David Bianco, CFA, has solidifed his status as the anti-Rosenberg with yet another pump piece issued by TARP recipient extraordinaire BofA/Merrill Lynch. The Chief US Equity Strategist and Rosie replacement sees an S&P earnings of approximately $70, or roughly a Div/0 compared to the most recent negative trailing EPS for S&P companies. How Bianco sees earnings growth on limited cost extraction and a persistently declining top line is just slightly beyond our meager calculating skills. However, with pearls such as:
Slow GDP + low inflation + more saving= shrink resistant PE
We expect the PE to contract as EPS growth slows to more normal levels, but the contraction should be limited because slow GDP growth should keep inflation low, the Fed on hold, and there will likely be higher savings chasing Financial assets. Also, EPS growth amid slower GDP is usually seen to be more secular and sustainable.
it is likely that not much thought is needed to get to the bottom of Bianco's motives. Also, just what does "higher savings chasing Financial assets" mean? Is it akin to Jim Cramer to buy Bear Stearns days before the stock dropped 90%? Regardless, as usual we turned to the disclosure section which these days tends to have the meat of any Merrill Lynch recommendation. Some of the more relevant bits of information obtained:
- Officers of MLPF&S or one or more of its affiliates (other than research analysts) may have a financial interest in securities of the issuer(s) or in related investments.
- Merrill Lynch is a regular issuer of traded financial instruments linked to securities that may have been recommended in this report. Merrill Lynch may, at any time, hold a trading position (long or short) in the securities and financial instruments discussed in this report.
- Merrill Lynch, through business units other than BAS-ML Research, may have issued and may in the future issue trading ideas or recommendations that are inconsistent with, and reach different conclusions from, the information presented in this report. Such ideas or recommendations reflect the different time frames, assumptions, views and analytical methods of the persons who prepared them, and Merrill Lynch is under no obligation to ensure that such other trading ideas or recommendations are brought to the attention of any recipient of this report.
Perhaps the SEC and the Attorney General can evalute the optimism of Merrill's employees the next time they see absolutely nothing wrong with them receiving over $4 billion in bonuses days before a taxpayer-funded, Ben Bernanke mandated bailout by even worse financial institutions.