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BofA's Chief US Equity Strategist Unable To Hide Optimistic Delirium

Tyler Durden's picture




 

The greatest piece of "research" humor today (and that is saying a lot as it is in direct competition with Wells Fargo's upgrade of Bank of America) comes from David Bianco, whose report "Six Reasons for Optimism" borders on the surreal.

Reasons to stay bullish following the 50+% rally

The 50+% equity market rally that we have witnessed off of the March low appears to have left many investors wary of a pullback. While a 5-10% pullback would not surprise us given the frequency of such moves, we see no catalyst for a pullback and we see more reasons to be bullish than bearish. We would view any pullback as a buying opportunity and not a sign of an impending major market correction.

Here are six reasons that support our view:
1. This rally has actually lagged historical recoveries when measured as a proportion of the market’s fall from the peak. [True, the market still has 400 points to go until its hits the all time high, last seen at a time when there was a few trillion in securitization activity each year, unemployment was just 5% lower than today, and GDP wasn't exclusively driven by government funding... oh yeah, and the consumer was actually spending]
2. Investor sentiment has shifted away from outright pessimism, but remains one of skepticism, according to our Sell Side Indicator. [Do "Dubiousness" and "Trust Issues" follow next on the Pessimism -> Skepticism scale?]
3. The macroeconomic environment is supportive of continued equity market gains based on BofA/ML economic forecasts. [We are shocked. SHOCKED. Enter the UMich Consumer Confidence, or "the market is up because the market is up" index]
4. Earnings are poised for sustainable year-on-year growth starting in Q4. [Earnings based on what: BofA/ML research reports? As for revenues, not so much?]
5. Valuation remains attractive on current and forward PEs, while the trailing 4Q PE continues to reflect the outsized losses of 4Q08. [If anyone tells you a 26 Fwd P/E is a anything but a steal, they are conflicted morons]
6. The relative attractiveness of stocks to bonds remains high on both a real and a nominal basis. [Appropriate clip further elucidating this point]

More comparable self-mutiliation follows.

And here is why "BofA/ML" got hosed on the Rosie/Bianco deal. From Rosenberg's Monday report... A somewhat less cheerleadery report on the economy from a firm that is not a direct beneficiary of spreading rose colored glasses.

 

 

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Wed, 10/07/2009 - 11:57 | 91462 Michael
Michael's picture

Why is it virtually impossible for people to say the word ENFORCEMENT?

I'll donate $1 to charity for every time I here the words; "Enforce the current Regulations" or "Enforce the Regulations currently on the books", or "Enforce the Regulations" in the TV MSM.

At the end of the day, I'll still have that same dollar in my pocket.

Wed, 10/07/2009 - 12:04 | 91474 deadhead
deadhead's picture

I would strongly recommend people view the "appropriate clip further elucidating this point" at the end of Bianco the Bull item number 6. It's only 10 seconds and will assist stimulation of the air sickness bag industry.

 

Wed, 10/07/2009 - 15:21 | 91729 ZerOhead
ZerOhead's picture

Delirium overdose. I've seen this happen before. Never exceed the US RDA.

Wed, 10/07/2009 - 12:06 | 91478 Anonymous
Anonymous's picture

So what's the over/under on seeing David Bianco writing for Yahoo! Finance? I give it 4 months.

Wed, 10/07/2009 - 12:11 | 91485 AN0NYM0US
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UBS Strategist Bianco Cuts 12-Month S&P 500 Forecast to 1,500

from just one short year ago (post Lehman, so he is without excuse)

Wed, 10/07/2009 - 12:20 | 91499 deadhead
deadhead's picture

nice call David.  You'll fit in very, very well in the new banking culture at BAC. 

 

Wed, 10/07/2009 - 12:12 | 91486 Cursive
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Bianco just needs to add a melting pocket watch for a watermark and it'll be complete.

Wed, 10/07/2009 - 12:12 | 91487 Careless Whisper
Careless Whisper's picture

WFC upgrades BAC who upgrades GS who upgrade MS who upgrades WFC. They got a name for that.

http://www.circlejerkboys.com/

 

Wed, 10/07/2009 - 12:20 | 91497 Cognitive Dissonance
Cognitive Dissonance's picture

I'm ashamed I even clicked on that link. Now I have IE "cookies" dropping all kinds of er.......interesting ads on my desktop. Time to flush my cache.

Shame on you Careless Whisper. :>)

Wed, 10/07/2009 - 13:56 | 91686 Careless Whisper
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Haha entering the site required an extra click; a little curious today?

Wed, 10/07/2009 - 16:49 | 91698 Cognitive Dissonance
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I didn't even enter the site to get the cookies. Simply clicking your link dropped cookies into my IE. I keep my computer very clean so something like unwanted cookies shows up very quickly because I have a tight firewall setup.

I flushed the cache and all is well now. My eyes will need more work.

Wed, 10/07/2009 - 12:21 | 91501 deadhead
deadhead's picture

as J. Dimon is said to have noted, "you're either in the club or you're not".

Wed, 10/07/2009 - 12:13 | 91489 Bankster T Cubed
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We need the market to crash so that these Wall Street asshats can finally be put in the trash can for good

Wed, 10/07/2009 - 12:28 | 91519 Anonymous
Anonymous's picture

which is why they are doing everything in their power to stop that from happening.

Wed, 10/07/2009 - 12:17 | 91493 Circumspice
Circumspice's picture

And here is why "BofA/ML" got hosed on the Rosie/Bianco deal.

Shenanigans. Times are tough at BofA right now, and people there could really use some humor.

Wed, 10/07/2009 - 12:22 | 91502 Hondo
Hondo's picture

Well, if it's that easy why haven't we been printing money at this rate for the last 80 years and what to stop us now????  I think we should double the printing presses as there is NO bad outcomes for doing so.

Wed, 10/07/2009 - 12:25 | 91510 Anonymous
Anonymous's picture

Some people simply don't mind spending all day filling buckets with shit for the right paycheck.

ZH needs to start a " SHITSLINGERS OF THE MONTH " award. There will be furious competition for the Top 10.

Wed, 10/07/2009 - 12:27 | 91514 AR
AR's picture

We have long contacts with the folks at BAC. We respect them. But, this Bianco kid has to go. He's embarrassing -- literally.  What does BAC do... wind this kid up each morning and send him out in public to humiliate himself. Just when you hope the bank might have learned something from all that they've been through, you get mouthpieces like this further degrading the intellect of the franchise.

Wed, 10/07/2009 - 13:02 | 91584 deadhead
deadhead's picture

Agreed with AR.

I would like to see Bianco tell the other side of the story, particularly on his overweight call for financials.

1. please discuss the impact on previously reported Q1 and Q2 earnings due to the revised FASB FAS 157 revisions. Please discuss the earnings impact of a reversion to a mark to market model.

2. please discuss the impact on future earnings due to the Jan 2010 implementaion of FASB FAS 166/167 requiring spe, siv assets to be brought back on bank balance sheets. Please discussion in conjunction with this the impact of the FDIC's current comment period as to how to implement the required capital increase due to 166/167.

3. Please discuss the earnings impact on the traditional bank (non IB portion) profit model of net interest profit margin due to new credit card pricing restrictions. Please discuss the earnings impact on reduced junk fees (overdrafts being the current hot button) due to pending legislation and consumer/political outcry.

4. Please discuss the earnings impact of increased Credit Union market penetration.

5. Please discuss the Level 3 assets and associated securitizations that are worth somewhat less than 100 cents on the dollar.

6. Please discuss the outlook for CRE marks on current balance sheets and if those marks are at par (most are!), what the impact will be on earnings with haircuts of 25-40%.

That's for starters.....

 

Wed, 10/07/2009 - 12:34 | 91527 Anonymous
Anonymous's picture

From Pavlov to the Stokolm syndrom

There is a slow but strong resignation, analysis fundamentals,real dividends will always be a lesser rewards than capital gains.
A familiar scenario of the Greenspan golden years,with a better outcome?

Wed, 10/07/2009 - 12:44 | 91547 Michael
Michael's picture

Create the problem, Steer the reaction, Those who created the problem propose the solution. Manufacture cognitive dissonance. Do it over and over again.

This is the Hegelian Dialectic.

What is the Hegelian Dialectic?
http://www.crossroad.to/articles2/05/dialectic.htm

Wed, 10/07/2009 - 13:22 | 91619 Anonymous
Anonymous's picture

this is no different then when merrill dumped their conservative internet analyst for blodget after his bold call on amazon. that worked out for awhile and then...

Wed, 10/07/2009 - 13:37 | 91650 Green Sharts
Green Sharts's picture

The "lagged historical recoveries when measured as a proportion of the fall from the peak" is pretty funny.  If I'm not mistaken, the drop from the peak was the largest in history in percentage terms (considering relatively short-term market cycles, not 1929-1933).  So he's starting with the biggest denominator in history.  Unless it is followed by the biggest advance in history to achieve the biggest numerator, the laws of arithmetic would say that it lagged the average historical recovery on a percentage basis.

I was not previously familiar with this chap but it sounds like he's got the potential to be the next Abby Joseph Cohen.

Wed, 10/07/2009 - 14:27 | 91744 Anonymous
Anonymous's picture

How does Rosenberg square his deflation thesis with a bearish $ thesis? Wouldn't deflation/deleveraging force $ to be bought back/extinguised and therefore to rise (see the $ during the depth of last year's deleveraging trend)?

Also, he focuses on the fact that retail sales was propped up because of C4C - it was, but ex cars, ex gasoline, retail sales still INCREASED - he of course conveniently omits this fact in his report. How do you explain that? Why is retail sales increasing at all when income is not growing and credit is falling?

I am quite bearish, but constantly question my thesis with data (and not just data that confirms my thesis but also data that repudiates or at least brings it into question). So I would point out that there is a segment of the consumer who is still working, who is not leveraged, and has the capacity to borrow. These people are still consuming, the US economy is still doing ok in the face of this massive unemployment and debt. Ignore this data at your own risk. Focus on data that only confirms your views and ignore contradictory data at your own risk. Write off the US consumer as if it was a monolithic blob at your own risk.

I repeat, I am quite bearish, but.....I remain opem that I may be wrong, at least modestly wrong.

Anyone care explain the 2 questions that I pose to David? Why are retail sales is even increasing at all? That too consumer discretionary items such as apparel!

Wed, 10/07/2009 - 20:19 | 92285 McGriffen
McGriffen's picture

You could be right on retail...annual comparisons to Q4 2008 may seem downright cheery. Even if consumers spend for Q4 (turkeys, festivus) I'm calling a long shot that Q1 2010 is anything special.  Hard to consume without income.

Check retail pricing action in 2 months.  I'm gonna go 50/50 on a price war started by a company Id label as "WM" followed secondarily by "T".

Retail margins are out the door...gotta get people in the door first.

Wed, 10/07/2009 - 21:02 | 92319 Fruffing
Fruffing's picture

Deflation would imply sustained low interest rates, meaning little demand for USD.   Rosie also calls for Deflation until re-flation.   Don't be surprised to see a call for Hyperinflation once this runs it's course   (18+ months)

Wed, 10/07/2009 - 14:38 | 91764 pooplagrande
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I just vurped.

Wed, 10/07/2009 - 14:40 | 91766 Anonymous
Anonymous's picture

"We would view any pullback as a buying opportunity and not a sign of an impending major market correction."

This is the most ridiculous comment! Why not wait for the pullback and see what's driving it? It may be that the pullback is due to a bank failure or a derivatives blow up, in which case it would be best to step off the train tracks!

And he's the chief??

Wed, 10/07/2009 - 16:23 | 91942 Prophet of Wise
Prophet of Wise's picture

There's a reason the firm idol is a golden bull. Bianco's job is the same as the Pied Piper of Hamelin. Keep playing the music until you've lured all the mindless goyim into the furnace so you can burn them and their wealth to death. For independence is a direct function of man's wealth. Destroy man's wealth and you destroy his independence. The creation of wealth is a direct function of freedom. Wealth is the product of man's reason and freedom provides his greatest capacity. The present ruling financial oligarchy is specifically purposed with bringing about the complete and total evisceration of man's independence by systematically destroying his wealth. Name one recent government program which does not destroy private wealth. Laissez-faire capitalism is the only system ever conceived of man capable of teaching man to fish and produce for themselves. It is the only system capable of producing personal worth and dignity. Imagine the shame man feels when he is forced to beg in the streets or at the hand of the state for his very survival and that of his family against the glory and the joy of providing for their every need in the spirit of mutual exchange trading value for value honestly and morally under the blanket of laissez-faire capitalism. Bianco is there to plunder the goyim. To reduce them to begging in the streets.

Wed, 10/07/2009 - 16:30 | 91953 Anonymous
Anonymous's picture

"Prophet" -- you are a moron. Govt education does not destory private wealth. Govt roads do not destory private wealth. Even defense and healthcare do not destory private wealth.

In fact, "re-distribution" does not necessarily destory wealth, it just moves it around. This can be productive (lawsuits against polluters) or non-productive (theft, corruption).

Rosenberg's economic research never made anyone a $. Lousy. Why so fascinated with co-incident and lagging (employment) indicators. LEADING indicators all turned up in March... and continue to rise. Profit from it.

Wed, 10/07/2009 - 16:49 | 91984 deadhead
deadhead's picture

lagging (employment) indicators. LEADING indicators all turned up in March... and continue to rise. Profit from it.

1. it ain't lagging if it's leading and unemployment continues to rise. Unemployment as a lagging indicator is only proven in inventory based or inflation based recessions. this one ain't either of those.  we have a credit based economy and it has contracted.

2. as to leading indicators, i would suggest that P/E ratios are a leading indicator and they have certainly risen over the historic 15 ish level. now, i could be wrong but I always thought p/e counted for something (except dot com bust).

Wed, 10/07/2009 - 20:59 | 92315 Fruffing
Fruffing's picture

Rosie & I started at ML at the same time, and my clients made a bundle from his insight.  

Better yet, we cleared the decks of the Financials and REITs before the storm hit, thanks to him.   And you can't deny his call on long duration treasuries in 08 was epic.   IG Credit for 09 as well.    If you can't make money using David's research, you shouldn't be running money.

Sun, 10/11/2009 - 19:01 | 96055 Rusty_Shackleford
Rusty_Shackleford's picture

"Govt education does not destory private wealth. Govt roads do not destory private wealth. Even defense and healthcare do not destory private wealth."

 

Quite an amazing series of insights you have there.  Please explain how the defense industry does not destroy private wealth. 

May I suggest you start with the basics such as Bastiat or Hazlitt.

 

Wealth is everywhere and always destroyed when it is spent by one who has not earned it.

Wed, 10/07/2009 - 16:57 | 91992 omi
omi's picture

Well, to be fair. SP right now is stronger than SP 2 years ago. Some companies died off, stronger ones were added. so 1000 SP points now was maybe like 850 SP points of 2 years ago in terms of company strength.

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