Described as “the giant vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” the legendary investment firm of Goldman Sachs still deserves respect for their analytical capabilities, which is so necessary to smell money.

Yesterday, they lowered their estimate of second quarter GDP growth from 3% to 2%, although they expect 2012 to see 3.2% growth.  In addition, they believe home pricess have another 5% to decline, which would be a blessing if that is the bottom.  Importantly for the President, Goldman thinks that unemployment will still be 8.3% at the end of the 2012.  (No president has ever been re-elected when unemployment was that high.)

They had been predicting the S&P would end this year at 1500 but have lowed that to 1450, which is still a 14% increase over the current level.  Gold will increase 10% by the end of next year.  The dollar will continue to appreciate against the Euro but depreciate against the Yen.  Yields on ten-year Treasury bonds will rise from 3% to 3.75% by year-end 2011 and 4.25% by year-end 2012.

Overall, they agree that this recovery is long and slow, that there is no “double-dip” recession, that interest rates will rise, and that commodities will continue to increase (including gold and oil).  Of course, long-time readers will recognize most all of this.

One big difference is that they express no fear of  the impact of a derivatives failure.  Oh . . . that’s right . . . Goldman Sachs is one of the world’s biggest dealers in derivatives . . . maybe, that’s their “blood funnel?”