Archive - May 21, 2013

"Our positive 2013 outlook for S&P 500 has played out much faster than we expected." That is how the latest equity update from Goldman Sachs, which until today had an S&P target of 1625 for the year end S&P, begins. And, logically, the only option for Goldman is to hike its outlook even more, because not even the Squid apparently could anticipate how quickly the policy it forced down the throats of central banks around the world, levitated markets to surpass its old price targets. The result is David Kostin (who until December had foreseen 1250 on the S&P for the end of 2012) and company were forced to goalseek even higher targets based on tried and true excel model fudging exercises, and such "value" creation as multiple expansion and dividend payments. To wit: "Our earnings estimates remain unchanged but we raise our dividend estimates and index return forecasts for 2013 through 2015. We expect S&P 500 will rise by 5% to 1750 by year-end 2013, advance by 9% to 1900 in 2014, and climb by 10% to 2100 in 2015. Our 2013 return implies a year-end P/E of 15.0x, a one multiple point premium to our fair-value estimate. We forecast dividends will rise by 30% during next two years. Dividend yield is likely to stay around 2%, in line with the 20-year average." For the record, Goldman had previously seen 1,900 in 2015. And now it sees another 200 points of value due to the magic of multiple expansion. That anyone can even pretend to forecast what happens three years into the future at a time when the central banks are injecting $160 billion (and soon $200 billion), and most likely will have to slowdown and halt such liquidity injection resulting in untold stock market carnage, is so beyond commentary we will leave it hanging for the ridiculous statement it is.

• IMF Tells Central Europe to Spend More (WSJ)
• Tornadoes Blast Oklahoma (WSJ)
• Frenetic search for survivors as 91 feared dead in tornado-hit Oklahoma (Reuters)
• JPMorgan investors on edge over vote on Dimon; what if they win? (Reuters)
• Wealthy bank depositors to suffer losses in EU law (Reuters)
• Yen Slips as Amari Backtracks (BBG)
• Japan Ready for More Yen Weakness Despite Recent Comments (WSJ)
• IRS officials back on Capitol Hill hot seat over targeting (Reuters)
• Li Keqiang pledges China boost to India trade (FT)
• Europe's Recession Sparks Grass-Roots Political Push (WSJ)
• Obama and Xi to meet in effort to calm growing US-China rivalry (FT)
• Berlin plans to streamline EU but avoid wholesale treaty change (FT)
• France must reform or face punitive measures - EU's Oettinger (Reuters)

Another event-free day in which the only major economic data point was the release of UK CPI, which joined the rest of the world in telegraphing price deflation, despite bubbles in the real estate and stock markets, printing 2.0% Y/Y on expectations of a 2.3% increase, the lowest since November 2009 and giving Mark Carney carte blanche to print as soon as he arrives on deck. In an amusing twist of European deja-vuness, last night Japan's economy minister who made waves over the weekend when he said that the Yen has dropped low enough to where people's lives may be getting complicated (i.e., inflation), refuted everything he said as having been lost in translation, and the result was a prompt move higher in the USDJPY, quickly filling the entire Sunday night gap. That said, and as has been made very clear in recent years, data is irrelevant, and the only thing that matters, at least so far in 2013, is whether it is Tuesday: the day that has seen 18 out of 18 consecutive rises in the DJIA so far in 2013, and whether there is a POMO scheduled. We are happy to answer yes to both, so sit back, and wait for the no-volume levitation to wash over ever. The US docket is empty except for Dudley and Bullard speaking, but more importantly, the fate of Jamie Dimon may be determined today when the vote on the Chairman/CEO title is due, while Tim Cook will testify in D.C. on the company's tax strategy and overseas profits.

If you develop your beliefs about gold and silver by sourcing mainstream media news, everything you believe about gold and silver will always be wrong.

The pattern is obvious. The dollar is going up. The question is why. In one word, the answer is arbitrage.

There are some strange things happening right now in the oil market worth mentioning.