Rosenberg Replacement Reaches For The Stratosphere, Sees 1,200 S&P On "Strong Earnings Growth"

Tyler Durden's picture

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.

h/t Deadhead

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deadhead's picture

"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%?"

I am soooo very glad that I am ahead of the curve on the chasing financial assets thing. I went all in on AIG at 55.90 and I'm gonna make a fortune! 

Next stop, tap the HELOC where every nickel is going to buy C.  The share price just can't go lower. 

If only they would let FHA go, i would kill to get in on that offering.


3greenlights's picture

"higher savings chasing Financial assets" mean?

Let's look at the lower tranche of society: Homer paying off his credit card. Homer's company no longer contributes to his 401k. Homer's company no longer pays for his medical, dental and vision.

Now let's look at the upper tranche: Wendell Thurston III lost his Gulfstream. Wendell lost his Aspen cabin on the slope. Wendell being hunted by DC for that little account he had across the pond.

Got me, I have no idea what Bianco means...

agrotera's picture

"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."


This must be a new disclaimer that was recommended to them by their bankheister brother GS since they are under scrutiny for this double, as long as they disclaim that they are telling one group of investors one thing then doing another that's just fine, right!!!!!  TOO BAD ALL OF THEIR OTHER CLIENTS (OTHER THAN THEIR CLIENTS THAT OWN THE PRIVATELY HELD FEDERAL RESERVE) DON'T KNOW THAT THIS IS THE WAY THEY DO BUSINESS!!!

ZerOhead's picture

Warning: Product may or may not contain lethal doses of potassium cyanide. Have a nice day!

Would have been simpler and more accurate N'est pas?

lizzy36's picture

I think his methodology is off.  I am looking for 1500 based on being comfortably numb (and lots of little pin pricks)

economicmorphine's picture

Merrill Lynch.....that's Bank of America's trading division, right?  I used to remember an independent company called Merrill Lynch.  They were so good at their job that they had a choice to make....either run into the waiting arms of Bankrupt of America, or fold.  Old age is a beautiful thing.  I've seen thinks young Mr. Bianco has not.  I'll wait this out and when TSHTF, I'll be ready. 

Gordon_Gekko's picture

Not surprising, considering he's a "CFA", which is basically a nice way of saying "MORON".

ZerOhead's picture

HEY! ... I resemble that remark

Arm's picture

CFA is a starting point, not the end of learning about markets.  There is a lot more to read about economics, and to learn from actual trading.  That said, it is MUCH better than learning from most ibank programs which consist basically in reading the FT and WSJ every day.

From your posts, I gather you have neither.

Anonymous's picture

ahh, Mr. Durden, when will you ever learn? Making money our present day financial markets is not about economic realities, it's about controlling the perception of economic realities and capitalizing on momentum.

BDig's picture

Correct me if I'm wrong.  With inflation coming on strong, would it be out of the question, theoretically, to see S&P at 1200 with strong earnings growth?  You know P/E ratio at 250 or so?  That sounds like earnings growth to me!

Anonymous's picture

Can we *please* establish a ZH policy of not mis-using the word "inflation"?

Surely you do not mean to suggest that an inflation of money-supply and credit is anywhere on the horizon. (If you do, then I apologize... and wish you luck with that. I'd suggest you use a calculator in the future -- especially before investing on that theory.)

If you mean "higher prices" and "dollar debasement"... *say that*

Gunther's picture

Higher savings means less spending (or does anybody believe in higher wages, err costs?)

In the consumption-driven economy that means lower GDP and less earnings.

Anonymous's picture

Hey Zero Hedge commentators, all you guys are some of the funniest, and wittieest guys, we've ever read. Thanks, and keep up the great comments. Regarding the above Bianco, Merrill/BAC "pump and dump" research report -- we ask -- are all these analysts this corrupt (and stupid), that to look good in front of their bosses, they would WHORE themselves at any cost. We're just speechless at the idiocy of all these analysts. We bet none of these guys have ever invested their own money. But then, why would they when they can score big bucks while walking around on their knees (sucking it up). Just amazing... We'd like to know what ROSIE thinks of Bianco's report? Bend over Davey, your boss just walked into the room.

ZerOhead's picture

You make WHORE sound like such a bad thing ...

Cognitive Dissonance's picture

Yeah, at least a WHORE gets paid to be f**ked while we all stand (lay?) around and don't even get a kiss or some KY.

Anonymous's picture

Facts do not get in the way of analysts' forecasts. Dreamweaver.

Fruffing's picture

Fortunately BASML Research does not have the "captcha" function at the timeclock...

Anonymous's picture

First BDig where do you see inflation coming on strong in reality? employment down, rents down, wages down, house prices down, GDP down ex..ex..ex...all deflationary not inflationary....and all the debt is still in the system (printing is inflationary..what the US is doing so far is mainly assuming mountains of new DEBT...debt is inheritable deflationary as well).

And if you considering the USD going to the crapper inflationary resulting in higher stock market...well, what about major capital flight out of US markets, also the resulting high "inflation" hedges going to the moon such as oil that will further stress the US consumer and prolong the recession/depression. all should be negative for the stock market. The only way they keep this dog up is through low volume momo, manipulation, propaganda, and fraud.

Anonymous's picture


Anonymous's picture

Undervalued in what sense? Because the P/E says the opposite.

pooplagrande's picture

He must be on a nice morphine/viagra/prozac cocktail. To the moon Alice!!!

Anonymous's picture


Maybe people who have just gotten the financial fright of a lifetime will take their frantically accumulated savings and put it in stocks.

Or...maybe they will pay down their debts and get a grip on their own finances?

It is sad to me, reading these words. It reminds me of an ex-football player taking about when he was a star, like the game was still on. For all of them, their day has long since passed.

TumblingDice's picture

The guy is on CNBC right now, sounds like mickey mouse.

quote: "banks don't want strong economic growth."

UbuTranscendent's picture


Evidently, the beast with two heads is schizophrenic:

"U.S. Stocks at Risk for 20 Percent Decline

Sept. 8 (Bloomberg) -- The U.S. stocks rally is “maturing” and the risk of a 20 percent retreat in the Standard & Poor’s 500 Index increased after sellers became more aggressive than buyers, Bank of America said.

Mary Ann Bartels, an analyst at Bank of America, said her volume intensity model, used to capture the market’s money flows, showed investor buying peaked last week and selling gained strength. That’s signaling the 50 percent rally in the S&P 500 from a 12-year low on March 9 may be near an end, she said."

Now, who to believe? Merrill Lynch or BofA? My head hurts.

I'll console myself with my new favorite word that Anon used a few comments earlier: Growthyness! Oh yass, growthyness, growthyness! I feel better now. Ubu.

deadhead's picture

good point....i get the ML reports.

Mary Ann Bartels is a technical analyst, focusing pretty much on standard TA matters, lots of fib stuff, comparison to historical trends, etcetera.  Her approach is different than some of the sell side stock jockeys at bac/ml.   

Verbal Kint's picture

That was about a year ago, any idea what Rich is up to now?

Anonymous's picture

Rich is running his own research shop.

BTW.. Bianco replaced Rich, not Rosie. Rosie's replacement is starting sometime this month.

Gilgamesh's picture

Oh, the comedy of it all.  JPM upgrading BAC today (among every other stock they haven't so far).  This on the same day as them whining about new regulations and writing "investment banks are no longer an attractive bet for shareholders."


New rules to curb bank profits, says JP Morgan: FT


JPMorganChase: How Much Capital Does a Bank Need?

If the G-20 finance ministers get their way and force JPM to increase its Tier 1 RBC to say $250 billion, that implies that ROE and EPS would be more than cut in half. Does this sound like an attractive investment proposition? More, if anything like the present reforms on OTC derivatives being proposed in the EU and US become law, the earnings and returns for JPM and all large banks will likely fall further from levels observed during the past five years -- even with no regulatory capital increase mandated by the G-20.

Verbal Kint's picture

Why don't you guys understand that as long as the FED keeps on printing tones of $$$$ the market cannot go down in nominal terms in the long run. It's like having a new currency every day... try to imagine what the market would look like if we switched numeraire to e.g. Jan 2008 dollars. (Only problem, the relevant exchange rate is secret, so we cannot compute this chance of measure...)

Grand Supercycle's picture

DOW / SP500 / FTSE daily uptrend still looking tired with ongoing topping action.

Weekly chart remains bullish.

Monthly chart remains bearish.


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