009 CDT #

Comments for "Q1 GDP will be Ugly"

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