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Chartology: When The Kool Aid Runs Low, Pour Some More
As the market tumbles, what does Goldman do? "We are raising our 2010 and 2011 operating EPS estimates to $78 and $93 (from $76 and $90) to reflect strong 1Q results and better net margins than we had expected. Our pre-provision and pre-writedown estimates are $83 and $93 reflecting growth of 15% and 12%. Our 3-month, 6-month, and 12-month S&P 500 forecasts equal 1160, 1250, and 1300, respectively, corresponding to 5%, 13%, and 18% returns." In the meantime clients continue to lose money both on Goldman's recommended longs and shorts: "Our recommended sector weightings have generated -14 bp of alpha YTD. Our overweight recommendations (Energy, Materials, Info Tech) have generated -33 bp of alpha while our underweight positions (Health Care, Consumer Staples, Utilities, Telecom) have generated +18 bp of alpha." But, David Kostin will be right about the S&P dammit. Also, here is how Goldman will lose clients even more money: a whole new set of unhittable targets: "Our 3-month, 6-month, and 12-month S&P 500 forecasts equal 1160, 1250, and 1300, respectively, corresponding to 5%, 13%, and 18% returns."
Some more amusement. We read:
Our 2010 Outlook report (published Dec 7, 2009) was sub-titled Cyclical start, defensive finish. We forecast the S&P 500 would start strongly and fade later in the year. Specifically, we anticipated the S&P 500 would trade towards 1300 as sustained low interest rates benefitted risk assets and strong growth in the BRICs economies persisted as a dominant macroeconomic theme. We anticipated during the second-half of 2010 investors would increasingly focus on the timing and path of the Fed’s tightening cycle. We viewed the prospect of higher rates would retard further advances in the equity market and anchor the S&P 500 near our year-end target of 1250.
Although the market touched a high of 1217 in late April, it has declined to a level where reaching 1300 by mid-year 2010 would require the S&P 500 to surge nearly 20% in five weeks, a prospect that seems remote at this time.
Several developments have caught us by surprise so far in 2010. We certainly did not anticipate that developed market sovereign credit risk would rank ahead of China economic growth as the critical global economic issue of the year. We also miscalculated the impact of politics on the markets. If “all politics is local,” as former Speaker of the US House of Representatives Tip O’Neill famously observed, then in the global village of the 21st century, politics – like capital – has no borders. Decisions made in one jurisdiction have immediate (and often unintended and undesired) consequences for others. This is the true lesson we learned in 1H 2010. [you only learned this now?????]
We introduce 3-month and 6-month interim price targets for the S&P 500 to provide our view of the likely path towards our 12-month DDMbased estimate of fair value. Our near-term forecast for the stock market mirrors those made by our colleagues in Global ECS Research (Economics, Commodities, and Strategy) for FX, commodities, interest rates, and the other major global stock indices. Forecasting short-term equity market returns is difficult, particularly given recent high volatility. Our interim price targets incorporate recent trends in financial conditions, earnings revisions, market trading patterns, historical conditional return distributions, forwardlooking views from the options market, and our gauge of investor positioning and sentiment based on our client conversations.
Our 3-month, 6-month, and 12-month S&P 500 forecasts equal 1160, 1250, and 1300, respectively, corresponding to 5%, 13%, and 18% returns. Options currently imply a 40% probability the S&P 500 will reach our 3-month target, suggesting we are more bullish about a recovery than market expectations. A 3-month return of 5% would rank in the 64th percentile of 3-month returns since 1950, conditional on a trailing 1-month return in the -5% to -10% range that we have just experienced.
As for the realists out there:
Client forecasts: Goldman Sachs hosted its 13th annual hedge fund conference this week in New York (May 26th). We polled participants on their expected equity market returns for 2010. 48% of hedge fund clients expect the S&P 500 will return between 1% and 10%. Just 3% of clients forecast equity returns greater than 10%. An additional 15% of participants forecast flat returns (between -1% and +1%), 23% estimate returns of -1% to - 10%, and 11% believe losses will be greater than -10%.
In other words 97% of the smart money thinks the market will not generate more than a 10% return.
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"Smart money"?...
what's the track record on forecasts like this for these guys?
They mostly make money the old fashioned way---
inside info,
fraud
and government subsidies
.....
oh, and phony bookkeeping, to conceal and defer losses and accelerate and overstate gains
Given where we have just come from you would think another quick 20% would be near impossible....except...they discover Fort Knox is full up with gold.
Unhittable targets? I don't see how 1250 is less likely than 900 within say 6 months. IMO both are equally likely.
If 97% are so pessimist, we are very close to a short term bottom
but the remaining 3 % are not bullish enough to compensate for the bearishness of the 97 %, SO we continue downwards until 100 % are bearish at which point, we would have hit true bottom and nobody will ever want to buy any stocks.
That, or basic math suggests Iceland will actually default soon. ;-)
Oh, my bad: I meant Dubai. No, I meant Greece. Sorry, that was Ireland. Portugal. Italy. France. The UK. Japan. Nah, never mind. ;-)
This time it's different. This time the bulls have psychotic breaks and never return to being bulls again.
That happened after the 1930's too ... after being subject to bucket shops and numerous other forms of fraud (efficiently designed to fleece the retail investors), many from that era refused to enter the stock market ever again.
I know people dying now in their 90's that have been in bonds *only* for the past sixty years. (Actually, after the great performance in the bond market for the last two decades, it worked out ok for many of them.)
Goldman continues to disgust people more and more everyday
Here's the Goldman playbook...
http://books.google.com/books?id=rsQ14C2MX7EC&printsec=frontcover&dq=do+...
Where is the no-bad-trade-for-a-whole-quarter strategy ?
US Weekly Kickstart
The path ahead to get fucked in the ass with a sandpaper condom.
Kill the squid
They and their TBTF buddies can make the S&P targets happen through their manipulation. On the other hand, if we use our ZH rule of thumb about Goldman: SEEEEEEEEEEEEEEELL!!!!!
Look at this crap again, I thought they took care of Dubai last time? Now, Dubai right back in the default bucket again, and in this article they explicitly talk about federal bailout like its an expected event if they have no options. This is a complete shame on the public worldwide, where it has gotten to the point where countries and businesses that get in trouble, just automatically assume they are in line for a federal bailout the taxpayers will pay. The idiot Bernanke has opened a floodgate that MUST be closed immediately. This mess is getting out of hand. Why should anyone pay any debts ever again?
DUBAI, United Arab Emirates (AP) -- Dubai will ride out its latest financial troubles without a federal bailout for another major investment company seeking postponement of debt repayments, the Emirates' finance chief said Saturday after the request raised new concerns about the city-state's credit woes.
Dubai International Capital, an investment company controlled by Dubai's ruler asked lenders for a three-month extension on repaying some of its debt. DIC did not provide details of the debt involved except to say the request involves "certain maturities."
The company has a $1.25 billion loan coming due in June.
You thought they took care of Dubai last time?! lulz. :P
They should change the headline to "Clients Please Take The Over Priced Shares We Are Holding Off Of Our Hands".
How's the S&P going anywhere absent another monster world wide stimulus package? Earnings have only risen because of stimulus and the fact companies have fired as many people as they can and still remain in business.
God, I love reading this stuff! It sounds less like an analysis of the global economic situation than instructions from God (or GS!) to central bankers.
Start the banknote printing presses you miserable serfs!! S&P 1300 by Independence Day or else!
The DOW is just 1 fat finger away from either 11.000 or 9000, but I'm a bull!
wow....wow....so they are going to finally kick start the economy by giving some pennies to the peasantry? they are going to put themselves in a position where they are going to have to let some trickle down?
really?
so, give a few days to buy a jacket and boots for this moment when hell freezes over.
He is trying to pull a Abbey Joseph Cohen. Be right once and make a name/career for yourself. Does not matter if you are wrong for the rest of your days. Anyone can throw numbers around, this guy is clearly an idiot. Until these strategist are fired for being wrong, they will continue to be cheerleaders.
If QE 2.0 is announced, then their year-ends could be hit easily.
Kool Aid. where's that come from? Are we talking KoolAid like Jim Jones' Guyana Kool Aid ? Or Electric Kool Aid ? Or just that yummy sugar with red dye drink? If Kool aid is referring to market bullshit why not call it that and let them eat the bullshit? Dont sugar coat it . Heres the Tabasco dig in eat all you want, field fresh..... market fresh.
it's jim's.
not sure when the end of quarter is but figure if it is June means they will have to window dress and drop the market further to hide their leverage.
didn't bloomberg just come out saying they got something like 7/9 trades wrong.
Fantastic news for my shorts! With Goldman saying market will melt up, a crash is nearly 100% guaranteed.
Remember what they were saying during the last manipulated advance?
Updated DOW charts :
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1