Shock And Yawn: BofA's David Bianco Proves He Is "Smarter" Than Goldman By Raising His S&P EPS Estimates

Tyler Durden's picture

Jan Hatzius' recent downgrade of the US economy, and the subsequent downgrade of the S&P by such formerly gruntled optimists as Goldman's David Kostin, has completely failed to register with permabullnut gallery. Case in point: the Bank of America strategist who was supposed to replace David Rosenberg, yet has become his own satirist caricature, David Bianco, has decided to go completely the other way, by actually rising not only his 2010 S&P estimates, but also 2011, and even, hilariously, 2012, this despite other such landed economist Ph.D's (from reputable institutions) as the San Fran Fed warning that there is a "significant" risk of a double dip in 2 years (yes, that's the Fed warning about a re-recession, not some rational, realistic, coherent human being), thus once again proving that his true worth is whatever CNBC pays him for his daily appearances in the Cheerleader Session block (which has now dropped out of Nielsen tracking due to complete lack of public interest in vapid propaganda). And for those who claim idiocy can not be captures in words, we disagree. To wit "Some dismiss our target because a deflationary shock could collapse current EPS. Others argue that EPS will be flat for years. We disagree; we think exceptionally low interest rates support real estate values and EPS will grow through foreign investment. The S&P has the best of the DM and EM world, low rates and healthy growth." Speechlessness ensues. What follows is propaganda so scary, it is good. If Bianco really believes this, we hope BofA provides free psychiatric sessions for its employees.

Higher S&P EPS, same targets

New S&P EPS estimates: $83 2010, $90 2011, $95 2012 We raise our 2010, 2011 and 2012 S&P 500 EPS estimates to $83, $90 and $95 from $80, $88 and $94, respectively, because 2Q results at $21.40+ or $86 of annualized EPS were stronger than we expected. Although we boost our 2010 EPS estimate, $83 for 2010E assumes flat 2H10 EPS as we expect US GDP to slow to a crawl.

How can EPS rise in 2011? Is peak EPS possible this soon? [Actually a better question is how can you have visibility on 2012. Oh wait, who cares]

Despite anemic US and European GDP growth expectations for 2011, S&P EPS should rise. Lower credit costs, higher oil prices, slower but continued growth in global spending on technology and capital goods, more acquisitions and share repurchases fueled by surplus cash hoards and cheap debt financing should lead to another year of EPS growth significantly outpacing US GDP growth. The return to peak EPS is the result of a “V+” shaped recovery in non-financial EPS already achieved. Although financial EPS has not fully recovered it has more to bounce, in our view. [one word: clinical]

Analysts did not cut their rosy 2011 EPS estimates

Despite all the market volatility and macro uncertainty of the year to date, analyst EPS estimates have held remarkably steady. The bottom-up EPS estimate for 2010 has had a consistent upward drift from about $80 in January to $83 today. The bottom-up estimate for 2011 has been stuck between $95-96 since late 2009. Given that this is the third time this year we raise our EPS estimates (which have always been well above strategist consensus), maybe we should sniff the rose. While we continue to think analyst estimates for 2011 will be trimmed, we now consider the bottom-up 2011 estimate is within reach if job growth surprises upward.

Our areas of concern on analyst consensus expectations

Analysts are well aware of the macro challenges facing the economy, including deleveraging and elevated unemployment. But they are also aware of the S&P’s heavy foreign and business spending exposure, which allow healthy EPS growth despite a sluggish US consumer. Bank analysts expect foreclosures to continue and credit costs to stay high, but they also know that loss reserves and provisions are far above normal. Our and analyst EPS estimates both fit 2011 US GDP of 2.5–3.0% (us at lower end), but we likely differ on: 1) FX rates, 2) the degree of regulatory profit pressures on Financials and Healthcare, 3) we are more cautious on vulnerable areas like auto and home related spending. BofAML forecasted Euro depreciation puts our 2011E EPS nearly $2 beneath what current FX suggests.

2010 end target stays 1,300, 12-month target stays 1,350

Our 2010 end target of 1,300 is 14.5x our 2011E EPS. This represents a very high target EPS yield (~7%) despite exceptionally low interest rates. Some dismiss our target because a deflationary shock could collapse current EPS. Others argue that EPS will be flat for years. We disagree; we think exceptionally low interest rates support real estate values and EPS will grow through foreign investment. The S&P has the best of the DM and EM world, low rates and healthy growth.

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NoBull1994's picture

yeah but Operating EPS will be $900 on the S&P next year, so I predict a 10x rise in the index.

101 years and counting's picture

"What about the herds of fat lazy cattle sitting behind desks in some administrative department who do nothing all day but update their facebook pages"

They've been cut already.  And those that haven't been cut, are being forced to take furlough days.  Those "fat lazy cattle" were easy to fire because no one cares about them.  Everyone cares about the teachers, cops and firefighters....because they provide "valuable services"....and are UNION.

Dr. No's picture

I doubt that.  The reason the politicians hold out the "teachers and fireman" carrot is because no one wants to fire them.  It is a way to get more money by threatening to lay them off.  In the mean while, the cattle still ahve jobs.  Been to the DMV lately?

Gully Foyle's picture

Dr. No

Or because those same unions can guarantee votes for specific candidates. Votes and donations.


HelluvaEngineer's picture

What makes you think the teachers are doing anything more constructive?

Gully Foyle's picture


Some of them are fucking their students.

HelluvaEngineer's picture

That would be (re)productive, not constructive

old_turk's picture

I'll have some of whatever he's been smokin'.



Astute Investor's picture

More like smarter than the average bear (no pun intended and apologies to Yogi and Boo-Boo).

David Bianco prior market forecasts:

2007: SPX target of 1,650 or +16.4% actual = +3.5%
2008: SPX target of 1,700 or +15.8% actual = -38.5%
2009: SPX target of 1,300 or +43.9% actual = +23.5%

Just like his current forecast...WORTHLESS!  Why anyone pays the least bit of attention to Mr. Biano's musings are beyond me.  Keep wondering if he is Elaine Garzarelli in drag.

VK's picture

The question is, is he long chinese solars?

Cognitive Dissonance's picture

David Bianco has the unfortunate job of being a cheerleader. Even when the teams losing big time, a good cheerleader still pushes the propaganda with all the gusto they can muster.

We must remind ourselves on a daily basis that the lie is not intended nor designed to change an opinion or point of view. Instead, it's sole reason for distribution is to keep the convinced believers (permabullnuts as was coined in another article) safely within the stockyard pen and the undecided frozen in their tracks.

This brings us down to those who are contrary, who are always in the minority and easily controlled when they are isolated and demoralized.

Astute Investor's picture

All the world's a stage.  So many cheerleaders needed to keep up team and fan spirit.  I can hear the chant echoing in the conference room at the Fed:

PUSH 'EM BACK, PUSH 'EM BACK, WAAAAAYYYY BACK!!! when discussing QE2 and stemming the deflationary tide.

Cognitive Dissonance's picture

"David Bianco, he's our man. If he can't do it, nobody can. Yeaaaahhhh!"

Lux Fiat's picture

Remember those Progressive ads which touted showing you their rates compared to 4 or 5 competitors?  A friend in the insurance industry back then basically said there was an agreement among companies that they rotated, more or less, who provided the next best quote and got the customer. 

I view the economic prognostications from the major WS players over the last year or so in the same light.  Every couple of quarters or so, it's another company's chief economist's turn to go spend his/her time in the barrel.  GS was in the barrel a while.  Now they are out, and working on restoring credibility ahead of their next barrel rotation.   The torch has been passed to BoA.  After another couple of quarters, wonder who will be next at "bat"?

SteveNYC's picture

Bianco = catastrophic failure

RobotTrader's picture


We are careening headfirst into a Global Systemic Collapse.

That's why consumer discretionary names like Fossil are breaking out to new highs....


SheepDog-One's picture

Where's that permabullnut Leo? 'Writing' another 99% cut n paste 'article' for our reading displeasure?

RobotTrader's picture

Leo is probably chasing Chinese solar stocks....

RobotTrader's picture

And of course, brace yourself for the coming crash in commercial RE.

REITs are still pinned at or near 52-week highs.

Abigail Adams's picture

I sure wish the real estate would go ahead and tank, or just reflect the actual numbers. I'm getting a bit tired of having to qualify to my husband that when "my shorts are down" it doesn't mean "come and get it."

Ted K's picture

"Cheerleader Session Block" classic......  Why don't they just hire some Playboy centerfolds and porn stars with signs with large green arrow pointed upwards on their panties and an upward moving graph sign to hold over their head.  You know, if we're going to play erection business news, why go halfway?????

VK's picture

You good sir, should be in charge at CNBC. Those ratings would bounce higher in no time, amongst other things.

Cognitive Dissonance's picture

I agree, but the psychology behind it is that it can't be too obvious. Otherwise we would be forced to overtly recognize it for what it is. That inevitably leads to discussion and debate. Better to be subliminal or at worst, just under the aware radar where it can fester and do it's magic of influencing and manipulating without being in-your-face obvious.

We humans love to deceive, beginning with ourselves.

MarketFox's picture

And this guy's REAL track record of actually making money is what ?

Yeah...that's what I thought.....

lajose12's picture

I am a recent reader.
from when QE2 and use the term
as I can go to read the text that gave rise

downrodeo's picture

what a strange thing to say...

dollydog's picture

does anyone have the full note?