Are Goldman Sachs’ Predictions Accurate?

CNBC reports that Goldman Sachs is predicting that the US has a 40% chance of entering another recession – that is two or more quarters of negative growth. Jan Hatzius, Goldman Sachs’ chief US economist, defended the prediction, saying, “Ultimately, it’s a judgment call… We’re basically indicating that we think the risk is sizable and elevated, especially given the already underway deterioration in the labor market, although it’s a gradual one.”

BAUPOST GROUP

Citing Goldman Sachs’ estimate that the US unemployment rate is expected to jump to between 9-10 percent, Hatzius explained, “Historically, U.S. business cycles have been quite vulnerable to rising unemployment and deteriorating dynamics in the labor market.” Goldman Sachs is estimating a growth of 0.5% for the first quarter next year, after elevating its predictions for the last quarter of 2011.

Of course, Hatzius has been wrong before.

In January 2011, he was bullish about the US economy, predicting that inflation would stay around 0.5% throughout 2011 and 2012 (see his early predictions here). Inflation is currently closer to 3.8%. In contrast, fund managers like Seth Klarman were more accurate, expressing concerns about runaway inflation and a weakening US dollar (read Seth Klarman’s predictions).

Hatzius also predicted in January that interest rates would “stay at zero for another two years” while fund managers like David Einhorn, Greenlight Capital, think that interest rates will continue to rise and, as a result, are pushing more money into commodities (check out Einhorn’s outlook here). In this case Hatzius was correct but for the wrong reasons. Interest rates are lower now because of the poor GDP growth rates. Hatzius was predicting a 3.4% growth rate for 2011 and 3.8% growth rate for 2012. Now he is expecting a contraction in 2012. We don’t think Hatzius or Goldman Sachs are doing any “real work” to make predictions. They just “predict” what the markets are telling – with a couple of months’ delay.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

The 10 Most Deadly Diseases in the World Today

The 5 Most Expensive Luxury Motorhomes in the World

20 Largest Stock Exchanges in the World

6 Richest Painters In The World 2014

The 6 Countries with the Best Hospitals In The World

10 Largest Beer Brewing Companies in the World

The 10 Richest Fitness Gurus In the World to Pump You Up

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!